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Momo (MOMO) Q4 Earnings & Revenues Surpass Estimates, Up Y/Y

Zacks Equity Research logoZacks Equity Research 3/13/2019 Zacks Equity Research

Momo Inc. MOMO reported fourth-quarter 2018 non-GAAP earnings per American Depositary Share (ADS) of 59 cents, which beat the Zacks Consensus Estimate by 5 cents and increased 11.3% from the year-ago quarter.

Revenues of $559.1 million surpassed the consensus mark of $540 million and surged 50% on a year-over-year basis.

The growth was primarily driven by robust growth in live video revenues, growth in user base and solid performance of Tantan Limited.   

Segment Details

Live-video service revenues (76.9% of total revenues) were $430.4 million, up 36% year over year, driven by an increase in the number of quarterly paying users and higher average revenues per paying user per quarter.

Value-added service revenues (18.8% of total revenues) mainly include membership subscription revenues and virtual gift revenues. Revenues surged 272% year over year to $105.1 million. Solid growth of the virtual gift business on the Momo application and addition of Tantan’s membership subscription revenues for the whole quarter drove growth.

Mobile marketing revenues (3.2% of total revenues) declined 15% year over year to $17.8 million. This decline was attributed to lower demand from advertising and marketing customers.

Mobile games (0.7% of total revenues) revenues plunged almost 44% to $3.7 million, primarily due to decrease in the number of quarterly paying users.

Other services mainly consisted of revenues from Phanta City, a TV variety show co-produced by Momo.

Momo Inc. Price, Consensus and EPS Surprise

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Momo Inc. Price, Consensus and EPS Surprise | Momo Inc. Quote

User Details

Monthly active users (MAU) on Momo application were 113.3 million in December 2018 compared with 99.1 million in the year-ago quarter.

Total paying users of live-video and value-added services, without double counting the overlap and including 3.9 million paying users of Tantan Limited, were 13 million in fourth-quarter 2018 compared with 7.8 million in fourth-quarter 2017.

Per user time spent on Momo’s platform reached an all-time high, in the reported quarter, since the beginning of 2017. This was driven by rapid adoption of audio and video-based live services.

Momo witnessed rise in the number of users on its Tantan platform. Total paying users reached 3.9 million in the reported quarter, a quarterly addition of 300,000 users. Further, total revenues for the same increased 36% sequentially, driven by paying user growth and the adoption of the See Who Likes Me feature.

Operating Details

Non-GAAP cost and expenses were $430.5 million in the reported quarter, up 59% year over year. This increase was driven by an increase in revenue sharing with live video broadcasters and virtual gift recipients.

Further, increase in marketing and promotional expenses to enhance brand awareness and lure users contributed to the increase in expenses. Notably, as a percentage of revenues, cost of revenues increased 200 basis points (bps) year over year to 54%

Non-GAAP research & development (R&D) expenses, as a percentage of revenues, increased 100 bps to 5%.

Sales & marketing (S&M) expenses as percentage of revenues increased 70 bps to 14.5%. Moreover, general & administrative (G&A) expenses increased significantly in the reported quarter.

The company’s operating income was $20.6 million in the fourth quarter of 2018, up 52.7% year over year.  The increase was mainly due to more government incentives received by Momo in the reported quarter.

Guidance

For first-quarter 2019, revenues are anticipated between RMB3.55 billion and RMB3.65 billion, representing an increase of 28-32% year over year.

The company plans to revamp live video broadcaster’s ranking system and adjust core platform’s algorithm to support better live streaming conversion in the near term. Further, offline promotional events are also expected to drive new paying users to live broadcasting.

Recent Development

Momo declared a special cash dividend of 62 cents per ADS, or 31 cents per ordinary share. Notably, the company will pay the cash dividend on Apr 30, 2019.

Zacks Rank & Stocks to Consider

Currently, Momo has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include Symantec Corporation SYMC, eGain Corporation EGAN and Synopsys, Inc. SNPS. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Symantec, eGain and Synopsys is projected to be 7.9%, 30% and 10%, respectively.

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