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Earnings Coverage: Match Group Inc (NASDAQ:MTCH) Dips on Poor Guidance

Match Group Inc (NASDAQ:MTCH) dove sharply lower after the company reported strong third quarter results but issued downside guidance for the fourth quarter on Tuesday afternoon. Third quarter revenue grew 29% to $444 mln vs. $430-440 mln guidance. Average Subscribers increased 23% to 8.1 mln while average revenue per user grew 6% to $0.57.

Breaking things down a bit further, strong results continue to be driven by Tinder, which added 344K paid subscribers during the quarter. Match had said subscriber additions would be similar to the second quarter, when the company added 299K subs. Tinder paid subs increased 61% year/year to 4.11 mln. As a result, third quarter EBITDA grew 38% to $165 mln versus $160-165 mln guidance. The company has now exceeded EBITDA guidance seven quarters in a row.

Match Group Inc (NASDAQ:MTCH) trumpets itself as a company that provides dating products. It operates a portfolio of brands, including Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, and Pairs. Match Group, Inc. offers its dating products through its Websites and applications in 42 languages approximately in 190 countries. The company was incorporated in 2009 and is headquartered in Dallas, Texas. Match Group, Inc. is a subsidiary of IAC/InterActiveCorp.

Despite guiding fiscal 2018 results toward the high end of its prior range, guidance for the fourth quarter was just below estimates. The company cited foreign exchange, indirect (advertising) softness due to GDPR (European data privacy regulation), and lower impressions on the top-line. Meanwhile, the company forecasted marketing spend up 20% due to major marketing campaigns at Tinder, Pairs, and the recently acquired Hinge, as well as higher litigation expenses.

Match also announced a $2/share special cash dividend, funded by cash on hand. Free Cash Flow increased 94% to $404 mln through the first nine months of the year. Meanwhile, the company will continue to look for compelling acquisition targets in the online dating space.

Management hosted a call beginning at 8:30 on Wednesday morning, providing additional color on its outlook for Tinder subscribers in coming quarters and providing commentary on next year’s top-line growth.


Here are our notes from the call:

  • Soft sub outlook in Q4 (below historical 200-250K sequential Tinder sub adds) reflects expectation for increased churn lapping huge adds from Gold uptake last year
  • Expects 200-250K adds per quarter next year (which would put subs over 5 million by the end of next year)
  • Picks feature resonates, increases Gold sub (ARPU) mix but not the same big effect as Gold
  • Not seeing any impact in Colombia where Facebook has launched dating and Tinder has number one market share. Facebook relationship is dynamic given advertising relationship
  • Hinge quarterly app downloads up 5x Y/Y to 750K in Q3; gaining traction in large cities
  • Aggregate stability at other brands
  • Guided FY19 top line growth in the mid-teens vs. +16.6% consensus
  • Margins came in higher than expected in 2018, will probably improve at a slower rate next year but marketing expense will grow slower than revenue at Tinder
  • Confident in 40% margin long-term, will give more 2019 guidance next quarter
  • Capital allocation priorities: Organic investment, M&A, Return of capital and Debt paydown; Decided to build cash instead of stretching for M&A, return to shareholders instead of sit on it

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