The “Incremental Minute” Could Introduce MeetMe to 52 Week Highs

- The “Incremental Minute” of user engagement has extremely high contribution margins, and recent app

modifications should yield better engagement.

- Management is in the early innings of optimizing its mobile ad management strategy.

- MeetMe trades a 50-80% discount to comps with similar growth rates or EBITDA margins.

- MEET’s financial leverage is powerful; ~65% of incremental revenue dollars should convert to EBITDA in 2016,

and ~85% of 2016 EBITDA converts to Free Cash Flow (“FCF”).

MeetMe, Inc. (NASDAQ: MEET)

BUY Recommendation. Current Price $3.34, Price Target $6.50.

Pinnacle Fund – Dallas, TX – greg@pinnaclefund.com

Stock Price 3.34$ Enterprise Value ($m) 153$

Shares Outstanding ($m) 53.7 Cash ($m) 26.4$

Market Cap ($m) 179$ Debt ($m) -$

December Fiscal Year End

I recommended buying MeetMe when the stock was $3.20 with a $5.70 target price on February 19, 2016. Please see

my recommendation on SeekingAlpha Pro. I’m increasing my price target to $6.50 based on increased confidence in the

business model.

Here is a brief summary of my initial recommendation for non-SeekingAlpha Pro members. My best stock successes

have occurred when I’ve been able to find stocks that were undervalued/trading at a discount to peers and were able to

deliver revenue and profitability growth in excess of expectations. MEET fits those criteria and is well positioned to trade

95% higher to $6.50 over the next year.

MeetMe is a location based mobile chat app for connecting with new people. MeetMe’s users are able to see

somebody’s interests, a brief description, and pictures. The CEO describes MeetMe as a digital bar targeting 18-30 year

olds. In 2014, Meeker/Kleiner Internet Trends Report estimated that 20% of time spent consuming media was on mobile

devices versus only 4% of advertising spend was on mobile devices. The time spent consuming media on a specific

device roughly matches the advertising spend for that device. For example, according to Meeker/Kleiner’s 2015

estimates, 24% of time spent consuming media is on the internet and 23% of advertising budgets are spent on the

internet. The mobile advertising industry is relatively young, and percentage of ad dollars spent on mobile devices is

trying to approach the percentage of time spent on mobile devices. Meeker/Kleiner updated their mobile estimate in

2015 to 24% of time consuming media was on mobile devices and 8% of advertising spend was on mobile devices. This

trend would indicate that advertising budgets are moving rapidly (approximately doubled as a percentage of ad budgets

from 4% to 8% in 2015) towards mobile devices.

MeetMe generates revenue from three business lines: Mobile (~88% of Q1’16 Revenue), Web (~6% of Q1’16 Revenue),

and Social Theater (~6% of Q1’16 Revenue). 90% of Mobile and Web revenue (85% of total revenue) is from advertising,

which differentiates MEET from subscription centric dating companies. Subscription revenue is approximately 4% of

Mobile revenue, and in-app purchases make up the balance of Mobile revenue. Therefore, MeetMe is a near pure play

on the massive shift in advertising dollars towards mobile. Mobile revenue grew 84% year-over-year in 2015 due to a

fundamental change in the business: bringing mobile ad inventory management in-house.

MeetMe outsourced mobile ad inventory management from October 31, 2013 to June 2, 2015 to Pinsight, a division of

Sprint, and BeanStock. Pinsight and Beanstock paid MeetMe a fixed price per ad request. Outsourcing ad inventory

management allowed MEET to focus on building the best app possible while relying on fixed rate advertising revenue

that did not experience seasonality. On June 3, 2015, MeetMe terminated its outsourcing relationships and brought

mobile ad inventory management in-house in order to capture additional economics. Concurrently, MEET reduced the

number of ads served to focus on achieving higher Click-Thru-Rates (“CTRs”). In Q1’15, MEET served 18 billion ads

through Pinsight and Beanstock at a fixed advertising rate (aka Cost Per Thousand Impressions or “CPM”), therefore

more ad requests equaled more revenue for MEET. In Q1’16, MEET served 10 billion ads, but those ads came at higher

CPMs. MEET is optimizing the number of ads served and CPMs to generate the most revenue from its users. I estimate

that MeetMe earned a $0.40 CPM in Q1’15 before MEET brought mobile ad inventory management in-house and

reduced the number of ad requests. MEET generated a $1.07 CPM in Q1’16 after executing those changes. Multiplying

ads served by average CPM and Monthly Active Users (“MAU”) calculates mobile advertising revenue. Mobile revenue

grew 42% year-over-year in Q1’16 despite only growing MAU 24%. Therefore, the delta between 42% revenue growth

and 24% MAU growth is explained by better monetization per user aka Average Revenue Per User (“ARPU”), and I

expect management to continue to grow ARPU sequentially throughout 2016.

