Market Overview

The Meet Group Reports Fourth Quarter and Full Year 2017 Financial Results

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The Meet Group, Inc. (NASDAQ:MEET), a public market leader in the
mobile meeting space, today reported financial results for its fourth
quarter and full year ended December 31, 2017.

Fourth Quarter 2017 Financial Highlights

  • Total revenue of $40.1 million, up 37% year over year
  • Mobile revenue of $32.0 million, up 15% year over year
  • GAAP net loss of $67.7 million, or $0.94 per diluted share primarily
    as a result of a non-cash asset impairment charge and deferred tax
    charge of $56.4 million and $7.7 million, respectively, compared to
    GAAP net income of $9.9 million, or $0.15 per diluted share in the
    prior year quarter
  • Adjusted EBITDA of $10.5 million, compared to $12.8 million in the
    prior year quarter
  • Non-GAAP net income of $9.5 million, or $0.12 per diluted share,
    compared to $12.4 million or $0.19 per diluted share in the prior year
    quarter

Full Year 2017 Financial Highlights

  • Total revenue of $123.8 million, up 63% year over year
  • Mobile revenue of $97.8 million, up 38% year over year
  • GAAP net loss of $64.2 million, or $0.93 per diluted share primarily
    as a result of a non-cash asset impairment charge and deferred tax
    charge of $56.4 million and $7.7 million, respectively, compared to
    GAAP net income of $46.3 million, or $0.80 per diluted share in the
    prior year
  • Adjusted EBITDA of $31.6 million, up 8% year over year, or a 26% margin
  • Non-GAAP net income of $28.5 million, or $0.39 per diluted share,
    compared to $26.9 million or $0.47 per diluted share in the prior year

(See the important discussion about the presentation of non-GAAP
financial measures, and reconciliation to the most direct comparable
GAAP financial measure, below.)

"Video has arrived at The Meet Group," said Geoff Cook, Chief Executive
Officer. "While we only just began to monetize livestreaming video in
the fourth quarter of 2017, it's already a $19 million annualized run
rate business based on the month of February's results, up 70% versus
the fourth quarter average.

"We believe that's remarkable progress, particularly given that we've
deployed video on only two of our four major apps, representing just 40%
of our total daily active users (DAU). We expect video revenue to
continue to grow quickly in 2018 and beyond, as we seek to rapidly
expand our daily video audience and improve our per-video-user
monetization rates. We are in the process of video-enabling our large,
global social community, and we believe that outside of Asia we are the
only social dating company of size with a full-scale commitment to live
video.

"It is important to note," Cook said, "that we expect the first quarter
of 2018 will be the first quarter in our history in which we generate
the majority of our revenue from user-pay, rather than advertising.
Fueled by the early success of video on MeetMe and Skout and our
acquisitions of Lovoo and Tagged, our share of user-pay revenue grew
from 6% in the fourth quarter of 2016 to 39% in the fourth quarter of
2017. We expect it will approach 60% in the first quarter of 2018. As we
continue to transition toward a user-pay revenue model, we continue to
manage costs closely to support our short-term and long-term financial
strength. Earlier this week we reduced our cost structure by an
additional $7 million on an annualized basis, primarily through
headcount and operating expense reductions in our San Francisco office.

"I am also pleased to announce the appointment of Jim Bugden as our
Chief Financial Officer. We believe Jim is the ideal financial partner
to help us navigate the transformation of our business model from
advertising to user-pay. He was the long-time CFO of myYearbook (the
predecessor of The Meet Group), and played a key role in diversifying
our revenue model through acquisitions of new lines of business as the
SVP of Corporate Development. Additionally, our Board of Directors
appointed Spencer Grimes as a member. Spencer brings considerable
experience in finance and media, currently as Managing Partner of
Twinleaf Management LLC, a Connecticut-based registered investment
adviser focused on small cap equities in media and technology. Mr.
Grimes is also an adjunct professor of digital media at The New School
in New York City. I look forward to working closely with Jim and
Spencer."

Fourth Quarter and Full Year Financial Results

For the fourth quarter of 2017, the Company reported revenue of $40.1
million, an increase from $29.2 million year over year. GAAP net loss
was $67.7 million, or $0.94 per diluted share, compared to GAAP net
income of $9.9 million, or $0.15 per diluted share year over year. GAAP
net loss includes both a non-cash asset impairment charge and a deferred
tax charge, both of which contributed to the year over year change. In
our annual impairment testing of goodwill and intangible assets, we
determined that a write-down of goodwill of $56.4 million was required
for our U.S. reporting entity. We believe this was due predominantly to
the market-driven impacts on advertising revenue resulting from lower
CPMs that negatively affected our results and outlook. We do not expect
that this non-cash impairment charge will impact our ability to generate
cash flow in the future. In addition, at the end of fourth quarter, with
the passage of the new corporate tax law, we took a $7.7 million
one-time, non-cash charge to adjust the value of our deferred tax asset.
Adjusted EBITDA in the fourth quarter of 2017 was $10.5 million compared
to $12.8 million year over year.

