THE MEET GROUP, INC. Company Overview
We operate location-based social networks for meeting new people - primarily on mobile platforms, including on iPhone, Android, iPad and other tablets - that facilitate interactions among users and encourage users to connect, communicate and engage with each other. Over the past three years we have transformed our business from an advertising-based revenue model to one where the majority of our revenue is derived from user pay monetization and subscriptions. The fastest-growing component of user pay monetization comes from in-app purchases, including virtual gifts associated with Live.
We began developing Live in 2016 with the belief that we could successfully pair
live streaming and dating - a model that we had seen work effectively for Asian
dating app providers. We first launched Live on the
We leverage Live by making it available to third-party apps (and users of third-party apps) as a video-as-a-service platform ("vPaaS"). With vPaaS, users of Live appear on and interact with users of other mobile apps and vice versa, providing mutually-beneficial revenue-share arrangements with the owners of these other third-party apps.
We also offer online marketing capabilities, which enable marketers to display their advertisements on our apps. We offer significant scale to our advertising partners, delivering more than 10 billion monthly advertising impressions across our active global user base and sophisticated programmatic strategies for effective targeting. We work with advertising partners to maximize the effectiveness of their campaigns by optimizing advertisement formats and placements for maximum performance and return on investment.
Just as Facebook has established itself as the social network of friends and family, and LinkedIn has established itself as the social network of colleagues and business professionals, we have created the social entertainment network not of the people you know, but of the people you want to know. Nimble, fast-moving and already in more than 100 countries, we are differentiating ourselves from other dating brands with Live, which is not offered by many of our direct competitors. Modeled after the live video platforms offered by Asian dating app providers, but enhanced in order to appeal to Western audiences, Live is aimed at the nexus of entertainment and community, where we believe our apps exhibit a natural strength.
Our vision extends beyond dating and entertainment. We focus on building quality products to satisfy the universal need for human connection among all people, everywhere - not just paying subscribers. We believe meeting new people is a basic human need, especially for users aged 18 to 34, when so many long-lasting relationships are made. We use advanced technology to engineer serendipitous connections among people who otherwise might never have met - a sort of digital coffeehouse, where everyone belongs. Over the years, our apps have originated untold numbers of chats, shares, good friendships, dates and romantic relationships - even marriages.
We believe we have significant growth opportunities enabled through our social entertainment platform. We believe our scale provides unique advantages to grow video monetization, while also establishing a high density of users within the geographic regions we serve. As our networks grow and the number of users in a location increases, we believe that users who are seeking to meet new people will incrementally benefit from the quantity of relevant connections.
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Cautionary Note Regarding Forward-looking Statements
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" ("MD&A") and the rest of this Quarterly
Report on Form 10-Q ("Quarterly Report") may be considered to be
"forward-looking statements" as that term is defined in the
In particular, these forward-looking statements include, among others, statements about:
• liquidity; • capital expenditures;
• opportunities for our business;
• growth of our business;
• anticipations and expectations regarding mobile usage and monetization.
• the closing of the transactions contemplated by the Merger Agreement
(defined below), including the Merger (defined below); and
• the potential impact of the 2019 novel coronavirus ("COVID-19").
All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future financial position, liquidity, business strategy, plans and objectives of management for future operations, are forward-looking statements. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "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 users' willingness to try new product offerings and engage in our app upgrades and new features, the risk that unanticipated events affect the functionality of our apps with popular mobile operating systems, any changes in such operating systems that degrade our apps' functionality and other unexpected issues that could adversely affect usage on mobile devices, the risk that the mobile advertising market will not grow, the ongoing existence of such demand and the willingness of our users to complete mobile offers or pay for Credits, Points, Gold, Icebreakers, Flash! and Shout!. Any forward-looking statement made by us in this Quarterly Report 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.
One should read the following discussion in conjunction with our audited
historical consolidated financial statements. MD&A contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to these differences include those
discussed in "Part I, Item 1A - Risk Factors" included in our Annual Report on
Form 10-K for the year ended
This MD&A is provided as a supplement to, and should be read in conjunction with, our audited "Consolidated Financial Statements" and the related notes thereto and the MD&A included in our Annual Report, as well as our unaudited "Consolidated Financial Statements" and the related notes thereto included elsewhere in this Quarterly Report.
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Merger Agreement
On
At the effective time of the Merger, and subject to the terms and conditions of
the Merger Agreement, all shares of our common stock, other than (i) shares with
respect to which appraisal rights are properly exercised and not withdrawn under
We expect the Merger will be completed by the end of 2020, subject to the satisfaction of all closing conditions.
