Market Overview

The Meet Group Reports Second Quarter 2018 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 second
quarter ended June 30, 2018.

Second Quarter 2018 Financial Highlights

  • Total revenue of $42.8 million, up 37% year over year
  • GAAP net loss of $0.2 million, or $0.00 per diluted share, compared to
    GAAP net income of $0.9 million, or $0.01 per diluted share in the
    prior year quarter
  • Adjusted EBITDA of $7.6 million, up 3% from the prior year quarter
  • Non-GAAP net income of $6.4 million, or $0.08 per diluted share,
    compared to $6.6 million or $0.09 per diluted share in the prior year
    quarter

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

"Our strong momentum continued into the second quarter," said Geoff
Cook, Chief Executive Officer. "We made outstanding progress in video
and reported better than anticipated results in advertising,
contributing to growth in revenue and Adjusted EBITDA. Combined with our
recent rollout of Live to Lovoo and the beta launch on MeetMe of Quick,
our new 1-on-1 livestreaming feature, we believe we have set the stage
for sustainable long-term revenue growth.

"Our investment in livestreaming video continues to yield strong
results," continued Cook. "The number of video users and video revenue
per user both increased sequentially. In less than two years, Live has
become foundational to our business, central to our user experience and
a key driver of our improving financial performance. No product in our
history has grown faster and none has transformed our company to the
degree that Live has. What's more, we have further diversified our
business and are now generating 60% of our revenue from user pay, up
from 26% in the year ago quarter. In July alone, we increased the
annualized revenue run rate for video to $37 million, up from $35
million in June. Having now rolled out Live to all of our apps, we
believe the opportunity to continue to grow video engagement and revenue
is significant."

In addition to announcing its second quarter results, the Company
announced that Nick Hermansader has re-joined the company as Senior Vice
President of Advertising. Nick joined The Meet Group from Imgur, an
image sharing and hosting network. He previously worked at The Meet
Group, having served as Vice President of Advertising Operations from
2013 to 2017. Additionally, Bill Alena, Chief Revenue Officer of The
Meet Group, has left the Company effective July 31, 2018 to pursue other
opportunities.

Cook commented, "I am thrilled to have Nick rejoin our team. He brings a
wealth of knowledge and a data-driven approach to managing mobile and
online advertising. We look forward to his contributions to the team."

Continued Cook, "Bill has been a tremendous contributor to our company
for many years. He joined us as the Vice President of Advertising at
myYearbook in 2007 and served as Chief Revenue Officer of The Meet Group
since 2011. He was instrumental in creating our advertising strategy. I
want to thank Bill for his tremendous contributions to our company. We
wish him well in the future."

Second Quarter Financial Results

For the second quarter of 2018, the Company reported revenue of $42.8
million, an increase of 37% from $31.3 million in the prior year quarter.

GAAP net loss was $0.2 million, or $0.00 per diluted share, compared to
GAAP net income of $0.9 million, or $0.01 per diluted share in the prior
year quarter. Adjusted EBITDA in the second quarter of 2018 was $7.6
million compared to $7.4 million in the prior year quarter.

The Company ended the quarter with $20.9 million in cash and cash
equivalents.

Company Outlook

The Company is providing the following outlook for the third quarter of
2018 and is increasing its outlook for the full year 2018.

Third quarter 2018:

  • Revenue in the range of $43 million to $44 million
  • Adjusted EBITDA in the range of $7.4 million to $7.8 million

Full year 2018:

  • Revenue in the range of $166 million to $168 million
  • Adjusted EBITDA in the range of $27 million to $28 million
 

THE MEET GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
     

June 30,
2018

 

December 31,
2017

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,922,457 $ 24,158,444
Accounts receivable, net of allowance of $637,802 and $527,958 at
June 30, 2018 and December 31, 2017, respectively
23,866,941 26,443,675
Prepaid expenses and other current assets 5,253,503   3,245,174  
Total current assets 50,042,901 53,847,293
Restricted cash 500,000 894,551
Goodwill 149,227,248 150,694,135
Property and equipment, net 3,632,350 4,524,118
Intangible assets, net 42,342,822 48,719,428
Deferred taxes 16,115,201 15,521,214
Other assets 1,878,851   1,144,032  
Total assets $ 263,739,373   $ 275,344,771  
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,325,941 $ 6,277,846
Accrued liabilities 17,812,588 19,866,438
Current portion of long-term debt 15,000,000 15,000,000
Current portion of capital lease obligations 187,606 254,399
Deferred revenue 5,006,501   4,433,450  
Total current liabilities 43,332,636 45,832,133
Long-term capital lease obligations, less current portion, net 110,056 192,137
Long-term debt 33,301,419 40,637,106
Long-term derivative liability 2,126,536 2,995,657
Other liabilities 114,340   147,178  
Total liabilities 78,984,987   89,804,211  
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; authorized - 5,000,000 shares; 0
shares issued and outstanding at June 30, 2018 and December 31, 2017
Common stock, $.001 par value; authorized - 100,000,000 shares;
73,121,962 and 71,915,018 shares issued and outstanding at June 30,
2018 and December 31, 2017, respectively
73,118 71,918
Additional paid-in capital 412,213,959 408,029,068
Accumulated deficit (225,867,346 ) (221,435,888 )
Accumulated other comprehensive loss (1,665,345 ) (1,124,538 )
Total stockholders' equity 184,754,386   185,540,560  
Total liabilities and stockholders' equity $ 263,739,373   $ 275,344,771  
 
