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Momo Announces Unaudited Financial Results for the Second Quarter of 2018

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Momo Announces Unaudited Financial Results for the Second Quarter of 2018

PR Newswire

BEIJING, Aug. 22, 2018 /PRNewswire/ -- Momo Inc. (NASDAQ:MOMO) ("Momo" or the "Company"), a leading mobile social networking platform in China, today announced its unaudited financial results for the second quarter of 2018.

Second Quarter of 2018 Highlights

  • Net revenues increased 58% year over year to $494.3 million.
  • Net income attributable to Momo Inc. increased to $117.8 million in the second quarter of 2018 from $60.8 million in the same period last year.
  • Non-GAAP net income attributable to Momo Inc. (note 1) increased 90% to $140.2 million in the second quarter of 2018 from $73.8 million in the same period last year.
  • Diluted net income per American Depositary Share ("ADS") was $0.56, compared to $0.29 in the same period last year.
  • Non-GAAP diluted net income per ADS (note 1) was $0.66, compared to $0.35 in the same period last year.
  • Monthly Active Users ("MAU") on Momo application were 108.0 million in June 2018, compared to 91.3 million in June 2017.
  • Total paying users of our live video service and value-added service, without double counting the overlap, including 3.1 million paying users of Tantan in June 2018, were 11.6 million for the second quarter of 2018, compared to 7.1 million for the second quarter of 2017.

First Half of 2018 Highlights

  • Net revenues increased 61% year over year to $929.4 million for the first half of 2018.
  • Net income attributable to Momo Inc. was $247.7 million for the first half of 2018, compared with $142.0 million during the same period of 2017.
  • Non-GAAP net income attributable to Momo Inc. (note 1) was $282.4 million for the first half of 2018, compared with $164.5 million during the same period of 2017.
  • Diluted net income per ADS was $1.18 for the first half of 2018, compared with $0.69 during the same period of 2017.
  • Non-GAAP diluted income per ADS (note 1) was $1.35 for the first half of 2018, compared with $0.80 during the same period of 2017.

"I am glad that we delivered another solid quarter. Our community continued to grow with healthy engagement trends, thanks to our consistent endeavors to drive product innovation and content enrichment." Commented Yan Tang, Chairman and CEO of Momo. "Our live streaming business continued to grow robustly.  In addition, value-added service revenues for the Momo app more than doubled from a year ago, demonstrating Momo's monetization potential as a social platform. Tantan officially joined our family in the second quarter of 2018 and started to contribute to our social ecosystem and topline growth. Together we will be pushing forward our strategic priorities and solidifying our leadership in China's open social territory"

Second Quarter of 2018 Financial Results

Net revenues

Total net revenues were $494.3 million in the second quarter of 2018, an increase of 58% from $312.2 million in the second quarter of 2017.

Live video service revenues continued its growth momentum and the total live video service revenues were $411.0 million in the second quarter of 2018, an increase of 58% from $259.4 million during the same period of 2017. The rapid growth in live video revenues was contributed by the increase in the quarterly paying users, which was 4.6 million for the second quarter of 2018, as well as, the increase in the average revenues per paying user per quarter.

Value-added service revenues mainly include membership subscription revenues and virtual gift revenues. The total value-added service revenues were $55.2 million in the second quarter of 2018, an increase of 124% from $24.6 million during the same period of 2017. The year over year increase was primarily attributable to the continuous growth of the virtual gift business on the Momo application and to a lesser extent, the consolidation of Tantan's membership subscription revenues for the single month of June 2018. The growth of the virtual gift business was driven by more paying use cases introduced to enhance the social experience for Momo users. Total paying users of the value-added service on Momo application was 5.3 million for the second quarter of 2018, compared with 4.5 million for the second quarter of 2017. As of June 30, 2018, Tantan has 3.1 million subscribers.

Mobile marketing revenues were $22.3 million in the second quarter of 2018, an increase of 17% from $19.0 million during the same period of 2017. The growth in mobile marketing revenues was driven by improved sell-through of our existing advertisement inventories and the increased demand from brand marketers.

Mobile games revenues were $5.5 million in the second quarter of 2018, a decrease of 40% from $9.1 million in the second quarter of 2017. The decrease in game revenues was mainly due to the decrease in the quarterly paying users.

Cost and expenses

Cost and expenses were $369.4 million in the second quarter of 2018, an increase of 50% from $246.0 million in the second quarter of 2017. The increase was primarily attributable to: (a) an increase in revenue sharing with the broadcasters related to our live video service and virtual gift recipients; (b) the production costs in connection with Phanta City, a TV variety show co-produced by the Company; (c) an increase in personnel related costs including share-based compensation expenses as a result of the Company's rapidly expanding talent pool; and (d) increased infrastructure related spending, such as short messaging service charges, bandwidth costs and server depreciation costs, driven by more functions introduced on Momo's platform; which was partially offset by a decrease in marketing and promotional expenses.

