What happened
Shares of Hello Group (MOMO 0.67%) fell 9.4% on Thursday as disappointing forward guidance overshadowed better-than-feared second-quarter 2023 results from the Chinese mobile social and entertainment platform.
To be sure, Hello Group's quarterly net revenue climbed a modest 0.9% year over year to $432.7 million, exceeding estimates for a 3.4% decline. That translated to adjusted (non-GAAP) net income of $87.2 million, or $0.43 per American depositary share (ADS), again beating expectations for adjusted earnings of $0.35 per ADS.
So what
To be fair, management pointed out that this was the company's first year-over-year increase in revenue since the pandemic began three years ago, thanks largely to stabilization from the "cash cow business" of its core Momo app. Growth was primarily driven by an increase in revenue from new stand-alone apps and live video services within Momo.
More concerning, however, is that Momo app total paying users declined around 8% year over year to 7.9 million. And monthly active users (MAUs) for Hello Group's Tantan application fell more than 30% year over year to 17.3 million, leading to a 36% drop in paying Tantan users during the quarter to 1.4 million.
The company also noted that, as of Aug. 31, 2023, it has repurchased 12.1 million ADS for $57.2 million (an average price of $4.72 per ADS) under a $200 million share-repurchase plan authorized in June.
Now what
Looking ahead to the (current) third quarter of 2023, Hello Group expects total revenue to decline in the range of 10.3% to 7.2% from last year's Q3 -- well below consensus expectations calling for a decline of around 5.8%.
In the end, Hello Group may have improved operating efficiency and briefly returned to top-line growth. But given its weak forward outlook, the company obviously has its work cut out for it as long as the user base of its core apps continues to shrink.
