Hello Group, the prominent Chinese social networking platform operator previously known as Momo, has reported disheartening financial results for its second quarter, reflecting year-over-year declines in its core segments, particularly in live video services and value-added services. The company is bracing for further downturns, forecasting a topline decrease of up to 15% in the ongoing three-month period when compared to last year.
For the third quarter, Hello Group anticipates revenue to range between 2.58 billion renminbi (approximately $362.5 million) to 2.68 billion renminbi (around $376.6 million). This projection marks an annual decline of approximately 12% to 15%, as indicated by four analysts surveyed by Capital IQ, who predict the revenue figure to hit 2.68 billion renminbi.
Chief Executive Yan Tang expressed optimism regarding the company's ability to explore new opportunities while optimizing localization efforts. "We are more convinced of the revenue growth opportunities in the overseas market," Tang stated in a Tuesday announcement. This optimism, however, was met with a 2.6% loss in the company's Nasdaq-listed shares during premarket trading.
Looking back at the quarter that ended on June 30, Hello Group's adjusted earnings per American depositary share saw a decline to 2.38 renminbi, down from 3.14 renminbi in the same period last year. Analysts had expected a lower figure of 2 renminbi. The total revenue for the company dropped by 14% year-over-year to 2.69 billion renminbi, falling short of the 2.67 billion renminbi that six analysts polled by Capital IQ had anticipated.
Tang remarked on the resilience of the team during these challenging times, stating, "I am pleased to see that our team has maintained the spirit of innovation and adaptation in a challenging environment." He emphasized the significance of Momo's primary business continuing to thrive within a healthy community ecosystem.
The revenue segment for live video services witnessed a sharp drop of 18%, totaling 1.3 billion renminbi. The company attributed this decline to various factors, including operational shifts aimed at reducing large-scale competitive events within the Momo app and a general softening of consumer trends.
In tandem, the segment for value-added services, including virtual gifts and membership subscriptions, also experienced a 10% dip, amounting to 1.35 billion renminbi. On a more positive note, mobile marketing revenue did see an increase of 14%, reaching 42 million renminbi. Additionally, the revenue derived from the Momo segment fell to 2.46 billion renminbi from 2.82 billion renminbi in the previous year.
The dating application Tantan also reported a revenue decline, falling to 233.7 million renminbi from 320.7 million renminbi the year prior. On the cost side, Hello Group successfully reduced total costs and expenses, which decreased to 2.28 billion renminbi from 2.52 billion renminbi in the previous year, showcasing the group's attempt to mitigate losses amidst the revenue declines.
In terms of stock performance, the price of Hello Group shares was noted at 6.47, reflecting a change of -0.17 and a percentage change of -2.56, indicating a challenging environment for investors and stakeholders alike. As the company navigates these financial difficulties, the focus will remain on exploring new opportunities for revenue growth and adapting to the changing market landscape..