 

THE MEET GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
      Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
Revenues $ 42,801,745   $ 31,329,468   $ 80,439,538   $ 51,388,265  
Operating costs and expenses:
Sales and marketing 7,753,486 4,599,842 14,801,479 9,705,350
Product development and content 24,411,288 16,526,905 46,512,825 24,984,399
General and administrative 5,154,103 5,160,799 10,623,281 8,023,226
Depreciation and amortization 3,505,180 2,965,175 7,134,783 4,650,014
Acquisition and restructuring 1,036,602   3,769,425   4,386,553   5,269,854  
Total operating costs and expenses 41,860,659   33,022,146   83,458,921   52,632,843  
Income (loss) from operations 941,086   (1,692,678 ) (3,019,383 ) (1,244,578 )
Other income (expense):
Interest income 2,742 1,400 9,950 3,970
Interest expense (671,294 ) (175,254 ) (1,278,980 ) (177,586 )
Gain (loss) on foreign currency transactions 4,216 (9,229 ) 107,259 (11,429 )
Other 28,571     21,627    
Total other expense (635,765 ) (183,083 ) (1,140,144 ) (185,045 )
Income (loss) before income tax benefit 305,321 (1,875,761 ) (4,159,527 ) (1,429,623 )
Income tax benefit (expense) (540,593 ) 2,732,356   (288,406 ) 2,732,064  
Net income (loss) $ (235,272 ) $ 856,595   $ (4,447,933 ) $ 1,302,441  
 
Basic and diluted net income (loss) per common stockholder:
Basic net income (loss) per common stockholder $   $ 0.01   $ (0.06 ) $ 0.02  
Diluted net income (loss) per common stockholder $   $ 0.01   $ (0.06 ) $ 0.02  
 
Weighted average shares outstanding:
Basic 72,753,487   70,122,234   72,369,619   65,632,962  
Diluted 72,753,487   74,885,903   72,369,619   70,569,243  
 
 

THE MEET GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
      Six Months Ended June 30,
2018   2017
Cash flows from operating activities:
Net income (loss) $ (4,447,933 ) $ 1,302,441
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 7,134,783 4,650,014
Stock-based compensation expense 4,259,795 3,502,350
Deferred taxes (441,417 ) (444,230 )
(Gain) loss on foreign currency transactions (107,259 ) 11,429
Bad debt expense 290,426 26,000
Amortization of loan origination costs 164,313 34,342
Changes in operating assets and liabilities:
Accounts receivable 2,141,980 5,862,051
Prepaid expenses, other current assets and other assets (2,426,711 ) 1,610,514
Accounts payable and accrued liabilities 2,344,109 161,914
Deferred revenue 686,332   (54,560 )
Net cash provided by operating activities 9,598,418   16,662,265  
Cash flows from investing activities:
Purchase of property and equipment (256,391 ) (595,126 )
Acquisition of business, net of cash and restricted cash acquired   (65,802,792 )
Net cash used in investing activities (256,391 ) (66,397,918 )
Cash flows from financing activities:
Proceeds from exercise of stock options 232,416 2,778,176
Proceeds from issuance of common stock 42,995,371
Proceeds from exercise of warrants 2,396,250
Payments of capital leases (142,043 ) (139,541 )
Proceeds from long-term debt 15,000,000
Payments for restricted stock awards withheld for taxes (306,120 ) (507,398 )
Payments of contingent consideration (5,000,000 )
Payments on long-term debt (7,500,000 ) (1,875,000 )
Net cash (used in) provided by financing activities (12,715,747 ) 60,647,858  
Change in cash, cash equivalents, and restricted cash prior to
effects of foreign currency exchange rate
(3,373,720 ) 10,912,205
Effect of foreign currency exchange rate (translation) (256,818 ) (11,429 )
Net (decrease) increase in cash, cash equivalents, and restricted
cash
(3,630,538 ) 10,900,776  
Cash, cash equivalents, and restricted cash at beginning of period 25,052,995   22,246,015  
Cash, cash equivalents, and restricted cash at end of period $ 21,422,457   $ 33,146,791  
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,110,448   $ 140,911  
 
 

THE MEET GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF TOTAL REVENUE

(UNAUDITED)

 
      Three Months Ended June 30,   Six Months Ended June 30,
2018  

2017(1)

 

2018  

2017(1)

 

$   % $   %   $   % $   %  
User pay revenue $ 25,570,553 59.7 % $ 8,144,890 26.0 % $ 47,976,083 59.6 % $ 9,760,165 19.0 %
Advertising 17,231,192   40.3 % 23,184,578   74.0 %   32,463,455   40.4 % 41,628,100   81.0 %  
Total revenue $ 42,801,745   100.0 % $ 31,329,468   100.0 %   $ 80,439,538   100.0 % $ 51,388,265   100.0 %  

(1) Prior period amounts have not been adjusted under the modified
retrospective adoption method.

