What does "lady friend" mean?

I was talking with the guy I'm interested in and he started talking about his "lady friend". I thought he was single and interested. Does lady friend mean a girl whos a friend or girlfriend. He was texting her and he would read me what she said and what he was saying. At one point she said (referring to movies) " you have bad taste" and he said he texted back "must have I'm friends with you". Does that mean he's just friends? The whole thing was kinda confusing.
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Well he showed me his phone a couple times so I know most of it is true.
What does "lady friend" mean?
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