Match Is a Raging Inferno, and Tinder Is Fueling the Flames

The purveyor of dating apps soared after it crushed top- and bottom-line expectations, and raised its full-year forecast.

Danny Vena
Danny Vena
Aug 7, 2019 at 9:38AM
Technology and Telecom

Match Group (NASDAQ:MTCH) really has been on fire over the past year, with its stock up 95% over the preceding 12 months -- and up more than 75% in 2019 alone -- heading into the company's second-quarter earnings report late Tuesday.

Investors hoped Match Group could keep the home fires burning, but the company did even better, soaring as much as 20% in after-hours trading to a new all-time high, on news that its flagship Tinder app maintained its potent subscriber growth, driving better-than-expected results.

The shape of a heart formed by flames.

Image source: Getty Images.

Growing at a fever pitch

Match Group reported revenue of $497.97 million, up 18% year over year -- or 22% in constant currency -- soaring past management's forecasted range of $480 million to $490 million, while easily surpassing analysts' consensus estimates of $489 million. 

This continued down to the bottom line, as the company generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $204 million, also easily exceeding management's guidance, which topped out at $195 million. This resulted in diluted earnings per share (EPS) of $0.43, down 4% year over year, but easily surpassing analysts' expectations of $0.40.

Average subscribers jumped to 9.1 million, up 18% year over year. Another factor contributing to the company's growth was the expanding average revenue per user (ARPU), which climbed to $0.58, up 2% year over year, or $0.60 on a constant currency basis, up 5%.

Swiping left on Tinder

Investors were really feeling the love for Match Group due to Tinder's unexpectedly robust growth. Average subscribers increased by 503,000 during the quarter, as the company added a total 1.56 million new members during the past year. This drove Tinder's direct revenue up 46% year over year, an acceleration from 38% in the first quarter.

Match Group continued its efforts to optimize the app, thereby driving more meaningful user interactions. The company added an improved recommendations engine, enhanced both its paywall and pricing strategy, and improved the Gold level merchandising. These efforts helped drive 39% subscriber growth at Tinder compared with the prior-year quarter.

Both new and existing customers spent more as well, with ARPU increasing by 6%, driven by continued adoption of Tinder Gold, the premium version of the app. Those results would have been "meaningfully higher" if not for headwinds related to foreign currency exchange rates.

The company is also working to present Tinder to a broader market, introducing Tinder Lite in Southeast Asia and South America. The app is 25% smaller than the full version, making it less taxing on smartphone batteries, and consumes less data.

Burning the candle at both ends

On the strength of the company's quarterly results, Match Group raised its full-year forecast, noting in its investor presentation that it's expecting "meaningful acceleration" in both revenue and EBITDA growth in the second half of the year compared to the first half. 

The company now expects year-over-year revenue growth in the high teens on a percentage basis, compared to the mid-teens it previously forecast. Match Group is also expecting EBITDA in a range of $770 million to $800 million, up from its previous estimate of $740 million to $790 million.

Tinder will play an important part of those results, as the company raised its forecast to approximately 1.6 million average subscriber additions, up from just 1 million previously.

For the third quarter, Match Group is guiding for revenue in a range of $535 million to $545 million and adjusted EBITDA of between $200 million and $205 million. The company is also anticipating about 400,000 sequential average subscriber additions at Tinder.

As long as Match Group continues to fuel Tinder's growth, investors aren't likely to get burned.