Investors should want to own MeetMe now because:

- MeetMe trades at ~6.2x EV/Consensus 2016 EBITDA, 8.5x consensus 2016 adjusted EPS, and a 12.5% FCF yield,

which is a 50-80% discount to comps with similar growth rates or EBITDA margins.

- MEET’s financial leverage is powerful; ~65% of incremental revenue dollars convert to EBITDA, and ~85% of

EBITDA converts to FCF. Therefore, ~55% of incremental revenue converts to FCF.

- Management is in the early innings of optimizing its mobile ad management strategy and will be able to

continue to grow revenue for several years by serving targeted ads that demand higher CPMs.

- 33% of Daily Active Users (“DAU”) and 50% of new user registrations are international users, which are not yet

monetized through advertising; management plans to begin monetizing international users in 2H’16.

- MeetMe has a significant amount of user data that management could monetize in the future.

- The “incremental minute” of user engagement could drive high incremental margin revenue dollars.

- Below is a summary of MeetMe’s Income Statement.

- I would like to evaluate MeetMe by examining its:

o “Incremental Minute” Opportunity

o “Discuss” Revamp

o Investment Risks o Valuation

2013 2014 2015E 2016E* 2017E*

Mobile Revenue 12,574 24,589 45,200

Web Revenue 21,682 12,795 5,755

Social Theater Revenue 6,122 7,433 5,949

Total Revenue 40,378 44,817 56,904 65,140 73,950

EBITDA 1,811 5,018 20,233 24,530 29,040

Diluted adj. EPS (0.29) (0.10) 0.25 0.39 0.46 * Analyst Consensus Estimates

Summary Income Statement

“Incremental Minute” Opportunity

MeetMe is making improvements to the mobile app, which has made me interested in answering the following

question: “how much money does MeetMe make if its DAU spend an average of 1 minute longer in the app every day?”

Understanding the answer to this question is important because management is making changes to the app to improve

user engagement, and increased user engagement could drive upside to guidance. First, can investors answer that

question? Yes, investors can make some reasonable assumptions to make this calculation. We need to know 1)

monetized Mobile DAU, 2) number of ads served per minute, and 3) Mobile CPMs.

Monetized Mobile DAU

Materially all of MeetMe’s mobile advertising revenue is generated from four countries: the US, the UK, Australia and

Canada. CEO Geoff Cook explained on MEET’s Q1’2016 earnings call that “our non-English users, who constitute

approximately 33% of our mobile DAU, do not see ads and therefore do not contribute at all to our mobile advertising

revenue.” Therefore, 66% of 1.14 million DAU equals ~750,000 monetized/English speaking DAU.

Ads Served Per Minute

Please see a picture with annotations denoting

native and banner ads.

Prior to April/May 2015, MeetMe banner ads

refreshed as users navigated between the

“Meet”, “Chat”, “Feed”, “Me”, and “m+” tabs.

Often, users were navigating between these

tabs very quickly, and ads may not have had

time to load. Ads may not have loaded in an

astounding 30% of all ad impressions. This

means that users may not have had a chance

to determine if they wanted to click on banner

ads because users never even saw an ad. As a

result, these 30% of ad requests saw a 0.0%

CTR. Changing ad request logic to request a

banner ad after a specific amount of time as

opposed to every time a user navigated

through tabs in the app removed poor

performing ad units and increased overall CTR,

which resulted in higher CPMs. Very

simplistically, higher CTRs result in higher

CPMs, and achieving CTRs above 0.4% results

in significantly more competition for inventory.

In other words, achieving CTRs greater than

0.4% means that more advertisers want to

advertise in your app, which drives more

competition for your ad inventory and higher

CPMs.

Anecdotally, I have timed banner ad requests and believe banner ads are reloading approximately every 10-15 seconds. I

believe 4-6 banner ads are loading every minute. After timing native ad requests, I do not believe that native ad requests

are based on the same ad logic as banner ads. Native ads appear to refresh every 15-30 seconds depending on the user’s

movements within the app. I believe 2-4 native ads are loading every minute.

