There's been something of a cloud hanging over Match Group (NASDAQ:MTCH) over the past year, ever since social media giant Facebook announced plans to get into the matchmaking business. Investors feared the worst, bidding the shares down 25% in the wake of the announcement.

In the ensuing year, however, the worrisome competition hasn't materialized, and quarter after quarter Tinder has continued to grow like wildfire. Match Group's first-quarter results had investors swiping right, driving the shares up about 8% to all-time highs in after-hours trading.

Flames forming a heart.

Image source: Getty Images.

Feel the love

Match reported revenue of $464.6 million, up 14% year over year, or 18% excluding the effect of exchange rates. This performance exceeded analysts' consensus estimates, which were calling for revenue of about $1 million less. Profit was even more robust, with diluted earnings per share of $0.42, soaring past the $0.32 analysts expected. 

The company's non-financial metrics showed the strength of the underlying business. Average subscribers grew 16% year over year to 8.613 million. The average revenue per user (ARPU) was flat, at $0.58, but was negatively affected by exchange rates. Excluding those, ARPU would have been $0.60. The growth was broad-based, as subscriber numbers increased 10% year over year in North America and 23% in international markets.

Plenty of Tinder to fuel the fire

Tinder continues to be the biggest contributor to investors' love affair with Match Group. Members increased by 384,000 during the quarter, as the company added a total 1.26 million new members during the past year. This drove Tinder's direct revenue up 38% year over year. Optimizations continued to drive both new user conversion and strong retention, helping drive the 36% subscriber growth compared with the prior-year quarter.

Both new and existing customers spent more as well, with ARPU increasing by 2%, driven by continued adoption of Tinder Gold, the premium version of the app.

Strong word-of-mouth is helping Match reduce its marketing spend, which has declined 10% as a percent of revenue over the past two years.

The path ahead

Match is taking a number of steps to position itself for future growth. One of the biggest potential opportunities is in the Asia-Pacific region. The area outside North America and Europe represents more than 400 million singles, according to the company, and two-thirds of that market has never tried a dating app. Match says this group is vastly underpenetrated.

The company announced in April that it had realigned its management to focus on the growth opportunity, by ensuring that "we have stellar talent on the ground that understands the cultural, regulatory, and market dynamics at play," said Match Group CEO Mandy Ginsberg in a press release last month. 

In addition, Match is working to localize Tinder in its various markets to encourage additional market penetration, while introducing Tinder Lite, a more compact version of the app.

Match is also working to expand its relationship-focused app Hinge, an acquisition the company completed early this year. The app has been described at the "anti-Tinder," as it aims for more meaningful, long-term relationships, rather than the more casual focus of Tinder. The company is looking to expand to users who have never used a dating app and believes that Hinge will attract a different type of user.

The company recently redesigned its flagship Match app and the initial rollout is producing promising results. The improvements are generating higher customer satisfaction scores and greater product engagement, with a 20% increase in "likes" and a 10% increase in messages sent.

What the future could hold

Match is forecasting second-quarter revenue in a range of $480 million to $490 million, which would represent growth of about 15% at the midpoint of its guidance. The company is also expecting adjusted EBITDA of between $190 million and $195 million.

To put this into the context of Wall Street sentiment, and while investors don't want to be lured into its short-term mindset, analysts' consensus estimates are calling for revenue of about $485 million -- at the midpoint of management's range -- and earnings per share of $0.40.

Seems that investors' love affair with Match will continue.