Momo Announces Unaudited Financial Results for the First Quarter 2018

Momo Inc. (NASDAQ: MOMO) (“Momo” or the “Company”), a leading mobile social networking platform in China, today announced its unaudited financial results for the first quarter 2018.

First Quarter 2018 Highlights

• Net revenues increased 64% year over year to $435.1 million.
• Net income attributable to Momo Inc. increased to $129.9 million in the first quarter of 2018 from $81.2 million in the same period last year.
• Non-GAAP net income attributable to Momo Inc. (note 1) increased 57% to $142.3 million in the first quarter of 2018 from $90.7 million in the same period last year.
• Diluted net income per American Depositary Share (“ADS”) was $0.63, compared to $0.40 in the same period last year.
• Non-GAAP diluted net income per ADS (note 1) was $0.69, compared to $0.44 in the same period last year.
• Monthly Active Users (“MAU”)^[1] were 103.3 million in March 2018, compared to 85.2 million in March 2017.
• Total paying users of our live video service and value-added service, without double counting the overlap, were 8.1 million for the first quarter of 2018, compared to 7.0 million for the first quarter of 2017.

>^[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. The active users on Hani, the Company’s stand-alone live video application, were not included in the MAU disclosed herein.

“We had another strong quarter and a great start to the year 2018. I am glad to see that we have achieved outstanding results on all strategical priorities we outlined at the beginning of the year. Our community continued to grow in size and engagements despite the negative seasonality, thanks to the product and marketing initiatives we have been taking in recent quarters. The content ecosystem continues to improve, driving robust organic growth momentum for live streaming business. Strong topline performance, coupled with the operating leverage of our business model creates ample room for us to make significant investment for our future while maintaining a healthy profit margin. ” Commented Yan Tang, Chairman and CEO of Momo. “We closed the acquisition of Tantan in May and together will be moving forward as a dominant player in China’s open social territory. Tantan has made remarkable progresses in user growth and monetization since the beginning of 2018. We believe Tantan has a great deal of potential to be unlocked and will be adding tremendous value to our ecosystem in the future.”

First Quarter 2018 Financial Results

Net revenues

Total net revenues were $435.1 million in the first quarter of 2018, an increase of 64% from $265.2 million in the first quarter of 2017.

Live video service revenues continued its momentum and the total live video service revenues were $371.5 million in the first quarter of 2018, an increase of 74.8% from $212.6 million during the same period of 2017. The rapid growth in live video revenues was contributed by the increase in the quarterly paying users, which was 4.4 million for the first quarter of 2018, as well as, 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 total value-added service revenues were $37.0 million in the first quarter of 2018, an increase of 62% from $22.9 million during the same period of 2017. The year over year increase was primarily driven by the increase in the number of paying users, and to a lesser extent, the increase in the average revenues per paying user per quarter with the result that we introduced more and more value-added services to our users to enrich communication experience among users. Total paying users of our value-added service were 5.1 million and 4.3 million for the first quarter of 2018 and 2017, respectively.

Mobile marketing revenues were $18.7 million in the first quarter of 2018, an increase of 5% from $17.9 million during the same period of 2017. The growth in mobile marketing revenues was driven by the increased demand from brand marketers.

Mobile games revenues were $6.6 million in the first quarter of 2018, a decrease of 43% from $11.6 million in the first quarter of 2017. The decrease in game revenues was mainly due to the decrease in the quarterly paying users.

Cost and expenses

Cost and expenses were $288.7 million in the first quarter of 2018, an increase of 65% from $175.1 million in the first quarter of 2017. 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)  an increase in personnel related costs including share-based compensation expenses as a result of the Company’s rapidly expanding talent pool; (c) an increase in marketing and promotional expenses to enhance our brand awareness, attract users and promote the live video service; (d) increased infrastructure related spending, such as short messaging service charges, bandwidth costs and server depreciation costs, driven by more functions introduced on Momo’s platform.

Non-GAAP cost and expenses (note 1) were $276.3 million in the first quarter of 2018, an increase of 67% from $165.6 million during the same period last year.

Income from operations

Income from operations was $147.5 million in the first quarter of 2018, compared to $91.0 million during the same period last year.

Non-GAAP income from operations (note 1) was $159.9 million in the first quarter of 2018, compared to $100.6 million during the same period last year.

Income tax expenses

Income tax expenses were $26.9 million in the first quarter of 2018, increased from $15.8 million in the first quarter of 2017. The increase was mainly because we generated higher profit in the first quarter of 2018.

Net income attributable to Momo Inc.

