挚文集团 (MOMO.US) 2025年第二季度业绩电话会

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会议摘要

Hello Group's Q2 2025 earnings saw domestic revenue decline by 11% to 2.8 billion RMB, with overseas revenue surging 73% to 442 million RMB, now 17% of total revenue. Adjusted operating income fell 6% to 448 million RMB. Key priorities include enhancing productivity, improving user experience, and expanding overseas. Despite a 547.9 million RMB tax accrual due to new regulations, the company anticipates domestic revenue to drop mid-single digits and overseas revenue to grow mid-teens in H2 2025. AI integration and cost discipline are emphasized for stable margins and growth. Adjusted gross margin for 2025 is forecasted to be 36-37%, with operating margin guidance expected to land at the lower end of the 13-14% range. A significant tax issue involves a reassessment of withholding tax rates, impacting future financials.

会议速览

Opening of Hello Group's financial report conference call for the second quarter of 2025

After the opening remarks, the phone conference will transition to an explanation of the financial report. Participants can ask questions during the Q&A session by pressing *1. The entire meeting will be recorded, and it will be hosted by the financial manager.

Release of the financial report for the second quarter of 2025 and future outlook

The company released its financial report for the second quarter of 2025 today, and invited the executive team to attend a performance briefing, discussing operational highlights, financial condition, and future guidance. Forward-looking statements made during the meeting are based on current market and operational conditions, involve uncertainties and risks, and the company does not undertake any obligation to update such statements.

Q2 2025 performance report and strategic goal updates

Reported the financial performance of the second quarter of 2025, domestic business revenue declined by 11%, while overseas business grew by 73%. Adjusted operating profit was 4.48 billion, a 6% decrease year-on-year. It was emphasized that the Momo platform maintained productivity and optimized the social ecosystem; overseas business expansion, strengthening the brand portfolio, and building long-term growth momentum. Domestic business is steadily recovering, overseas business costs are controllable, and revenue is rapidly increasing.

The Momo application optimizes user experience and user growth strategies through AI technology.

The Momo app has significantly enhanced user experience and retention rates by introducing AI greetings and chat assistant features. At the same time, by optimizing user acquisition strategies, reducing budget for low-efficiency channels, improving efficiency in acquiring high-value users, the app has achieved stable growth in user base and reduced unit acquisition costs.

Momo application optimization user acquisition strategy and improve product efficiency.

In the second quarter, Momo adjusted its user acquisition strategy, reducing investment in acquiring users with negative returns, while optimizing product experience such as enhancing chat room functions and adjusting recommendation algorithms to stimulate high-paying users' consumption enthusiasm. In addition, by hosting non-bonus-driven live competitions and increasing exposure of high-quality anchors, the monetization efficiency of traffic has been improved, leading to quarterly revenue growth. In the Hong Kong market, profitability was maintained by reducing channel investments, despite a certain impact on overall user scale, organic user growth showed a positive trend.

In the second quarter, both MAU and paying users decreased, and revenue was affected by product upgrades.

In the second quarter, MAU decreased to 10.2 million, with a decrease of 80,000 paying users, mainly due to the reduction in marketing costs and the initial improvement in product experience leading to short-term pressure on conversion rates. Despite the decrease in paying users, the payment rate has slightly decreased, and the pool of paying users has increased by 18% annually. In order to optimize user experience, product upgrades focus on strengthening new user applications and simplifying core dating experiences, although this may impact revenue in the short term, it is reducing the negative impact through continuous optimization.

Financial and Market Strategy Analysis Q2: Parallel Growth in Domestic and Overseas Markets

In the second quarter, the company effectively controlled the decline in user payment rate by optimizing product design and pricing strategies, achieving continuous growth in application revenue. Although the number of paying users decreased, the decrease in revenue was much smaller than the decrease in users. Overseas business grew rapidly, especially in the Middle East region, with significant increases in paying users and revenue through product optimization and the efforts of local teams. However, considering the segmented demands of different user groups and the increase in channel investment costs, the company has decided to cautiously promote overseas market expansion, focusing on improving products and optimizing user acquisition costs.

Overseas Investment and Brand Reshaping: Strategy Sharing Focused on Growth and Profit Balance.

