OREANDA-NEWS. Momo Inc. (NASDAQ:MOMO) ("Momo" or the "Company"), a leading mobile social networking platform in China, today announced its unaudited financial results for the second quarter 2016.

Second Quarter 2016 Highlights

  • Net revenues increased 222% year over year to $99.0 million.
  • Net income attributable to Momo Inc. increased 804% to $15.4 million in the second quarter 2016 from $1.7 million in the same period last year.
  • Non-GAAP net income attributable to Momo Inc. (note 1) increased 290% to $23.2 million in the second quarter 2016 from $6.0 million in the same period last year.
  • Diluted net income per American Depositary Share (“ADS”) was $0.08, compared to $0.01 in the same period last year.
  • Non-GAAP diluted net income per ADS (note 1) was $0.12, compared to $0.03 in the same period last year.
  • Monthly Active Users ("MAU")1 were 74.8 million in June 2016, compared to 78.4 million in June 2015.

First Half 2016 Highlights

  • Net revenues increased 163% year over year to $149.9 million for the first half of 2016.
  • Net income attributable to Momo Inc. was $22.5 million for the first half of 2016.
  • Non-GAAP net income attributable to Momo Inc. (note 1) was $35.9 million for the first half of 2016.
  • Diluted net income per ADS was $0.11 for the first half of 2016.
  • Non-GAAP diluted income per ADS (note 1) was $0.18 for the first half of 2016.

“I am pleased with the progresses we made in the second quarter 2016. Our performances reflected our strategic focus on driving user growth through product innovations as well as digging deeper into monetization opportunities.” Commented Yan Tang, Chairman and CEO of Momo.

"In the second quarter our live video business took off as a remarkable success with revenues tripped from the first quarter of 2016, reaching $57.9 million. Live video, together with mobile marketing, drove a 222% year over year growth in our total revenues, reaching $99 million for the second quarter.

What makes us more excited is that live video opens up many doors for us other than simply being a revenue engine. Enabled by technological advancement, live video service is fundamentally changing the way people interact, socialize and have fun via internet.  Although we are already seeing new use cases emerging on our platform, we believe we are only at the beginning of a golden age where live video converges with social activities. We are excited about the many opportunities ahead of us and are running a few pioneering projects to delve deeper into the space. Very soon, we will be launching a new version - Momo 7.0 to further integrate live video into the social experience on Momo. I’m looking forward to its debut and hope our users enjoy the wonderful journey we are about to take them through.”

Second Quarter 2016 Financial Results

Net revenues

Total net revenues were $99.0 million in the second quarter of 2016, an increase of 222% from $30.7 million in the second quarter of 2015.

Live video service, which was launched in the third quarter of 2015, continued its strong momentum and generated revenues of $57.9 million in the second quarter of 2016. The rapid growth in live video revenues is mainly because of the increase in paying users of live video service. Paying users of live video service for the second quarter of 2016 reached 1.3 million.

Mobile marketing revenues were $16.6 million in the second quarter of 2016, an increase of 146% from $6.7 million during the same period of 2015. The significant growth in mobile marketing business was driven by the improving efficiency of the Company’s proprietary in-feed marketing service launched in the second quarter of 2015, as well as more new customers and orders introduced by sales agents engaged since the third quarter of 2015, offset by weaker demand from brand marketers.

Membership subscription revenues were $15.6 million in the second quarter of 2016, an increase of 5% from $14.8 million during the same period of 2015. Members are Momo users who have paid the subscription fees for the membership services. The slight year over year increase in membership subscription revenues was primarily driven by the increase in average revenues per paying user, due to the premium VIP package introduced in June 2015. Momo members were 3.2 million and 3.5 million as of June 30, 2016 and 2015, respectively.

Mobile games revenues were $7.4 million in the second quarter of 2016, a decrease of 3% from $7.7 million during the second quarter of 2015. The decrease in game revenues was mainly due to a lesser number of popular games were available on Momo’s platform in the second quarter 2016 as compared with the second quarter of 2015.