Non-GAAP cost and expenses (note 1) were $346.5 million in the second quarter of 2018, an increase of 49% from $233.0 million during the same period last year.

Other operating income

Other operating income was $15.7 million in the second quarter of 2018, a significant increase from $7.6 million during the second quarter of 2017. The increase was mainly due to more government incentives received in the second quarter of 2018.

Income from operations

Income from operations was $140.6 million in the second quarter of 2018, compared to $73.7 million during the same period last year.

Non-GAAP income from operations (note 1) was $163.4 million in the second quarter of 2018, compared to $86.7 million during the same period last year.

Income tax expenses

Income tax expenses were $31.1 million in the second quarter of 2018, increased from $13.9 million in the second quarter of 2017. The increase was mainly because we generated higher profit in the second quarter of 2018.

Net income attributable to Momo Inc.

Net income attributable to Momo Inc. was $117.8 million in the second quarter of 2018, compared to $60.8 million during the same period last year.

Non-GAAP net income (note 1) attributable to Momo Inc. was $140.2 million in the second quarter of 2018, compared to $73.8 million during the same period last year.

Net income per ADS

Diluted net income per ADS was $0.56 in the second quarter of 2018, compared to $0.29 in the second quarter of 2017.

Non-GAAP diluted net income per ADS (note 1) was $0.66 in the second quarter of 2018, compared to $0.35 in the second quarter of 2017.

Cash and cash flow

As of June 30, 2018, Momo's cash, cash equivalents, term deposits and restricted cash totaled $1,079.8 million, compared to $1,059.6 million as of December 31, 2017. Net cash provided by operating activities in the second quarter of 2018 was $155.7 million, compared to $108.1 million for the same quarter of 2017.

First Half of 2018 Financial Results

Net revenues for the first half of 2018 were $929.4 million, an increase of 61% from $577.5 million in the same period of 2017, primarily driven by the significant increase in net revenues from live video service, and value-added service.

Net income attributable to Momo Inc. was $247.7 million in the first half of 2018, compared to $142.0 million during the same period of 2017.

Non-GAAP net income attributable to Momo Inc. (note 1) was $282.4 million in the first half of 2018, compared to $164.5 million during the same period of 2017.

Diluted net income per ADS was $1.18 during the first half of 2018, compared to $0.69 in the same period of 2017.

Non-GAAP diluted net income per ADS (note 1) was $1.35 during the first half of 2018, compared to $0.80 in the same period of 2017.

Net cash provided by operating activities was $285.7 million during the first half of 2018, compared to $203.4 million in the same period of 2017.

Recent Development

Completion of Offering of Convertible Senior Notes

By July 30, 2018, the Company had completed the offering of $725.0 million in aggregate principal amount of convertible senior notes due 2025, including an exercised over-allotment option of $75.0 million principal amount of notes that the Company granted to the initial purchasers (the "Notes").

The Notes will bear interest at a rate of 1.25% per year, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2019. The Notes will mature on July 1, 2025, unless previously repurchased, redeemed or converted in accordance with their terms prior to such date.

Holders of the Notes have the right to require us to repurchase for cash all or part of their notes on July 1, 2023 at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

The Notes will be convertible into Momo's American depositary shares ("ADSs"), at the option of the holders, based on an initial conversion rate of 15.4776 of the Company's ADSs per US$1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately US$64.61 per ADS and represents an approximately 42.5% conversion premium over the closing trading price of the Company's ADSs on June 26, 2018, which was US$45.34 per ADS).

Repayment of Long-term Bank Loan

To facilitate the closing of our acquisition of 100% equity stake of Tantan Limited, we borrowed a bank loan facility from a domestic commercial bank in May 2018. Total amount of drawdown was US$300.0 million, with a fixed interest rate of 4.5% per annum and with a period of two years. We repaid the bank loan in July 2018.

Business Outlook

For the third quarter of 2018, the Company expects total net revenues to be between $525.0 million and $540.0 million, representing a year-over-year increase of 51% to 55% and a quarter-over-quarter increase of 13% to 17% on a constant currency basis. This forecast reflects the currency translation risks and assumes an average exchange rate of RMB 6.8055 to US$1.00. These estimates reflect the Company's current and preliminary view, which is subject to change.