 

THE MEET GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA

(UNAUDITED)

 
      Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
Net income (loss) $ (235,272 ) $ 856,595 $ (4,447,933 ) $ 1,302,441
 
Interest expense 671,294 175,254 1,278,980 177,586
Income tax (benefit) expense 540,593 (2,732,356 ) 288,406 (2,732,064 )
Depreciation and amortization 3,505,180 2,965,175 7,134,783 4,650,014
Stock-based compensation expense 2,090,870 2,368,192 4,259,795 3,502,350
Acquisition and restructuring 1,036,602 3,769,425 4,386,553 5,269,854
(Gain) loss on foreign currency transactions (4,216 ) 9,229   (107,259 ) 11,429  
Adjusted EBITDA $ 7,605,051   $ 7,411,514   $ 12,793,325   $ 12,181,610  
 
GAAP basic net income (loss) per common stockholder $   $ 0.01   $ (0.06 ) $ 0.02  
GAAP diluted net income (loss) per common stockholder $   $ 0.01   $ (0.06 ) $ 0.02  
Basic adjusted EBITDA per common stockholder $ 0.10   $ 0.11   $ 0.18   $ 0.19  
Diluted adjusted EBITDA per common stockholder $ 0.10   $ 0.10   $ 0.16   $ 0.17  
 
Weighted average shares outstanding:
Basic 72,753,487   70,122,234   72,369,619   65,632,962  
Diluted 78,240,935   74,885,903   77,574,279   70,569,243  
 
 

THE MEET GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

(UNAUDITED)

 
      Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
GAAP Net income (loss) $ (235,272 ) $ 856,595 $ (4,447,933 ) $ 1,302,441
 
Stock-based compensation expense 2,090,870 2,368,192 4,259,795 3,502,350
Amortization of intangibles 2,954,485 2,378,152 6,011,094 3,604,307
Income tax (benefit) expense 540,593 (2,732,356 ) 288,406 (2,732,064 )
Acquisition and restructuring 1,036,602   3,769,425   4,386,553   5,269,854  
Non-GAAP net income $ 6,387,278   $ 6,640,008   $ 10,497,915   $ 10,946,888  
 
GAAP basic net income (loss) per common stockholder $   $ 0.01   $ (0.06 ) $ 0.02  
GAAP diluted net income (loss) per common stockholder $   $ 0.01   $ (0.06 ) $ 0.02  
Basic Non-GAAP net income per common stockholder $ 0.09   $ 0.09   $ 0.15   $ 0.17  
Diluted Non-GAAP net income per common stockholder $ 0.08   $ 0.09   $ 0.14   $ 0.16  
 
Weighted average shares outstanding:
Basic 72,753,487   70,122,234   72,369,619   65,632,962  
Diluted 78,240,935   74,885,903   77,574,279   70,569,243  
 

Webcast and Conference Call Details

Management will host a webcast and conference call to discuss second
quarter 2018 financial results today, August 1, 2018 at 8:30 a.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 1467378 to the operator. An audio replay will be available at
855-859-2056 domestically or 404-537-3406 internationally, using
passcode 1467378 through August 8, 2018. 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 portfolio of mobile social
entertainment apps designed to meet the universal need for human
connection. We leverage a powerful live-streaming video platform,
empowering our global community to forge meaningful connections. Our
primary apps, MeetMe©, LOVOO©, Skout©, and Tagged©, keep millions of
mobile daily active users entertained and engaged and originate untold
numbers of casual chats, friendships, dates, and marriages. Our apps,
available on iPhone, iPad, and Android in multiple languages, use
innovative products and sophisticated data science to let our users
stream live video, send gifts, chat, and share photos. The Meet Group
has a diversified revenue mix consisting of in-app purchases,
subscription, and advertising, and we have offices in New Hope,
Philadelphia, 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 third quarter 2018 and full year 2018 revenue
and Adjusted EBITDA will be in the projected range, whether momentum
will continue as expected, whether we have set the stage for sustainable
long-term revenue growth as expected, whether our investment in
livestreaming video will continue to yield strong results and whether
the opportunity to continue to grow video engagement and revenue is
significant. 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, 2017 filed with the SEC on March 16, 2018 and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2018 filed with the
SEC on May 7, 2018. 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, Skout and
Lovoo.

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, goodwill and
long-lived asset impairment charges, 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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