Market Overview

The Meet Group Reports Third 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 third
quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights

  • Total revenue of $45.7 million, up 42% year over year
  • GAAP net income of $1.3 million, or $0.02 per diluted share, compared
    to $2.2 million, or $0.03 per diluted share in the prior year quarter
  • Adjusted EBITDA of $8.7 million, compared to adjusted EBITDA of $8.9
    million in the prior year quarter
  • Non-GAAP net income of $7.6 million, or $0.10 per diluted share,
    compared to $8.1 million or $0.11 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 measures, below.)

"We continue to grow video revenue across all of our apps," said Geoff
Cook, Chief Executive Officer. "In one year, we have increased the
annualized video revenue run rate from virtually zero to $55 million for
the month of October. Our successful Lovoo acquisition and integration,
together with the dramatic growth of video revenue, have contributed to
transforming our revenue mix. We tripled user pay revenue from a year
ago, with that portion of our business now contributing 61% of our total
revenue, up from 27% in the third quarter of 2017. We believe we are in
the early days of the video opportunity and that livestreaming aligns
perfectly with our mission: to facilitate human connection.

"Traffic in the quarter was also strong. We grew mobile daily active
users 3% sequentially to 4.3 million and mobile monthly active users 7%
sequentially to 14.6 million, reflecting quarter-over-quarter gains from
each of MeetMe, Lovoo, Skout, and Tagged. For the quarter, daily live
video users averaged approximately 870,000, up more than 36%
sequentially. In addition, we recently surpassed our 100 millionth gift
sent since launching Live monetization a year ago."

"Advertising results were also solid," continued Cook, "increasing
sequentially for the second consecutive quarter. We continue to see
evidence of a return to seasonal trends in advertising and remain
cautiously optimistic about the opportunity to grow ad revenue in the
fourth quarter."

Third Quarter Financial Results

For the third quarter of 2018, the Company reported revenue of $45.7
million, an increase of 42% from $32.2 million in the prior year quarter.

GAAP net income was $1.3 million, or $0.02 per diluted share, compared
to $2.2 million, or $0.03 per diluted share, in the prior year quarter.
Adjusted EBITDA in the third quarter of 2018 was $8.7 million compared
to $8.9 million in the prior year quarter, reflecting the ongoing shift
towards user pay revenue.

The Company ended the quarter with $21.8 million in cash and cash
equivalents.

Company Outlook

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

Fourth quarter 2018:

  • Revenue in the range of $47.8 million to $48.8 million
  • Adjusted EBITDA in the range of $8.7 million to $9.1 million

Full year 2018:

  • Revenue in the range of $174 million to $175 million
  • Adjusted EBITDA in the range of $30.2 million to $30.6 million
 
THE MEET GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
  September 30,
2018
  December 31,
2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 21,822,387 $ 24,158,444
Accounts receivable, net of allowance of $555,402 and $527,958 at
September 30, 2018 and December 31, 2017, respectively
24,575,376 26,443,675
Prepaid expenses and other current assets   5,081,053     3,245,174  
Total current assets 51,478,816 53,847,293
Restricted cash 500,000 894,551
Goodwill 148,863,242 150,694,135
Property and equipment, net 3,253,213 4,524,118
Intangible assets, net 39,345,358 48,719,428
Deferred taxes 16,379,363 15,521,214
Other assets   1,972,799     1,144,032  
Total assets $ 261,792,791   $ 275,344,771  
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,054,937 $ 6,277,846
Accrued liabilities 19,146,585 19,866,438
Current portion of long-term debt 15,000,000 15,000,000
Current portion of capital lease obligations 152,131 254,399
Deferred revenue   4,820,137     4,433,450  
Total current liabilities 45,173,790 45,832,133
Long-term capital lease obligations, less current portion, net 74,408 192,137
Long-term debt, less current portion, net 25,338,637 40,637,106
Long-term derivative liability 1,822,202 2,995,657
Other liabilities   114,627     147,178  
Total liabilities   72,523,664     89,804,211  
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; authorized - 5,000,000 shares; 0
shares issued and outstanding at September 30, 2018 and December 31,
2017
Common stock, $.001 par value; authorized - 100,000,000 shares;
73,534,370 and 71,915,018 shares issued and outstanding at September
30, 2018 and December 31, 2017, respectively
73,534 71,918
Additional paid-in capital 415,572,623 408,029,068
Accumulated deficit (224,569,415 ) (221,435,888 )
Accumulated other comprehensive loss   (1,807,615 )   (1,124,538 )
Total stockholders' equity   189,269,127     185,540,560  
Total liabilities and stockholders' equity $ 261,792,791   $ 275,344,771  
 
