Momo: 2Q19 revenue of 4.15 billion yuan, net profit of 1.24 billion yuan, and 110 million monthly active users

On August 27, Beijing time, China's leading mobile social networking platform Momo (Nasdaq: MOMO) announced its unaudited financial results for the second quarter of 2019. The financial report shows that in the second quarter of 2019, Momo's net revenue reached 4.1526 billion yuan (about 604.9 million US dollars), a year-on-year increase of 32%. Not measured in accordance with US generally accepted accounting principles, the net profit attributable to Momo's parent company in the second quarter of 2019 was 1.2425 billion yuan (about 181 million US dollars), and it has been profitable for 18 consecutive quarters.

In the first half of 2019, Momo's net revenue reached 7.8755 billion yuan (about 1.1472 billion U.S. dollars), a year-on-year increase of 33%. Not measured in accordance with US generally accepted accounting principles, the net profit attributable to Momo was 2.1528 billion yuan (about 313.6 million U.S. dollars), compared with 1.7970 billion yuan in the same period last year. Not measured in accordance with US generally accepted accounting principles, the diluted net profit per American depositary share (ADS) was 9.75 yuan (about 1.42 U.S. dollars), compared with 8.58 yuan in the same period last year.

According to data compiled by Yahoo Finance, 13 Wall Street analysts on average expected Momo's revenue in the second quarter of 2019 to be $569.77 million. The financial report shows that Momo's revenue in the second quarter of 2019 was 4.1526 billion yuan (about 604.9 million US dollars), far exceeding Wall Street expectations. Previously, Momo's second quarter revenue forecast was between 4 billion and 4.1 billion yuan, and the financial report data far exceeded the company's expectations.

Second Quarter 2019 Results Highlights

Net revenue reached 4.1526 billion yuan (approximately US$604.9 million), a year-on-year increase of 32%.

Net profit attributable to Momo's parent company was RMB 731.8 million (approximately US$106.6 million), compared with RMB 750.2 million in the same period last year. This change was mainly due to the fact that Momo recognized equity incentive expenses totaling RMB 482.5 million (approximately US$70.3 million) in the second quarter of 2019, including equity incentive expenses totaling RMB 323.7 million (approximately US$47.1 million) for specific options granted to the founding team of Tantan, compared with RMB 134.2 million in the same period last year. In August 2018, Tantan granted 3,578,205 stock options to its founding team. One of the exercise conditions of this option is that if Tantan meets certain requirements and conditions in terms of performance, this option will be immediately vested in the founding team of Tantan. In the second quarter of 2019, Tantan met the above-mentioned specific requirements and conditions, so we recognized equity incentive expenses of RMB 323.7 million (approximately US$47.1 million).

Not measured in accordance with US generally accepted accounting principles, net profit attributable to Momo's parent company increased to 1.2425 billion yuan (approximately US$181 million), compared with 893.2 million yuan in the same period last year.

Diluted net income per American depositary share (ADS) was RMB 3.33 (approximately US$0.49), compared with RMB 3.55 in the same period last year. Not measured in accordance with US generally accepted accounting principles, diluted net income per American depositary share (ADS) was RMB 5.60 (approximately US$0.82), compared with RMB 4.22 in the same period last year.

In June 2019, the monthly active users of Momo's main app were 113.5 million, compared with 108 million in the same period last year.

In the second quarter of 2019, the total number of paid users of Momo's live streaming services and value-added services reached 11.8 million (including 3.2 million paid users of Tantan), compared with 11.6 million in the same period last year (including 3.1 million paid users of Tantan in June 2018).

Recent Developments

Tantan's download and payment services were fully restored on July 15, 2019. As of August 25, 2019, the number of Tantan's paying users was 4.1 million.

2019 First Half Results Highlights

Net revenue reached 7.8755 billion yuan (approximately US$1.1472 billion), a year-on-year increase of 33%.

Net profit attributable to Momo was RMB 1.0211 billion (approximately USD 148.7 million), compared with RMB 1.5754 billion in the same period last year. Not measured in accordance with US GAAP, net profit attributable to Momo was RMB 2.1528 billion (approximately USD 313.6 million), compared with RMB 1.7970 billion in the same period last year.

Diluted net income per American depositary share (ADS) was RMB 4.71 (approximately US$0.69), compared with RMB 7.52 in the same period last year. Not measured in accordance with US generally accepted accounting principles, diluted net income per American depositary share (ADS) was RMB 9.75 (approximately US$1.42), compared with RMB 8.58 in the same period last year.