Cost and expenses

Costs and expenses were $85.2 million in the second quarter of 2016, an increase of 171% from $31.4 million in the second quarter of 2015. The increase was primarily attributable to: (a) an increase in revenue sharing with the broadcasters related to our live video service and the production costs in connection with Momo Live shows; (b) increase in marketing and promotional expenses to expand service accessibility and attract live video service users; (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 higher volume of cash collection through such channels; and (e) increased infrastructure related spending, such as bandwidth costs and server depreciation as well as SMS and network costs, driven by more functions introduced on Momo’s platform.

Non-GAAP costs and expenses (note 1) were $77.3 million in the second quarter of 2016, an increase of 185% from $27.2 million during the same period last year.

Income (loss) from operations

Income from operations was $14.0 million in the second quarter of 2016, compared to a loss of $0.4 million during the same period last year.

Non-GAAP income from operations (note 1) was $21.8 million in the second quarter of 2016, compared to $3.8 million during the same period last year.

Net income

Net income attributable to Momo Inc. was $15.4 million in the second quarter of 2016, compared to $1.7 million during the same period last year.

Non-GAAP net income (note 1) attributable to Momo Inc. was $23.2 million in the second quarter of 2016, compared to $6.0 million during the same period last year.

Net income per ADS

Diluted net income per ADS was $0.08 in the second quarter of 2016, compared to $0.01 in the first second quarter of 2015.

Non-GAAP diluted net income per ADS (note 1) was $0.12 in the second quarter of 2016, compared to $0.03 in the second quarter of 2015.

Cash and cash flow

As of June 30, 2016, Momo’s cash, cash equivalents and term deposits totaled $503.5 million compared to $469.5 million as of December 31, 2015. Net cash provided by operating activities in the second quarter of 2016 was $42.6 million compared to $9.3 million for the same quarter of 2015.

First Half 2016 Financial Results

Net revenues for the first half of 2016 were $149.9 million, an increase of 163% from $57.1 million in the same period of 2015, primarily driven by the significant increase in net revenues from live video service, mobile marketing business, and membership subscription.

Net income attributable to Momo Inc. was $22.5 million in the first half of 2016, compared to $8.4 million during the same period of 2015, primarily driven by the significant increase in net revenues, offset by the increase in cost and expenses.

Non-GAAP net income attributable to Momo Inc. (note 1) was $35.9 million in the first half of 2016, compared to $15.4 million during the same period of 2015.

Diluted net income per ADS was $0.11 during the first half of 2016, compared to $0.04 in the same period of 2015.

Non-GAAP diluted net income per ADS (note 1) was $0.18 during the first half of 2016, compared to $0.08 in the same period of 2015.

Net cash provided by operating activities was $48.2 million during the first half of 2016.

Note 1: Non-GAAP measures

To supplement our consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”), we use various non-GAAP financial measures that are adjusted from the most comparable GAAP results to exclude share-based compensation.

Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are shown in tables at the end of this earnings release, which provide more details about the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of the historical and current financial performance of our continuing operations and our prospects for the future. Our non-GAAP financial information should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to the GAAP results. In addition, our calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Our non-GAAP information (including non-GAAP cost and operating expenses, income from operations, net income attributable to Momo Inc., and diluted earnings per ADS) is adjusted from the most comparable GAAP results to exclude share-based compensation. A limitation of using these non-GAAP financial measures is that share-based compensation charge has been and will continue to be for the foreseeable future a significant recurring expense in our results of operations. We compensate for these limitations by providing reconciliations of our non-GAAP measures to our U.S. GAAP measures. Please see the reconciliation tables at the end of this earnings release.

 

About Momo

Momo is a leading mobile social networking platform in China. Momo connects people in a personal and lively way through a revolutionary mobile-based social networking platform. With powerful and precise location-based features, Momo enables users to connect with each other and expand relationships from online to offline. Momo’s platform includes the Momo mobile application, the Hani mobile application and a variety of related features, functionalities, tools and services that it provides to users, customers and platform partners. Leveraging its social interest graph engine and analysis of user behavior data, Momo is able to provide users a customized experience based on their social preferences and needs. Momo users can maintain and strengthen their relationships through private and group communication tools, content creation and sharing functions, as well as the offline social activities promoted on Momo’s platform.

