Hello Group Inc. Announces Unaudited Financial Results for the Second Quarter of 2022

BEIJING, Sept. 1, 2022 /PRNewswire/ -- Hello Group Inc. (NASDAQ: MOMO) ("Hello Group" or the "Company"), a leading mobile social and entertainment platform in China, today announced its unaudited financial results for the second quarter of 2022.   

Second Quarter of 2022 Highlights

• Net revenues decreased by 15.3% year over year to RMB3,110.4 million (US$464.4 million*) in the second quarter of 2022.
• Net income attributable to Hello Group Inc. decreased to RMB345.6 million (US$51.6 million) in the second quarter of 2022, from RMB464.2 million in the same period of 2021.
• Non-GAAP net income attributable to Hello Group Inc. (note 1) decreased to RMB463.5 million (US$69.2 million) in the second quarter of 2022, from RMB551.0 million in the same period of 2021.
• Diluted net income per American Depositary Share ("ADS") was RMB1.68(US$0.25) in the second quarter of 2022, compared to RMB2.15 in the same period of 2021.
• Non-GAAP diluted net income per ADS (note 1) was RMB2.22(US$0.33) in the second quarter of 2022, compared to RMB2.54 in the same period of 2021.
• Monthly Active Users ("MAU") on Momo application were 111.2 million in June 2022, compared to 115.6 million in June 2021. MAU on Tantan application were 24.8 million in June 2022.
• For the Momo app total paying users was 8.6 million for the second quarter of 2022, compared to 9.3 million for the same period last year. Tantan had 2.2 million paying users for the second quarter of 2022 compared to 3.1 million from the year ago period.

First Half of 2022 Highlights

• Net revenues decreased 12.4% year over year to RMB6,258.5 million (US$934.4 million) for the first half of 2022.
• Net income attributable to Hello Group Inc. was RMB635.5 million (US$94.9 million) for the first half of 2022, compared to RMB925.8 million during the same period of 2021.
• Non-GAAP net income attributable to Hello Group Inc. (note 1) was RMB862.0 million (US$128.7 million) for the first half of 2022, compared to RMB1,184.6 million during the same period of 2021.
• Diluted net income per ADS was RMB3.11 (US$0.46) for the first half of 2022, compared to RMB4.29 during the same period of 2021.
• Non-GAAP diluted net income per ADS (note 1)was RMB4.16 (US$0.62) for the first half of 2022, compared to RMB5.45 during the same period of 2021.

"The COVID resurgence in the first half of 2022 has brought many challenges and uncertainties to the overall market environment and our execution of strategic goals. However, I'm pleased to see that our team managed to deliver good results in the second quarter by adjusting our product and operational initiatives in a timely manner to cope with external headwinds, at the same time adapting our execution plan to fit the evolving external environment." commented Li Wang, CEO of Hello Group.

Second Quarter of 2022 Financial Results

Net revenues

Total net revenues were RMB3,110.4 million (US$464.4 million) in the second quarter of 2022, a decrease of 15.3% from RMB3,671.7 million in the second quarter of 2021.

Live video service revenues were RMB1,520.0 million (US$226.9 million) in the second quarter of 2022, a decrease of 27.7% from RMB2,101.3 million during the same period of 2021. The decrease was primarily attributable to consumption softness caused by the macro uncertainties including COVID resurgence, regulatory changes, and to a lesser extent the strategic decision to de-emphases Tantan's live streaming business.

Value-added service revenues mainly include virtual gift revenues and membership subscription revenues. Total value-added service revenues were RMB1,536.4 million (US$229.4 million) in the second quarter of 2022, an increase of 1.9% from RMB1,507.3 million during the same period of 2021. The year-over-year increase was primarily attributable to the rapid revenue growth from the new standalone apps. The increase was partially offset by the decrease in Tantan's value-added service due to the demonetization process to improve user experience and retention, as well as COVID's negative impact on users' dating sentiment and propensity to pay for VAS.

Mobile marketing revenues were RMB35.9 million (US$5.4 million) in the second quarter of 2022, a decrease of 30.4% from RMB51.6 million during the same period of 2021. The decrease in mobile marketing revenues was due to the negative impact of macro headwind on client's advertising budget, and our product adjustment to address new regulation requirement.