 
THE MEET GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2018   2017 2018   2017
Revenues $ 45,716,053   $ 32,246,472   $ 126,155,591   $ 83,634,737  
Operating costs and expenses:
Sales and marketing 8,753,156 4,600,148 23,554,635 14,305,498
Product development and content 26,134,682 16,021,977 72,647,507 41,006,376
General and administrative 4,938,844 5,021,739 15,562,125 13,044,965
Depreciation and amortization 3,423,929 2,969,570 10,558,712 7,619,584
Acquisition and restructuring   416,141     3,378,838     4,802,694     8,648,692  
Total operating costs and expenses   43,666,752     31,992,272     127,125,673     84,625,115  
Income (loss) from operations   2,049,301     254,200     (970,082 )   (990,378 )
Other income (expense):
Interest income 3,823 1,374 13,773 5,344
Interest expense (559,345 ) (244,361 ) (1,838,325 ) (421,947 )
Gain (loss) on foreign currency transactions (6,229 ) 9,357 101,030 (2,072 )
Other   6,527         28,154      
Total other expense   (555,224 )   (233,630 )   (1,695,368 )   (418,675 )
Income (loss) before income tax benefit (expense) 1,494,077 20,570 (2,665,450 ) (1,409,053 )
Income tax benefit (expense)   (196,146 )   2,202,152     (484,552 )   4,934,216  
Net income (loss) $ 1,297,931   $ 2,222,722   $ (3,150,002 ) $ 3,525,163  
 
Basic and diluted net income (loss) per common stockholder:
Basic net income (loss) per common stockholder $ 0.02   $ 0.03   $ (0.04 ) $ 0.05  
Diluted net income (loss) per common stockholder $ 0.02   $ 0.03   $ (0.04 ) $ 0.05  
 
Weighted average shares outstanding:
Basic   73,362,467     71,800,274     72,704,205     67,711,324  
Diluted   79,365,576     76,078,563     72,704,205     72,425,863  
 
 
THE MEET GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 

Nine Months Ended
September 30,

2018   2017
Cash flows from operating activities:
Net income (loss) $ (3,150,002 ) $ 3,525,163
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 10,558,712 7,619,584
Stock-based compensation expense 7,026,991 5,802,046
Deferred taxes (694,951 ) (5,383,583 )
(Gain) loss on foreign currency transactions (101,030 ) 2,072
Bad debt expense 408,998 168,000
Amortization of loan origination costs 261,373 142,034
Change in derivatives (18,412 )
Changes in operating assets and liabilities:
Accounts receivable 1,302,954 3,850,379
Prepaid expenses, other current assets and other assets (2,326,004 ) 4,391,126
Accounts payable and accrued liabilities 4,414,400 2,669,471
Deferred revenue   515,743     (115,831 )
Net cash provided by (used in) operating activities   18,198,772     22,670,461  
Cash flows from investing activities:
Purchase of property and equipment (404,446 ) (1,055,020 )
Acquisition of business, net of cash and restricted cash acquired       (65,802,792 )
Net cash provided by (used in) investing activities   (404,446 )   (66,857,812 )
Cash flows from financing activities:
Proceeds from exercise of stock options 824,307 2,797,893
Proceeds from issuance of common stock 42,995,371
Proceeds from exercise of warrants 2,396,250
Payments of capital leases (211,290 ) (202,401 )
Proceeds from long-term debt 15,000,000
Payments for restricted stock awards withheld for taxes (306,127 ) (507,398 )
Payments of contingent consideration (5,000,000 )
Payments on long-term debt   (15,559,842 )   (15,000,000 )
Net cash provided by (used in) financing activities   (20,252,952 )   47,479,715  
Change in cash, cash equivalents, and restricted cash prior to
effects of foreign currency exchange rate
(2,458,626 ) 3,292,364
Effect of foreign currency exchange rate (translation)   (271,982 )   (2,072 )
Net (decrease) increase in cash, cash equivalents, and restricted
cash
  (2,730,608 )   3,290,292  
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 $ 22,322,387   $ 25,536,307  
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,598,781   $ 279,913  
 
