It has been about a month since the last earnings report for Match Group (MTCH). Shares have added about 7.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Match Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Match Group Q1 Earnings and Revenues Improve Y/Y
Match Group reported first-quarter 2020 adjusted earnings of 55 cents per share, which increased 31% from year-ago quarter’s figure.
Revenues of $544.6 million increased 17% year over year on robust momentum at Tinder as well as solid performances of Hinge and Pairs. Excluding the effect of foreign exchange, the top line rose 19% year over year. The upside was primarily driven by rise in average subscriber base and average revenue per user (ARPU).
Notably, activity across all brands has increased since the COVID-19 outbreak, especially among users below the age of 30. However, rate of new signups and propensity to pay has declined since the outbreak.
Average subscriber base increased 15% to 9.9 million and ARPU increased 1.7% to 59 cents at the end of the reported quarter.
North America subscriber base increased 5% to 4.6 million, while International advanced 26% to 5.3 million. Increase in subscriber base in North American and internationally was driven by the solid performance of Tinder as well as Hinge and Pairs.
North America ARPU increased 5% to 63 cents, while International ARPU dropped 1% to 55 cents. North America ARPU was driven by increased purchases of à la carte features at Tinder, while International ARPU was affected by strength of the U.S. dollar compared with Euro and other currencies.
Moreover, robust Tinder average subscriber increased 28% year over year came to 6 million, which contributed to the quarterly results.
Direct revenues from Tinder increased 31% year over year, while direct Tinder ARPU growth was 2% during the quarter.
Adjusted EBITDA was $171.5 million, up 11% year over year. Adjusted EBITDA margin contracted 200 basis points (bps) year over year to 31%.
Total cost and expenses, as a percentage of revenues, expanded 100 basis points (bps) on a year-over-year basis and came in at 75% in the reported quarter. This was driven by an increase in general and administrative expense owing to legal expenses of $10.7 million and costs of $3.5 million related to the separation from InterActiveCorp (IAC).
Operating income advanced 13% from the year-ago quarter’s tally to $134.7 million. Operating margin contracted 100 bps to 25%.
Match Group had cash and cash equivalent balance of $791.3 million as of Mar 31, 2020 up from $465.7 million as of Dec 31, 2019. The company had long-term debt of $2.1 billion as of Mar 31 compared with $1.6 billion as of Dec 31, 2019.
As of Mar 31, the company generated operating cash flow of $74.7 million compared with $658 million in the previous quarter. Free cash flow came in at $64.9 million compared with $620 million in the previous quarter.
The company stated that cash flows were negatively impacted by the timing of a cash receipt, which the company received in the previous quarter instead of first-quarter 2020.
During the reported quarter, the company repurchased 1.3 million shares at an average price of $64.57 per share. The company has 8.6 million shares remaining under the previously announced share repurchase program.
Due to COVID-19 related uncertainties prevailing in the market, the company hasn’t provided any concrete figures for revenue guidance.
Notably, Match Group expects second-quarter revenues to grow year over year, but decline sequentially on a percentage basis by low single digits. The company had generated revenues of $498 million in second-quarter 2019.
Moreover, strength in the U.S. dollar compared with other international currencies is expected to negatively impact revenues by more than $10 million or 2% in the second quarter.
Adjusted EBITDA is anticipated to be flat year-over-year after including about $7 million of expected cost pertaining to its separation with InterActiveCorp/IAC. Adjusted EBITDA in second-quarter 2019 was reported at $203 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 8.97% due to these changes.
At this time, Match Group has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Match Group has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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