Mobile games revenues were RMB17.2 million (US$2.6 million) in the second quarter of 2022, an increase of 87.3% from RMB9.2 million in the second quarter of 2021, primarily due to one new mobile game launched in the second half of 2021.

Net revenues from the Momo segment decreased from RMB3,157.5 million in the second quarter of 2021 to RMB2,779.5 million (US$415.0 million) in the second quarter of 2022, primarily due to the decrease in net revenues from live video service. Net revenues from the Tantan segment decreased from RMB513.5 million in the second quarter of 2021 to RMB330.8 million (US$49.4 million) in the second quarter of 2022, due to our strategy to lower the monetization level in order to improve user experience and retention, as well as the impact from the elevated COVID situations.

Cost and expenses

Cost and expenses were RMB2,804.8 million (US$418.7 million) in the second quarter of 2022, a decrease of 8.8% from RMB3,075.6 millionin the second quarter of 2021. The decrease was primarily attributable to: (a) a decrease in revenue sharing with broadcasters related to Momo's core live video service and Tantan's live video service, which was partially offset by an increase in revenue sharing with virtual gift recipients for our virtual gift service; (b) a decrease in depreciation and amortization cost due to the impairment of intangible assets in 2021; (c) a decrease in marketing and promotional expenses by improving marketing efficiency of Momo and Tantan, which was partially offset by an increase to promote our new app "Tietie"; and (d) a decrease in salary expenses, due to our continuous optimization in personnel costs since the beginning of the year.

Non-GAAP cost and expenses (note 1) were RMB2,686.9 million (US$401.1 million) in the second quarter of 2022, a decrease of 9.8% from RMB2,980.1 million during the same period of 2021.

Other operating income

Other operating income was RMB40.6 million (US$6.1 million)in the second quarter of 2022, a decrease from RMB90.3 million during the second quarter of 2021. The other operating income mainly consisted of government incentives.

Income from operations

Income from operations was RMB346.2 million (US$51.7 million)in the second quarter of 2022, compared to RMB686.3 million during the same period of 2021. Income from operations of the Momo segment wasRMB483.5 million (US$72.2 million) in the second quarter of 2022, which decreased from RMB711.3 million in the second quarter of 2021. Loss from operations of the Tantan segment was RMB131.3 million (US$19.6 million) in the second quarter of 2022, compared to loss from operations of RMB11.9 million in the second quarter of 2021.

Non-GAAP income from operations (note 1) was RMB464.1 million (US$69.3 million) in the second quarter of 2022, compared to RMB781.9 million during the same period of 2021. Non-GAAP income from operations of the Momo segment wasRMB589.2 million (US$88.0 million)in the second quarter of 2022, which decreased from RMB835.8 millionin the second quarter of 2021. Non-GAAP loss from operations of the Tantan segment was RMB119.0 million (US$17.8 million) in the second quarter of 2022, compared to non-GAAP loss from operations of RMB40.9 million in the second quarter of 2021.

Other gain or loss, net

Other gain was RMB66.3 million (US$9.9 million) in the second quarter of 2022, which was resulted from the Company repurchased some of our convertible senior notes from certain bond holders in the second quarter of 2022, compared to a loss of RMB10.5 million in the same period of 2021.

Income tax expenses

Income tax expenses were RMB146.0 million (US$21.8 million) in the second quarter of 2022, compared to RMB291.5 million in the second quarter of 2021. The decrease was primarily due to the following reasons: (a) the lower profit in the second quarter of 2022; (b) in the second quarter of 2022, we accrued withholding income tax of RMB37.7 million (US$5.6 million)on undistributed earnings generated in the second quarter of 2022by our wholly-foreign owned enterprise ("WFOE"),because we plan to remit WFOE's earnings to its offshore parent company in the foreseeable future to fund its demand on US dollar in business operations, payments of dividends, potential investments, etc. In the second quarter of 2021, the Company distributed dividends of RMB1,300.0 million from our WFOE in China to our offshore entity and paid withholding income tax of RMB130.0 million.

