Hello Group Inc. Q2 FY2025 earnings call

• For Momo: Focus on maintaining the productivity of the cash cow business, enhancing user track experience with AI features (e.g., in-house developed AI greeting and chat assistant features), refining user acquisition based on ROI, and optimizing acquisition materials for high ARPPU users.
• For Tantan: Maintain and improve core dating experience, build efficient business model, conduct product upgrades (strengthening view user application, simplifying UI layout), optimize user acquisition to achieve 100% ROI, and restructure membership packages to mitigate impact of product upgrades on paying ratio.
• For overseas business: Continue deepening presence in overseas markets, with overseas revenue growing rapidly, optimizing products and channels in the MENA region, and focusing on dating market in developed countries, including Tantan International's stabilization and potential as a growth engine.

In Q2 '25, total group revenue was RMB 2.62 billion, down 3% year-over-year. Domestic revenue was RMB 2.18 billion (11% of group revenue), down 11% y/y; overseas revenue was RMB 442 million (17% of group revenue), up 73% y/y. Adjusted operating income was RMB 448 million, down 6% from Q2 last year with a margin of 17%. Momo's value-added service revenue was RMB 1.85 billion, down 11% y/y. Tantan's onshore revenue in Q2 was RMB 160 million, down 18% y/y, with ARPPU up 18% y/y. Overseas revenue in Q2 was RMB 442 million, up 17.3% y/y and 7% quarter-over-quarter, accounting for 17% of group revenue compared to 10% in the same period last year.

• Third quarter revenue is estimated to be in the range of RMB 2.59 billion to RMB 2.69 billion, representing a decrease of 3.2% to an increase of 0.6% year-over-year. Overseas revenue is expected to grow mid-60s in Q3. Nonsocial emerging brands are continuing to accelerate at a triple-digit pace and will be an important growth driver. By Q4, overseas growth is expected to reaccelerate as ROI optimization takes effect and with contributions from newer brands.

• Tax withholding changes: Accrual of additional withholding income tax of RMB 547.9 million related to prior periods, with the tax rate changing from 5% to 10% for dividends paid by the WOFE in Mainland China to its offshore parent company. - Macro factors: Soft consumer sentiment and weak macro environment affecting live streaming spending and high-paying user behavior. - Product upgrade impact: Tantan's product upgrade had a negative impact on paying ratio and user retention initially, though efforts are being made to mitigate this through product fine-tuning.

Q: Can you talk about the second half outlook and AI application?

A: Momo revenue recovery due to seasonal factors and nonbonus-oriented competition events; AI integrated into social products to enhance user experience, with applications like AI-assisted icebreaking and a stand-alone AI character role play in chat in Japan.

Q: Can management elaborate more details of measures taken to restructure membership package?

A: Adopted user classification approach, tailored exposure strategy and monetization approaches for different user groups, divided domestic cities into tiers, developed suitable membership packages, and adjusted UI design to highlight key information.

Q: Your views on sustainability of strong overseas growth?

A: Focus on improving ARPU and ROI, with overseas business seeing strong momentum across social and emerging brands, emerging brands growing triple-digit, and overseas dating brands as key growth drivers in the future.

Q: Any change in terms of profit margin and withholding tax issue?

A: Margin outlook: Gross margin expected closer to lower end of prior range due to live streaming and tax scrutiny; withholding tax: Accrual of additional tax related to prior periods, with the issue not unique to the company and industry-wide context noted.