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Meet Group (MEET) Q4 Earnings Flat Y/Y, Revenues Increase

Zacks Equity Research

The Meet Group MEET reported fourth-quarter 2018 non-GAAP earnings of 12 cents per share, which came in line with the Zacks Consensus Estimate and were flat year over year.

Non-GAAP net revenues grew 31% year over year to $52.5 million. Additionally, the figure beat the Zacks Consensus Estimate of $52 million.

The year-over-year growth was driven by robust performance from video platform, partially offset by a decline in non-video user pay revenues.

Quarter Details

In the reported quarter, Video products recorded revenues of $15.2 million and constituted 29% of the company’s total revenues. Further, the company witnessed traction in video revenues for each app sequentially.

Global average revenue per daily active video user (vARPDAU) was $0.18 in the fourth quarter, an increase from $0.14 in the prior quarter.

On average, daily active users of video grew 46,000 sequentially to 916,000. Management stated that approximately 20% of users were engrossed in its video platform on a daily basis.

The Meet Group had launched video monetization on its app 15 months back. Notably, the average number of daily streamers grew 21,000 sequentially to 138,000 in the reported quarter, driven by the monetization opportunity.

While Mobile daily active users (DAU) increased marginally from the prior quarter, Mobile monthly active users (MAU) increased to 15.2 million from 14.6 million in the third quarter.

Advertising revenues stayed strong sequentially but declined 14% year over year to $21.2 million in the reported quarter.

The company launched battle feature on its The Meet Group and Skout apps in the reported quarter. Notably, Battles brings together two livestreamers and their audiences for a live competition in categories like singing or comedy, which helps in boosting monetization.

MeetMe, Inc. Price, Consensus and EPS Surprise

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

Acquisition

The Meet Group recently announced the acquisition of Initech, LLC, a privately held company that owns and operates the leading same-sex social application, Growlr.

Notably, this acquisition will aid the company in tapping the user base of Growlr, which has 200,000 global daily active users, exchanging millions of messages each day.

Moreover, the company expects to roll out live video on Growlr in the fourth quarter of 2019.

Operating Details

Operating expenses were $47.6 million, declining 50.5% year over year.

Sales and marketing expenses were $8.5 million, up 39.3% year over year due to higher marketing spend and the inclusion of LOVOO.

Product development expense was $30.1 million, reflecting an increase of 52.8%. This was driven by an increase in mobile content costs of $10.1 million on the back of increased adoption of Live Video.

However, general and administrative expenses declined 15.4% to $5.5 million due to a decrease in stock-based compensation.

Adjusted EBITDA came in at $10.5 million, flat year over year. However, EBITDA margin contracted 600 basis points (bps) to 20%. The decline was attributed to unfavorable shift in revenue mix from advertising to user pay.

Balance Sheet and Cash Flow

The Meet Group exited the quarter with cash & cash equivalents of $28.4 million compared with $21.8 million in the third quarter of 2018.

Cash flow from operations came in at $10.4 million compared with $8.6 million in the third-quarter.  Resulting free cash flow for the reported quarter was $8.3 million.

Guidance

For 2019, The Meet Group expects revenues between $210 and $215 million. Adjusted EBITDA is anticipated in the range of $39.0 million to $42.0 million.

For first quarter 2019, revenues are expected in the range of $47.5 million and $48.0 million, while adjusted EBITDA is likely to be in the range of $7.0 million and $7.5 million.

The company expects to launch a new game, Levels in the third quarter of 2019. Management expects Levels to increase user engagement as streamers and gifters strive to reach higher levels.

For full-year 2019, capital expenditure is expected to remain in the range of $2 million to $3 million.

Zacks Rank & Stocks to Consider

Currently, The Meet Group has a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same sector include Symantec Corporation SYMC, eGain Corporation EGAN and Synopsys, Inc. SNPS. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Symantec, eGain and Synopsys is projected to be 7.9%, 30% and 10%, respectively.

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