Hello Group Inc. (MOMO) reported a notable earnings beat in its third-quarter results for 2024, with earnings per share (EPS) of $2.46 surpassing the forecasted $1.84. This strong performance, coupled with positive signals from its overseas operations, contributed to a 4.87% rise in premarket trading, bringing the stock price to $7.10.
Key Takeaways
- Hello Group's EPS exceeded expectations by 33.7%.
- Revenue declined by 12% year-over-year.
- Overseas business, particularly the Xochitl app, showed significant growth.
- The company introduced new AI-driven features in its Momo (NASDAQ:MOMO) app.
- Market sentiment remains positive despite domestic challenges.
Company Performance
Hello Group experienced a mixed performance this quarter. While the company achieved a significant earnings beat, its total revenue decreased by 12% year-over-year to RMB 2.67 billion. The decline in revenue was attributed to reduced earnings from live broadcasting and value-added services. However, the company's overseas operations, especially the Xochitl app, experienced rapid growth, which helped offset some of the domestic challenges.
Financial Highlights
- Revenue: RMB 2.67 billion, down 12% YoY
- Earnings per share: $2.46, beating the forecast of $1.84
- Non-GAAP Net Income: RMB 493.3 million, down 19% YoY
- Non-GAAP Operating Margin: 17%, down 5.4 percentage points YoY
Earnings vs. Forecast
Hello Group's actual EPS of $2.46 exceeded the forecast of $1.84, marking a 33.7% surprise. This performance is particularly impressive given the recent downward revisions in EPS estimates. The earnings beat reflects the company's effective cost management and strong growth in its overseas operations.
Market Reaction
Following the earnings announcement, Hello Group's stock rose by 4.87% in premarket trading, reaching $7.10. This increase reflects investor optimism, driven by the company's better-than-expected earnings and promising growth in international markets. The stock's movement is notable given its 52-week range, with a high of $8.19 and a low of $4.79.
Company Outlook
Looking ahead, Hello Group expects fourth-quarter revenue to range between RMB 2,560 million and RMB 2,660 million. The company anticipates continued growth in its overseas apps, projecting over 40% year-over-year growth. However, it expects revenue from the Momo and Tantan apps to decrease slightly.
Executive Commentary
CEO Tang Yan emphasized the importance of the overseas business, stating, "We believe that our overseas business will play an increasingly significant role in driving the group's revenue and profit in the future." CFO Peng Hui added, "We are not pursuing just top line growth at the expense of bottom line," highlighting the company's focus on profitable growth.
Q&A
During the earnings call, analysts inquired about the growth drivers for the overseas business. The company attributed this to successful localization strategies. Questions also focused on Tantan's user experience improvements and the impact of macroeconomic challenges on domestic operations.
Risks and Challenges
- Macroeconomic pressures in the domestic market could impact revenue.
- Continued revenue decline in core services such as live broadcasting.
- Potential market saturation and competition in the dating app sector.
- The need to maintain growth momentum in overseas markets.
- Fluctuations in foreign exchange rates affecting international revenue.
Full transcript - Hello Group Inc (MOMO) Q3 2024:
Conference Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2024 Hello Group Inc. Earnings Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer Please note this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Ms.
Ashley Jing. Thank you. Please go ahead, ma'am.
Ashley Jing, Investor Relations, Hello Group: Thank you, operator. Good morning and good evening, everyone. Thank you for joining us today for Hello Group's Q3 2024 earnings conference call. The company's results were released earlier today and are available on the company's IR Web site. On the call today are Mr.
Tang Yan, CEO of the company Ms. Jiang Sichuan, CEO of the company and Ms. Peng Hui, CFO of the company. They will discuss the company's business operations and highlights as well as the financials and guidance. They will all be available to answer your questions during the Q and A session that follows.
Before we begin, I would like to remind you that this call may contain forward looking statements made under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward looking statements. Further information regarding this and other risks, uncertainties and factors is included in the company's filings with the U. S. Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statement as a result of new information due to events or otherwise, except as required under law. I will now pass the call over to our COO, Ms. Jiang Sichuan. Ms. Jiang, please?
Jiang Sichuan, COO, Hello Group: Thank you. Hello, everyone. Thank you for joining our call. I would now like to I will now give you an update on our business on Q3 2024. Starting with an overview of our financial performance.
For Q3 2024, total group revenue was RMB2.67 billion, close to the high end of our guidance, down 12% from the year ago, with a smaller year over year decrease than in Q2. Adjusted operating income was RMB 455 1,000,000, down 33% year over year, representing a margin of 17%, down 5.4 percentage points from a year ago. Looking at the Momo app and standalone new app, total revenue was RMB2.46 billion, down 10% year over year. The decrease was mainly due to the 17% year over year decline in the Momo app, resulting from our proactive product adjustments and the spending softness amidst the weak microeconomy. The decrease was partially offset by the accelerated 41% year over year revenue growth in standalone new apps driven by our overseas business.