Note 1: Non-GAAP measures

To supplement our consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), we use various non-GAAP financial measures that are adjusted from the most comparable GAAP results to exclude share-based compensation and amortization of intangible assets from acquisitions, and provision for income tax related to the amortization of intangible assets.

Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are shown in tables at the end of this earnings release, which provide more details about the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of our continuing operations and our prospects for the future. Our non-GAAP financial information should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to the GAAP results. In addition, our calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Our non-GAAP information (including non-GAAP cost and operating expenses, income from operations, net income attributable to Momo Inc., and diluted earnings per ADS) is adjusted from the most comparable GAAP results to exclude share-based compensation, amortization of intangible assets from acquisitions, and provision for income tax related to the amortization of intangible assets. A limitation of using these non-GAAP financial measures is that share-based compensation, amortization of intangible assets from acquisitions and provision for income tax related to the amortization of intangible assets charge has been and will continue to be for the foreseeable future a significant recurring expense in our results of operations. We compensate for these limitations by providing reconciliations of our non-GAAP measures to our U.S. GAAP measures. Please see the reconciliation tables at the end of this earnings release.

Conference Call

Momo's management will host an earnings conference call on Wednesday, August 22, 2018 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Beijing / Hong Kong Time on August 22, 2018).

Dial-in details for the earnings conference call are as follows:

International: 

+65-6713-5090

U.S. Toll Free:

+1-866-519-4004

Hong Kong Toll Free: 

800-906601

Mainland China:

4006-208038

Passcode:

Momo

Please dial in 15 minutes before the call is scheduled to begin.

A telephone replay of the call will be available after the conclusion of the conference call through 8:00 a.m. U.S. Eastern Time, August 29, 2018. The dial-in details for the replay are as follows:

International:

+61-2-8199-0299

U.S. Toll Free:

+1-855-452-5696

Passcode:  

9585639

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of Momo's website at http://ir.immomo.com.

About Momo

Momo is a leading mobile social networking platform in China. Momo connects people in a personal and lively way through a revolutionary mobile-based social networking platform. With powerful and precise location-based features, Momo enables users to connect with each other and expand relationships from online to offline. Momo's platform includes the Momo mobile application and a variety of related features, functionalities, tools and services that it provides to users, customers and platform partners. Leveraging its social interest graph engine and analysis of user behavior data, Momo is able to provide users a customized experience based on their social preferences and needs. Momo users can maintain and strengthen their relationships through private and group communication tools, content creation and sharing functions, as well as the offline social activities promoted on Momo's platform. Momo users are also able to enjoy live video on our platform. In addition, in May 2018, Momo completed its acquisition of Tantan, a leading social and dating app for the younger generation. Tantan, whose primary users consist of young Chinese singles, is designed to help its users find and establish romantic connections, as well as meet interesting people.

For investor and media inquiries, please contact:

Momo Inc.

Investor Relations
Phone: +86-10-5731-0538
Email: ir@immomo.com  

Christensen

In China
Mr. Christian Arnell
Phone: +86-10- 5900-1548
E-mail: carnell@christensenir.com  

In US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

Safe Harbor Statement

This news release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to our management quotes and our financial outlook for the third quarter of 2018. 

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for the second quarter of 2018 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the third quarter of 2018 and may be unable to grow our business in the manner planned. We may also modify our strategy for growth.  In addition, there are other risks and uncertainties that could cause our actual results to differ from what we currently anticipate, including those relating to our ability to retain and grow our user base, our ability to attract and retain sufficiently trained professionals to support our operations, and our ability to anticipate and develop new services and enhance existing services to meet the demand of our users or customers.  For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see our filings with the U.S. Securities and Exchange Commission.

All information provided in this press release and in the attachments is as of the date of the press release. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, after the date of this release, except as required by law. Such information speaks only as of the date of this release.

 

 


Momo Inc.


Unaudited Condensed Consolidated Statement of Operations


(US dollars in thousands, except per share data)



Three months


First half year


ended June 30


ended June 30



2017


2018


2017


2018


Net revenues:









Live video service

259,417


410,977


471,994


782,473


Value-added service

24,636


55,221


47,503


92,212


Mobile marketing

19,018


22,264


36,907


40,973


Mobile games

9,143


5,454


20,704


12,101


Other services

10


354


354


1,640


Total net revenues

312,224


494,270


577,462


929,399


Cost and expenses:









Cost of revenues

(150,668)


 

(269,736)


(271,112)


(479,344)


Research and development

(10,317)


(25,069)


(18,876)


(42,602)


Sales and marketing

(69,084)


(54,553)


(103,081)


(98,895)


General and administrative

(15,978)


(20,003)


(28,078)


