Momo Inc (ADR) (MOMO) Reports Unaudited 2Q Financial Results: Shares Fall 19%


Momo Inc (ADR) (NASDAQ:MOMO) announced its unaudited financial results for the second quarter 2017.

Second Quarter 2017 Highlights

  • Net revenues increased 215% year over year to $312.2 million.
  • Net income attributable to Momo Inc. increased to $60.8 million in the second quarter of 2017 from $15.4 million in the same period last year.
  • Non-GAAP net income attributable to Momo Inc. (Note 1) increased 218% to $73.8 million in second quarter of 2017 from $23.2 million in the same period last year.
  • Diluted net income per American Depositary Share (“ADS”) was $0.29, compared to $0.08 in the same period last year.
  • Non-GAAP diluted net income per ADS (Note 1) was $0.35, compared to $0.12 in the same period last year.
  • Monthly Active Users (“MAU”)[1] were 91.3 million in June 2017, compared to 74.8 million in June 2016

First Half 2017 Highlights

  • Net revenues increased 285% year over year to $577.5 million for the first half of 2017.
  • Net income attributable to Momo Inc. was $142.0 million for the first half of 2017, compared with $22.5 millionduring the same period of 2016.
  • Non-GAAP net income attributable to Momo Inc. (Note 1) was $164.5 million for the first half of 2017, compared with $35.9 million during the same period of 2016.
  • Diluted net income per ADS was $0.69 for the first half of 2017, compared with $0.11 million during the same period of 2016.
  • Non-GAAP diluted income per ADS (Note 1) was $0.80 for the first half of 2017, compared with $0.18 million during the same period of 2016.

“I’m pleased that we delivered another strong quarter to our shareholders. User base growth continued to accelerate, driven by the expansion of our video content ecosystem. The usage of short video service has reached new milestones and revenues from live video service has hit new record highs,” commented Yan Tang, Chairman and CEO of Momo. “More importantly, with the newly launched 8 series, we have moved on to make new explorations and innovations in the social and entertainment territories. We believe these pioneering efforts will allow us to capture the many emerging opportunities that we are seeing on the horizon and thus will help us build longer term growth drivers for the Company.”

Second Quarter 2017 Financial Results

Net revenues

Total net revenues were $312.2 million in the second quarter of 2017, an increase of 215% from $99.0 million in the second quarter of 2016.

Live video service continued its momentum and generated revenues of $259.4 million in the second quarter of 2017. The rapid growth in live video revenues was largely contributed by the increase in the quarterly paying users, which was 4.1 million for the second quarter of 2017, and to a lesser extent, the increase in the average revenues per paying user per quarter.

Value-added service revenues mainly include membership subscription revenues and virtual gift revenues, the latter of which we launched in the fourth quarter of 2016 to enrich communication experience among users. The total value-added service revenues were $24.6 million in the second quarter of 2017, an increase of 58% from $15.6 million during the same period of 2016. The year over year increase was primarily driven by the increase in the number of paying users and the increase in the average revenues per paying user per quarter as a result of that we introduced more value-added services to our users. Total paying users of our value-added service were 4.5 million and 3.2 million as of June 30, 2017 and 2016, respectively.

Mobile marketing revenues were $19.0 million in the second quarter of 2017, an increase of 15% from $16.6 millionduring the same period of 2016. The growth in mobile marketing business was driven by better sell-through of our existing advertisement inventories.

Mobile games revenues were $9.1 million in the second quarter of 2017, an increase of 23% from $7.4 million during the second quarter of 2016. The increase in game revenues was mainly due to the contribution of a self-developed game, for which we recognized revenue on a gross basis.

Cost and expenses

Cost and expenses were $246.0 million in the second quarter of 2017, an increase of 189% from $85.2 million in the second quarter of 2016. The increase was primarily attributable to: (a) an increase in revenue sharing with the broadcasters related to our live video service and virtual gift recipients; (b) increase in marketing and promotional expenses to enhance our brand awareness, attract users and promote the live video service; (c) an increase in personnel related costs including share-based compensation expenses as a result of the Company’s rapidly expanding talent pool; (d) an increase in fees to payment channels resulting from a higher volume of cash collection through such channels; and (e) increased infrastructure related spending, such as bandwidth costs and server depreciation costs, driven by more functions introduced on Momo’s platform.

Non-GAAP cost and expenses (Note 1) were $233.0 million in the second quarter of 2017, an increase of 201% from $77.3 million during the same period last year.

Other operating income

Other operating income was $7.6 million in the second quarter of 2017, a significant increase from $0.2 million during the second quarter of 2016. The increase was mainly due to government incentives received in the second quarter of 2017.

