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MeetMe Set to Buy LOOVO, Expand International Customer Base

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The MeetMe Group Inc (MEET - Free Report) formerly known as MeetMe Inc continues to drive on accretive acquisitions. The company recently announced an agreement to buy German dating App LOVOO for $70 million in cash, inclusive of a $5-million contingent earn out.

The latest deal follows the acquisitions of If(we) Inc (parent of Tagged) in April this year and Skout in October, 2016.

Acquisitions Improving Competitive Position

We note that the mobile meeting and dating app market is currently dominated by Match Group Inc (MTCH - Free Report) , parent of OkCupid and Tinder. Momo Inc (MOMO - Free Report) and Spark Networks Inc (LOV - Free Report) are other well known names. However, the addition of LOOVO along with If(We) and Skout significant improves the company’s competitive position.

Notably, both If(We) and Skout acquisitions helped in driving top-line growth in the last quarter. Revenues surged 91% year over year to $31.3 million. Most importantly, app engagement improved. In June, MeetMe set a new record for average daily chats at 30.5 million, driven by nearly 6 million minutes of video viewing time and 1.5 million minutes of broadcasting time per day.

MeetMe expects the LOOVO acquisition to provide significant scale to user base. LOOVO has almost 5 million monthly active users (MAUs) and 1.9 million daily active users (DAUs). Moreover, its popularity is evident from the fact that 47K new registrations are done every day on the app.

Post acquisition, MeetMe projects mobile MAUs and DAUs to surge 48% and 71% sequentially to 15.8 million and 4.6 million, respectively. Mobile chats sent per day are expected to jump 19.9% to 74.6 million. Mobile new users per day are projected to soar 32% sequentially to 193K.

LOOVO Expands International Footprint

LOOVO is the #1 dating app in German speaking countries (Germany, Switzerland and Austria) and one of the top #3 in Southern Europe (Italy, Spain and France). Hence, the addition of the app will definitely help in expanding MeetMe’s international footprint.

Further, LOOVO’s strong user base benefits top line, which was almost $32.4 million on a trailing 12-months basis. Subscriptions, In-app purchases and advertisements accounted for 48%, 24% and 28% of revenues, respectively.

MeetMe management now projects international mobile revenue and mobile non-advertising revenue to surge by 169% and 168%, respectively. Moreover, the acquisition is expected to be accretive to MeetMe’s earnings per share (EPS) in 2018 and beyond.

Although management expects second-half results to be softer due to weak CPM growth, we believe that the expanding international user base will boost MeetMe’s top-line growth. Moreover, the new video feature (launched in April), Tagged Live (launched in August) and the upcoming video product for Skout on both Android and iOS will further boost results in the remainder of 2017.

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