Mobile CPMs

MeetMe provides investors with mobile revenue by source in its quarterly investor presentation. In Q1’2016, mobile

revenue was $11.7 million. Banner ads, native ads, credits, and subscriptions represented 50%, 41%, 5%, and 4% of

mobile revenue, respectively. Therefore, investors know that mobile banner and native ads represented $5.85 million

and $4.80 million of revenue in Q1’2016, respectively. Management also disclosed that MeetMe “generated 10 billion

ad impressions in the first quarter on mobile, and 40% of those were native, and approximately 60% banner” in

Q1’2016. Therefore, banner CPMs were approximately $0.97, and native CPMs were approximately $1.20.

The Math

Management commentary and some reasonable assumptions allow investors to calculate the effect an incremental

minute of monetized DAU engagement could have had on Q1’16 revenues.

1Q'16 Source

Mobile Revenue by Source ($mm)

Banner Ads 5.850$ Q1'16 Investor Presentation

Native Ads 4.797$ Q1'16 Investor Presentation

Credits 0.585$ Q1'16 Investor Presentation

Subscription 0.468$ Q1'16 Investor Presentation

Total Mobile Revenue 11.700$ Q1'16 Investor Presentation

Mobile Ads served (mm)

Banner Ads 6,000 Q1'16 Earnings Call

Native Ads 4,000 Q1'16 Earnings Call

Total Ads Served 10,000 Q1'16 Earnings Call

Mobile CPMs

Banner CPM 0.975$ Pinnacle Calculation

Native CPM 1.199$ Pinnacle Calculation

Blended CPM ex-Credits/Subscription 1.065$ Pinnacle Calculation

DAU (mm)

Mobile DAU 1.140 Q1'16 Earnings Release

% Mobile DAU Monetized 66.0% Q1'16 Earnings Call

Monetized Mobile DAU 0.752 Pinnacle Calculation

Incremental Minute Assumptions

Banners Per Minute 5 Pinnacle Estimate

Natives Per Minute 3 Pinnacle Estimate

Total Ads Per Minute 8 Pinnacle Estimate

Incremental Revenue Opportunity ($mm)

Incremental Banner Revenue 0.334$ Pinnacle Estimate

Incremental Native Revenue 0.246$ Pinnacle Estimate

Total Incremental Revenue 0.580$ Pinnacle Estimate

“Incremental Minute” Conclusion

Based on these reasonable assumptions, MEET could have potentially generated $580,000 incremental revenue in

Q1’2016 had user engagement increased by 1 minute per day per monetized DAU. Moreover, that incremental revenue

should have extremely high EBITDA margins. Similar to how investors look at same-store-sales for restaurants,

incremental revenue from increased user engagement should have very high EBITDA margins because that revenue

should not have any meaningful variable OPEX.

Who cares?!? Good question. This exercise is not meaningful unless investors understand: 1) Is a 1 minute per day

increase a realistic increase in engagement, and 2) why would user engagement increase?

First, lets try to understand how long the average user spends in the app. Various industry sources point to MEET weekly

average users (“WAU”) spending approximately 80-90 minutes per week in the MeetMe app. That would equate to

approximately 12-13 minutes in the MeetMe app per day. Let’s sanity check that industry estimate with data that

MeetMe provided in Q4’2015. My calculation estimates that monetized Mobile DAU spent about 20 minutes per day in

the app in Q4’15. In either the 12.5 minute per day per WAU or 20 minute per day per DAU scenario, I would argue that

a 1 minute increase (or a 5-8% increase) in app usage per day is reasonable.

Second, MeetMe’s revamp of the Discuss tab significantly improved the app experience and could drive better user

engagement. Lets explore why I think Discuss is important to MeetMe.

Q4'15 Source

DAU (mm)

Mobile DAU 1.115 Q5'15 Earnings Release

% Mobile DAU Monetized 66.0% Q1'16 Earnings Call

Monetized DAU (mm) 0.735 Pinnacle Calculation

Ad Impressions/Q (mm) 12,600.0 Q4'15 Investor Presentation

Ad Impressions/Day (mm) 137.0 Pinnacle Calculation

Ad Impressions/Day/Monetized DAU 186.3 Pinnacle Calculation

Total Ads/Minute 9.0 Pinnacle Estimate

Minutes/Monetized DAU 20.7 Pinnacle Estimate

“Discuss” Revamp

On May 16, 2016, MeetMe completed its first major app refresh in over a year when the legacy “Feed” feature was

replaced with “Discuss”. “Discuss” significantly improved users’ ability to find relevant topics of conversation with

nearby users. In the pictures below, you can see how discuss is displayed in the picture below to a MeetMe user. The

significant change is at the top of the landing page where the app lists several topics displayed below as “Sports”, “Video

Games”, “TV”, and more. I count 38 different categories that users can utilize to search for interesting conversations

with nearby people. For example, a user that clicked on the video game button at the top of the picture on the left

would see the picture on the right. The first conversation shows a women looking for friends that want to play Xbox. If I

was a gamer looking to make new friends on MeetMe, playing a video game online with a girl in my geographic area

seems like a great way to potentially make a new friend or start a relationship. Users that click on the Sports button may

see a conversation thread talking about the Oklahoma City Thunder basketball game against the Golden State Warriors.