Adjusted operating income was RMB440,000,000, down 33% year over year, with a margin of 17.8%, down 5.9 percentage points year over year, mainly due to the declines in revenues and margin of the Momo app. For Tantan, Q3 total revenue was RMB212 1,000,000, down 28% year over year due to the decreased number of paying users. Adjusted operating income was RMB 15,170,000 compared with RMB 27,58,000 from the year ago, representing a margin of 7.2 percent, down 2.2 percentage points year over year. Now I will give you an update on executing our strategic priorities for each business line. Our main goal for the Momo app this year is to maintain the productivity of this CatchPal business with a healthy social ecosystem.
Tantan's goal is to continue improving the core dating experience and view an efficient business model that drives profitable growth. As for our new endeavors, our goal is to enrich the brand portfolio further, push the business front to EBITDA, Momo and Tantan and build a long term growth engine. I will now walk you through the details of our execution. 1st, on the Momo app product and operations in Q3, our product team focused on optimizing the user experience and increasing the volume of effective user interactions. We introduced multiple voice based 1 on 1 chat experiences in our legacy tech based chat greeting features to facilitate in-depth user interactions.
As for female users, we use women's favorite mini social games and exciting reward mechanisms to increase female user engagement and stickiness. We also provide an AI assisted reading tool to improve the quality of ice breaking reading messages for male users, thereby increasing the response rate and interactive experience for female users. On the user acquisition front, we have optimized transitional channels over the past 2 years, bringing down acquisition costs and improving ROI. Therefore, we reduced overall marketing spending that kept traffic relatively stable. However, as the costs continue to decline, the potential to further optimize transitional channels is getting limited.
So we started exploring new ways to drive traffic from KOLs. For example, increasing brand exposure and user favorability by working with short video influencers in new media. In Q3, we increased our investments in KOL channels and the numbers of videos released and played related to the normal app increased significantly from quarter 2. While deepening our collaboration with KOLs, we also have been refining our channel strategy. Continuous cost optimization has given KOL marketing costs a clear advantage over transitional channels.
Therefore, we plan to continue working with KOLs, including enhancing the selection of accumulation of influences, further innovating ad materials and optimizing onboarding and conversion strategies. This help us further improve user acquisition ROI and strengthening Momo's branding. To increase the proportion of female users, our user acquisition team continued to refine the ad material tailored to women and collaborated with our products and operation teams to emphasize features favored by female users. In quarter 3, the Momo app had 6,900,000 paying users, a sequential decrease of 300,000. This is mainly due to 2 factors.
1st, the WaaS ecosystem adjustment reduced competition events and operational activities, resulting a decrease in the number of paying users. 2nd, to improve profitability and pursue profitable growth, we further reduced the acquisition of small ticket paying users with negative ROI, decreasing long tail users. Now on the productivity of Momo's cash cow business. Momo's live streaming revenue was RMB1.22 billion, down 14% year over year and flat sequentially. The year over year decline was mainly due to our strategy to proactively reduce revenue oriented large scale competition events to maintain a healthy social ecosystem and spending softness among top cohort users amid the weak macro economy.
To mitigate revenue pressure, our live streaming team focused on introducing innovative features to improve the product experience for mid and long child users. Meanwhile, we set up our live streaming promotion efforts in the Nearby People and the Nearby Host features, which resulted in the steady increase in live streaming, penetration and paying ratio. The reduction in high priced competition events, combined with the increase in sales of live streaming showrooms, our costumes and PK props that do not require any revenue sharing, resulting in a slight sequential decrease in the revenue sharing ratio, which play a positive role in stabilizing the profit level of the cash cow business. Revenue from value added services, excluding Tantan, totaled RMB1.22 billion, down 6% year over year, up 1% sequentially. RAS revenue from the Momo app was RMB 828,000,000, down 17% year over year and 3% sequentially.
Revenue from the stand alone app was RMB 391 million, up 32% year over year and 10% sequentially. The year over year decline in Momo app RaaS revenue was mainly due to our proactive product and operational adjustments to mitigate regulatory risk, combined with the impact of spending softness against the weak macro economy. In Q3, our product team promoted chat room in the nearby feature and nearby people features, applied new algorithms to improve penetration. On the operational front, we organized operational activities that tie into holidays and festivals to boost consumer sentiment. In addition to transitional audio features, we continued introducing new voice based gamified play such as Brilliant and matching puzzle game in chat room.