Income from operations

Income from operations was $73.7 million in the second quarter of 2017, compared to $14.0 million during the same period last year.

Non-GAAP income from operations (Note 1) was $86.7 million in second quarter of 2017, compared to $21.8 millionduring the same period last year.

Income tax expenses

Income tax expenses were $13.9 million in the second quarter of 2017, increased from $0.4 million in the second quarter of 2016. The increase was mainly because the tax holiday of one of our major profit generating entities changed from 100% exemption to 50% exemption of income tax.

Net income

Net income attributable to Momo Inc. was $60.8 million in the second quarter of 2017, compared to $15.4 million during the same period last year.

Non-GAAP net income (Note 1) attributable to Momo Inc. was $73.8 million in the second quarter of 2017, compared to $23.2 million during the same period last year.

Net income per ADS

Diluted net income per ADS was $0.29 in the second quarter of 2017, compared to $0.08 in the second quarter of 2016.

Non-GAAP diluted net income per ADS (Note 1) was $0.35 in the second quarter of 2017, compared to $0.12 in the second quarter of 2016.

Cash and cash flow

As of June 30, 2017, Momo’s cash, cash equivalents and term deposits totaled $846.3 million, compared to $651.3 millionas of December 31, 2016. Net cash provided by operating activities in the second quarter of 2017 was $108.1 million, compared to $42.6 million for the same quarter of 2016.

First Half 2017 Financial Results

Net revenues for the first half of 2017 were $577.5 million, an increase of 285% from $149.9 million in the same period of 2016, primarily driven by the significant increase in net revenues from live video service, value-added service, mobile marketing business, and mobile games.

Net income attributable to Momo Inc. was $142.0 million in the first half of 2017, compared to $22.5 million during the same period of 2016.

Non-GAAP net income attributable to Momo Inc. (Note 1) was $164.5 million in the first half of 2017, compared to $35.9 million during the same period of 2016.

Diluted net income per ADS was $0.69 during the first half of 2017, compared to $0.11 in the same period of 2016.

Non-GAAP diluted net income per ADS (Note 1) was $0.80 during the first half of 2017, compared to $0.18 in the same period of 2016.

Net cash provided by operating activities was $203.4 million during the first half of 2017, compared to $48.2 in the same period of 2016.

Business Outlook

For the third quarter of 2017, the Company expects total net revenues to be between $337.0 million and $342.0 million, representing a year-over-year increase of 115% to 118%. These estimates reflect the Company’s current and preliminary view, which is subject to change.

Appointment of Chief Technology Officer

The Company has recently appointed Mr. Chunlai Wang as its chief technology officer. Prior to his appointment as Momo’s chief technology officer, Mr. Wang had served as the vice president of technology of Momo since April 2015.  From June 2014 to April 2015, Mr. Wang served as the technology director of Momo. Before that, he had been in charge of the technology team of Momo since June 2013 and had been actively involved in the development of key technological infrastructures of Momo since he joined the Company in February 2012.  Prior to joining Momo, Mr. Wang served as an engineer and a senior engineer in NetEase between September 2010 and February 2012.  From March 2009 to September 2010, he co-founded a business dedicated to semantic search services.  Mr. Wang received his master’s degree in engineering from Peking University in July 2013, and his bachelor’s degree from Beijing Jiaotong University in June 2009.

Share Price Movement

Shares of Momo are currently trading at $36.69, down $8.39 or nearly -19%. MOMO has a 1-year high of $46.69 and a 1-year low of $16.73. The stock’s 50-day moving average is $42.76 and its 200-day moving average is $36.84.

Analyst Ratings

On the ratings front, Momo has been the subject of a number of recent research reports. In a report issued on August 14, Jefferies analyst Karen Chan reiterated a Buy rating on MOMO, with a price target of $54, which represents a potential upside of 34% from where the stock is currently trading. Separately, on May 3, Merrill Lynch’s Binnie Wong reiterated a Buy rating on the stock and has a price target of $48.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Karen Chan and Binnie Wong have a yearly average return of 23.6% and 23.1% respectively. Chan has a success rate of 80% and is ranked #172 out of 4608 analysts, while Wong has a success rate of 63% and is ranked #1342.

 

Momo, Inc. operates as a mobile-based social networking platform. The platform includes Momo mobile application and related features, functionalities, tools and services that is provided to users, customers and platform partners. It enables users to establish and expand social relationships based on location and interests. The company was founded by Yan Tang, Yong Li, Xiao Liang Lei and Zhiwei Li on November 23, 2011 and is headquartered in Beijing, China.

Stay Ahead of Everyone Else

Get The Latest Stock News Alerts