Meeting people and making new friends through common interests is significantly easier and more natural. The ability

to seek out conversations by a specific topic in “Discuss” dramatically improves MeetMe’s relevance to users, and I think

user engagement could easily increase by 1 minute or more per DAU.

Banner Ads

New

Discuss

Topic

Buttons

You might be saying “great, MeetMe has made a material improvement to the app that could drive incremental revenue

and earnings, but what is the revenue and earnings opportunity for the rest of the year?” That’s the right question.

Using reasonable assumptions (in the table below), I think MEET could generate an additional $1.6 million in Revenue in

2H’16 from an incremental 1 minute per day of monetized DAU engagement. As I highlighted earlier, I think this revenue

comes at extremely high margin and could potentially contribute as much as $1.5 million in EBITDA because there isn’t

any variable marketing spend for this incremental revenue. Consensus is currently estimating $36.6 million in Revenue

and $16.5 million in EBITDA in 2H’16. A 1 minute, or 5-8%, increase in monetized DAU engagement could increase 2H’16

EBITDA estimates by 9% ($1.5m incremental EBITDA/$16.5m consensus EBITDA estimate). “Discuss” could be a catalyst

that drives 1 minute or more improved monetized user engagement.

“Discuss” is just one feature that management has improved. MeetMe attended the B.Riley conference in Santa Monica

on May 25, 2016, and management disclosed in its investor presentation that it plans to enable multi-photo upload and

Facebook/Instragram integration to facilitate better photo sharing.

Investment Risks

- The mobile advertising market is nascent and has not gone through a major recession. The effect an economic

recession would have on mobile CPMs is uncertain; however, internet advertising rates fared better than all

other media platforms during the Great Recession. I believe the mobile advertising space today is very similar to

the internet advertising market in 2008. Internet advertising spend outperformed all other media platforms in

the Great Recession.

- Mobile CPMs generally increase from Q1 sequentially through Q4 due to seasonality in advertising budgets. If

Mobile CPMs do not increase seasonally for any reason, MeetMe’s business could be negatively impacted.

- Facebook has been slowly rolling out ads on Instagram since 2014, and Match Group could monetize Tinder

through ads in the future. Mobile CPMs could decrease if many publishers all turn on mobile ads simultaneously

before demand has sufficiently developed.

- MeetMe increased its 2016 marketing spend guidance from 10%, which was issued on the Q4’15 earnings call,

to 15%, which was issued on the Q1’16 earnings call. CEO Geoff Cook said that marketing spend will be

“accretive, especially within the United States” on the Q1’16 earnings call. Management continued “the way we

typically think about our spend is we allocate some portion to English speaking countries, that tends to be the

majority, some portion to international markets, and in Q1, we saw better results than we had seen in the past

in terms of quality of the spend and our ability to drive users for less than their lifetime value.” My model is

conservatively modeling a 50% year-over-year reduction in marketing spend productivity, which is not in-line

with management’s commentary about the better productivity of marketing spend, and my model is still

outlining potential for upside to guidance. Financial results could be negatively impacted if management acts

irrationally and spends marketing dollars in a dilutive manner.

- MeetMe grew Mobile DAU and MAU from 772,000 and 2.45 million users in Q1’14 to 1.14 million and 4.382

million, respectively. The stock could be negatively impacted if MeetMe is unable to continue to grow its users.

- MeetMe has $26.4m in cash on the balance sheet and $0 debt at the end of Q1’16. Management has said that it

is evaluating acquisitions along with a share repurchase plan. At the May 2016 B. Riley conference, CFO David

Clark said that management is looking for tuck-in acquisitions that could be “EBITDA accretive in the very short

term.” The stock could be negatively affected if management acquires a company that is not EBITDA accretive in

the very short term.