Early data shows that the retention of this new mini game live feature is better than the average retention of chat room. We expect the full rollout of these new features will help increase chat rooms' user engagement rate. Turning to Tantan. First on user terms and financial performance. Since the acquisition of Tantan, the number of organic new users has shown a long term downward trend due to the need for new branding investments.
And user growth was largely dependent on acquisition channels. Although the ROI OEM to channel investment reduction and cost control strategy over the past 2 years has effectively driven Tantan to achieve profitability, it also has put much pressure on Tantan's user base. The product upgrades we launched in Q2 aim to explore effective solutions to improve the core dating experience and increase user retention. However, the upgrade is still in early stage and it has not yet significantly impacted our overall user retention. Due to the combination of the broad factors, Tantan's user base has not yet stabilized.
MAU decreased by 7% sequentially to 12,000,000 in September. As of the end of Q3, Tantan had 940,000 paying users, down 60,000 sequentially, mainly due to the decline in MAU and the short term impact of the product upgrades on new user paying conversions. Turning to Tantan Financial. Quarter 3 total revenue was RMB212 1,000,000 down 28% year over year and 9% sequentially. The year over year decrease was due to the decline in payers, whereas overall ABPU increased slightly.
ABPU of our live streaming business decreased in the beginning as we continue to emphasize live streaming. We have some low correlation with the dating experience. Meanwhile, the last team drove the sales of SVIP and Black Gold membership by subsiding members' paying features and redesigning the guidance leverages on paying experience, which drove a slight increase in Tantan's overall ARPU, partially alleviated revenue pressure. The sequential revenue decrease was mainly due to the decrease in payers and slightly lower ARPU due to the impact of live streaming business. In terms of business lines, gross revenue was RMB137 1,000,000, down 19% year over year and 2% sequentially.
While live streaming revenue was RMB 66.65 million, down 45% year over year and 20% retention. Now moving to our efforts on Tantan's product and user acquisition and the challenges we faced. First on the marketing and user acquisition, to adjust the continuous decline in organic traffic caused by years of inadequate brand exposure. In quarter 3, our marketing team selected online and offline events that are popular amongst young men and women and organized various marketing activities at a controllable cost to promote Tantan's brand awareness. For example, we set up interactive groups at music festivals, which we believe is the most effective way to reach young people offline and guide them using Tantan to explore the music for a dating experience.
We combined online community activities and KOL events marketing to expand brand influence. At the same time, we continue to accumulate influence of resource and optimize channel investment strategies, resulting in a significant sequential reduction in average KOL user acquisition costs. In terms of channel, we continue to reduce investment based on ROI and further reduce costs from the transitional channels such as fees and app stores. This coupled with increased investments in KOL channels with the most competitive user acquisition costs helped significantly reduce unit acquisition costs quarter over quarter. Therefore, we acquired more users with a slight sequential decrease in total channel investments.
With lower unit acquisition costs and a slightly higher new user output, although channel ROI has not turned fully positive, we have seen various degrees of improvement year over year and quarterly. Next (LON:NXT), update on Tantan's product and operations. In quarter 2, based on the results of user surveys, we initiated a product upgrade to adjust to major problems that make users feel their experience are unrealistic. 1st, uncertainty about authenticity of user identity and 2, lack of response to chat after matching. To address the first issue, such as product picture looking to be true, limited information that lacks real life references and if sufficient, real person verification, Our product team has increased the proportion of high quality profile on the platform by providing prompts to encourage users to enrich their profile information and guiding users in choosing suitable profile pictures.
Meanwhile, we offered rewards such as extra swipe to users who completed their real person verification to increase the overall real person verification rate. Regarding the lack of response to chat platform matching, previously, we deliberately increased the exposure of some high quality active users in the algorithm to improve the experience of some users who don't get matching opportunities easily. While this approach increased the number of matches, it unfortunately resulted in many matches that did not convert to check. This quarter, we reduced matching concentrations in our algorithm to address the issue of some female users not chatting after matching because they receive too many matches. At the product level, we tested several features aimed at improving the response rate, such as Xing Shu or Love Letter, which allows users directly deliver a message to a favorite person every once in a while.
Improving interactive quality through this unit outreach, we expect this series of product trials to play a positive role in improving the response rate. Product upgrades have enhanced matching quality and encouraged more in-depth conversations. However, the short term, this has a negative impact on Tantan's original business model, which was built around look at picture, swipe, page to increase matching up. The decline in new user paying conversion was one of the reasons for the sequential decrease in Tantan's paying users. However, we believe that providing a good product experience to improve user retention and drive organic user growth is the foundation of Tantan to achieve long term sustainable revenue and profit growth.