For the full year 2017, the Company reported revenue of $123.8 million,
an increase from $76.1 million in 2016. GAAP net loss for the year was
$64.2 million, or $0.93 per diluted share, compared to GAAP net income
of $46.3 million, or $0.80 per diluted share, in the prior year. The
Company reported a non-cash asset impairment charge for our U.S.
reporting entity and a deferred tax charge of $56.4 million and $7.7
million, respectively, related to the reasons noted above. Adjusted
EBITDA for the full year 2017 was $31.6 million, compared to $29.3
million in 2016. Non-GAAP net income was $28.5 million, or $0.39 per
diluted share, compared to $26.9 million or $0.47 per diluted share in
the prior year.

The Company ended the year with approximately $24 million in cash and
cash equivalents.

         

THE MEET GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
December 31,
2017
December 31,
2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 24,158,444 $ 21,852,531

Accounts receivable, net of allowance of $527,958 and $283,000 at
December
31, 2017 and 2016, respectively

26,443,675 23,737,254
Prepaid expenses and other current assets 3,245,174   1,489,267  
Total current assets 53,847,293 47,079,052
Restricted cash 894,551 393,484
Goodwill 150,694,135 114,175,554
Property and equipment, net 4,524,118 2,466,110
Intangible assets, net 48,719,428 17,010,565
Deferred taxes 15,521,214 28,253,827
Other assets 1,144,032   110,892  
Total assets $ 275,344,771   $ 209,489,484  
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,277,846 $ 5,350,336
Accrued liabilities 19,419,595 8,395,060
Current portion of long-term debt 15,000,000
Current portion of capital lease obligations 254,399 221,302
Deferred revenue 4,433,450   434,197  
Total current liabilities 45,385,290 14,400,895
Long-term capital lease obligations, less current portion, net 192,137
Long-term debt 40,706,597
Long-term derivative liability 2,995,657
Other liabilities 147,178    
Total liabilities 89,426,859   14,400,895  
STOCKHOLDERS' EQUITY:

Preferred stock, $.001 par value; authorized - 5,000,000 shares; 0
shares issued
and outstanding at December 31, 2017 and 2016

Common stock, $.001 par value; authorized - 100,000,000 shares;
71,915,018
and 58,945,607 shares issued and outstanding at
December 31, 2017 and 2016, respectively

71,918 58,949
Additional paid-in capital 408,029,068 351,873,801
Accumulated deficit (221,058,536 ) (156,844,161 )
Accumulated other comprehensive loss (1,124,538 )  
Total stockholders' equity 185,917,912   195,088,589  
Total liabilities and stockholders' equity $ 275,344,771   $ 209,489,484  
 
                 

THE MEET GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

Three Months Ended
December 31,

Year Ended December 31,
2017 2016 2017 2016
Revenues $ 40,119,076   $ 29,222,186   $ 123,753,813   $ 76,124,109  
Operating costs and expenses:
Sales and marketing 6,050,466 6,313,958 20,355,964 15,089,987
Product development and content 19,698,097 8,059,563 60,704,473 25,790,173
General and administrative 6,504,840 3,063,319 19,549,805 9,494,804
Depreciation and amortization 3,954,243 1,802,568 11,573,827 4,069,211
Acquisition and restructuring 3,125,448 829,169 11,774,140 2,457,295
Goodwill impairment 56,428,861     56,428,861    
Total operating costs and expenses 95,761,955   20,068,577   180,387,070   56,901,470  
(Loss) income from operations (55,642,879 ) 9,153,609   (56,633,257 ) 19,222,639  
Other income (expense):
Interest income 387 2,488 5,731 21,185
Interest expense (438,445 ) (3,160 ) (860,392 ) (19,388 )
Change in warrant liability (864,596 )
(Loss) gain on foreign currency adjustment (30,416 ) 69 (32,488 ) 33,416
Other 9,631     9,631    
Total other expense (458,843 ) (603 ) (877,518 ) (829,383 )
(Loss) income before income tax (expense) benefit (56,101,722 ) 9,153,006 (57,510,775 ) 18,393,256
Income tax (expense) benefit (11,637,816 ) 749,916   (6,703,600 ) 27,875,362  
Net (loss) income $ (67,739,538 ) $ 9,902,922   $ (64,214,375 ) $ 46,268,618  
 