Valuation

MEET is the cheapest stock that I know relative to its growth rate. Companies that trade for the cheapest valuation in its comp group are often experiencing some sort of degradation in their respective businesses. I do not believe MeetMe is facing any large macro headwinds, but MEET still trades for a 50-80% discount to peers based on EV/EBITDA, P/E, PEG and FCF Yield. MEET should screen well for growth, GARP, and value investors. The Case for Growth Investors Consensus estimates expect MEET to grow consolidated revenues and Mobile revenues 14.6% and 28.5% in 2016, respectively. I expect MEET’s Mobile revenue to be 90% of total revenue exiting 2016, and total revenue growth could accelerate in 2017 when management monetizes international users. MeetMe trades at a 1 turn discount on EV/2016 Revenue to accelerating growth internet peers. The Case for GARP Investors MEET is growing revenues 14.6% according to its guidance and showing operating leverage with ~65% of incremental revenue converting to EBITDA in 2016 (compared to consolidated EBITDA margins of 37.5%). MEET is trading for 6.2x EV/2016 EBITDA, 11x GAAP EPS, 8.5x adjusted EPS, and has a 0.15 2016 PEG ratio. I believe MEET will continue to grow in 2017. The Case for Value Investors MEET is trading for a 12.1% consensus 2016 FCF yield assuming a fully diluted share count of 53.7 million shares. Approximately 55% of incremental revenue falls through to FCF, and management is evaluating accretive acquisitions as well as initiating a share repurchase plan. The company has $57 million in net operating losses to offset cash taxes for the next 2+ years. MEET has $26 million in net cash and could add $22 million in free cash to end the year with $48 million in cash on the balance sheet, which would equal 27% of its current market cap. I’ve compared MEET to several different peer groups to examine relative valuation. Gaming and Dating/Chat Apps When comparing MEET to Gaming and Dating/Chat Apps, MEET trades for a 73%, 85% and 75% discount to peer average EV/2016 EBITDA, Price to 2016 EPS, and 2016 PEG basis, respectively.

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Gaming and Dating/Chat 2.18 1.98 1.76 26.48 23.35 11.29 75.2 59.4 23.6 0.62 0.44 1.5% -0.6% 4.9%

GLUU 132.3 325 166 0.67 0.76 0.65 9.89 NM NM NM NM NM NA NA -5.1% -9.3% 5.3%

ZNGA 739.7 1,931 1,421 2.03 1.90 1.72 82.95 27.35 14.99 NM 115.0 39.6 NA 0.21 -2.5% 2.4% 5.3%

MOMO 143.7 1,727 0 NM NM NM NM NM NM 150.3 46.2 17.7 0.20 0.11 NA NA NA

KING 316.1 5,691 4,770 2.39 NA NA 7.43 NA NA 11.1 NA NA NA NA NA NA NA

MTCH 245.0 3,533 4,667 4.57 3.79 3.31 16.50 11.20 9.13 22.2 18.9 15.4 1.10 0.67 5.0% 6.9% 8.9%

LOV 25.9 44 39 0.82 1.04 1.05 13.93 32.37 7.17 NM NM 12.1 NA NA NA NA NA

SINA 69.9 3,517 2,319 2.63 2.43 2.06 28.15 22.48 13.85 117.1 57.6 33.3 0.56 0.46 8.7% -2.5% 0.0%

MEET 53.7 179 153 2.70 2.36 2.07 7.58 6.26 5.28 13.4 8.6 7.3 0.15 0.40 4.7% 12.5% 13.9%

Social Comps When comparing MEET to Social comps, MEET trades for a 66%, 76%, 81%, and 81% discount to peer average EV/2016 EBITDA, Price to 2016 EPS, 2016 PEG, and 2016 FCF yield, respectively.

Internet Comps Growing Revenue 10-30% When comparing MEET to Internet comps growing revenue 10-30%, MEET trades for a 59%, 82%, 79%, and 62% discount to peer average EV/2016 EBITDA, Price to 2016 EPS, 2016 PEG, and 2016 FCF yield, respectively.

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Social 5.34 4.11 3.32 20.59 18.33 11.06 117.1 35.5 22.5 0.83 0.55 3.1% 2.4% 3.9%