We need to drive user growth based on profitability to sustain the long term positive business cycle. Lastly, in terms of new endeavors, in Q3, the total revenue of the new apps reached RMB418 1,000,000 with an accelerated growth rate of 41% year over year and 17% sequentially, mainly driven by our overseas business. Sogou (NYSE:SOGO)'s revenue in Q3 achieved its target sequential growth of the past year, driven by improvements in our operational efficiencies. In Q3, our management, key product and tech team from the Beijing headquarter visited several key social markets. They work with local teams to analyze user feedbacks and optimize product and technical solutions.
We optimized agency forecasters' payment and compensation system and strengthening our frontline staff decision making power, boosting their work morale. We also optimized channel strategies for paying users' growth paying ratio and the number of paying users. ARPU increased significantly quarter over quarter, driven by various sectors such as introducing new virtual gifts, gameplay enhancements and product design improvements. Together, the improvements in paying users and ABBY will drive rapid sequential revenue growth. In Q3, we strengthened our supply side collaboration with new agencies and increased its numbers of broadcasters, which also plays a positive role in driving revenue growth.
With the gradual expansion of the business, Fuzhou's revenue sharing ratio has trended slightly upward since the beginning of the year, mainly because of the relatively low margin business, including the Turkish market and the newly introduced live streaming business, grew much faster than the overall overseas market. Our team has, partially alleviated the pressure on GP margin caused by the increase in revenue sharing ratio by optimizing top up channel costs. Combined with our ROI oriented user acquisition strategy, enabling us to enjoy operational leverage and fast profit growth despite the increase in channel investments. In Q3, we made good progress in enhancing the localization progress and expanding the voice based features to live streaming. The growth in users and financial metrics have well reflected our team's recent efforts.
We believe that continuously strengthening localized operation and improving user and product experience, we can bring continuous growth to social and our other overseas product in the MENA region. We will commit more firmly to overseas business in the future. This concludes my remarks. Now let me pass the call to Kathy for the financial review. Kathy, please.
Sure. Thanks,
Peng Hui (Kathy), CFO, Hello Group: Dick. Hello, everyone. Thank you for joining our conference call today. Now let me briefly take you through the financial review. Total (EPA:TTEF) revenue for the Q3 2024 was RMB 2.6 7,000,000,000, down 12% year on year and a slight decrease of 0.6% quarter on quarter.
Non GAAP net income attributable to the company was RMB493.3 million, down 19% year on year, but up 10% from the last quarter. Looking into the key revenue items for Q3. Firstly, on live broadcasting. Total revenue from live broadcasting business for the Q3 of 2024 was RMB1.29 billion, down 16% year over year and 1% quarter over quarter. The year over year decrease was largely attributable to a decline in the core Momo live streaming business and to a lesser extent, the decrease in Tantan.
The sequential decrease was due to the Tantan. The sequential decrease was due to the decline in Tantan live streaming, whereas Momo remained relatively stable. In terms of segments, Momo live broadcasting revenue totaled RMB1.22 billion for the quarter, down 14% year over year and flat from last quarter. The year over year decrease was due to our proactive product and operational adjustments to scale back from revenue oriented competition events and the soft spending sentiment amid the weak macro economy. Tantan's live broadcasting revenue amounted to RMB66,600,000 down 45% year over year and 20% quarter over quarter.
The decrease was due to our strategic decision to deemphasize the less dating centric service. Revenue from the value added services for the Q3 of 2024 was RMB1.360 billion, down 8% from Q3 last year, but up 1% sequentially. The year over year decrease was due to a decline in both Momo and Tantan. However, the growth of the standalone new app partially offset the downward revenue pressure. The sequential growth of value added service revenue was driven by the growth of new endeavors.
Revenue from VaaS on an ex Tantan basis was RMB1.22 billion in the Q3 of 2024, down 6% from Q3 last year, but up 1% from the previous quarter. Momo app VAS revenue decreased 17% from Q3 last year due to our proactive product adjustments to manage regulatory risks as well as the weak spending sentiment and down 3% sequentially due to our continued product adjustment to deemphasize agency dominated gamified play. Revenue from the standalone new apps, which is consolidated in Momo segment on P and L, continued to grow both on a year over year and quarter over quarter basis, driven by the improvement of overseas business. Tantan's VAS revenue amounted to RMB137,200,000 down 19% year over year and 2% sequentially. The decrease was due to a decline in paying users, which was in turn due to a decline in user base and the short term impact of the user interface upgrade on paying conversion.