Basic and diluted net (loss) income per common stockholders:
Basic net (loss) income per common stockholders $ (0.94 ) $ 0.17   $ (0.93 ) $ 0.89  
Diluted net (loss) income per common stockholders $ (0.94 ) $ 0.15   $ (0.93 ) $ 0.80  
 
Weighted average shares outstanding:
Basic 71,808,179   58,856,831   68,743,956   51,963,702  
Diluted 71,808,179   64,121,470   68,743,956   57,745,652  
 
           

THE MEET GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET (LOSS) INCOME TO ADJUSTED EBITDA

(UNAUDITED)

 

Three Months Ended
December 31,

Year Ended December 31,
2017 2016 2017 2016
Net (loss) income $ (67,739,538 ) $ 9,902,922 $ (64,214,375 ) $ 46,268,618
 
Interest expense 438,445 3,160 860,392 19,388
Change in warrant liability 864,596
Income tax expense (benefit) 11,637,816 (749,916 ) 6,703,600 (27,875,362 )
Depreciation and amortization 3,954,243 1,802,568 11,573,827 4,069,211
Stock-based compensation expense 2,665,232 1,013,145 8,467,278 3,567,987
Goodwill impairment 56,428,861 56,428,861
Acquisition and restructuring 3,125,448 829,169 11,774,140 2,457,295
Loss (gain) on foreign currency adjustment 30,416   (69 ) 32,488   (33,416 )
Adjusted EBITDA $ 10,540,923   $ 12,800,979   $ 31,626,211   $ 29,338,317  
 
GAAP basic net (loss) income per common stockholder $ (0.94 ) $ 0.17   $ (0.93 ) $ 0.89  
GAAP diluted net (loss) income per common stockholder $ (0.94 ) $ 0.15   $ (0.93 ) $ 0.80  
Basic adjusted EBITDA per common stockholder $ 0.15   $ 0.22   $ 0.46   $ 0.56  
Diluted adjusted EBITDA per common stockholder $ 0.14   $ 0.20   $ 0.43   $ 0.51  
 
Weighted average shares outstanding:
Basic 71,808,179   58,856,831   68,743,956   51,963,702  
Diluted 75,965,208   64,121,470   73,198,544   57,745,652  
 
                 

THE MEET GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET INCOME

(UNAUDITED)

 

Three Months Ended
December 31,

Year Ended December 31,
2017 2016 2017 2016
GAAP Net (loss) income $ (67,739,538 ) $ 9,902,922 $ (64,214,375 ) $ 46,268,618
 
Stock-based compensation expense 2,665,232 1,013,145 8,467,278 3,567,987
Amortization of intangibles 3,370,712 1,364,850 9,353,171 2,507,433
Income tax expense (benefit) 11,637,816 (749,916 ) 6,703,600 (27,875,362 )
Goodwill impairment 56,428,861 56,428,861
Acquisition and restructuring 3,125,448   829,169   11,774,140   2,457,295  
Non-GAAP net income $ 9,488,531   $ 12,360,170   $ 28,512,675   $ 26,925,971  
 
GAAP basic net (loss) income per common stockholder $ (0.94 ) $ 0.17   $ (0.93 ) $ 0.89  
GAAP diluted net (loss) income per common stockholder $ (0.94 ) $ 0.15   $ (0.93 ) $ 0.80  
Basic Non-GAAP net income per common stockholder $ 0.13   $ 0.21   $ 0.41   $ 0.52  
Diluted Non-GAAP net income per common stockholder $ 0.12   $ 0.19   $ 0.39   $ 0.47  
 
Weighted average shares outstanding:
Basic 71,808,179   58,856,831   68,743,956   51,963,702  
Diluted 75,965,208   64,121,470   73,198,544   57,745,652  
 

Webcast and Conference Call Details

Management will host a webcast and conference call to discuss fourth
quarter and full year 2017 financial results today, March 7, 2018 at
4:30 p.m. Eastern time. To access the call dial 866-572-9351 (US and
Canada) or 703-736-7482 (International) and when prompted provide the
participant passcode 7858249 to the operator. In addition, a webcast of
the conference call will be available live on the Investor Relations
section of the Company's website at www.themeetgroup.com
and a replay of the webcast will be available for 90 days.