Net income

Net income was RMB344.3 million (US$51.4 million) in the second quarter of 2022, compared to RMB461.5 million during the same period of 2021. Net income from the Momo segment was RMB482.0 million (US$72.0 million) in the second quarter of 2022, compared to RMB481.3 million in the same period of 2021. Net loss from the Tantan segment was RMB131.7 million (US$19.7 million) in the second quarter of 2022, compared to net loss of RMB6.7 million in the second quarter of 2021.

Non-GAAP net income (note 1) was RMB462.3 million (US$69.0 million) in the second quarter of 2022, compared to RMB548.3 million during the same period of 2021. Non-GAAP net income from the Momo segment wasRMB587.6 million (US$87.7 million) in the second quarter of 2022, which decreased from RMB605.8 million in the second quarter of 2021. Non-GAAP net loss of the Tantan segment was RMB119.4 million (US$17.8 million) in the second quarter of 2022, compared to non-GAAP net loss of RMB44.5 million in the second quarter of 2021.

Net income attributable to Hello Group Inc.

Net income attributable to Hello Group Inc. was RMB345.6 million (US$51.6 million) in the second quarter of 2022, compared toa net income of RMB464.2 million during the same period of 2021.

Non-GAAP net income (note 1) attributable to Hello Group Inc. was RMB463.5 million (US$69.2 million) in thesecond quarter of 2022, compared to RMB551.0 million during the same period of 2021.

Net income per ADS

Diluted net income per ADS was RMB1.68 (US$0.25) in the second quarter of 2022, compared toRMB2.15 in the second quarter of 2021.

Non-GAAP diluted net income per ADS (note 1) was RMB2.22(US$0.33)in the second quarter of 2022, compared to RMB2.54in the second quarter of 2021.

Cash and cash flow

As of June 30, 2022, the Company's cash, cash equivalents, short-term deposits, long-term deposits, short-term restricted cash and long-term restricted cash totaled RMB13,947.2 million (US$2,082.3 million), compared to RMB15,707.0 million as of December 31, 2021. The decrease of cash, cash equivalents, short-term deposits, long-term deposits, short-term restricted cash and long-term restricted cash was mainly due to the cash dividend we paid to our shareholders and payment for repurchase of convertible senior notes in the second quarter of 2022.

Net cash provided by operating activities in the second quarter of 2022 was RMB200.3 million (US$29.9 million), compared to a net cash used in operating activities of RMB167.8 million in the second quarter of 2021. For the second quarter of 2022, included in our cash provided by operating activities is RMB100.0 million (US$14.9 million) of cash payment to Chinese tax authorities to repatriate RMB1,000.0million (US$149.3 million) from our WFOE in China to our offshore entity. For the second quarter of 2021, included in our cash used in operating activities isRMB678.2 million of cash payment to Tantan founders to settle the previously granted liability-classified share options upon their termination of services with Tantan.

First Half of 2022 Financial Results

Net revenues for the first half of 2022 were RMB6,258.5 million (US$934.4 million), a decrease of 12.4% from RMB7,142.3 million in the same period of 2021.

Net income attributable to Hello Group Inc. was RMB635.5 million (US$94.9 million) for the first half of 2022, compared to RMB925.8 million during the same period of 2021.

Non-GAAP net income attributable to Hello Group Inc. (note 1) was RMB862.0 million (US$128.7 million) for the first half of 2022, compared to RMB1,184.6 million during the same period of 2021.

Dilutednet income per ADS was RMB3.11(US$0.46) during the first half of 2022, compared to RMB4.29 in the same period of 2021.

Non-GAAP diluted net income per ADS (note 1) was RMB4.16(US$0.62) during the first half of 2022, compared to RMB5.45 inthe same period of 2021.

Net cash provided by operating activities was RMB243.7 million (US$36.4 million) during the first half of 2022, compared to RMB333.8 million in the same period of 2021.

Recent Development

Execution of share repurchase program

On June 7, 2022, Hello Group's board of directors authorized a share repurchase program under which the Company may repurchase up to US$200 million of its shares over the next 24 months. As of September 1, 2022, the Company has repurchased 4.18 million ADSs for US$19.2 million on the open market under this program, at an average purchase price of US$4.58 per ADS.

