The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Thomas Chong - Jefferies LLC - Analyst
: (spoken in foreign language)
(interpreted) During the prepared remarks, management highlights, Momo is affected by tax issue from the supply side and adjust the
revenue sharing ratio. Can management comment about the latest progress of the adjustment? And how should we think about the margin
impact.
On the other hand, can management also provide some more color why our peers didn't mention a similar issue. On the guidance we've
just given this is about low teens year-on-year decline for Momo. So just for the full year. So how should we think about the revenue trend
for this cash cow business as we come into 2026? Thank you.
Unidentified Company Representative
(spoken in foreign language)
(interpreted) Okay. Let me translate. At the end of Q2, tax authorities introduced policy adjustments related to the flexible workforce, which
officially took effect on October 1. For Momo, these adjustments primarily affect some mid-tier broadcasters and agencies in our audio and
net-based scenarios. And shortly after the adjustments were announced regional tax authorities in certain areas reached out to their local
MCMs to clarify implementation details.
And this led to a noticeable decline in work enthusiasm among supply side. even before the adjustments were formally effective, resulting
in revenue pressure for Momo app in the third quarter. Momo has maintained a relatively low revenue sharing ratio to broadcasters and
agencies compared to our peers, thanks to our unique social attribute and agencies and broadcasters are willing to accept this lower ratio
while still making considerable income.
However, this characteristic made some made them particularly vulnerable to these recent tax changes and especially some mid-tier agencies
to protect the reasonable income level of our supply-side partners. In August, we adjusted revenue sharing policy for the group's mostly
affected by the tax changes. This initiative led to a modest sequential revenue recovery in September compared to July and August.
However, entering Q4 with the formal implementation of the tax policy adjustment and tightened regulatory oversight of the agency's tax
compliance, we have observed further pressure on certain agencies and broadcasters and to partially offset these impacts, we have further
increased the revenue sharing support for the supply side.
And this additional concessions are expected to reduce the group's gross margin by approximately 1 percentage points to 2 percentage
points in the second half of 2025. On the revenue front, we had originally expected the year-on-year decline in the domestic revenue in
the second half to narrow compared to the first half. However, based on the Q3 actual results and our Q4 current outlook, this improvement
has not materialized to the extent anticipated.
Furthermore, I would like to echo earlier remarks. As one of the China's earliest mobile social platform, Momo has maintained strong brand
vitality to this day, driven by continuous product innovation and back-end algorithm optimization. Core engagement metrics such as tooling
messages, in-depth, chat rates and user retention have continued to improve steadily.
In Q3, the launch of new scenarios, particularly audio and video chats, contributed to a steady increase in the number of paying users. This
not only reflects continuous improvement -- improving connection efficiency between the platform and our users but also validates Momo's
solid operational foundation and product innovation capabilities within this open social field.
And coupled with our profit-oriented strategy and the team's effective cost control, we are fully confident that Momo will continue to deliver
meaningful profit and operating cash flow to the group. And for specific figures, I will hand over to Cathy.
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DECEMBER 10, 2025 / 12:00PM, MOMO.OQ - Q3 2025 Hello Group Inc Earnings Call
However, entering Q4, with the formal implementation of the tax policy adjustment and tightened the regulatory oversight of the agency's
tax compliance. We have observed further pressure on certain agencies and broadcasters, and to partially offset this impacts, we have
further increased the revenue sharing support for the supply side.
And this additional concessions are expected to reduce the group's gross margin by approximately 1 percentage to 2 percentage points in
the second half of 2025. On the revenue front, we had originally expected the year-on-year decline in the domestic revenue, in the second
half, to narrow compared to the first half.
However, based on the Q3 actual results and our Q4 current outlook, this improvement has not materialized to the extent anticipated.
Furthermore, I would like to echo ix earlier remarks. As one of China's earliest mobile social platform, Momo has maintained strong brand
vitality to this day, driven by continuous product innovation and back and algorithm optimization. Care engagement matrix, such as two-way
messages, in-depth chat rates, and user retention have continued to improve steadily.
In Q3, the launch of a new scenarios, particularly audio and video chats, contributed to a steady increase in the number of paying users.
This not only reflects continuous improvement, improving, connection efficiency between the platform and our users, but also validates
more and more solid operational foundation and product innovation capabilities within this open social field.