Now turning into costs and expenses. Non GAAP cost of revenue for the Q3 of 2024 was RMB1.62 billion compared to RMB1.77 billion for the same period last year. Non GAAP gross margin for the quarter was 39.4 percent, down 2 percentage points from the same from the year ago period. The year over year decrease was due to several different factors. Number 1, higher payout ratio, which was further due to 2 factors: overseas business becoming a bigger percentage of total, while bearing a higher payout ratio and to a lesser degree, higher payout from Momo, the old cash cow business to better incentivize the agencies in view of a downward pressure trend of a downward revenue trend number 2, deleverage, where infrastructure and personnel and other relatively fixed costs take up a higher percentage of revenues number 3, payment channel costs represent a higher percentage of total revenues as revenue mix shifts towards overseas business, where channel fees as a percentage of revenues are much higher than those from domestic business.
Non GAAP R and D expenses for the Q3 was RMB185.4 million compared to RMB186.7 million for the same period last year or a 1% decrease year over year. The decrease was due to continuous optimization in personnel and infrastructure costs. Non GAAP R and D expenses as a percentage of revenue was 7% compared with 6% from the year ago period. We ended the quarter with 13.55 total employees, of which 280 are from Tantan, compared to 14.10 total employees, of which 314 from Tantan a year ago. The R and D personnel as a percentage of total employee for the group was 61% compared with 64% Q3 last year.
Non GAAP sales and marketing expenses for the Q3 was RMB350.1 million or 13% of total revenue compared to RMB368.1 1000000 or 12 percent of total revenue for the same period last year. Sales and marketing expenses decreased 5% year on year in absolute rmb amount. Non GAAP G and A expenses was RMB85.2 million for the Q3 of 2024 compared to RMB76.5 million for the same period last year, both representing roughly 3% of total revenue. Non GAAP operating income was RMB454.7 million, a decrease of 33% from Q3 2023, down 5% from the previous quarter. Non GAAP operating margin for the quarter was 17%, down 5.4 percentage points from the same period last year and 0.3 percentage points from the previous quarter.
Non GAAP OpEx as a percentage of total revenue was 23%, an increase from 21% for Q3 2023 and flat from Q2 this year. Now briefly on income tax expenses. Total income tax expense was RMB95.3 million for the quarter with an effective tax rate of 17%. In Q3, the company accrued withholding income tax of RMB15.2 million, which is 5% of undistributed profit generated by our royalty. Without the withholding tax, our estimated non GAAP effective tax rate was around 14% in the 3rd quarter.
Now turning to balance sheet and cash flow items. As of September 30, 2024, Hello Group's cash, cash equivalents, short term deposits, long term deposits, short term investments and restricted cash totaled RMB14.78 billion compared to RMB13.48 billion as of December 31, 2023. Net cash provided by operating activities in the Q3 2024 was RMB 341.0 million. Lastly, on business outlook. We estimated our 4th quarter revenue to come in the range from RMB 2,560,000,000 to RMB 2,660,000,000, representing a decrease of 14.7 percent to 11.4 percent year on year or a decrease of 4.3% to 0.5% quarter over quarter.
At segment level, for Q3 for Q4 'twenty four, on a sequential basis, we expect Momo revenue to decrease mid to low single digit. On the Tantan side, we expect revenue to decrease low single digit. Please be mindful that this forecast represents the company's current and preliminary view on the market and operational conditions, which are subject to changes. That concluded our prepared portion of today's discussion. With that, let me turn the call back to Ashley to start Q and A.
Ashley, please? Thank you.
Ashley Jing, Investor Relations, Hello Group: Just a quick reminder before we take
Jiang Sichuan, COO, Hello Group: any questions. For those who can
Ashley Jing, Investor Relations, Hello Group: speak Chinese, please ask your questions in Chinese first and followed by English translation by yourself. And please also limit the number of questions to 1 to 2, so we can take more people. Okay. So operator, we're ready for questions. Thank you.
Conference Operator: Thank you. Your first question comes from Rafael Chen from Bocchi Research. Please go ahead.
Rafael Chen, Analyst, Bocchi Research: I will translate myself. Thanks for taking my question. Congrats on the strong growth momentum of overseas business. Could management share the main contributors driving the overseas business growth in the Q3? Also, could we have the latest revenue and profit figures for the overseas business and the growth outlook for the Q4 and the 2025?
Ashley Jing, Investor Relations, Hello Group: Okay. Let me translate. The sequential growth of our overseas business in the first half of the year was slower than we had anticipated at the beginning of 2024, primarily due to the need to address many areas for improvement in local operations, which requires more time than we thought. Revenue growth accelerated in the 3rd quarter, thanks to the optimization of cross border personnel management. As a result, the operational efficiency of the Xochu team got significantly improved.