Discussed the strategy of increasing channel investment to balance growth and profit, emphasizing the importance of reshaping brand and product in overseas markets, especially in Southeast Asia and among overseas Chinese markets. Focus on providing high-quality dating experiences, driving Panton International as a pilot project to strengthen presence overseas, and offering effective crossover services from online to offline.

Financial Review of the Second Quarter of 2025: Revenue and Tax Impacts

In the second quarter of 2025, total revenue was 26.2 billion RMB, non-GAAP net profit was 451.9 billion, a year-on-year increase of 1%. Mainland China revenue was 21.4 billion, a year-on-year decrease of 11% but a sequential increase of 3%, mainly affected by the macroeconomic environment and a decrease in advertising users. It is worth mentioning that mainland China's profit incurred a one-time income tax expense of 547.9 billion, which does not reflect regular operations.

Financial performance and cost control strategy for the second quarter of 2025, non-GAAP.

The report disclosed that overseas revenue for the second quarter of 2025 increased by 73% compared to the same period last year. It provided a non-GAAP analysis of costs and revenue, pointing out the reasons for the decrease in gross profit margin, including the increase in payment rates due to the structured revenue transfer in overseas markets, one-time SS payments, and rising payment costs. Non-GAAP research and development expenses remained stable, while sales and marketing expenses decreased. An analysis of operational income and profit margins showed that cost control strategies were effective.

Analysis of income tax expenses and cash flows in the second quarter of 2025 and future prospects.

In the second quarter of 2025, the company adjusted its tax rate due to the request from the Chinese tax authorities, resulting in an additional 547.9 million RMB of tax prepayment, of which 356.1 million RMB has already been paid. The total tax expense is 638 million RMB, excluding the prepayment, and the non-GAAP effective tax rate is expected to be around 11%. The total cash and cash equivalents decreased from 1.473 billion RMB as of December 31, 2024 to 1.239 billion RMB as of June 30, 2025, mainly due to loan repayments and dividend payments. Revenue for the third quarter is forecasted to be between 2.59 billion and 2.69 billion RMB, with a decrease in the mainland China business and growth in overseas business.

Q&A session: Chinese question and guidance for English translation

Before the Q&A session of the meeting starts, participants were instructed to ask questions in Chinese and then provide their own English translation. Additionally, instructions were given on how to use the telephone keypad to ask questions or cancel requests.

Exploring AI Applications and Strategies: From Tool Innovation to Future Outlook

The conversation discussed prospects for the second half of the year and the application of AI tools such as AI greetings and chat assistants after initial tasks exceeded expectations. Both parties expressed their thoughts and strategies on AI applications, emphasizing innovation and practice of AI tools in different scenarios, as well as planning and expectations for the future.

Analysis of Q2 Performance Growth and AI Application Strategy in Social Platform

In the second quarter, the performance of the social platform saw a sequential increase due to seasonal recovery, and operating costs were reduced by hosting international competitions with non-cash rewards. In response to challenges posed by the new tax laws, operational policies were adjusted to ensure compliance and stable revenue. AI technology was integrated into existing products to enhance user experience, particularly in the area of social networking, where an AI role-playing game was well received in the Japanese market. Investment in underlying technology research and development was increased to enhance the value of overseas social products.

Product upgrades affect and strategy adjustments to optimize user classification and revenue.

To deal with the user classification and revenue pressure brought by product upgrades, a classification strategy based on factors such as real user verification, engagement, and payment history was adopted. Customized exposure and monetization schemes were implemented, such as adjusting matching rates and paywall design to increase conversion rates of high-potential users. At the same time, UI design was optimized, emphasizing the display of key information such as age and lifestyle descriptions. These adjustments effectively alleviated revenue pressure, promoted organic user growth, and laid the foundation for reducing channel investment and recovering user base and revenue in the future.

Overseas revenue continues to grow rapidly, and the company looks forward to a stable development in the future.

The strong growth of overseas business was discussed, particularly in social entertainment and overseas dating services, emphasizing breakthroughs in the Netherlands and the Amal market, as well as optimistic expectations for the acquisition of the dating app brand 'Happen'. While the strict process requirements may affect year-on-year growth in the short term, in the long term, overseas revenue is expected to maintain healthy and steady growth, becoming a key driver of international income.

