To change the Hangouts settings, open the Hangouts app, tap the Hangouts Options icon > Settings.
Enable merged conversations: Enable this setting to merge your contact conversations from both SMS and Hangouts together.
Tap SMS to change its settings including SMS enabled (or disabled), Default SMS Messaging Account, Blocked people, Sound, Vibrate, Delete old messages, Delivery reports, Auto retrieve MMS, and Roaming auto-retrieve.
Tap your Google Account to access Profile photo, Share your status, Hangouts messages & invites, Video calls, Customize invites, Join Google+ (or Google+ profile), Verified phone number(s), Hidden contacts, Sign out, and Improve Hangouts.