MEET Meet Group Inc

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 Facebook, Twitter 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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The Meet Group, Inc.Investor Contact:Leslie Arena, 267-714-6418larena@themeetgroup.comorMedia Contact:Brandyn Bissinger, 267-446-7010bbissinger@themeetgroup.com