momo.com Inc. (8454.TW) Earnings Call Transcript & Summary

Earnings Results Presentation. I'm Liu, IR Manager here at momo. It's great to have you with us again. Joining me today are our President, Jeff; and our Financial and Accounting Vice President, Gina. Both of them will be available during the Q&A session later on. This session is being webcast live on our website, where you can also download the earnings report and the investor presentation. Here, how we will run today's meeting. Jeff will start by walking us through the key operational highlights, followed by a message from our management team. After that, I will go over our financial and business performance for the second quarter. As always, we will wrap up with a Q&A section, where Jeff and Gina will take your questions. Before we begin, just a quick reminder. Today's discussion may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially. So please refer to the safe harbor notice in our presentation for more detail. And now I will turn the call over to Jeff.

Okay. Thank you, Lin. Good afternoon. Thank you for attending our second quarter earnings call. I will begin with an overview of the industry environment. In the second quarter, total retail sales in Taiwan reached TWD 1.17 trillion, representing a year-over-year decline of 1.6%. This was the weakest performance since the third quarter of 2021, and it indicated a weak market and concerns over the economic environment. Despite this challenging situation and intensifying competition, we remain focused on targeted marketing strategies to defend our market share and deepen user engagement. While promotional efforts grow some margin pressure, we were able to offset most of it through structural and efficiency improvement, which kept our take rate and gross margin from operations relatively stable comparing with last year. Our operations have remained resilient in face of the macroeconomic headwinds. Our 3P business has continued to grow steadily, expanding our long-tail product offerings, contributing to overall GMV growth and attracting young segments. User metrics also remained solid with purchasing customer increasing by 5.1% year-over-year. These numbers reflect stronger customer relationship in both engagement and stickiness. Besides gaining young segment, our existing user base, particularly with age 30 and above, show high engagement and consistent purchasing behavior. In terms of product categories, we saw solid momentum in 3C, pet, cosmetics, and travel. However, the trading down behavior and competition had some impact on our sales momentum in home essentials and FMCGs. Moving to financials. Our consolidated revenue for the second quarter was TWD 26.03 billion, bringing first half revenue to TWD 52.4 billion. Throughout the quarter, we continued to invest in technology, marketing, and new growth engines to strengthen our foundation and long-term competitiveness. Operating income came in at TWD 773 million and the net profit attributable to owners of the company was TWD 652 million or TWD 2.58 per share. Thanks to the disciplined execution and efficiency in all aspects of the operation. Our balance sheet remains healthy with TWD 5.25 billion in cash and equivalents, offering a strong cushion and enabling our flexibility. Looking ahead, driving GMV growth remains our long-term objective. Our actions will be adapted to meet the dynamics of the market and the competition. Our strategy will be extended to capture all opportunities organically and non-organically. We will stay focused on disciplined operation practice and be efficient as our 3P business continue to scale and helping on our GMV growth and our retail media network keeps expanding its business. We have successfully diversified our business beyond our original 1P business. We will keep investing in those new business areas. With focused execution and disciplined resource allocation, we believe momo is well-positioned to navigate market uncertainty and manage the competition. Now I will hand over to Lin.