Net income attributable to Momo Inc. was $129.9 million in the first quarter of 2018, compared to $81.2 million during the same period last year.

Non-GAAP net income (note 1) attributable to Momo Inc. was $142.3 million in the first quarter of 2018, compared to $90.7 million during the same period last year.

Net income per ADS

Diluted net income per ADS was $0.63 in the first quarter of 2018, compared to $0.40 in the first quarter of 2017.

Non-GAAP diluted net income per ADS (note 1) was $0.69 in the first quarter of 2018, compared to $0.44 in the first quarter of 2017.

Cash and cash flow

As of March 31, 2018, Momo’s cash, cash equivalents, term deposits and restricted cash totaled $969.4 million, compared to $1,059.6 million as of December 31, 2017. Net cash provided by operating activities in the first quarter of 2018 was $129.9 million, compared to $95.4 million for the same quarter of 2017.

Recent Development

Drawdown of Long-term Bank Loan

To facilitate the closing of our acquisition of 100% equity stake of Tantan Limited, as previously announced on February 23, 2018, we borrowed a bank loan facility from a domestic commercial bank in May 2018. Total amount of drawdown was US$300 million, with a fixed interest rate of 4.5% per annum and with a period of two years.

Business Outlook

For the second quarter of 2018, the Company expects total net revenues to be between $470.0 million and $485.0 million, representing a year-over-year increase of 51% to 55%. Our revenue guidance includes around $4.5 million revenue from Tantan for the month of June 2018 which we expect to consolidate in our financial statement of the second quarter of 2018. These estimates reflect the Company’s current and preliminary view, which is subject to change.

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, and such adjustment has no impact on income tax. 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.

Safe Harbor Statement

This news release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to our management quotes and our financial outlook for the second quarter of 2018.

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for the first quarter of 2018 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the second quarter of 2018 and may be unable to grow our business in the manner planned. We may also modify our strategy for growth.  In addition, there are other risks and uncertainties that could cause our actual results to differ from what we currently anticipate, including those relating to our ability to retain and grow our user base, our ability to attract and retain sufficiently trained professionals to support our operations, and our ability to anticipate and develop new services and enhance existing services to meet the demand of our users or customers.  For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see our filings with the U.S. Securities and Exchange Commission.

All information provided in this press release and in the attachments is as of the date of the press release. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, after the date of this release, except as required by law. Such information speaks only as of the date of this release.

Momo Inc. (NASDAQ: MOMO) (“Momo” or the “Company”), a leading mobile social networking platform in China, today announced its unaudited financial results for the first quarter 2018.

First Quarter 2018 Highlights

• Net revenues increased 64% year over year to $435.1 million.
• Net income attributable to Momo Inc. increased to $129.9 million in the first quarter of 2018 from $81.2 million in the same period last year.
• Non-GAAP net income attributable to Momo Inc. (note 1) increased 57% to $142.3 million in the first quarter of 2018 from $90.7 million in the same period last year.
• Diluted net income per American Depositary Share (“ADS”) was $0.63, compared to $0.40 in the same period last year.
• Non-GAAP diluted net income per ADS (note 1) was $0.69, compared to $0.44 in the same period last year.
• Monthly Active Users (“MAU”)^[1] were 103.3 million in March 2018, compared to 85.2 million in March 2017.
• Total paying users of our live video service and value-added service, without double counting the overlap, were 8.1 million for the first quarter of 2018, compared to 7.0 million for the first quarter of 2017.

>^[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. The active users on Hani, the Company’s stand-alone live video application, were not included in the MAU disclosed herein.

“We had another strong quarter and a great start to the year 2018. I am glad to see that we have achieved outstanding results on all strategical priorities we outlined at the beginning of the year. Our community continued to grow in size and engagements despite the negative seasonality, thanks to the product and marketing initiatives we have been taking in recent quarters. The content ecosystem continues to improve, driving robust organic growth momentum for live streaming business. Strong topline performance, coupled with the operating leverage of our business model creates ample room for us to make significant investment for our future while maintaining a healthy profit margin. ” Commented Yan Tang, Chairman and CEO of Momo. “We closed the acquisition of Tantan in May and together will be moving forward as a dominant player in China’s open social territory. Tantan has made remarkable progresses in user growth and monetization since the beginning of 2018. We believe Tantan has a great deal of potential to be unlocked and will be adding tremendous value to our ecosystem in the future.”

First Quarter 2018 Financial Results

Net revenues

Total net revenues were $435.1 million in the first quarter of 2018, an increase of 64% from $265.2 million in the first quarter of 2017.

