Investors will be keen to see how Tinder, the fastest-growing dating app on the planet, is doing when Match Group, Inc. (MTCH +0.00%) reports earnings on Aug. 1. Match Group, the parent company of Tinder, is home to over 45 dating websites and mobile apps. Each service is tailored to certain demographics and gives users the choice of a free ad-supported version of the product or an upgraded monthly subscription service without ads and more features.
Guidance and estimates
Match Group's management stated in the first quarter's earnings report that it expects total revenue for the company to be between $303 million and $313 million for the second quarter, a 12% year-over-year increase at the midpoint of guidance and up 3% from last quarter.
Wall Street analysts have a consensus estimate of $0.19 per share for Q2 earnings.
| Metric | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Q1 2017 | Q2 2017 Forecast |
|---|---|---|---|---|---|---|
| Revenue | $260 million | $275 million | $288 million | $295 million | $299 million | $303 million to $313 million (company estimate) |
| EPS | $0.04 | $0.13 | $0.21 | $0.27 | $0.08 | $0.19 (analyst estimate) |
Data sources: Historical numbers from Google Finance; Q2 revenue forecast from Match Group. Analyst consensus estimate from The Wall Street Journal.
Why Tinder is so important
Most of the revenue Match Group produces is from paying subscribers to its websites and mobile apps. The company has a metric it reports each quarter called average paid member count (PMC) to better help investors understand the company. The average PMC for the quarter is the total of all paid members at the end of each day added together and then divided by the number of days in the quarter.
At the end of last quarter, the company reported average PMC of 5.911 million, up 16% year over year. It also reported that Tinder had 1.858 million for its average PMC, up more than 100% from the previous year and accounting for more than 30% of the total PMC in the last reported quarter. Tinder's average PMC increased by 943,000 from Q1 2016 to Q1 2017 while all of Match Group was up by 828,000. In short, Tinder is fueling the company's growth.
| Brand of Dating Product | PMC Q1 2016 | PMC Q2, 2016 | PMC Q3, 2016 | PMC Q4, 2016 | PMC Q1, 2017 |
|---|---|---|---|---|---|
| Tinder | 0.915 million | 1.121 million | 1.386 million | 1.631 million | 1.858 million |
| All Match Group products including Tinder | 5.083 million | 5.301 million | 5.546 million | 5.697 million | 5.911 million |
Data source: Match Group.
Image source: Getty Images.
Piper Jaffray analyst Samuel Kemp is bullish when it comes to Tinder. He recently published a note (reported by Barron's) that included raising his estimate for Tinder paid member additions for the quarter to 340,000, double his previous estimate.
Average revenue per paying user
Match's average revenue per paying user is another metric worth watching. The number, equal to the average daily spend of paying members, was at $0.53 at the end of the last quarter. This direct revenue from subscribers accounted for over 96% of Match Group's first-quarter revenue. The rest comes from advertising.
New product update
There are a number of new features and products Match Group plans to introduce in the second half of the year that could be discussed in the quarterly report.
Management discussed Tinder Online -- which lets users to access Tinder on the web without using the mobile app -- as being in the test phase at the end of Q1. In addition to allowing for greater access, Tinder Online may also move a portion of the payments out of the app store, where Match pays a fee, and directly to Match.
CEO Gregg Blatt discussed the use of artificial intelligence as a means to create matches for users on Tinder in the Q1 conference call. He also said: "We are adding new revenue features and a host of other cool stuff I can't really talk about yet. But I said last time Tinder will look and feel different to our users by the end of this year, and we are well on track to bring that around."
It sounds as if there may be some surprises in store. Investors will hope to hear more when Match Group reports earnings after the bell on Aug. 1 and holds its quarterly conference call on Aug. 2.