And coupled with our profit oriented strategy and the team's effective cost control, we are fully confident that Walmart will continue to deliver
meaningful profit and operating cash flow to the group.
And for specific figures, I will hand over to Cathy.
Question: Jenny Yuan - UBS AG - Analyst
: (spoken in foreign language)
(interpreted)
My question is regarding our overseas business. Overseas revenue grew 69% year-over-year in the third quarter, ahead of management's
previous guidance of 60% growth. So could you please focus through which part of this is upfront expectations?
And for the fourth quarter, we are guiding a 70% year-over-year growth in overseas revenue. So could you please break down how much
of this is driven by the organic business? And how much is driven by the consolidation impact on the newly acquired happen?
And given the trajectory, how do we expect overseas growth year? Is there a chance -- is it likely that overseas performance could fully
offset the revenue decline in the domestic market?
Unidentified Company Representative
(spoken in foreign language)
(interpreted) Okay. So in Q3, the vast majority of incremental revenue comes from the overseas business comes from audio and video-based
products in the MENA region, and driven primarily by the two new apps, Ammar and Yahalan. Our core performance metrics for the overseas
audience video-based business is (inaudible). So around midyear, as we increase the marketing spend, China ROI began to decline.
So in response, we deliberately scaled back marketing investments and plan to resume more spending only after unit acquisition cost
decrease or ARPU and gross margin improve. Accordingly, we also moderated our near-term revenue expectations for these audio and
video products.
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DECEMBER 10, 2025 / 12:00PM, MOMO.OQ - Q3 2025 Hello Group Inc Earnings Call
During Q3, the local team successfully drove ARPU growth through continued product optimization and deeper supply side partnerships,
whilst simultaneously lowering revenue sharing ratios. These efforts led to a clear improvement in which in turn has allowed us to step up
user acquisition investment again and resulting in accelerating growth momentum.
And beyond the audio video products in MENA our overseas dating portfolio also delivered solid performance in Q3. Notably, following the
brand repositioning led by the Singapore team, Tantan International has begun migrating users to its refresh international version.
The migration is progressing in line with our expectations. And both revenue and profit has stabilized and returned to growth for the first
time in nearly a year and product features and new designs tailored specifically for overseas kinase users have laid a strong foundation for
Tantan International to deepen this presence in Southeast Asia and other global markets.
And furthermore, the AI-powered role playing dating app we launched in Japan a year ago, has made significant revenue progress. And
we accept this contribution to overseas revenue to grow steadily as we continue upgrading the AI model and the product matures.
On the M&A front, we completed the acquisition of the branch stating brand happened in September, and while its contribution to Q3
revenue was limited, it is expected to make a more meaningful impact on our Q4 overseas performance.
As for growth outlook for next year, I will hand it over to Cathy for more details.
Question: Leo Chiang - Deutsche Bank AG - Analyst
: (spoken in foreign language)
(interpreted) Let me translate. Thanks management, for taking my question. My question is regarding to the company's and manage strategy
to ensure the peace. Some focus on maybe doing M&A such as industry geography revenue (technical difficulty)
Question: Leo Chiang - Deutsche Bank AG - Analyst
: Is that better now?
Question: Leo Chiang - Deutsche Bank AG - Analyst
: Okay. Yeah. So question is regarding to the company's M&A strategy. Could management share the key factors the company focus on
when doing M&A, such as industry, geography, revenue and profit and for the acquired products, will the company be actively involved in
the business management? Thank you.
Unidentified Company Representative
Okay. Thank you.
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DECEMBER 10, 2025 / 12:00PM, MOMO.OQ - Q3 2025 Hello Group Inc Earnings Call
Question: Xueqing Zhang - CICC - Analyst
: (spoken in foreign language)
(interpreted) Thanks for taking my question, and my question is about profit margin and shareholder returns. And previously mentioned that
the fastest growing overseas audio and video based social business has a lower gross margin compared to domestic one.
Additionally, more and more recently adjusted its revenue sharing ratio. So how should we view the overall gross margin going forward?
More than many of our overseas initiatives are still in the investment phase. So does it imply that your profit margin may further decline next
year and would this impact decisions regarding shareholder returns. Thank you.
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DECEMBER 10, 2025 / 12:00PM, MOMO.OQ - Q3 2025 Hello Group Inc Earnings Call
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