 
THE MEET GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF TOTAL REVENUE
(UNAUDITED)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
2018  

2017(1)

2018  

2017(1)

$

 

%

$

 

%

$

 

%

$

 

%

User pay revenue $ 28,058,843 61.4 % $ 8,582,700 26.6 % $ 76,034,926 60.3 % $ 18,342,865 21.9 %
Advertising   17,657,210 38.6 %   23,663,772 73.4 %   50,120,665 39.7 %   65,291,872 78.1 %
Total revenue $ 45,716,053 100.0 % $ 32,246,472 100.0 % $ 126,155,591 100.0 % $ 83,634,737 100.0 %
 

(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
September 30,

 

Nine Months Ended
September 30,

2018   2017 2018   2017
Net income (loss) $ 1,297,931 $ 2,222,722 $ (3,150,002 ) $ 3,525,163
 
Interest expense 559,345 244,361 1,838,325 421,947
Income tax (benefit) expense 196,146 (2,202,152 ) 484,552 (4,934,216 )
Depreciation and amortization 3,423,929 2,969,570 10,558,712 7,619,584
Stock-based compensation expense 2,767,196 2,299,696 7,026,991 5,802,046
Acquisition and restructuring 416,141 3,378,838 4,802,694 8,648,692
(Gain) loss on foreign currency transactions   6,229   (9,357 )   (101,030 )   2,072  
Adjusted EBITDA $ 8,666,917 $ 8,903,678   $ 21,460,242   $ 21,085,288  
 
GAAP basic net income (loss) per common stockholder $ 0.02 $ 0.03   $ (0.04 ) $ 0.05  
GAAP diluted net income (loss) per common stockholder $ 0.02 $ 0.03   $ (0.04 ) $ 0.05  
Basic adjusted EBITDA per common stockholder $ 0.12 $ 0.12   $ 0.30   $ 0.31  
Diluted adjusted EBITDA per common stockholder $ 0.11 $ 0.12   $ 0.28   $ 0.29  
 
Weighted average shares outstanding:
Basic   73,362,467   71,800,274     72,704,205     67,711,324  
Diluted   79,365,576   76,078,563     77,831,545     72,425,863  
 
 
THE MEET GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(UNAUDITED)
 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2018   2017 2018   2017
GAAP Net income (loss) $ 1,297,931 $ 2,222,722 $ (3,150,002 ) $ 3,525,163
 
Stock-based compensation expense 2,767,196 2,299,696 7,026,991 5,802,046
Amortization of intangibles 2,904,120 2,378,152 8,915,214 5,982,459
Income tax (benefit) expense 196,146 (2,202,152 ) 484,552 (4,934,216 )
Acquisition and restructuring   416,141   3,378,838     4,802,694     8,648,692  
Non-GAAP net income $ 7,581,534 $ 8,077,256   $ 18,079,449   $ 19,024,144  
 
GAAP basic net income (loss) per common stockholder $ 0.02 $ 0.03   $ (0.04 ) $ 0.05  
GAAP diluted net income (loss) per common stockholder $ 0.02 $ 0.03   $ (0.04 ) $ 0.05  
Basic Non-GAAP net income per common stockholder $ 0.10 $ 0.11   $ 0.25   $ 0.28  
Diluted Non-GAAP net income per common stockholder $ 0.10 $ 0.11   $ 0.23   $ 0.26  
 
Weighted average shares outstanding:
Basic   73,362,467   71,800,274     72,704,205     67,711,324  
Diluted   79,365,576   76,078,563     77,831,545     72,425,863  
 

Webcast and Conference Call Details

Management will host a webcast and conference call to discuss third
quarter 2018 financial results today, November 7, 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 3187279 to the operator. An audio replay will be available at
855-859-2056 domestically or 404-537-3406 internationally, using
passcode 3187279 through November 14, 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 fourth 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, whether there
is a return to seasonal trends in advertising, whether there is an
opportunity to grow ad revenue in the fourth quarter 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 quarters ended March 31, 2018 and June 30,
2018 filed with the SEC on May 7, 2018 and August 2, 2018, 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, 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, changes
in warrant obligations, nonrecurring acquisition, restructuring or other
expenses, gain or loss on foreign currency adjustment, and goodwill and
long-lived asset impairment charges, if any. 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 on intangibles, non-recurring
acquisition and restructuring costs, goodwill and long-lived asset
impairment charges 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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