A look at Tinder's latest feature, which prioritizes your best photos. Image source: Tinder.
Match Group (MTCH +0.00%), the world's biggest online dating company, is set to report third-quarter earnings after the market closes on Tuesday, November 1.
The parent of popular match-making services like Tinder, Match.com, and OkCupid has seen its stock jump 22% over the last three months, reaching an all-time high. While there has not been much concrete news on the stock since its last earnings report, optimism about new paid dating app customers, both young and old, seemed to be one of the factors buoying it. A partnership announced with Spotify in September also seemed to give the stock a boost, as it rocketed 10% higher in two days.
With the Q3 earnings report on tap in just a week, let's take a look at what investors should expect.
The analyst expectations
| Category | Q3 2016 Estimates | Q3 2015 Actuals | YOY Change |
| Revenue | $318 million | $269 million | 18.2% |
| EPS | $0.19 | N/A | - |
| Operating Income | $107.6 million | $58.3 million | 84% |
Source: Yahoo! Finance and S-1 filing.
Since Match Group's third quarter last year took place before the company went public, a consistent earnings per share comparison isn't available. Nevertheless, the massive expected growth in operating income on an 18% top-line increase shows the power of Match Group's subscription model. Each incremental subscriber should expand the company's margins and further allow it to develop scale and enhance its brand, adding network effects. For each incremental user that its services gain, it makes the service more desirable for future users. Analysts expect revenue growth to slow next year as the company laps last year's acquisition of PlentyofFish, but organic growth should remain solid, and many expect it to make more acquisitions.
Third-quarter moves
Match Group's most important service, the popular location-based dating app Tinder, was busy enhancing its platform during the last quarter.
In July, it launched Tinder Social, a way to use Tinder to look for other groups to go out with rather than just meet individuals to date.
In September, the service teamed up with Spotify, the leading music streaming service, to make Spotify playlists available on Tinder profiles and add features like an anthem, or display music clips on your profile. The partnership adds a new sensory experience to Tinder, and allows users to use musical tastes to help choose a match.
Soon after that, the company made several other moves. It introduced Tinder Stacks, a Tinder-like technique for decision-making using the company's swiping technology. It announced an investment in Hey! Vina, a fast-growing social-networking app for women to make connections professionally or socially with other women.
Later that week, Tinder added a new paid feature, Tinder Boost, which allows users to get to the top of the queue for 30 minutes, multiplying the number of profile views by as much as 10, increasing the chances of a match. Of all the new features, Tinder has introduced recently, Boost seems the most likely to have an immediate impact on the bottom line.
Finally, the company launched a new technology called Smart Photos, which tests your photos to determine which one gets the most right-swipes and reorders your photos so the best ones are first.
The expectations game
The market reaction generally corresponds to the company's performance against Wall Street's expectations. Match Group has beat earnings estimates all three times in its history as a publicly traded company, and I'd expect that pattern to continue in the Q3 report. Management did not provide guidance, but the online dating company's momentum, margin expansion, and recent efforts to make Tinder more appealing should keep it on track for more growth.
Keep an eye on paid member growth, operating margins, and performance at Tinder, as those factors seem to be the most key in determining the company's future.