(37,234)


Total cost and expenses

(246,047)


(369,361)


(421,147)


(658,075)


Other operating income

7,569


15,692


8,474


16,779


Income from operations

73,746


140,601


164,789


288,103


Interest income

4,628


8,239


8,380


15,779


Interest expense

-


(1,950)


-


(1,950)


Impairment loss on long-term investments

(4,386)


-


(4,386)


-


Income before income tax and share of
    income on equity method investments

73,988


146,890


168,783


301,932


Income tax expenses

(13,938)


(31,143)


(29,715)


(58,048)


Income before share of income on equity
    method investments

60,050


115,747


139,068


243,884


Share of income on equity method investments

514


1,692


2,697


2,971


Net income

60,564


117,439


141,765


246,855


Less: net loss attributable to non-controlling interest

(198)


(340)


(205)


(808)


Net income attributable to Momo Inc.

60,762


117,779


141,970


247,663


 

Net income per share attributable to ordinary 
   shareholders









Basic

0.15


0.29


0.36


0.62

Diluted

0.15


0.28


0.34


0.59

Weighted average shares used in calculating net
   income per ordinary share








Basic

394,579,193


405,737,852


392,220,292


402,388,870

Diluted

416,635,812


423,089,714


413,773,272


419,086,110













 

 

 







Momo Inc.

Unaudited Condensed Consolidated Statement of Comprehensive Income

(US dollars in thousands, except per share data)








Three months


First half year

ended June 30


ended June 30


2017


2018


2017


2018

Net income

60,564


117,439


141,765


246,855

Other comprehensive income(loss), net of tax of nil








Foreign currency translation adjustment

6,680


(50,756)


8,943


(24,002)

Comprehensive income

67,244


66,683


150,708


222,853

Less: comprehensive loss attributed to the non-
  controlling interest

(200)


(457)


(207)


(825)

Comprehensive income attributable to Momo Inc.
  shareholders

67,444


67,140


150,915


223,678

 

 


 

Momo Inc.

Unaudited Condensed Consolidated Balance Sheets

( US dollars in thousands)






December 31


June 30

2017

2018

Assets




Current assets




Cash and cash equivalents

685,827


306,255

Term deposits

373,794


416,360

Restricted cash

-


357,139

Accounts receivable, net of allowance for doubtful
    accounts of $90 and $nil as of December 31, 2017 and 
    June 30, 2018, respectively

39,597


32,434

Prepaid expenses and other current assets

82,717


69,650

Amount due from related parties

5,143


2,030

Short-term investment

1,614


-

Total current assets

1,188,692


1,183,868

Property and equipment, net

39,762


48,189

Intangible assets

7,462


162,519

Rental deposits

2,651


2,955

Long term investments

44,337


62,357

Deferred tax assets, non-current

7,197


2,759

Other non-current assets

8,495


14,081

Goodwill

3,401


626,528

Total assets

1,301,997


2,103,256

Liabilities and equity




Current liabilities




Accounts payable

74,535


86,535

Deferred revenue

64,865


59,969

Accrued expenses and other current liabilities

87,809


102,151

Amount due to related parties

5,804


5,869

Income tax payable

27,033


13,213

Deferred consideration in connection with business
    acquisitions

-


74,131

Total current liabilities

260,046


341,868

Deferred tax liabilities, non-current

1,866


40,630

Bank loan

-


300,000

Other non-current liabilities

2,305


3,989

Total liabilities

264,217


686,487

Shareholder's equity (Note a)

1,037,780


1,416,769

Total liabilities and shareholder's equity

1,301,997


2,103,256


Note a: As of June 30, 2018, the number of ordinary shares issued and outstanding was 408,975,956.

 

 

 


Momo Inc.


Unaudited Condensed Consolidated Statement of Cash Flows


( US dollars in thousands)





Three months


First half year


ended June 30


ended June 30


2017


2018


2017


2018

Cash flows from operating activities:








      Net income

60,564


117,439


141,765


246,855

      Adjustments to reconcile net income to net cash 
provided by operating activities:








Depreciation of property and equipment

2,463


5,505


4,585


10,459

Amortization of intangible assets

183


2,061


183


2,287

Share-based compensation

12,998


21,011


22,507


33,393

Share of income on equity method investments

(514)


(1,692)


(2,697)


(2,971)

Impairment loss on long-term investments

4,386


-


4,386


-

Income on disposal of property and equipment

(2)


-


(2)


-

Provision of allowance for doubtful accounts

85


(92)


85


(92)

Changes in operating assets and liabilities:








Accounts receivable

(4,228)


1,742


(318)


