U.S. Markets closed

Match Group (MTCH) Beats on Q2 Earnings & Revenues, Stock Up

Zacks Equity Research

Match Group MTCH delivered second-quarter 2019 adjusted earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 45 cents and improved 19.5% year over year.

Revenues of $497.9 million rose 18% year over year and beat the Zacks Consensus Estimate of $487 million. Excluding the effect of Foreign Exchange, the top line was up 22% year over year. The increase was primarily driven by an improvement of 18% and 2% in average subscriber base and Average Revenue per Subscriber (ARPU), respectively.

Notably, shares were up 3.5%, yesterday, primarily due to better-than-expected second quarter results and encouraging third-quarter guidance. Further, robust Tinder average subscriber growth (up 36% year over year) positively impacted share price. Moreover, Match Group’s stock has gained 62.1% in a year, against the industry's decline of 24.3%.

Quarter Details

Average subscriber base and ARPU were 9.1 million and 58 cents, respectively, at the end of the reported quarter. North America subscriber base increased 9%, while International advanced 27%. Growth in ARPU was driven primarily by strength in both North America (up 4% year over year) and International (up 1%).

In the second quarter, Tinder average subscribers increased 1.5 million year over year and came in at 5.2 million. Sequentially, the same increased 503,000 ARPU, reflecting an improvement of 2% year over year. This primarily came on the back of higher number of Gold subscribers.

Direct revenues from Tinder grew 46% year over year, primarily backed by 39% increase from average subscriber growth and 6% year over increase from ARPU.

Adjusted EBITDA was $203.5 million, up 16% year over year. Adjusted EBITDA margins came in at 41%, down 100 bps year over year. Margins were primarily impacted by higher cost of revenue, partially offset by lower selling and marketing expense as a percentage of revenues.

Total cost and expenses increased 20% year over year to $325.1 million. Selling and marketing (S&M) were up 5.1% on a year-over-year basis. While General and administrative expense improved 47.6% on a year-over-year basis, product development expenses remained flat.

Operating income advanced 15% from the year-ago quarter to $172.9 million. However, operating margin contracted 100 bps to 35%.

Balance Sheet

Match Group exited the second quarter with cash and cash equivalent balance of $266.4 million, up from $224.9 million reported in the previous quarter. The company had long-term debt of $1.6 billion flat from the previous quarter.

Cash flow from operations was $233 million during six months ended Jun 30, 2019. Free cash flow came in at almost $212 million.

During the reported quarter, the company repurchased 0.8 million shares at an average price of $66.79 per share. The company had 1.4 million shares remaining under the previously announced share repurchase program.

Guidance

Match Group anticipates third-quarter 2019 revenues between $535 million and $545 million. Tinder remains the key catalyst. Unfavorable foreign exchange is expected to hurt the top line growth. The Zacks Consensus Estimate is pegged at $519.7 million.

Adjusted EBITDA is anticipated to be in the range of $200 million to $205 million.

For fiscal 20209, Match Group expects 1.6 million average subscriber additions at Tinder.

Zacks Rank and Stocks to Consider

Match Group currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Rosetta Stone RST, Fortinet, Inc. FTNT and Nikon Corp. NINOY, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rosetta, Fortinet and Nikon have a long-term earnings growth rate of 12.5%, 15% and 1%, respectively.

This Could Be the Fastest Way to Grow Wealth in 2019

Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.

These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.

Click here to see these breakthrough stocks now >>

Click to get this free report Fortinet, Inc. (FTNT) : Free Stock Analysis Report Nikon Corp. (NINOY) : Free Stock Analysis Report Match Group, Inc. (MTCH) : Free Stock Analysis Report Rosetta Stone (RST) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research