1 MAU during a given calendar month is defined as Momo users who accessed the Momo platform through Momo mobile application and utilized any of the functions on the Momo platform for at least one day during the 30-day period counting back from the last day of such calendar month.

Momo Inc.
Unaudited Condensed Consolidated Statement of Operations
(US dollars in thousands, except per share data)
 
  Three months   First half year  
Ended June 30   ended June 30  
    2015       2016       2015       2016    
Net revenues:                
Live video service   -       57,912       -       73,490    
Mobile marketing   6,733       16,569       12,777       28,927    
Membership subscription   14,834       15,599       27,855       30,462    
Mobile games   7,674       7,436       13,808       14,870    
Other services   1,485       1,496       2,610       2,185    
Total net revenues   30,726       99,012       57,050       149,934    
Cost and expenses:                
Cost of revenues   (6,256 )     (42,252 )     (11,938 )     (62,482 )  
Research and development   (5,986 )     (7,789 )     (10,696 )     (14,679 )  
Sales and marketing   (14,826 )     (26,380 )     (21,605 )     (38,902 )  
General and administrative   (4,334 )     (8,741 )     (8,602 )     (15,248 )  
Total cost and expenses   (31,402 )     (85,162 )     (52,841 )     (131,311 )  
Other operating income   235       154       389       308    
(Loss) Income from operations   (441 )     14,004       4,598       18,931    
Interest income   2,172       1,781       3,980       3,480    
Impairment loss on long-term investments   -       (306 )     -       (306 )  
Income before income tax and share of income on equity method investments   1,731       15,479       8,578       22,105    
Income tax expenses   (33 )     (352 )     (184 )     (906 )  
Income before share of income on equity method investments   1,698       15,127       8,394       21,199    
Share of income on equity method investments   7       285       10       1,264    
Net income attributable to Momo Inc.   1,705       15,412       8,404       22,463    
 

Net income per share attributable to ordinary shareholders

                
Basic   0.00       0.04       0.02         0.06    
Diluted   0.00       0.04       0.02         0.06    
Weighted average shares used in calculating net income per ordinary share              
Basic   344,273,028       379,031,710       332,454,848         367,107,794    
Diluted   401,178,629       400,937,985       401,598,258         402,702,145    
Momo Inc.
Unaudited Condensed Consolidated Statement of Comprehensive Income
(US dollars in thousands, except per share data)
 
  Three months   First half year
ended June 30   ended June 30
    2015       2016     2015     2016  
Net income attributable to Momo Inc.   1,705       15,412     8,404     22,463  
Other comprehensive income, net of tax of nil              
Foreign currency translation adjustment   (31 )     (3,461 )   79     (2,861 )
Comprehensive income attributable to Momo Inc. shareholders   1,674       11,951     8,483     19,602  
Momo Inc.
Unaudited Condensed Consolidated Balance Sheets
(US dollars in thousands)
 
  December 31   June 30
2015 2016
Assets      
Current assets      
Cash and cash equivalents 169,469   199,434
Term deposits 300,000   304,091
Accounts receivable, net of allowance for doubtful accounts of $nil and $nil as of December 31, 2015 and June 30, 2016, respectively 14,896   21,522
Prepaid expenses and other current assets 18,297   20,101
Amount due from related parties 1,175   1,282
Total current assets 503,837   546,430
Property and equipment, net 16,259   14,741
Rental deposits 743   871
Long term investments 19,318   30,277
Other non-current assets 2,000   -
Total assets 542,157   592,319
Liabilities and equity      
Current liabilities      
Accounts payable 10,445   23,923
Deferred revenue 28,274   32,937
Accrued expenses and other current liabilities 26,694   25,663
Amount due to related parties 6,532   6,706
Total current liabilities 71,945   89,229
Other non-current liabilities 1,826   1,518
Total liabilities 73,771   90,747
Shareholder’s equity (Note a) 468,386   501,572
Total liabilities and shareholder’s equity 542,157   592,319

Note a: As of June 30, 2016, the number of ordinary shares issued and outstanding was 385,307,903.