Live video service revenues continued its momentum and the total live video service revenues were $371.5 million in the first quarter of 2018, an increase of 74.8% from $212.6 million during the same period of 2017. The rapid growth in live video revenues was contributed by the increase in the quarterly paying users, which was 4.4 million for the first quarter of 2018, as well as, 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 total value-added service revenues were $37.0 million in the first quarter of 2018, an increase of 62% from $22.9 million during the same period of 2017. The year over year increase was primarily driven by the increase in the number of paying users, and to a lesser extent, the increase in the average revenues per paying user per quarter with the result that we introduced more and more value-added services to our users to enrich communication experience among users. Total paying users of our value-added service were 5.1 million and 4.3 million for the first quarter of 2018 and 2017, respectively.

Mobile marketing revenues were $18.7 million in the first quarter of 2018, an increase of 5% from $17.9 million during the same period of 2017. The growth in mobile marketing revenues was driven by the increased demand from brand marketers.

Mobile games revenues were $6.6 million in the first quarter of 2018, a decrease of 43% from $11.6 million in the first quarter of 2017. The decrease in game revenues was mainly due to the decrease in the quarterly paying users.

Cost and expenses

Cost and expenses were $288.7 million in the first quarter of 2018, an increase of 65% from $175.1 million in the first quarter of 2017. 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)  an increase in personnel related costs including share-based compensation expenses as a result of the Company’s rapidly expanding talent pool; (c) an increase in marketing and promotional expenses to enhance our brand awareness, attract users and promote the live video service; (d) increased infrastructure related spending, such as short messaging service charges, bandwidth costs and server depreciation costs, driven by more functions introduced on Momo’s platform.

Non-GAAP cost and expenses (note 1) were $276.3 million in the first quarter of 2018, an increase of 67% from $165.6 million during the same period last year.

Income from operations

Income from operations was $147.5 million in the first quarter of 2018, compared to $91.0 million during the same period last year.

Non-GAAP income from operations (note 1) was $159.9 million in the first quarter of 2018, compared to $100.6 million during the same period last year.

Income tax expenses

Income tax expenses were $26.9 million in the first quarter of 2018, increased from $15.8 million in the first quarter of 2017. The increase was mainly because we generated higher profit in the first quarter of 2018.

Net income attributable to Momo Inc.

Net income attributable to Momo Inc. was $129.9 million in the first quarter of 2018, compared to $81.2 million during the same period last year.

Non-GAAP net income (note 1) attributable to Momo Inc. was $142.3 million in the first quarter of 2018, compared to $90.7 million during the same period last year.

Net income per ADS

Diluted net income per ADS was $0.63 in the first quarter of 2018, compared to $0.40 in the first quarter of 2017.

Non-GAAP diluted net income per ADS (note 1) was $0.69 in the first quarter of 2018, compared to $0.44 in the first quarter of 2017.

Cash and cash flow

As of March 31, 2018, Momo’s cash, cash equivalents, term deposits and restricted cash totaled $969.4 million, compared to $1,059.6 million as of December 31, 2017. Net cash provided by operating activities in the first quarter of 2018 was $129.9 million, compared to $95.4 million for the same quarter of 2017.

Recent Development

Drawdown of Long-term Bank Loan

To facilitate the closing of our acquisition of 100% equity stake of Tantan Limited, as previously announced on February 23, 2018, we borrowed a bank loan facility from a domestic commercial bank in May 2018. Total amount of drawdown was US$300 million, with a fixed interest rate of 4.5% per annum and with a period of two years.

Business Outlook

For the second quarter of 2018, the Company expects total net revenues to be between $470.0 million and $485.0 million, representing a year-over-year increase of 51% to 55%. Our revenue guidance includes around $4.5 million revenue from Tantan for the month of June 2018 which we expect to consolidate in our financial statement of the second quarter of 2018. These estimates reflect the Company’s current and preliminary view, which is subject to change.

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, and such adjustment has no impact on income tax. 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.

Safe Harbor Statement

This news release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to our management quotes and our financial outlook for the second quarter of 2018.

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for the first quarter of 2018 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the second quarter of 2018 and may be unable to grow our business in the manner planned. We may also modify our strategy for growth.  In addition, there are other risks and uncertainties that could cause our actual results to differ from what we currently anticipate, including those relating to our ability to retain and grow our user base, our ability to attract and retain sufficiently trained professionals to support our operations, and our ability to anticipate and develop new services and enhance existing services to meet the demand of our users or customers.  For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see our filings with the U.S. Securities and Exchange Commission.

All information provided in this press release and in the attachments is as of the date of the press release. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, after the date of this release, except as required by law. Such information speaks only as of the date of this release.