FB 2,311.9 272,514 316,540 17.66 12.14 9.11 28.26 19.81 15.01 NA NA NA NA NA 2.1% 3.1% 4.4%

LNKD 118.0 15,276 15,296 5.11 4.11 3.43 19.62 15.19 12.22 NM 37.6 30.5 NA 1.31 1.8% 2.7% 4.1%

TWTR 701.9 10,107 8,134 3.67 2.97 2.46 14.58 11.16 8.78 NM 27.8 21.1 NA 0.67 -0.3% 1.6% 2.1%

LOV 25.9 44 39 0.82 1.04 1.05 13.93 32.37 7.17 NA NA 12.1 NA NA NA NA NA

MTCH 245.0 3,533 4,667 4.57 3.79 3.31 16.50 11.20 9.13 NA 18.9 15.4 1.10 0.67 5.0% 6.9% 8.9%

YELP 68.0 1,753 1,595 2.90 2.28 1.83 23.07 16.13 11.23 NM NM NM NA NA 1.3% 2.3% 3.8%

SINA 69.9 3,517 2,319 2.63 2.43 2.06 28.15 22.48 13.85 117.1 57.6 33.3 0.56 0.46 8.7% -2.5% 0.0%

MEET 53.7 179 153 2.70 2.36 2.07 7.58 6.26 5.28 13.4 8.6 7.3 0.15 0.40 4.7% 12.5% 13.9%

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Revenue growth (teens% to 30%) 4.41 3.57 3.09 19.55 15.25 11.70 38.4 47.0 22.5 0.74 0.83 5.0% 4.8% 7.4%

GOOG 343.4 249,530 428,768 7.07 6.05 5.23 14.49 12.21 10.48 31.8 21.7 18.3 0.46 1.00 6.4% 7.9% 9.8%

BIDU 270.7 47,597 43,359 4.24 3.58 2.95 17.14 14.76 11.18 11.6 28.1 20.7 NM 0.58 10.9% 4.6% 6.9%

RUBI 48.5 747 589 2.59 1.99 1.65 9.90 9.16 6.68 NM 17.2 14.8 NA 0.92 4.9% 4.5% 7.4%

CRTO 60.9 2,783 2,504 4.69 3.54 2.83 17.46 12.45 9.28 47.6 26.3 19.8 0.32 0.61 2.1% 3.3% 4.9%

EIGI 140.4 1,311 3,285 4.40 2.79 2.50 12.28 8.25 7.24 NM 5.7 6.0 NA NM 16.9% 11.8% 17.2%

Z 119.4 3,424 4,854 7.53 5.84 4.80 55.43 40.05 23.13 NM 317.3 60.2 NA NA -0.3% 2.2% 4.0%

MTCH 245.0 3,533 4,667 4.57 3.79 3.31 16.50 11.20 9.13 22.2 18.9 15.4 1.10 0.67 5.0% 6.9% 8.9%

TREE 11.9 923 745 2.93 1.91 1.54 18.25 11.54 8.85 20.3 33.5 26.3 NM 0.97 2.2% 4.2% 6.1%

LNKD 118.0 15,276 15,296 5.11 4.11 3.43 19.62 15.19 12.22 NM 37.6 30.5 NA 1.31 1.8% 2.7% 4.1%

SINA 69.9 3,517 2,319 2.63 2.43 2.06 28.15 22.48 13.85 117.1 57.6 33.3 0.56 0.46 8.7% -2.5% 0.0%

YELP 68.0 1,753 1,595 2.90 2.28 1.83 23.07 16.13 11.23 NM NM NM NA NA 1.3% 2.3% 3.8%

TRIP 132.9 8,922 9,200 6.17 5.83 4.99 19.85 21.60 17.05 49.4 38.9 29.8 1.45 0.97 3.6% 3.9% 4.6%

EXPE 136.3 15,450 18,716 2.81 2.10 1.83 16.76 11.39 9.14 19.9 22.2 16.9 NM 0.55 3.9% 6.5% 6.9%

PCLN 49.6 63,268 66,306 7.19 6.20 5.39 17.81 15.62 13.41 25.8 18.9 16.2 0.52 0.94 4.6% 5.1% 5.9%

EVDY 33.2 219 302 1.30 1.17 1.04 6.61 6.71 4.92 NM 13.7 7.3 NA 0.08 2.3% 8.7% 20.3%

MEET 53.7 179 153 2.70 2.36 2.07 7.58 6.26 5.28 13.4 8.6 7.3 0.15 0.40 4.7% 12.5% 13.9%

Internet Comps with 10-40% EBITDA Margins

When comparing MEET to Internet comps with 10-40% EBITDA margins, MEET trades for a 56%, 80%, 76%, and 56% discount to peer average EV/2016 EBITDA, Price to 2016 EPS, 2016 PEG, and 2016 FCF yield, respectively.

Internet Comps with High Single Digit or Greater FCF Yields

When comparing MEET to high FCF Yield Internet comps, MEET trades for a 33%, 50%, 75%, and 31% discount to peer average EV/2016 EBITDA, Price to 2016 EPS, 2016 PEG, and 2016 FCF yield, respectively.