Business Outlook

For the third quarter of 2022, the Company expects total net revenues to be between RMB3.1 billion to RMB3.2 billion, representing a decrease of 17.5% to 14.9% year-over-year. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change, particularly as to the potential impact of the COVID-19 resurgence on the Chinese and global economies, as well as on users' paying capabilities.

Note 1: Non-GAAP measures

To supplement our consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), we, Hello Group, use various non-GAAP financial measures that are adjusted from the most comparable GAAP results to exclude share-based compensation, impairment loss on goodwill and intangible assets, amortization of intangible assets from business acquisitions, and tax impacts related to the amortization of intangible assets from business acquisitions.

Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are shown in tables at the end of this earnings release, which provide more details about the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors'overall understanding of the historical and current financial performance of our continuing operations and our prospects for the future. Our non-GAAP financial information should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to the GAAP results. In addition, our calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Our non-GAAP information (including non-GAAP cost and operating expenses,income (loss) from operations, net income (loss), net income (loss) attributable to Hello Group Inc., and diluted net income per ADS) is adjusted from the most comparable GAAP results to exclude share-based compensation, impairment loss on goodwill and intangible assets, amortization of intangible assets from business acquisitions, and tax impacts related to the amortization of intangible assets from business acquisitions. A limitation of using these non-GAAP financial measures is that share-based compensation, impairment loss on goodwill and intangible assets, amortization of intangible assets from business acquisitions, and tax impacts related to the amortization of intangible assets from business acquisitions have been and will continue to be for the foreseeable future significant recurring expenses in our results of operations. We compensate for such limitation by providing reconciliations of our non-GAAP measures to our U.S. GAAP measures. Please see the reconciliation tables at the end of this earnings release.

Conference Call

Hello Group's management will host an earnings conference call on Thursday, September 1, 2022, at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Beijing / Hong Kong Time on September 1, 2022).

Participants can register for the conference call by navigating to:

https://s1.c-conf.com/diamondpass/10024750-8qar7z.html.

Upon registration, each participant will receive details for the conference call, including dial-in numbers,conference call passcode and a unique access PIN. Please dial in 10 minutes before the call is scheduled to begin.

A telephone replay of the call will be available after the conclusion of the conference call through September 8, 2022. The dial-in details for the replay are as follows:

U.S. / Canada: 1-855-883-1031
Hong Kong:      800-930-639
Passcode:        10024750

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of Hello Group's website at https://ir.hellogroup.com.

About Hello Group Inc.

We are a leading player in China's online social and entertainment space. Through Momo, Tantan and other properties within our product portfolio, we enable users to discover new relationships, expand their social connections and build meaningful interactions. Momo is a mobile application that connects people and facilitates social interactions based on location, interests and a variety of online recreational activities. Tantan, which was added into our family of applications through acquisition in May 2018, is a leading social and dating application. It is designed to help its users find and establish romantic connections as well as meet interesting people. We also operate a number of other applications to serve different social and entertainment demands from our users.

For investor and media inquiries, please contact:

Hello Group Inc.

Investor Relations
Phone: +86-10-5731-0538
Email: ir@hellogroup.com   

Christensen

In China
Mr. Eric Yuan
Phone: +86-10-5900-1548
E-mail: Eyuan@christensenir.com  

In U.S.

Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

Safe Harbor Statement

This news release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to our management quotes, our financial outlook for the third quarter of 2022, as well as the amount of, timing, methods and funding sources for repurchases of our shares under the share repurchase program.

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for thesecond quarter of 2022 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the third quarter of 2022 and may be unable to grow our business in the manner planned. We may also modify our strategy for growth.  Moreover, there are other risks and uncertainties that could cause our actual results to differ from what we currently anticipate, including those relating to our ability to retain and grow our user base, our ability to attract and retain sufficiently trained professionals to support our operations, our ability to anticipate and develop new services and enhance existing services to meet the demand of our users or customers, the impact of the COVID-19 pandemic on the Company's business operations and the economy in China, the market price of the Company's stock prevailing from time to time, the nature of other investment opportunities presented to the Company from time to time, the Company's cash flows from operations, general economic conditions, and other factors.  For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see our filings with the U.S. Securities and Exchange Commission.

All information provided in this press release and in the attachments is as of the date of the press release. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, after the date of this release, except as required by law. Such information speaks only as of the date of this release.