World’s fastest-growing company Momo reports a drop in net profit in Q2

The Chinese social platform recorded a 32% growth in second-quarter revenues.

Photo: Provided by company's PR

China’s social platform Momo disclosed Tuesday that it made RMB 4.2 billion (USD 604.9 million) in the second quarter of 2019, up 32% year-on-year.

According to the company, live video service revenues were RMB 3.1 billion,  accounting for 75% of Momo’s entire revenue, an 18% increase year-on-year.

Value-added service (VAS) revenues including virtual gift incomes and membership subscription revenues reached RMB 948.4 million, up 169% year-on-year. The increase was primarily due to the continued growth of the virtual gift business and the more paying scenarios on the app, which had 113.5 million monthly active users in June 2019, compared to 108.0 million in June 2018.

The consolidation of membership subscription revenues during Q2 for Momo’s subsidiary dating app, Tantan, also contributed to VAS revenue growth. Momo informed that the number of paying users on Tantan was 4.1 million as of August 25, 2019. Overall, Momo reported that its total paying users of live video and VAS services were 11.8 million at the end of the second quarter of 2019, compared to 11.6 million in the same period of 2018.

Momo completed its acquisition of Tantan in May 2018. The Tinder-like app was one of the top ten social apps on Android in Nepal, Singapore, Indonesia, and the Philippines, with more than 10 million installs, Tech in Asia reported in December, citing data from App Annie.

Tantan was however removed from mobile app stores due to Chinese governmental regulations in April 2019, Momo confirmed in a press release. The company initiated several internal measures aimed at strengthening its content screening efforts, finally restoring Tantan’s downloads and payment services by July 15, 2019.

Yan Tang, chairman, and CEO of Momo, said in the earnings release that since the full restoration of Tantan, the app has been recovering with robust momentum across different user and revenue metrics. He added that Tantan is expected to become an important driver of the company’s growth in the coming few years.

Although Momo posted solid revenues growth during Q2, its net profit decreased to RMB 731.8 million in the second quarter, slightly down from RMB 750.2 million in the same period of 2018.

The company attributed this decrease to a share-based compensation expense of RMB 482.5 million in the second quarter, compared with expenses of the same type in the second quarter of only RMB 134.2 million. Momo explained that the share-based compensation expenses in the Q2 include an expense of RMB 323.7 million, which turned to be share options for founders of Tantan as incentives.

On the other hand, Mobile marketing-generated RMB 76.2 million in revenue, down 46% year-on-year, while mobile games created RMB 23.2 million in revenue, a decrease of 33% from RMB34.8 million in the second quarter of 2018.  Momo attributed these segments inflections due to the suspension of certain user posting functions and a continued reduction in its paying user base of mobile games.

Momo was ranked first in Fortune’s 2019 edition of 100 fastest-growing companies worldwide, which takes account of earnings per share growth rate, revenue growth rate and annualized stock return in past three years.