Overseas business growth and profit strategy adjustments: analysis of the impact of tax issues.

Discussed the company's overseas business growth strategy, including slowing down Q2 growth moderately to maintain profitability, with Q3 growth expected to slow to around 60% and a return to acceleration in Q4. Emphasized the contribution of emerging brands to margin improvement, as well as plans to optimize return on investment. Also mentioned the impact of changes in income tax policies on the company and the industry, with investors expressing concern about this.

Revenue outlook for 2025: domestic decline, overseas growth, cost optimization to boost profits.

The discussion is focused on the revenue trends of the group in 2025. It is expected that domestic revenue will show a low double-digit year-on-year decline, while overseas markets are expected to achieve around 70% year-on-year growth. Overall, group revenue may remain stable or slightly decrease. Despite facing pressure from tightened tax policies and macroeconomic uncertainty, it is expected that the impact on gross profit margins can be effectively mitigated through adjustments to revenue distribution policies and cost control. It is particularly noted that, despite significant reductions in marketing expenses, the improvement in product optimization and monetization strategies has supported the resilience of revenue, with profitability expected to significantly improve.

Analysis of the adjustment of group gross profit margin expectations and the cost of overseas expansion in 2025.

Discussed the possibility of the group's gross profit margin fluctuating in 2025 due to adjustments in business structure, and predicted that the gross profit margin will be close to the lower end of the guidance range. At the same time, research and development and marketing expenses will be optimized and increased to support overseas growth, with operating profit margin expected to be in a lower range. Despite facing short-term challenges such as tax audits, the annual gross profit margin remains stable overall, in line with previous guidance.

The impact of the tax department's adjustment of the dividend tax policy on Hong Kong-funded enterprises.

The tax department's new interpretation of the regulations states that starting in April 2024, Hong Kong-based companies will need to pay a 10% standard tax rate on dividends instead of the previous 5% preferential tax rate. This adjustment not only affects the company in question but also suggests that similar reviews may be faced by others in the industry. While the company is confident in the initial assessment of reasonableness, they have complied with the latest guidance to adjust their accounting practices, emphasizing that this is a complex legal interpretation process.

要点回答

Q：What were the financial performance highlights for the second quarter?

A：Financial performance highlights for the second quarter include total group revenue of 2.62 billion RMB, down 3% year over year; domestic revenue of 2.8 billion RMB, down 11% year over year; overseas business revenue of 442 million RMB, up 73% year over year; and adjusted operating income of 448 million RMB, down 6% from Q2 last year, with a margin of 17%.

Q：What updates were provided on the execution of strategic goals?

A：Updates on the execution of strategic goals include the focus on productivity for Momo, improving the coordinating experience for Tantan, and growing the overseas business while stabilizing domestic business. The company continued to drive rapid revenue growth with controllable costs and expenses.

Q：What were the user acquisition efforts and results on the Momo app?

A：User acquisition efforts on the Momo app focused on reducing investments in channels with negative ROI and refining the approach based on ROI. Unit acquisition costs decreased, and the overall user base remained stable despite increased channel investments. Momo app had 3.5 million paying users, a sequential decrease of 0.6 million due to ongoing cost-cutting efforts in user acquisition.

Q：How did the revenue from Momo's core business and broadcasting activities perform?

A：Revenue from Momo's core business and broadcasting activities declined by 11% year over year to 1.85 billion RMB. The decrease was mainly due to reduced spending sentiment among high-paying users in the live streaming experience. However, efforts to enhance the chat room experience among cohort users and product innovations helped stimulate consumption and increase bus revenue by 4% from the last quarter.

Q：What strategy did Hong Kong implement to maintain profitability and how did it affect user numbers?

A：To maintain profitability amidst revenue pressure, Hong Kong continued its strategy of reducing channel investment, aiming for a plan initiated at the start of the year with a target ROI of over 100%. This resulted in a decrease in channel traffic, putting pressure on the overall user scale. However, organic user growth showed a positive trend, and the MAU for Hong Kong reached 10.2 million, down 5% from the last quarter. The number of paying users in Hong Kong decreased by 80,000 to 720,000, partially due to the improvement in user experience associated with the product upgrade.

Q：What impact has the new version of the dating app had on user experience, paying rate, and monetization?