Our strategy of empowering local staff in product operations will help us better address the unique social preferences and needs of users from different cultural backgrounds. By leveraging the strength of our local team, we have been able to strengthen cooperation with the local supply side. And with the rapid growth of our overseas business, our operational markets and regions are also becoming more diverse. Therefore, we will continue to optimize cross border management, establish offices in key markets, recruit more local talent and drive continuous growth in revenue and profit through robust focus on localization. Let me translate first.
So in the Q3, total revenue of the new apps reached close to RMB220 1,000,000 with Xochio contributing 60% to 70%. And Xochio has now surpassed the revenue scale of Tantan. And its revenue in the Q3 was up more than 50% year on year. And as we strengthen our localized operation capabilities, we expect Sogou to continue to grow rapidly next year. Meanwhile, we expect our other 2 Middle Eastern apps to enter rapid into a period of rapid revenue growth and possibly breakeven next year.
The incremental revenue and profit generated by our overseas business partially offset the decline in revenue and profits from the Momo app. We believe that compared with our domestic business, which face many uncertainties such as macroeconomic and regulatory issues, the growth potential and trajectory of our overseas business are relatively clear. This is particularly true in the social field where we have distinct product and operational advantages. That's why we have prioritized the allocation of human and financial resources to the operation and expansion of our overseas business in recent years. We believe that our overseas business will play an increasingly significant role in driving the group's revenue and profit in the future, which will be clearly reflected next year.
And as for the financial outlook, I will leave that to Cathy. Please.
Peng Hui (Kathy), CFO, Hello Group: Okay. Obviously, outlook. In our Q4 guidance, we are assuming Xochitl to grow probably by 40 plus percent year over year. That would close out 2024 with a year over year growth rate of close to 50%. As the app gets bigger, obviously, the growth rate could slow down a little bit.
However, our 2 other social entertainment apps in the Middle East, North Africa area have been ramping up rapidly recently. We do expect these 2 apps to start bearing fruits and contributing to the bottom line in a contributing to both the top line and bottom line in a meaningful way in 2025. With these 3 overseas apps, we believe overseas revenues will continue to grow pretty fast and hopefully could accelerate its growth rate next year. The other thing worth mentioning is that if you look at the way we manage our overseas business, we are not pursuing just top line growth at the expense of bottom line. We always want what we call profitable growth.
That means next year as overseas apps continue to grow at top line, bottom line performance for these three apps are going to continue to improve as well. Hopefully that answers your question. I'm handing back to Ashley for next question.
Ashley Jing, Investor Relations, Hello Group: Operator, next question please.
Conference Operator: Thank you. Your next question comes from Jenny Huang from UBS. Please go ahead.
Peng Hui (Kathy), CFO, Hello Group: So let me translate myself. So thanks to management for taking my question and congrats on the good results. My question is regarding the outlook for our cash cow business. So Komo has been on a growing product adjustment for a year since the end of the quarter last year. Could you please share whether these adjustments will continue going forward?
And when we might see a recovery in growth Q4 on quarter and year over year? And how should we view the profit to sustain sustainability of the cash cow business going forward? Thank you.
Ashley Jing, Investor Relations, Hello Group: Okay. So last year, we implemented operational adjustments to our live streaming and audio and video based VAS experiences with a focus on reducing revenue oriented competition events. And although this impacted our financial performance, it has played a positive role in reducing revenue concentration and creating a more stable and healthier social ecosystem for our cash cow business. So we remain committed to this operational strategy in the Q4 and further deemphasizing high revenue competition events. For the live streaming business, this means that the incremental revenue from the year end competition event will be very limited compared to the previous years.
And in the audio and video based Ava's experiences, we believe there's still room for further optimization of some agency dominant use cases and gamify play. So we will continue to fine tune our operation in the 4th quarter. As Sigg mentioned earlier, in order to offset the decline in revenue from competition events, we have increased the monetization of mid to long tail paying users in live streaming and value added services experiences. So we rolled out more interactive features and content suitable for this kind of cohort of users and increasing the penetration and paying ratio while driving steady growth in organic revenue. So our primary operational focus in the current macro economy and regulatory environment is to enhance our platform's ability to accommodate mid to long tail users and expand their revenue scale.
After about a year of adjustments, we are quite satisfied with the overall content and ecosystem of the Momo app. I believe this has laid a solid foundation for us to maintain the productivity of the cash cow business next year. As for the specific financial outlook, I will leave that to Cathy. Okay.