Momo Inc.
Unaudited Condensed Consolidated Statement of Cash Flows
(US dollars in thousands)
 
  Three months   First half year
  Ended June 30   ended June 30
    2015       2016       2015       2016  
Cash flows from operating activities:              
Net income attributable to Momo Inc.   1,705       15,412       8,404       22,463  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation of property and equipment   1,529       2,048       2,771       4,111  
Share-based compensation   4,252       7,815       6,995       13,460  
Investing income   (7 )     (285 )     (10 )     (1,264 )
Impairment loss on long-term investments   -       306       -       306  
Loss on disposal of property and equipment   -       4       5       5  
Changes in operating assets and liabilities:              
Accounts receivable   (4,426 )     (4,163 )     (10,099 )     (7,122 )
Prepaid expenses and other current assets   (7,328 )     (3,980 )     (10,176 )     (1,969 )
Amount due from related parties   711       (271 )     (1,782 )     (140 )
Rental deposits   546       (20 )     603       (147 )
Accounts payable   2,593       6,761       3,512       13,509  
Income tax payable   (151 )     -       -       -  
Deferred revenue   2,603       7,157       5,964       5,477  
Accrued expenses and other current liabilities   7,353       12,004       9,541       (370 )
Amount due to related parties   79       (2 )     148       179  
Other non-current liabilities   (154 )     (154 )     2,136       (308 )
Net cash provided by operating activities   9,305       42,632       18,012       48,190  
Cash flows from investing activities:              
Purchase of property and equipment   (3,347 )     (1,713 )     (5,367 )     (2,515 )
Proceeds from disposal of property and equipment   -       36       -       38  
Payment for long term investments   (3,627 )     -       (7,235 )     (8,529 )
Prepayment of long term investments   (806 )     -       (806 )     -  
Purchase of term deposits   -       (50,091 )     (350,000 )     (319,377 )
Cash received on maturity of term deposits   -       15,313       -       315,313  
Net cash used in investing activities   (7,780 )     (36,455 )     (363,408 )     (15,070 )
Cash flows from financing activities:              
Proceeds from exercise of options   162       108       162       138  
Deferred payment of purchase of property and equipment   -       (160 )     -       (293 )
Payment for IPO costs   (500 )     -       (2,634 )     -  
Net cash used in financing activities   (338 )     (52 )     (2,472 )     (155 )
Effect of exchange rate on cash and cash equivalents   (14 )     (3,163 )     39       (3,000 )
Net increase (decrease) in cash and cash equivalents   1,173       2,962       (347,829 )     29,965  
Cash and cash equivalent at beginning of period   101,966       196,472       450,968       169,469  
Cash and cash equivalent at end of period   103,139       199,434       103,139       199,434  
Momo Inc.
Reconciliation of Non-GAAP financial measures to comparable GAAP measures
(US dollars in thousands, except per share data)
 
1.  Reconciliation of Non-GAAP cost and operating expenses, (loss) income from operations, and net income to comparable GAAP measures.
 
  Three months   Three months
ended June 30, 2015 ended June 30, 2016
  GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP  
Cost and operating expenses   (31,402 )   4,252 (a)     (27,150 )     (85,162 )   7,815 (b)     (77,347 )  
(Loss) income from operations   (441 )   4,252 (a)     3,811       14,004     7,815 (b)     21,819    
Net income attributable to Momo Inc.   1,705     4,252 (a)     5,957       15,412     7,815 (b)     23,227    
                         
  First half year   First half year
ended June 30, 2015 ended June 30, 2016
  GAAP   Adjustments   Non-GAAP   GAAP   Adjustments   Non-GAAP  
Cost and operating expenses   (52,841 )   6,995 (c)     (45,846 )     (131,311 )   13,460 (d)     (117,851 )  
Income from operations   4,598     6,995 (c)     11,593       18,931     13,460 (d)     32,391    
Net income attributable to Momo Inc.   8,404     6,995 (c)     15,399       22,463     13,460 (d)     35,923