Hello Group Stock Slumps After Financial Results

25th March 2022 Luke Smith

The stock price of the Hello Group fell significantly following the announcement of their Q4’21 and full year 2021 financial results. The group announced their results earlier this week.

Hello Group fell 9% in early trading Thursday after the company’s fourth-quarter earnings missed the consensus mark with the revenue guidance showing weakness.

On the top line, revenue declined 3.2% Y/Y to $576.6M, beating consensus by $7.33M. That takes the full year’s revenue to $2.29B (-3% Y/Y).

Some of the key financial highlights from the results include:

Net revenues decreased by 3.2% year over year to RMB3,674.2 million (US$576.6 million*) in the fourth quarter of 2021.
Net loss attributable to Hello Group Inc. was RMB4,242.7 million (US$665.8 million) in the fourth quarter of 2021, compared to a net income of RMB651.5 million in the same period of 2020. Due to the fact that the Group’s fair market value as indicated by its market capitalization was significantly below its net book value of equity, the Group determined that a triggering event had occurred for impairment. The Group conducted a detailed impairment analysis and recorded RMB4,397.0 million (US$690.0 million) as impairment loss, which represented the total value of all the goodwill and intangible assets with the exception of its operational licenses and permits on the consolidated statement of operations for the year ended December 31, 2021.
Non-GAAP net income attributable to Hello Group Inc. (note 1) decreased to RMB280.9 million (US$44.1 million) in the fourth quarter of 2021, from RMB836.4 million in the same period of 2020. Non-GAAP net income attributable to Hello Group Inc. included an accrual of withholding income tax of RMB207.4 million (US$32.5 million) on undistributed earnings generated in 2021 by our wholly-foreign owned enterprise (“WFOE”), due to our plan to remit WFOE’s earnings to its offshore parent company in the foreseeable future to fund its demand on US dollar in business operations, payments of dividends, potential investments, etc.. Without this item, non-GAAP net income attributable to Hello Group Inc. would have been RMB488.3 million (US$76.6 million) in the fourth quarter of 2021.
Diluted net loss per American Depositary Share (“ADS”) was RMB21.50 (US$3.37) in the fourth quarter of 2021, compared to a diluted net income per ADS of RMB2.98 in the same period of 2020.
Non-GAAP diluted net income per ADS (note 1) was RMB1.38 (US$0.22) in the fourth quarter of 2021, compared to RMB3.80 in the same period of 2020.
Monthly Active Users (“MAU”) on Momo application were 114.1 million in December 2021, compared to 113.8 million in December 2020. MAU on Tantan application were 27.0 million in December 2021.
Total paying users of live video service and value-added service, without double counting the overlap and including 2.5 million paying users of Tantan Limited (“Tantan”), were 11.4 million for the fourth quarter of 2021, compared to 12.8 million for the fourth quarter of 2020, which included 3.8 million paying users of Tantan.

In terms of the full year 2021 financial results:

Net revenues decreased 3.0% year over year to RMB14,575.7 million (US$2,287.2 million) for the full year of 2021.
Net loss attributable to Hello Group Inc. was RMB2,913.7 million (US$457.2 million) for the full year of 2021, compared to a net income of RMB2,103.5 million during the same period of 2020.
Non-GAAP net income attributable to Hello Group Inc. (note 1) was RMB2,037.1 million (US$319.7 million) for the full year of 2021, compared with RMB2,896.2 million during the same period of 2020.
Diluted net loss per ADS was RMB14.40 (US$2.26) for the full year of 2021, compared to a diluted net income per ADS of RMB9.65 during the same period of 2020.
Non-GAAP diluted net income per ADS (note 1) was RMB9.56 (US$1.50) for the full year of 2021, compared with RMB13.16 during the same period of 2020.

Li Wang, CEO of Hello Group, said: “2021 was a busy year for us. Despite a variety of external challenges, our team was able to methodically execute our strategic priorities and delivered solid results. I am confident that we’ll continue to navigate through the challenges ahead and capitalise on the growth opportunities down the road.”