A：The new version of the dating app has had a positive impact on user experience, which in turn has affected the paying rate and usage of attention. The upgraded version was fully rolled out in Q2, and measures are being taken to mitigate negative impacts on user matrix and monetization through continuous product fine-tuning.

Q：What is the progress in user acquisition costs and monetization strategies?

A：Unit acquisition costs have narrowed and increased slightly compared to the last quarter. The I remained stable with a significant year-over-year and quarter-over-quarter growth in monetization and Tans profitability. The company has also seen a revenue decline with a smaller decrease in the number of paying users.

Q：How has the overseas revenue trend been and what factors drove the year-over-year growth?

A：Overseas revenue reached 442 million RMB, up 73% year over year and 7% quarter over quarter. The growth was driven by the audio and video-based social product, product optimization in the Mena region, and the conversion of pay accounts, which resulted in sequential revenue growth from a high base.

Q：What is the strategy regarding the overseas acquisition and why is it more prudent to be cautious?

A：The strategy for overseas acquisition is cautious, with a planned increase in channel investment only after reaching a set level of ROI. The aim is to balance growth and the bottom line to avoid compromising the top-line expansion through cost牺牲. The company is also trying to penetrate the market with a standalone app and is focusing on improving app and optimizing acquisition costs.

Q：What are the current focuses of the overseas business and the progress of the Singapore team?

A：The current focus of the overseas business is on the dating market across developed countries, with the Singapore team contributing a double-digit percentage of total overseas revenue, primarily driven by Tantan International. The Singapore team has reshaped the product and branding strategy, moving from balancing entertainment and dating to focusing on the core dating experience for overseas Chinese and other Asian country users. Hong Kong International revenue has now stabilized, and the company plans to focus on dating and growth opportunities in overseas Chinese communities and the Southeast Asian market.

Q：What are the financial review results for the second quarter?

A：The total revenue for the second quarter was 2.62 billion renminbi. After adjustments for withholding income taxes and a one-off tax expense item, the non-GAAP net income for the quarter was 451.9 million renminbi, up 1% from Q2 last year. The revenue items showed a decrease in PRC mainland fast revenue due to soft consumer sentiment and a year-over-year increase in overseas revenue driven by multiple social entertainment and dating brand expansion. The non-GAAP cost of revenue, gross margin, and operating income were 1.60 billion renminbi, 38.8%, and 414.447.7 million renminbi, with a margin of 17.1%, respectively. Income tax expenses for the quarter were 638 million RMB.

Q：How much of the additional withholding tax was related to dividends paid by the company in 2024 and the first half of 2025?

A：Of the total additional withholding tax of 356.1 million renminbi, the amount related to dividends paid by the company in 2024 and the first half of 2025 was 356.1 million renminbi, and this amount has been paid in September 2025.

Q：What is the main reason for the decrease in cash reserves as of June 30, 2025?

A：The decrease in cash reserves as of June 30, 2025, was primarily attributable to the repayment of a 1.76 billion renminbi bank loan, including accrued interests, and the payment of cash dividends of an equivalent of 346 million renminbi to shareholders in the first half of 2025.

Q：What is the estimated range for the company's third quarter revenue and what factors are considered?

A：The estimated range for the company's third quarter revenue is from 2.59 billion to 2.69 billion renminbi. This estimate is based on the assumption that year-over-year, mainland China business will decrease mid to low single digits while overseas revenue is expected to grow in the mid-sixties.

Q：How is the company integrating AI into its existing social products?

A：The company is integrating AI into existing social products to enhance user experience, particularly in the areas of ice-breaking conversations and maintaining ongoing interactions. Through product operations and AI-assisted features, such as chat advice, the company aims to address user pain points and provide a better user experience. Additionally, the company has launched a standalone AI character roleplay chat app in Japan, which is doing well in the market and is part of ongoing efforts to modernize the AI integration.

Q：What measures has the company taken to address the impact of the product upgrade on pay ratios?

A：The company has recently launched a new Hong Kong product that has increased the number of users' complete application and profile pages, showing more comprehensive information. However, this improvement has put some pressure on revenue adjustments.

Q：What approach did the company adopt in Q2 for user classification and monetization strategies?