Peng Hui (Kathy), CFO, Hello Group: Before I talk about 2025, perhaps let me first quickly review the way we've been managing the way how we've been managing the productivity of the cash cow business throughout last year and then point toward the directions we move toward next year. The biggest theme of 2024 for the cash cow was to deemphasize the promotionalstimulating agency driven events in order to improve the healthiness of our ecosystem in view of the current macro environment, both from a regulatory and from an economic point of view. As we took different steps to enable such operational changes, the revenue has been gradually coming down. So in order to maintain the productivity of the cash cow business, we have also been taking measures to control spending more tightly. At the beginning of 2024, the original plan was to put all the adjustments into Q1 and make the revenue impact one off.
However, as we move deeper into the year, it turned out that we did a pretty good job in cost control and thus over delivered in terms of profit. As a result, the team decided to take this opportunity to continue to put in additional adjustment measures to scale back on bonus driven promotional events in the second half. And in turn, we saw the top line of the CashCall business continuing to trend downward throughout 2025 from Q2 onwards. With that in mind, looking out to 2025, well, first of all, I won't be able to talk about next year in very quantitative terms before we finalize the financial planning next year, early next year. But as in previous years, there are several points to share to help you think about the performance of the cash cow, at least trend wise for the coming few quarters.
As Tang Yan first of all, as Tang Yan said, after a year of pretty significant operational adjustments at the expense of top line, we feel we now feel pretty good on the ecosystem front. And therefore, currently, we do not see additional adjustments needed for next year. If you think about what that translates into top line performance next year, how that translate into top line performance next year, Q1 Momo is Q1 2025 Momo is still going to see seasonality, which would cause a sequential decline. And then Q2, there will be a seasonal bounce back. Since we do not expect any deliberate operational efforts to demonetize next year, how significant the bounce back in Q2 2025 will really depend on macroeconomic factor that would play substantially into the consumer spending sentiment on our platform.
So if you put all these analysis together, what we can come down to is that because the revenue has been trending downwards in the second half of twenty twenty four, next year in terms of year over year comparison, it's quite likely that cash cow will continue to see revenue decline on a year over year basis. In 2024, if you throw in the midpoint of our Q4 guidance, it looks like that the Momo segment, which by the way included both the Cash Cow business and the overseas apps, that whole Momo segment will likely still see a revenue decline in the low teens kind of range. That reflects both volunteer demonetization efforts on regulatory concerns and macro headwinds. For 2025, because on the regulatory side, it seems that we are now in a pretty safe place and the overseas, as Tang Yan said a little bit earlier, the overseas growth will continue to push the top line up for Momo segment. Assuming macro status quo continues, the Y o Y decrease should significantly narrow from what we saw in 2024.
But of course, assuming macro status quo is going to continue is kind of a big assumption. We'll see how things play out next year. But of course, even assuming a substantial narrow down in yoydecreaseratio in absolute dollar amount, the cash cow may still face a pretty significant top line decrease in 2024. So we are going to have to see what we can do on cost control front to mitigate impact on bottom line. On that specific point, I shall have more color to share as we finish our financial planning in the beginning of 2024 when we have our Q4 earnings call early next year.
So that's basically the color that I can give on the productivity of the cash comp. Back to Ashley for next question.
Ashley Jing, Investor Relations, Hello Group: Hi, operator. Next question please.
Conference Operator: Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead.
Jenny Huang, Analyst, UBS: Good evening. Thanks management for taking my question. My question is about Tantan. Just now management mentioned in prepared remarks that there are various updates to our product offerings, but also highlight the impact is yet to be seen such as on the user retention side. And also we are seeing user scale and revenue remains soft.
My question is about which product ideas or solutions management gets more positive? How long does it take about the upgrade and the timeline? And how should we think about our time to time Q4 and 2025 outlook? Thank you.
Ashley Jing, Investor Relations, Hello Group: Okay. Let me give you more details regarding your question. For Tantan's goal is to continue to improve the quality experience and build an efficient business model that drives profitable growth. And currently, Tantan needs to address 2 issues. One is product experience and the other is business model.
So in terms of product, some users feel the experience is unrealistic and chat interaction after matching is quite low. And therefore, although users have a real strong demand for dating, but Tantan cannot really meet the needs of many of our users. And the second issue is insufficient branding and low organic traffic, which makes unit acquisition cost too high to form a positive business cycle to achieve a profitable growth. So we believe that we must first improve the product experience to a reasonable level and then develop a new sustainable business model. So over the past two quarters and for the next quarter or 2, we have focused and will continue to focus on addressing 2 user experience issues.
One is users' uncertainty about the authenticity of the matches' identity and the other is the lack of response to chats post matching. Our team encouraged the users to enrich their profile information and guide them in choosing the proper style for their profile pictures. And these efforts significantly increased the proportion of high quality profiles on our platform And to effectively increase the overall real person verification rate, we offered rewards such as extra swipes to users who completed the real person verification process. And previously, paying users had a clear advantage over non paying users in terms of product experience. And moving forward, our goal is to give our verified users a distinct user experience advantage over those non verified users and to encourage more users to complete the verification process.
