MeetMe (MEET) Q4 Earnings In Line with Estimates, Shares Up

Zacks Equity Research
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MeetMe Inc.’s MEET share price advanced 16.17% on Mar 7, after the company reported impressive fourth-quarter 2016 results. Earnings of 15 cents per share (excluding stock-based compensation) soared 131.6% from the year-ago quarter driven by strong top-line growth.

Including stock-based compensation, MeetMe reported earnings of 17 cents per share, in line with the Zacks Consensus Estimate.

Revenues increased a whopping 147% from the year-ago quarter to almost $29.2 million, which was also in line with the Zacks Consensus Estimate.


In full-year 2016, mobile daily active users (DAU) increased 84% to 2.03 million on average and total mobile monthly active users increased 103% to $8.2 million, largely on the back of  the Skout acquisition.

MeetMe reported earnings of 80 cents per share in full-year 2016 as compared with 12 cents in full-year 2015. Revenues jumped 33.8% over full-year 2015 to $76.1 million.

We note that MeetMe has outperformed the Zacks Internet Services industry in the last one year. While the stock has gained 87.5%, the industry witnessed an increase of 13.9% in the same period.

Quarter Details

Mobile revenue surged 62% from the year-ago quarter to $27.8 million. MeetMe DAU was in line with the third quarter and up 13% on a year-over-year basis. Skout DAU declined by approximately 10% sequentially due to the blockade in Indonesia, which was Skout’s second largest country.

On a quarterly basis, mobile average revenue per user (ARPU) including Skout was $3.36 in reported quarter compared with $4.22 a year ago. Mobile average revenue per daily active user (ARPDAU) was 15 cents as compared with 17 cents a year ago.

In the quarter, 46% of over total 18 billion ad impressions came from the U.S. Web revenue was $350,000 down from $1.2 million a year ago and in line with the company’s expectations.

Adjusted EBITDA margin contracted 160 basis points (bps) to 43.8% in the quarter. Management noted that Skout is on track to deliver $7.5 million of adjusted EBITDA in the first year of its acquisition.

As percentage of revenues, Sales & Marketing (S&M) expense increased a massive 740 bps from the year-ago quarter. However, this was partially offset by lower product development and content as well as general & administrative (G&A) expenses.

Product development and content as percentage of revenues fell 280 bps to 27.6% from the year-ago quarter. Similarly, G&A expense as percentage of revenues decreased 630 bps on a year-over-year basis.

As a result, operating margin contracted 60 bps from the year-ago quarter to 34.2%.

At the end of the quarter, MeetMe had cash & cash equivalents of $21.85 million.

MeetMe, Inc. Price, Consensus and EPS Surprise

 

MeetMe, Inc. Price, Consensus and EPS Surprise | MeetMe, Inc. Quote

Acquisitions

During the quarter, MeetMe completed the acquisition of Skout, a dating app operator. The deal was valued at $54.6 million, of which MeetMe paid $28.5 million in cash, and the remaining in the form of common stock.

Recently, the company announced that it has entered into a definitive agreement to acquire if(we) a social and mobile technology company based in San Francisco and the parent of Tagged and hi5. Per MeetMe, if(we) had 2.3 million mobile and 5.4 million total monthly active users (MAU) at the end fourth-quarter 2016.

MeetMe believes that the acquisition will add 10.4 million mobile app chats per day and 18,000 new registered mobile app users on average each day. Management expects If(we) to contribute at least $9 million in adjusted EBITDA in the first 12 months and is anticipated to be accretive to earnings.

The company expects to fund the acquisition with cash on hand, cash from operations and financings available including a $30 million bank loan from JPMorgan JPM.

Guidance

MeetMe intends to be the first meeting and dating company to add live video on its mobile apps. The company plans to launch it in the coming weeks to beta users and complete the rollout in the second quarter. The company expects to launch it on Skout in the third quarter.

For full-year 2017, MeetMe expects total revenue to be in the range of $100–$105 million, which represents year-over-year growth in the range of 31–38%. Adjusted EBITDA is anticipated to be in the range of $35–$40 million, which represents growth of 19–36% on a year-over-year basis.

Management anticipates positive net income and free cash flow for all the four quarters. Capital expenditure is expected to be $2.4 million for the year.

MeetMe expects revenues to be in the range of $19.5–$20.5 million, which represents 47–54% growth in the seasonally soft first-quarter. Adjusted EBITDA is anticipated to be in the range of $4–$5 million, representing growth of 8–35% on a year-over-year basis. Higher spending on user acquisition (20% versus 16%) is expected to hurt EBITDA.

Zacks Rank & Key Picks

Currently, MeetMe carries a Zacks Rank #3 (Hold). Autohome ATHM and The Trade Desk TTD are better-ranked stocks in the sector. Autohome sports a Zacks Rank #1 (Strong Buy), while The Trade Desk carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Autohome and The Trade Desk is currently pegged at 16.45% and 4%, respectively.

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