A：In Q2, the company adopted a user classification approach that groups users based on factors like complete real person verification, engagement levels, paying histories, and parental status. They implemented tailored exposure strategies and monetization approaches, including adjusting matching rates and paywall design for users with high paying potential, as well as dividing domestic cities into tiers based on user engagement level and regional consumption capacity.

Q：What are the two strategies to maximize revenue mentioned in the speech?

A：To maximize revenue, the company's goal is to either increase the paying ratio or grow the number of paying users. The strategies include enhancing user experience through UI design and court saving features, as well as highlighting key information on the home page. This focus on user experience is believed to have helped drive organic user growth and usage extension.

Q：How has the shift towards organic user acquisition through marketing channels been changing?

A：Since the start of the year, there has been a steady increase in organic user acquisition, surpassing the previous majority of users acquired through marketing channels. The improved user experience provided by the product has laid a solid foundation for recovering the user base and revenue following a reduction in channel investment.

Q：What factors contributed to the rapid growth of the overseas business in the first half of the year?

A：The rapid growth of the overseas business in the first half of the year was attributed to continuous breakthroughs in Holland land and Amar, maintaining steady growth momentum across the social entertainment business. Despite increased China investment, the ROI consistently met targets, allowing for revenue growth and improving profitability. The social entertainment business could have grown even faster in Q2 and Q3 due to the strict process requirements set by the group aiming for higher flow. The company's dating business also performed very well, with the stabilization of overseas operations and acquisitions that have significant untapped potential in the European market.

Q：What is the revenue forecast for the second half of the year and the overseas business outlook?

A：For the second half of the year, Q3 is expected to have a year-over-year growth rate of around 60% as the company deliberately paces marketing spend and focuses on improving revenue through optimizing user acquisition costs and enhancing ARPU. Non-social emerging brands are continuing to accelerate at a critical digit pace and will become increasingly important growth drivers as the year progresses. By Q4, with the effects of ROI optimization and contributions from newer brands, overseas growth is expected to reaccelerate again. For the overseas revenue outlook, it is anticipated to grow around 70% for the whole year.

Q：What is the expected impact of recent tax scrutiny on the company's revenue and profitability?

A：Recent tax scrutiny has led to some pressure on momosa added services in the second half of the year. This has caused fluctuations in revenue and gross margins, particularly in Q3 and Q4. The company adjusted its revenue sharing policy to offset part of the impact, keeping the overall effect on top-line manageable. Time performance has been a positive surprise, showing resilience despite significant cost savings and a stabilizing revenue trend. For the full year 2025, the group expects a low teens year-over-year decline in domestic revenue, offset by strong growth in overseas, resulting in a slight downside or flat comparison to 2024.

Q：How is the company managing the mixed forces that affect gross margin expectations?

A：The company is managing mixed forces affecting gross margin expectations by slightly raising payout ratios to support domestic agencies and performers adapting to the new tax environment, which could lead to a 1 to 2 percentage point increase in overall payout. Additionally, the increasing contribution of overseas revenue and the shift across businesses make it difficult to predict group-level margin expectations. However, the adjusted gross margin is expected to land closer to the lower end of the range, with an estimated adjusted gross margin of 39% in 2024 and a guided range of around 36 to 37% for 2025.

Q：What caused the decrease in adjusted gross margin in the last quarter and what is the current expectation?

A：The decrease in adjusted gross margin in the last quarter was due to the recent interpretation by the tax authorities regarding the applicable withholding tax rate for dividends distributed by the company. The authorities determined the standard 10% rate should apply instead of the 5% preferential rate under the mainland China and Hong Kong tax arrangement. As a result, adjusted gross margin is expected to decrease to the lower end of the previously guided range, with a projected adjusted gross margin of around 36 to 37% for 2025.

Q：What is the company's understanding of the tax scrutiny they are facing and how widespread is this issue?

A：The company believes that the tax scrutiny they are facing is not unique to them and is common to many companies with similar structures that have followed the same practice. The tax authorities have reassessed the preferential dividend tax rate that was previously applied and now require a 10% standard rate. The company continued to believe their initial assessment was reasonable, but they have adjusted their accounting in compliance with the authority's latest guidance. Many companies with similar structures have faced similar scrutiny, according to discussions with third-party advisors and the authorities.

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