Executive Comments

Tang Yan, Chairman and CEO of Momo, said: "The company performed very well in the second quarter. Our financial performance remains strong and all strategic priorities have been advanced. Since the full resumption of downloads and payment services in mid-July, Tantan's core indicators such as users and revenue have rebounded strongly. This shows the strong market demand for online dating in China and also verifies Tantan's special position in this field. We expect Tantan to become an important growth engine for the company in the next few years."

Second Quarter 2019 Financial Results

Net revenue

Net revenue in the second quarter of 2019 was RMB 4.1526 billion (approximately US$604.9 million), an increase of 32% compared with RMB 3.1525 billion in the same period last year.

In the second quarter of 2019, Momo's live broadcast service revenue was 3.0999 billion yuan (about 451.5 million U.S. dollars), an increase of 18% compared with 2.6209 billion yuan in the same period last year. The growth in live broadcast service revenue was mainly due to the increase in the number of paid users of live broadcast services and the increase in the average revenue of paid users each quarter.

In the second quarter of 2019, the revenue from value-added services reached RMB 948.4 million (approximately USD 138.1 million), an increase of 169% from RMB 352.6 million in the previous year. Value-added services include membership subscription services and virtual gift services. The growth in revenue from value-added services was mainly due to the fact that Momo introduced more payment plans to enhance the social experience of users, which promoted the continued growth of the virtual gift business. It was also affected by the consolidation of Tantan’s membership revenue in the second quarter. In the second quarter of last year, Tantan only had membership revenue in June.

In the second quarter of 2019, mobile marketing revenue was RMB 76.2 million (approximately US$11.1 million), and mobile game revenue was RMB 23.2 million (approximately US$3.4 million).

In the second quarter of 2019, the net revenue of Momo main app increased from 3.1198 billion yuan in the second quarter of 2018 to 3.8654 billion yuan (about 563.1 million US dollars), mainly due to the significant growth of net revenue of live broadcast services and value-added services. In the second quarter of 2019, the net revenue of Tantan increased from 31 million yuan in the second quarter of 2018 to 284.8 million yuan (about 41.5 million US dollars), mainly from value-added service revenue. Tantan revenue has been consolidated since June 2018.

Costs and expenses

Costs and expenses in the second quarter of 2019 were RMB 3.3868 billion (approximately US$493.3 million), an increase of 44% from RMB 2.3568 billion in the same period last year. The increase in costs and expenses was mainly due to:

1. Increase in personnel-related costs, including equity incentives, especially the recognition of RMB 323.7 million (approximately US$47.1 million) in equity incentive expenses for the options of the Tantan founding team, as well as the results of the company's rapid expansion of its talent pool;

2. Increase in revenue sharing with anchors providing live broadcast services and virtual gift services;

3. Increase in marketing and promotion expenses used to attract users and promote live broadcasting business;

4. Increase in infrastructure-related expenses, such as broadband costs and server depreciation. The increase in these costs is due to the introduction of more features on the Momo platform; the reduction in TV program-related expenses offsets part of the costs and expenses.

In the second quarter of 2019, costs and expenses, not measured in accordance with U.S. generally accepted accounting principles, were RMB 2.8667 billion (approximately US$417.6 million), an increase of 30% from RMB 2.2109 billion in the same period last year.

Other operating profit

Other operating profit was RMB 161.9 million (approximately US$23.6 million) in the second quarter of 2019, compared with RMB 100.1 million in the same period last year. The increase in other operating profit was mainly due to more government subsidies received in the second quarter of 2019.

Operating Profit

The operating profit in the second quarter of 2019 was 927.7 million yuan (about 135.1 million US dollars), compared with 895.8 million yuan in the same period last year. The operating profit of Momo's main app in the second quarter of 2019 was 1.3544 billion yuan (about 197.3 million US dollars), compared with 1.1593 billion yuan in the same period last year. Tantan's operating loss in the second quarter of 2019 was 431.4 million yuan (about 62.8 million US dollars), compared with a loss of 97.8 million yuan in the same period last year. Tantan's revenue has been consolidated since June 2018.

Not measured in accordance with US GAAP, operating profit was RMB 1.4479 billion (approximately US$210.9 million), compared with RMB 1.0417 billion in the same period last year. Not measured in accordance with US GAAP, operating profit of Momo's main app in the second quarter of 2019 was RMB 1.4885 billion (approximately US$216.8 million), compared with RMB 1.2589 billion in the same period last year. Not measured in accordance with US GAAP, operating loss of Tantan in the second quarter of 2019 was RMB 47.9 million (approximately US$7 million), compared with RMB 51.5 million in the same period last year. Tantan's revenue has been consolidated since June 2018.