Impact of the 2019 Novel Coronavirus
We are closely monitoring the impact of the COVID-19 pandemic on all aspects of
our business. In the first quarter of 2020, we took a number of precautionary
measures designed to help minimize the risk of the spread of the virus to our
employees, including suspending all non-essential travel worldwide for our
employees, temporarily closing our offices in the
In
Starting in
This situation is changing rapidly, and additional impacts may arise that we are
not aware of currently. As a result, the effects of COVID-19 may not be fully
reflected in our financial results until future periods. One should review "Part
I, Item 1A - Risk Factors" and "Part II, Item 1A - Risk Factors," respectively,
in our Annual Report and Quarterly Report for the quarter ended
Operating Metrics
We measure website and app activity in terms of monthly active users ("MAUs") and daily active users ("DAUs"). We define an MAU as a registered user of one of our platforms who has logged in and visited within the last month of measurement. We define a DAU as a registered user of one of our platforms who has logged in and visited within the day of measurement. We define a vDAU as a registered user of one of our platforms who has logged in and visited Live, either as a broadcaster or a viewer, on the day of measurement.
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The following table sets forth our average MAUs, DAUs and vDAUs for the three
months ended
Average for the
Three Months Ended June 30,
(in thousands) 2020 2019
MAUs 18,925 18,242
DAUs 4,596 5,118
vDAUs 1,021 892
Second Quarter of 2020 Highlights
• Revenue: Our revenue was$90.3 million for the three months endedJune 30, 2020 , up 73.7% from$52.0 million for the three months endedJune 30, 2019 . • Net Income: Our net income was$10.4 million for the three months endedJune 30, 2020 , up 370.9% from$2.2 million for the three months endedJune 30, 2019 . • Adjusted EBITDA: Our adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was$20.8 million for the three months endedJune 30, 2020 , up 112.6% from$9.8 million for the three months endedJune 30, 2019 . For the definition of Adjusted EBITDA, please refer to the heading "Non-GAAP Financial Measure" included in this MD&A. • Cash and Cash Equivalents: We had cash and cash equivalents of$47.6 million as ofJune 30, 2020 .
Trends in Our Metrics
In addition to MAUs, DAUs and vDAUs, we measure activity on our apps in terms of
average revenue per user ("ARPU"), average daily revenue per daily active user
("ARPDAU") and vARPDAU. We define ARPU as the quarterly revenue per average MAU.
We define ARPDAU as the average daily revenue per DAU. We define vARPDAU as the
average daily video revenue per vDAU. We define a mobile MAU as a user who
accessed our sites by one of our mobile apps or by the mobile optimized version
of our websites for
For the three months ended
For the three months ended
For the three months ended
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The following graphs set forth our average MAUs, mobile MAUs, DAUs, mobile DAUs
and vDAUs by quarter from the three months ended
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For the three months ended
For the three months ended
For the three months ended
The following graphs set forth our web ARPU, mobile ARPU, web ARPDAU, mobile
ARPDAU and vARPDAU by quarter from the three months ended
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As our business continues to evolve and as subscription and in-app purchases contribute to a larger portion of our revenue, we may choose to report new or additional metrics that are more closely tied to key business drivers or stop reporting metrics that are no longer relevant.
Factors Affecting Our Performance
We believe the following factors affect our performance:
• Number of MAUs, DAUs and vDAUs: We believe our ability to grow web and
mobile MAUs, DAUs and vDAUs affects our revenue and financial results by
influencing the number of advertisements we are able to show, the value of
those advertisements and the volume of subscriptions and in-app purchases,
as well as our expenses and capital expenditures.
• User Engagement: We believe changes in user engagement patterns affect our
revenue and financial performance. Specifically, the number of visits and
the amount of time spent by each MAU, DAU or vDAU generates affects the
number of advertisements we are able to display and therefore the rate
at which we are able to monetize our active user base. In addition, the
number of users that make in-app purchases and the amounts that they
purchase directly impacts our revenue. We continue to create new features
and enhance existing features to drive additional engagement. The percent
of MAUs and DAUs that engage with our video products and their conversion
to paying users also affects the amount of in-app purchases revenue we are
able to earn.
• Advertising Rates: We believe our revenue and financial results are
materially dependent on industry trends, and any changes to the cost per
thousand advertising impressions could affect our revenue and financial
results. In 2017, we experienced declining advertising rates, which
negatively affected our revenue. In 2018, we saw some stabilization in
advertising rates and a return to normal seasonality in advertising
trends. In 2019, we saw continued stabilization in advertising rates and
another year of typical seasonality. In 2020, we were negatively impacted
by the global macroeconomic effects of the COVID-19 pandemic. We expect to
continue investing in new types of advertising and new placements.