Thank you, Jeff. I will now walk you through our consolidated financial and operational performance for this quarter. Despite continued uncertainty in retail market and relatively soft consumer sentiment, active user grew 5.1% year-over-year. This helped offset some of the pressure and supported stable GMV growth. In the second quarter of 2025, momo delivered solid operational results. Revenue reached TWD 26 billion and operating income was TWD 773 million. Net profit attributable to owners of the company came in at TWD 652 million, translating to earnings per share of TWD 2.58. For the first half of 2025, total revenue reached TWD 52.4 billion despite macroeconomic headwinds in the retail sector, GMV growth remained steady, supported by our marketing campaign and gaining good traction in mo shop+. Operating income for the first half was TWD 1.56 billion, impacted by intensified promotional discount driven by market competition, increased cost in supporting our expanding 3P business and continued investing in logistics and technology. Net profit attributable to owner of the company totaled TWD 1.51 billion with earnings per share of TWD 5.99. Now let us take a look at our balance sheet as of June 30, 2025. Total assets reached TWD 28.8 billion, with the majority allocated to cash and cash equivalents as well as property, plant, and equipment. The increase in fixed assets mainly came from continued investing in Southern distribution center and ongoing construction at our central distribution center. Total liabilities stood at TWD 20.5 billion, reflecting lower warehouse lease payment. Shareholder equity was TWD 8.3 billion, with the decrease primarily driven by valuation losses under other comprehensive income, mainly related to fair value adjustments on our investing in We Can Medicines Company Limited and LINE Bank Taiwan Limited. Next, I would like to highlight our cash flow performance in the first half of the year. Net cash inflow from operating activity totaled TWD 1.76 billion. Capital expenditure reached TWD 1.17 billion, which included TWD 140 million for Southern distribution center, TWD 740 million for construction at the central distribution center, TWD 92 million for warehouse equipment purchase, and about TWD 100 million for computer hardware and software. Let us now take a look at how we are applying AI and big data to drive smarter logistics operations. At momo, we continue to leverage technology to enhance decision-making across inbound allocation, warehouse selections, and deliver routing. Our system dynamically adjust inventory and replenishment plans based on regional demand and real-time stock level. This helped reduce cross-region shipments and improve overall supply chain efficiency. Through predictable warehouse assignment, we are able to anticipate where orders are likely to come from and where products should be sorted. As a result, about 16% of our orders are now fulfilled directly from a single warehouse at the time of order placement, eliminating the need for inter-warehouse transfer and improving both sorting speed and delivery efficiency. On the delivery side, we have the route optimization model that consider order volume and real-time traffic data. These optimized routes are pushed directly to driver device, allowing for smarter zone planning and faster delivery. To boost last mile agility, we have also introduced electric tricycle. This offers better load efficiency and enhanced safety, especially in dense urban area. Under the Smart Logistics framework, overall delivery efficiency improved by over 10% year-over-year, while the average energy cost per parcel dropped by around 42%. This improvement not only enhanced our cost structure and fulfillment capability, but also help reduce transportation-related emissions, supporting our path towards scalable and sustainable fuel. Turning to our new growth driver, mo shop+ continued to deliver strong momentum. Repeat order volume grew by 174% year-over-year. The number of listed products has now exceeded 2.6 million, and we have onboarded over 7,000 curated machine partners. As our supplier base and category coverage continue to expand, we are seeing enriched product offering and stronger user engagement across this platform. Now looking at momo Retail Media Network. Around 20% of our brand partners have started using the service to boost brand visibility and drive conversions. While the initiative is still in its early stage, we remain focused on enhancing the user experience and closely monitoring performance across different verticals. This insight will help shape our future product rollout and optimization. Since it launched last year, moPlus has been positioned to serve highly active users identified as VVIP. This group consistently show high-value behaviors. On a year-over-year basis, moPlus member average revenue per user increased by 27%, while net purchase value grew by 36%, highlighting the strong monetization potential of this segment. In addition to high-value user engagement through moPlus, we have also made meaningful progress in integrating sustainability into our membership strategy. Since 2023, momo has launched the Green Life membership program designed to foster a more sustainable e-commerce ecosystem. The program is structured around four core benefits: reusable packaging, consolidated delivery, a carbon dashboard, and green product incentive, enabling consumers to engage with sustainability through their everyday shopping behavior. As of the end of 2024, Green Life membership has surpassed 700,000 members, contributing to an estimated 238 metric tons of carbon reduction, eliminating over 740,000 cardboard boxes and achieved a 21.4% return rate for usable -- reusable bags, more than double the rate observed amongst non-members. To further encourage participation, we introduced a Green Point system. Green Life members can earn points by choosing consolidated shipping, store pickup, returning reusable bags, or purchasing green label products. This point can then be redeemed for exclusive member benefits, charitable donation, or biodiversity conservation efforts, turning sustainable choice into tangible and rewarding actions. From an operational perspective, Green Life member also help improve logistics efficiency. In particular, the consolidated delivery model reduced shipping frequency and packaging waste, lowering emissions while generating real cost savings, creating alignment between ESG impact and business value. Demographically, this member tend to value both quality of life and environmental responsibility. They are more willing to delay shipment for lower carbon options, demonstrate rational and long-term consumption behavior and show higher level of brand affinity and platform engagement. This trade make them strong candidates to become part of momo long-term core user base. Overall, the Green Life membership program rates how ESG initiatives can be deeply integrated into user strategy, positioning our platform uniquely, reinforcing brand trust and contributing to long-term operational efficiency. Momo remains committed to deepen its effort in sustainability. We actively align with the United Nations Sustainable Development Goals and continue to embed ESG principles into our core operations. This effort has been recognized by the international capital market, reinforcing our long-term direction. Going forward, we will continue to strengthen our sustainability-driven competitiveness and create long-term value for our shareholders and stakeholders. Thank you. Okay. With that, we would like to open the floor for questions. You may dial in via the phone or submit your questions through the chat box on the webcast page. We look forward to your participation. Thank you.

[Operator Instructions]

We have two questions lined up. So let us start with this. Just can we have some update for the competition landscape?

Right. Taiwan's e-commerce market remains highly competitive with players actively investing in marketing and frequently use price as a competitive tool. So that particularly happening during the promotion period and some of the items even is a daily practice. However, it's not only the negative side of those intensified competition. We also see the competition can enlarge the overall e-commerce market. So as the leading 1P e-commerce player in this market, we just need to react smartly and while we have to respond to their pricing attacks, and in the meantime, find a way to grow our existing business and protect our profitability. I think we have proven we have done it pretty well during the second quarter, and we will continue to do so. We will see this competition will last for some time. And when it reached to some stage, everyone reaches in certain size and those pricing strategy will not be able to last for long. That's my take for the current competitive landscape in Taiwan.

Okay. Thank you, Jeff. And the second question is, how we grow market shares? And what is the company views on the online penetration rate in Taiwan?

Yes. Taiwan EC penetration rate is still low. We still have the -- we still believe it's going to catch up some time. However, this time, we are facing a lot of uncertainties, particularly from the macro environment. And also, we are facing consumer spending reallocating to traveling and spending -- the consumer spending in overseas has grown continuously. Those are all negative impact in terms of the market penetration rate. However, I just said, because the competition intensifies, I think there are a lot of resources actually putting into this market, and that will enlarge the overall e-commerce penetration in long term. And as far as momo is concerned, we have been leading in the 1P area. However, we can see we still have a lot of potential in 3P, and it has proven we have achieved good growth on the 3P in terms of the GMV. So overall, although our revenue in second quarter is negative compared to last year, our overall GMV still grow. So I will say the EC market in Taiwan will continue to grow, although it may not be as fast as we would like to be at this time of the year. In the longer run, we still think it will catch up with the rest of the country in this region.

Thank you, Jeff.