I am going to argue that MEET should trade for 12x the high end of management’s EBITDA guidance of $26 million based on the massive relative discount to public peers. A 12x EBITDA multiple is still a discount to this comp group, and I think very defensible given that competitor PlentyOfFish was acquired by MTCH for ~13 forward EBITDA, and MOMO, “MeetMe’s closest comp” according to CEO Geoff Cook at the B. Riley conference, recently received an investment from Alibaba (NYSE: BABA) valuing the company at 13.3x forward EBITDA. Assuming 53.7 million fully diluted shares, $48 million in cash at the end of 2016, and applying 12x to $26m in 2016 EBITDA generates a ~$6.50 target price.

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Yield

EBITDA margins (teens to 40%) 3.62 3.10 2.71 16.98 14.29 11.01 39.1 43.6 23.0 0.65 0.84 5.3% 5.5% 7.8%

YHOO 949.1 34,270 29,580 7.23 8.39 8.29 31.08 38.69 34.63 NM 71.9 62.1 NA 3.92 0.9% 1.1% 0.8%

BIDU 270.7 47,597 43,359 4.24 3.58 2.95 17.14 14.76 11.18 11.6 28.1 20.7 NM 0.58 10.9% 4.6% 6.9%

RUBI 48.5 747 589 2.59 1.99 1.65 9.90 9.16 6.68 NM 17.2 14.8 NA 0.92 4.9% 4.5% 7.4%

EIGI 140.4 1,311 3,285 4.40 2.79 2.50 12.28 8.25 7.24 NM 5.7 6.0 NA NM 16.9% 11.8% 17.2%

CRTO 60.9 2,783 2,504 4.69 3.54 2.83 17.46 12.45 9.28 47.6 26.3 19.8 0.32 0.61 2.1% 3.3% 4.9%

WWWW 50.9 860 1,570 2.81 2.08 1.88 10.08 9.08 7.27 9.8 6.6 5.5 0.14 0.26 16.1% 14.2% 17.1%

Z 119.4 3,424 4,854 7.53 5.84 4.80 55.43 40.05 23.13 NM 317.3 60.2 NA NA -0.3% 2.2% 4.0%

ANGI 58.6 516 515 1.50 1.48 1.39 18.38 16.50 12.02 NA 138.3 37.8 NM 0.14 1.8% 4.1% 7.3%

XOXO 26.5 429 337 2.38 2.18 1.97 11.49 9.86 8.03 77.2 32.6 24.6 0.24 0.75 4.0% 5.7% 6.1%

DATE 31.1 233 169 NA NA NA NA NA NA NA NA NA NA NA NA NA NA

MTCH 245.0 3,533 4,667 4.57 3.79 3.31 16.50 11.20 9.13 NA 18.9 15.4 1.10 0.67 5.0% 6.9% 8.9%

TREE 11.9 923 745 2.93 1.91 1.54 18.25 11.54 8.85 20.3 33.5 26.3 NM 0.97 2.2% 4.2% 6.1%

RATE 90.4 782 871 2.35 2.18 2.00 6.85 8.65 8.07 NM 17.4 NA NA NA 10.5% 7.0% 9.2%

LNKD 118.0 15,276 15,296 5.11 4.11 3.43 19.62 15.19 12.22 NM 37.6 30.5 NA 1.31 1.8% 2.7% 4.1%

MWW 88.9 230 283 0.42 0.44 0.43 2.65 3.27 3.04 3.3 9.6 7.9 NM 0.35 19.5% 9.0% 13.4%

SINA 69.9 3,517 2,319 2.63 2.43 2.06 28.15 22.48 13.85 117.1 57.6 33.3 0.56 0.46 8.7% -2.5% 0.0%

TWTR 701.9 10,107 8,134 3.67 2.97 2.46 14.58 11.16 8.78 NM 27.8 21.1 NA 0.67 -0.3% 1.6% 2.1%

YELP 68.0 1,753 1,595 2.90 2.28 1.83 23.07 16.13 11.23 NM NM NM NA NA 1.3% 2.3% 3.8%

TRIP 132.9 8,922 9,200 6.17 5.83 4.99 19.85 21.60 17.05 49.4 38.9 29.8 1.45 0.97 3.6% 3.9% 4.6%

EXPE 136.3 15,450 18,716 2.81 2.10 1.83 16.76 11.39 9.14 19.9 22.2 16.9 NM 0.55 3.9% 6.5% 6.9%

PCLN 49.6 63,268 66,306 7.19 6.20 5.39 17.81 15.62 13.41 25.8 18.9 16.2 0.52 0.94 4.6% 5.1% 5.9%

IACI 73.4 4,072 4,776 1.48 1.48 1.38 9.87 8.90 7.25 41.7 17.5 12.9 0.13 0.37 7.4% 6.7% 9.4%

EVDY 33.2 219 302 1.30 1.17 1.04 6.61 6.71 4.92 NM 13.7 7.3 NA 0.08 2.3% 8.7% 20.3%

