Beaten Down Chinese Online Social Networking Stock Hello Group's Q3 Earnings Reveal a Mixed Bag

Hello Group Inc MOMO reported a third-quarter FY23 net revenue decline of 5.9% year-on-year to $417.1 million, versus the consensus of $417.2 million.

China's mobile-based social and entertainment services provider reported an adjusted net income per ADS of $0.42, versus the consensus of $0.35.

Drivers: Monthly Active Users (MAU) on the Tantan application were 15.7 million in September 2023, down from 20.9 million in September 2022.

The total number of paying users of its Momo app declined from 8.4 million in Q3 FY22 to 7.8 million in Q3 FY23. Tantan had 1.4 million paying users for Q3 FY23 versus 2.0 million in Q3 FY22.

Segments: Revenues from the Live video service declined by 7.6% Y/Y to $209.8 million, Total value-added service decreased by 4.6% Y/Y to $201.0 million, Mobile marketing increased by 8.7% Y/Y to $4.2 million, and Mobile games rose 1.9% Y/Y to $1.1 million.

Net revenues from the Momo segment declined by 5.1% Y/Y to $376.0 million, while the Tantan segment revenues decreased by 13.6% to $40.4 million.

Adjusted income from operations improved to $93.4 million. 

Hello Group held $1.87 billion in cash and equivalents and generated $79.8 million in operating cash flow.

Chair and CEO Yan Tang said, "The group level profitability continued to grow from the prior year period, thanks to our effective cost optimization and efficiency improvement initiatives, which enabled us to maintain the stability of Momo cash cow business, turn Tantan profitable as well as support the development of new endeavors."

Outlook: Hello sees a Q4 revenue of RMB 2.9 billion - RMB 3.0 billion (a decrease of 9.7% - 6.6% year over year) versus the consensus of $414.39 million.

The stock has lost 30.9% year-to-date.

Price Action: MOMO shares traded higher by 8.37% at $7.12 premarket on the last check Friday.