Income tax expense

Income tax expense for the second quarter of 2019 was RMB283.9 million (approximately US$41.4 million), an increase from RMB198.6 million in the same period last year. The increase in income tax expense was primarily due to the additional revenue we earned in the second quarter of 2019.

Net Profit

Net profit in the second quarter of 2019 was 731.1 million yuan (about 106.5 million U.S. dollars), compared with 748.1 million yuan in the same period last year. Net profit of Momo's main app in the second quarter of 2019 was 1.1495 billion yuan (about 167.4 million U.S. dollars), compared with 1.0086 billion yuan in the same period last year. Tantan's net loss in the second quarter of 2019 was 423.2 million yuan (about 61.6 million U.S. dollars), compared with a net loss of 94.8 million yuan in the same period last year, mainly due to the recognition of 323.7 million yuan (about 47.1 million U.S. dollars) of equity incentive expenses for the founding team of Tantan. Tantan's revenue has been consolidated since June 2018.

Not measured in accordance with US GAAP, net profit was RMB 1.2418 billion (approximately US$180.9 million), compared with RMB 891.0 million in the same period last year. Not measured in accordance with US GAAP, net profit of Momo's main app in the second quarter of 2019 was RMB 1.2836 billion (approximately US$187 million), compared with RMB 1.1082 billion in the same period last year. Not measured in accordance with US GAAP, net loss of Tantan in the second quarter of 2019 was RMB 49.1 million (approximately US$7.1 million), compared with a net loss of RMB 51.4 million in the same period last year. Tantan's revenue has been consolidated since June 2018.

Net profit attributable to Momo's parent company

In the second quarter of 2019, the net profit attributable to Momo's parent company was 731.8 million yuan (about 106.6 million US dollars), compared with 750.2 million yuan in the same period last year.

Not measured in accordance with US generally accepted accounting principles, net profit attributable to Momo's parent company was 1.2425 billion yuan (approximately US$181 million), compared with 893.2 million yuan in the same period last year.

Net income per American Depositary Share (ADS)

Diluted net income per American depositary share (ADS) in the second quarter of 2019 was RMB 3.33 (approximately US$0.49), compared with RMB 3.55 in the same period last year. Not measured in accordance with US generally accepted accounting principles, diluted net income per American depositary share (ADS) was RMB 5.60 (approximately US$0.82), compared with RMB 4.22 in the same period last year.

Cash and Cash Flow

As of June 30, 2019, Momo held cash, cash equivalents, time deposits and short-term investments of RMB 12.4898 billion (approximately US$1.8194 billion), compared with RMB 11.2926 billion as of December 31, 2018. Net cash from operating activities in the second quarter of 2019 was RMB 1.4220 billion (approximately US$207.1 million), compared with RMB 992.4 million in the same period last year.

2019 First Half Results

In the first half of 2019, Momo's net revenue reached 7.8755 billion yuan (about 1.1472 billion U.S. dollars), a year-on-year increase of 33% from 5.9169 billion yuan in the same period last year. This was mainly due to the significant growth in live broadcast services and value-added services.

In the first half of 2019, the net profit attributable to Momo was 1.0211 billion yuan (about 148.7 million US dollars), compared with 1.5754 billion yuan in the same period last year.

In the first half of 2019, net profit attributable to Momo was RMB 2.1528 billion (approximately US$331.6 million), not measured in accordance with US generally accepted accounting principles, compared with RMB 1.7970 billion in the same period last year.

In the first half of 2019, diluted net profit per American depositary share (ADS) was 4.71 yuan (about US$0.69), compared with 7.52 yuan in the same period last year.

In the first half of 2019, diluted net income per American Depositary Share (ADS), not measured in accordance with U.S. generally accepted accounting principles, was RMB 9.75 (approximately US$1.42), compared with RMB 8.58 in the same period last year.

Net cash generated from operating activities in the first half of 2019 was RMB 2.5979 billion (approximately US$378.4 million), compared with RMB 1.8179 billion in the same period last year.

Performance Outlook

The company expects net revenue for the third quarter of 2019 to be between RMB 4.25 billion and RMB 4.35 billion, a year-on-year increase of between 17% and 19%. This reflects the company's management's initial view of the current market and operating environment, which may change in the future.