10,121

Prepaid expenses and other current assets

(8,041)


3,526


(12,616)


12,522

Amount due from related parties

(176)


4,305


(513)


3,136

Rental deposits

(271)


76


(1,440)


129

Deferred tax assets

-


3,231


73


4,485

Other non-current assets

(48)


(4,182)


(781)


(5,996)

Accounts payable

5,165


5,855


11,621


14,726

Income tax payable

(1,754)


(4,403)


8,043


(14,639)

Deferred revenue

1,757


(4,035)


1,333


(9,322)

Accrued expenses and other current liabilities

34,208


5,998


25,276


(20,620)

Amount due to related parties

1,463


71


1,208


66

Deferred tax liability

(46)


(515)


(46)


(571)

Other non-current liabilities

(109)


(182)


793


1,683

Net cash provided by operating activities

108,083


155,719


203,445


285,651

Cash flows from investing activities:








Purchase of property and equipment

(4,140)


(4,067)


(11,344)


(14,182)

Proceeds from disposal of property and equipment

3


-


7


1

Payment for long term investments

(2,114)


(7,860)


(3,629)


(8,490)

Prepayment of long term investments

-


-


-


(7,398)

Payment for acquired intangible assets

(2,187)


-


(2,765)


-

Prepaid consideration for business acquisition

-


-


-


(229,823)

Payment for business acquisition

-


(285,096)


-


(285,096)

Purchase of term deposits

(130,181)


(616,662)


(391,968)


(1,189,083)

Cash received on maturity of term deposits

79,502


758,853


384,109


1,133,945

Cash received from sales of short term investment

-


-


-


1,653

Net cash used in investing activities

(59,117)


(154,832)


(25,590)


(598,473)

Cash flows from financing activities:








      Proceeds from exercise of options

111


9


410


393

      Deferred payment of purchase of property and
equipment

(30)


(169)


(204)


(1,322)

Proceeds from bank loan

-


300,000


-


300,000

Net cash provided by financing activities

81


299,840


206


299,071

Effect of exchange rate changes

5,342


(27,821)


7,463


(8,682)

Net increase(decrease)  in cash, cash equivalent, and
restricted cash

54,389


272,906


185,524


(22,433)

Cash, cash equivalent, and restricted cash at beginning of
period

388,699


390,488


257,564


685,827

Cash, cash equivalent, and restricted cash at end of period

443,088


663,394


443,088


663,394










 

 

 


 

Momo Inc.

Reconciliation of Non-GAAP financial measures to comparable GAAP measures

(US dollars in thousands, except per share data)


1.     Reconciliation of Non-GAAP cost and operating expenses, income from operations, and net income to comparable GAAP
        measures.






Three months


Three months

ended June 30, 2017

ended June 30, 2018


GAAP


Adjustments


Non-
GAAP


GAAP


Adjustments


Non-
GAAP

Cost and operating expenses

(246,047)


12,998 (a)


(233,049)


(369,361)


22,848 (b)


(346,513)

Income from operations

73,746


12,998 (a)


86,744


140,601


22,848 (b)


163,449

Net income attributable to
   Momo Inc.

60,762


12,998 (a)


73,760


117,779


 22,389 (b)(c)


140,168














First half year


First half year

ended June 30, 2017

ended June 30, 2018


GAAP


Adjustments


Non-
GAAP


GAAP


Adjustments


Non-
GAAP

Cost and operating expenses

(421,147)


22,507 (d)


(398,640)


(658,075)


35,230 (e)


(622,845)

Income from operations

164,789


22,507 (d)


187,296


288,103


35,230 (e)


323,333

Net income attributable to
   Momo Inc.

141,970


22,507 (d)


164,477


247,663


 34,771 (e)(f)


282,434


Notes:


(a)   Adjustments to exclude share-based compensation of $12,998 from the unaudited condensed consolidated statements.

(b)   Adjustments to exclude share-based compensation of $21,011 and amortization of intangible assets from acquisitions of
        $1,837 from the unaudited condensed consolidated statements.

(c)    Adjustments to exclude the provision for income tax related to amortization of intangible assets from acquisitions of
        $459 from the unaudited condensed consolidated statements.

(d)   Adjustments to exclude share-based compensation of $22,507 from the unaudited condensed consolidated statements.

(e)   Adjustments to exclude share-based compensation of $33,393 and amortization of intangible assets from acquisitions of
        $1,837 from the unaudited condensed consolidated statements.

(f)    Adjustments to exclude the provision for income tax related to amortization of intangible assets from acquisitions of
        $459 from the unaudited condensed consolidated statements.

 

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SOURCE Momo Inc.

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