While we have made significant progress in terms of user identity authenticity, we still need to do more to improve chat interaction rates in the long term. Unfortunately, we feel that the current approach is on the right track. We plan to have all testing underway by the end of the year and wrap up this round of upgrade in the first half of next year. Since Tantan hasn't entered a positive business cycle yet, we expect the decline in users and revenue to continue for the next two quarters. And to try Tantan's recovery, here are some thoughts.
First, by improving Tantan's basic dating experience and especially user identity authenticity, we expect user base to gradually stabilize even without increasing marketing investment. And secondly, after essential product adjustments are made, we will invest more in branding initiatives to drive organic traffic. 3rd, we will continue to explore and develop innovative product features that improve user experience, while identifying value added products that increase ARPU. China's dating market is very large with significant unmet needs. We will continue to explore this space to capture growth opportunities.
Regarding the bottom line, we will not pursue profits before Tantan enters a positive business cycle, but we will not let Tantan fall into continuous losses again. As for detailed financials, I will leave that.
Peng Hui (Kathy), CFO, Hello Group: With regards to financial performance, the simple answer is that the top line is likely to continue to trend down sequentially due to two reasons. The first one is, as Tang Yan mentioned just now, Tantan has not reached a self sustaining positive business cycle yet. User number is still trending down. The second reason is that, although there is still room to pull up the ARPU, the focus at this point is to get the dating experience right. And therefore, we do not want to put too much pressure on the team, so they won't let monetization get in the way when consumer experience is the most crucial priority.
With regards to profits, this year Tantan is on track to achieve, I think, RMB50 1,000,000 plusminus in terms of segment profits. However, the bottom line has also been trending down slightly throughout the year due to the top line pressure. So before we reach I would say that before we reach the tipping point on top line performance, we do need to take some steps to cut down on the cost and expenses front, so that Tantan won't slide back to loss. That's one of the key priorities for our financial planning for Tantan 2025. And I think on that, I'm going to have more details for you on our next earnings call when we finish planning for 2025.
Back to Ashley.
Jiang Sichuan, COO, Hello Group: In interest of
Ashley Jing, Investor Relations, Hello Group: time, let's take one last question before we call you today. Operator, please?
Conference Operator: Thank you. Your final question comes from Xueqing Cheng from CICC. Please go ahead.
Thomas Chong, Analyst, Jefferies: Thanks management for taking my question. My question about shareholder returns. Firstly, regarding dividends, the company has a tracker record of 6 consecutive years of special dividends. So what's your dividend plan for this year? Additionally, regarding share buyback, the company has buyback nearly USD 150,000,000 year to date.
So the current buyback program, which will expire in the middle of 2026, has less than USD 50,000,000 quota. At the current pace of repurchase, we expect that this program will be exhausted by early 2025. So what's your plan for further share buybacks? Thank you.
Peng Hui (Kathy), CFO, Hello Group: Okay. I'll take that question. As you correctly pointed out, during the past 12 months, we've bought back more than I think $150,000,000 worth of 1 more shares and paid around $100,000,000 in cash dividends. For me, I really look at both approaches meaning cash dividend and buyback, as ways to enhance shareholder value. But sometimes one works better than the other.
If you take our Q3 balance sheet number and do a quick math, we are you will be looking at somewhere around $8.7 per share in net cash and that's a growing number as we continue to make profit. And yet, our stock is trading at, I believe, below $7 per share at this point. I would say in view of such a significant undervaluation, we should give buyback bigger priority in comparison with cash dividends. However, how much we could buyback is limited to a number of factors, the biggest of which is the liquidity out there in the market. If you look at the past couple of quarters, our repurchase has been running at from $30,000,000 per quarter to around $60,000,000 per quarter.
With the limited liquidity we have, it's hard to exceed that kind of run rate in terms of how much we buy back. That means we it's quite likely that we may continue to have excess cash on top of buyback. If that continue to be the case, we will certainly continue to consider cash dividend as an additional way to return cash to the shareholders, so we can share our prosperity. The other question you have is, we'll be at the current run rate, we'll probably use up the repurchase already authorized by the Board of Directors. But I think we're not limited to that cap If the current program is used up, I'm sure that the Board of Directors will continue to make decisions that makes sense in terms of enhancing the shareholder value.
So that's what I can say at this point. Maybe back to Ashley to conclude the call.
Ashley Jing, Investor Relations, Hello Group: Okay. Well, thank you everyone for participating in the call and I think that's going to be the end of it And we'll see you next year. Thank you.
Conference Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
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