About The Meet Group

The Meet Group (NASDAQ:MEET) is a fast-growing portfolio of mobile apps
designed to meet the universal need for human connection. Our apps -
currently MeetMe®, LOVOO®, Skout®, Tagged®, and Hi5® - let users in more
than 100 countries chat, share photos, stream live video, and discuss
topics of interest, and are available on iPhone, iPad, and Android in
multiple languages. Using innovative products and sophisticated data
science, The Meet Group keeps its 4.3 million mobile daily active users
engaged and originates untold numbers of casual chats, friendships,
dates, and marriages. The Meet Group offers advertisers the opportunity
to reach customers on a global scale and has leading mobile monetization
strategies, including advertising, in-app purchases, and subscription
products. The Meet Group has offices in New Hope, San Francisco,
Dresden, and Berlin. For more information, visit themeetgroup.com,
and follow us on FacebookTwitter or LinkedIn.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995, including whether our total revenue and mobile revenue will
continue to grow, whether our Adjusted EBITDA will continue to grow,
whether video revenue will continue to grow as expected in 2018 and
beyond, whether we will expand our daily video audience and improve
per-video-user monetization rates as expected, whether the first quarter
of 2018 will be the first in our history in which we generate the
majority of our revenue from user-pay, whether user-pay revenue will
represent 60% of total revenue in the first quarter of 2018, and whether
the non-cash impairment charge will impact our ability to generate cash
flow in the future. All statements other than statements of historical
facts contained herein are forward-looking statements. The words
"believe," "may," "estimate," "continue," "anticipate," "intend,"
"should," "plan," "could," "target," "potential," "project," "is
likely," "expect" and similar expressions, as they relate to us, are
intended to identify forward-looking statements. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we believe may
affect our financial condition, results of operations, business strategy
and financial needs. Important factors that could cause actual results
to differ from those in the forward-looking statements include the risk
that our applications will not function easily or otherwise as
anticipated, the risk that we will not launch additional features and
upgrades as anticipated, the risk that unanticipated events affect the
functionality of our applications with popular mobile operating systems,
any changes in such operating systems that degrade our mobile
applications' functionality and other unexpected issues which could
adversely affect usage on mobile devices. Further information on our
risk factors is contained in our filings with the Securities and
Exchange Commission ("SEC"), including the Form 10-K for the year ended
December 31, 2016 filed with the SEC on March 9, 2017, our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2017, June 30,
2017 and September 30, 2017 filed with the SEC on May 10, 2017, August
4, 2017 and November 9, 2017, respectively. Any forward-looking
statement made by us herein speaks only as of the date on which it is
made. Factors or events that could cause our actual results to differ
may emerge from time to time, and it is not possible for us to predict
all of them. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by law.

Regulation G – Non-GAAP Measures

The Company defines mobile traffic and engagement metrics (including
MAU, DAU, chats per day, and new users per day) to include mobile app
traffic for all properties and mobile web traffic for MeetMe and Skout.

The Company uses Adjusted EBITDA and Non-GAAP Net Income, which are not
calculated and presented in accordance with U.S. generally accepted
accounting principles ("GAAP"), in evaluating its financial and
operational decision making and as a means to evaluate period-to period
comparison. The Company uses these non-GAAP financial measures for
financial and operational decision-making and as a means to evaluate
period-to-period comparisons. The Company presents these non-GAAP
financial measures because it believes them to be an important
supplemental measure of performance that is commonly used by securities
analysts, investors and other interested parties in the evaluation of
companies in our industry. We refer you to the reconciliations below.

The Company defines Adjusted EBITDA as earnings (or loss) from
operations before interest expense, benefit or provision for income
taxes, depreciation and amortization, stock-based compensation, warrant
obligations, non-recurring acquisition, restructuring or other expenses,
gain or loss on cumulative foreign currency translation adjustment, gain
on sale of asset, bad debt expense outside the normal range, and
goodwill and long-lived asset impairment charges. The Company excludes
stock-based compensation because it is non-cash in nature. The Company
defines Non-GAAP Net Income as earnings (or loss) before benefit or
provision for income taxes, amortization of intangibles, non-recurring
acquisition and restructuring costs, bad debt expense outside the normal
range, and non-cash stock based compensation.

Non-GAAP financial measures should not be considered as an alternative
to net income, operating income, cash flow from operating activities, as
a measure of liquidity or any other financial measure. They may not be
indicative of the historical operating results of the Company nor is it
intended to be predictive of potential future results. Investors should
not consider non-GAAP financial measures in isolation or as a substitute
for performance measures calculated in accordance with GAAP.

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