WBMD 38.7 2,581 2,679 4.21 3.81 3.48 13.87 11.72 10.28 45.1 35.7 31.0 1.36 2.04 2.3% 4.9% 5.9%

BCOR 41.4 365 806 1.84 1.75 1.63 9.81 8.67 7.51 NM 8.7 6.5 NA 0.19 -3.1% 13.3% 16.1%

MEET 53.7 179 153 2.70 2.36 2.07 7.58 6.26 5.28 13.4 8.6 7.3 0.15 0.40 4.7% 12.5% 13.9%

Ticker Shares

Out

Mkt

Cap

EV EV 2015

Rev

EV 2016

Rev

EV 2017

Rev

EV 2015

EBITDA

EV 2016

EBITDA

EV 2017

EBITDA

2015

CY P/E

2016

CY P/E

2017

CY P/E

2016

PEG

2017

PEG

2015 FCF

Yield

2016 FCF

Yield

2017 FCF

Yield

FCF yield (High Single Digits % or greater)2.89 2.30 2.38 11.33 9.38 9.28 15.7 17.1 14.5 0.62 0.55 9.4% 8.7% 11.5%

BIDU 270.7 47,597 43,359 4.24 3.58 2.95 17.14 14.76 11.18 11.6 28.1 20.7 NM 0.58 10.9% 4.6% 6.9%

RUBI 48.5 747 589 2.59 1.99 1.65 9.90 9.16 6.68 NA NA 14.8 NA 0.92 4.9% 4.5% 7.4%

EIGI 140.4 1,311 3,285 4.40 2.79 2.50 12.28 8.25 7.24 NM NA NA NA NA 16.9% 11.8% 17.2%

WWWW 50.9 860 1,570 2.81 2.08 1.88 10.08 9.08 7.27 NA 6.6 5.5 0.14 0.26 16.1% 14.2% 17.1%

MTCH 245.0 3,533 4,667 4.57 3.79 3.31 16.50 11.20 9.13 NA 18.9 15.4 1.10 0.67 5.0% 6.9% 8.9%

RATE 90.4 782 871 2.35 2.18 2.00 6.85 8.65 8.07 NA NA 13.9 NA 0.54 10.5% 7.0% 9.2%

MWW 88.9 230 283 0.42 0.44 0.43 2.65 3.27 3.04 NA 9.6 NA NM NA 19.5% 9.0% 13.4%

EXPE 136.3 15,450 18,716 2.81 2.10 1.83 16.76 11.39 9.14 19.9 22.2 16.9 NM 0.55 3.9% 6.5% 6.9%

BCOR 41.4 365 806 1.84 1.75 1.63 9.81 8.67 7.51 NA NA NA NA NA -3.1% 13.3% 16.1%

MEET 53.7 179 153 2.70 2.36 2.07 7.58 6.26 5.28 13.4 8.6 7.3 0.15 0.40 4.7% 12.5% 13.9%

Conclusion MEET is attractively positioned as a pure play investment opportunity levered to the shift in advertising dollars towards

mobile devices. The management team is taking positive steps to increase the user experience and relevance of MeetMe

to its 18-30 year old demographic, and increased user engagement could drive upside to numbers. MeetMe’s financial

metrics offer a rare combination of growth and value that should appeal to a broad set of investors. I want to own MEET

while the stock goes through discovery and receives more investor interest.

Disclosure

The author of this posting and related persons or entities ("Author") currently holds a long position in this security which

can currently be considered a short-term holding. Author may buy additional shares, or sell some or all of Author's

shares, at any time. Author has no obligation to inform anyone of any changes to Author's view of MEET. Please consult

your financial, legal, and/or tax advisors before making any investment decisions. While Author has tried to present facts

it believes are accurate, Author makes no representation as to the accuracy or completeness of any information

contained in this note. The reader agrees not to invest based on this note, and to perform his or her own due diligence

and research before taking a position in MEET. READER AGREES TO HOLD HARMLESS AND HEREBY WAIVES ANY CAUSES

OF ACTION AGAINST AUTHOR RELATED TO THE NOTE ABOVE. As with all investments, caveat emptor.