Shares of MeetMe (MEET) are up 20% in early trading, as the company raised guidance projecting higher bottom line profits and faster growth. The problem is that in today's press release, the company said 60% of this is expected to be collected from one client named Jack and the Beanstalk…I don't think I could have made this up. So let me get this straight:
- You send out PR raising guidance
- You identify that you have collection issues with the bulk of your accounts receivable
- The company you are collecting from named themselves after a fairy tale
- Your stock went up 20% on the news
Let me ask a stupid question: What happens to shares if Beanstock doesn't pay in full? Let me answer that question - the stock will go down - and it will go lower than it did before you upped guidance, so I really don't understand what the company is doing here.
A Confusing Climb Up the Beanstalk
Geoff Cook, Chief Executive Officer of MeetMe, stated, “Since resuming management of our advertising inventory, we have experienced stronger rates than we originally anticipated. Our daily mobile app advertising revenue in the first three weeks of June has increased 23% versus the May average, and in the seven days ending June 21st, we have experienced 53% higher daily mobile app advertising revenue than the May average. We continue to enhance and improve our current ad inventory and look forward to testing full-screen mobile video ad units in July.”
David Clark, Chief Financial Officer of MeetMe, added, “We now expect second quarter revenue to be between $10.5 million and $10.7 million, above our previously revised guidance of $9.0 million to $9.5 million. Adjusted EBITDA for the second quarter is expected to be between $1.5 million and $2.0 million, compared to our previously provided revised guidance of adjusted EBITDA in the range of $250,000 to $750,000. All guidance amounts are subject to change based on our determination of the collectability of all amounts owed to us by Beanstock Media, Inc. Beanstock represents approximately $5.8 million in accounts receivable, of which approximately $2.25 million is overdue. We believe none of these amounts is in dispute.”
MeetMe expects to announce full second quarter 2015 results in early August, at which point it expects to also furnish additional revenue and profitability related metrics and updated annual guidance for 2015. MeetMe says it is the leading social network for meeting new people in the US and the public market leader for social discovery. MeetMe enables people to chat with on mobile devices, with approximately 80% of traffic coming from mobile and more than one million total daily active users.
The company changed its name to MeetMe, Inc. in June 2012 – it was formerly known as Quepasa Corporation. This leads me to ask: Quepasa? What the hell are you guys doing? You are supposed to sandbag guidance, not set yourself up for failure. But I will make a note in my calendar to listen to the call and fully expect a handful of beans.