Additionally, we are prioritizing initiatives that generate revenue
directly from users, including new in-app purchases products and a premium
subscription product, in part to reduce our dependency on advertising
revenue.
• User Geography: The geography of our users influences our revenue and
financial results because we currently monetize users in distinct
geographies at varying average rates. For example, ARPU in the U.S. and
Canada is significantly higher than in Latin America .
• New User Sources: The percentage of our new users that are acquired
through inorganic, paid sources impacts our financial performance,
specifically with regard to ARPU for web and mobile.
Inorganically-acquired users tend to have lower engagement rates, tend to
generate fewer visits and advertisement impressions and to be less likely
to make in-app purchases. When paid marketing campaigns are ongoing, our
overall usage and traffic increases due to the influx of
inorganically-acquired users, but the rate at which we monetize the
average active user overall declines as a result.
• Advertisement Inventory Management: Our revenue trends are affected by
advertisement inventory management changes affecting the number, size or
prominence of advertisements we display. In general, more
prominently-displayed advertising units generate more revenue per
impression.
• Apple App Store and Google Play Store : Our mobile apps are distributed
through the Apple App Store and the Google Play Store . Our business will
suffer if we are unable to maintain good relationships with Apple and
Google , if their terms and conditions or pricing change to our detriment,
if we violate, or either company believes that we have violated, its terms
and conditions or if either of these platforms are unavailable for a
prolonged period of time.
• Seasonality: Historically, advertising spending has been seasonal with a
peak in the fourth quarter of each year. With the decline in advertising
rates in 2017, we did not experience this seasonality consistent with
prior years. In 2018 and 2019, we saw some stabilization in advertising
rates and a return to normal seasonality in advertising trends. We believe
this seasonality in advertising spending affects our quarterly results,
which historically have reflected a growth in advertising revenue between
the third and fourth quarters and a decline in advertising revenue between
the fourth and subsequent first and second quarters of each year. Growth
trends in web and mobile MAUs, DAUs and vDAUs affect our revenue and
financial results by influencing the number of advertisements we are able
to show, the value of those advertisements, the volume of payments
transactions and our expenses and capital expenditures.
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• Business Combinations: Acquisitions have been an important part of our
growth strategy. In 2016 and 2017, we acquired three companies (Skout,
if(we) and LOVOO), representing four significant brands for our portfolio
(Skout, Tagged, Hi5 and LOVOO). In 2019, we acquired Initech and the
Growlr app. Our ability to integrate acquired apps into our portfolio will
impact our financial performance. As a consequence of the contributions of
these businesses and acquisition-related expenses, our consolidated
results of operations may not be comparable between periods.
• The Merger: Failure to complete the previously-announced Merger could
adversely impact the market price of our common stock as well as our
business and operating results. This risk, as well as other risks
associated with the Merger, are identified further in "Part I, Item 1A -
Risk Factors" included in our Annual Report.
• COVID-19: While our total revenue increased significantly during the
second quarter of 2020, the future impacts of the pandemic and any
resulting economic impact are largely unknown and rapidly evolving. It is
possible that the COVID-19 pandemic, the measures taken by the governments
of countries affected and the resulting economic impact may negatively
impact our results of operations, cash flows and financial position as
well as our vendors, advertising partners and users. As a result, the
effects of COVID-19 may not be fully reflected in our financial results
until future periods. Refer to "Part I, Item 1A - Risk Factors" and "Part
II, Item 1A - Risk Factors," respectively, in our Annual Report and First
Quarter Quarterly Report for a description of the material risks that we
currently face in connection with COVID-19.
Changes in user engagement patterns from web to mobile, international diversification and the rollout of Live also affect our revenue and financial performance. We believe overall engagement as measured by the percentage of users who create content (such as video broadcasts, status posts, messages or photos) or generate feedback increases as our user base grows. We continue to create new and improved features to drive social sharing and increase monetization.
We believe our revenue trends are also affected by advertisement inventory management changes affecting the number, size or prominence of the advertisements we display and traditional seasonality.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are described in the MD&A
included in our Annual Report. We believe there have been no new critical
accounting policies, or material changes to our existing critical accounting
policies and estimates during the three and six months ended
Recent Accounting Pronouncements
For detailed information regarding recently-adopted and recently-issued accounting pronouncements and their actual or expected impacts to our unaudited consolidated financial statements, see "Note 1 - Description of Business, Basis of Presentation and Summary of Significant Accounting Policies" to the unaudited "Consolidated Financial Statements" and the related notes thereto included elsewhere in this Quarterly Report.
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