Hello Group (MOMO), a leading mobile social and entertainment platform in China, just released its Q1 Non-GAAP earnings. The company offers Momo, a mobile application connecting people and facilitating social interactions based on location, interests, and various online recreational activities including, live talent shows, short videos, social games, as well as other video- and audio-based interactive experiences, such as online parties, mobile karaoke and user participated reality shows; Tantan, a social and dating application; and other applications under the Hertz, Soulchill, Duidui, and Tietie names.

The company’s EPADS (Earnings Per Average Diluted Share) of $0.34 beat estimates by $0.06. Revenue of $410.5 million (-10.5% YoY) still exceeded expectations by $21.98 million. MAU, the Monthly Active Users on Momo application were 106.5 million in March 2023, compared to 110.9 million in March 2022. In March 2023, Hello Group's board of directors declared a special cash dividend in the amount of US$0.72 per ADS, or US$0.36 per ordinary share.

MAU on Tantan application were 19.5 million in March 2023, compared to 25.6 million in March 2022. For the Momo app total paying users was 7.8 million for the reporting quarter, compared to 8.6 million for the same period last year. Tantan had 1.6 million paying users for the period compared to 2.4 million from the year ago period.

Revenue from live video services was RMB 1,429.3 million (US$208.1 million) over the reporting period, down 11.2% from RMB 1,608.7 million in the same period in 2022. The decrease was quoted as primarily due to pressure on the Momo app from Covid-related factors and product adjustments to accommodate regulatory changes back in Q2 2022.

Value-added service revenue mainly included so-called “virtual gift revenue” and membership subscription revenue. The total revenue of value-added services in Q1 2023 was RMB 1,361.5 million (US$198.2 million), an 8.2% decrease from RMB 1,483.4 million in the same period in 2022. Traffic and users' willingness to pay decreased, reducing Tantan's channel investment. The decline was partially offset by rapid revenue growth from new standalone applications.

Outlook: For the remaining part of 2023, the company expects total net revenues to be between RMB3.0 billion to RMB3.1 billion, representing a decrease of 3.5% to 0.3% YoY. Despite lukewarm results and the sliding stock price, at P/E of around 8.5 and P/S of less than 1, and dividend yield of over 7%, Hello Group remains an attractive component of Chinese stocks’ portfolio diversification.