Why Is Match Group (MTCH) Down 5.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Match Group (MTCH). Shares have lost about 5.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Match Group due for a breakout? 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 drivers.
Match Group Q1 Earnings Up Y/Y, Revenues Top Estimates
Match Group reported first-quarter 2022 earnings of 60 cents per share compared with earnings of 57 cents reported in the year-ago quarter.
The Zacks Consensus Estimate for first-quarter 2022 earnings was pegged at 66 cents per share.
Revenues of $798.6 million increased 20% year over year and beat the Zacks Consensus Estimate by 0.5%.
Excluding the forex, the top line increased 24% year over year to $824.8 million. This strong growth was driven by continued strong growth in both payers and revenue per payer (RPP) despite the negative impacts from Russia’s invasion of Ukraine on the company’s European business, continued COVID-19 cases and restrictions, and negative foreign exchange effects on revenues.
Quarter in Detail
In the first quarter, the number of total payers increased 13% to 16.3 million. The number of total payers from the Americas, Europe, and the Asia Pacific (APAC) and Other increased 7%, 11% and 34%, respectively, on a year-over-year basis.
Growth in Payers was driven by Tinder across all geographies, and by the acquisition of Hyperconnect in APAC and Other. Hinge also contributed to the growth in Payers in Americas with decreases at certain long-standing brands in the Americas.
Total RPP increased 6% year over year to $16 million. Region-wise, RPP from the Americas, Europe, and APAC and Other increased 8%, 2% and 3%, respectively.
Americas RPP increased primarily due to increases in subscriptions and à la carte purchases at Tinder and Hinge. Europe RPP and APAC and Other RPP increased primarily due to the acquisition of Hyperconnect with additional contributions to Europe RPP from Tinder.
Direct revenues from the Americas were up 16% to $399.9 million. Direct revenues from Europe increased 14% to $215.3 million, while APAC and Other reported a 38% surge in direct revenues to $168.5 million.
Direct revenues from Tinder jumped 18% year over year. The total number of payers for Tinder rose 17% year over year to 10.7 million, driven by continued product momentum and by a slower-than-expected rollout of an initiative to eliminate age-based discounts. Tinder RPP increased 1% in the first quarter.
Tinder launched a co-marketing campaign with Netflix for the dating reality TV show Love is Blind: Japan, which resulted in a new user spike during the campaign period and strong engagement in the app.
Direct revenues from non-Tinder brands collectively increased 22% on a year-over-year basis. Non-Tinder brands witnessed 7% growth in the total number of payers to 5.6 million as well as a 14% increase in RPP.
In the first quarter, Hinge continued to resonate with users with its release of new Prompts specifically for the LGBTQ+ community, a dating app first. Hinge is on track for launch in its first non-English speaking market, Germany, in the second quarter, with a marketing push to follow shortly after.
Hyperconnect continues to build momentum. Azar has seen recent success with the addition of live streaming video into the 1:1 video chat app. Hakuna undertook partnerships with popular brands including Hello Kitty and Tokyo Avengers, which drove revenues and new user growth after their launch in Japan.
Single Town, Hyperconnect’s metaverse-based experience for dating and social discovery, is adding more dating features and continues to focus on scaling users. The launch of 1:1 chat and topic chat lists to help start conversations, as well as in-app events such as the “Single Town Charm Show,” have all been attracting a lot of attention.
The integration of Hyperconnect’s technology into the company’s other brands continues to progress well, with Match, Meetic, Pairs, and POF all successfully leveraging tech features from Hyperconnect into their products.
Operating Details
Total operating costs and expenses increased 24% year over year to $590.8 million in the first quarter. Excluding the acquisition of Hyperconnect, the cost of revenues increased 17% year over year primarily due to an increase in in-app purchase fees.
The upside can be attributed to the increased cost of revenues, selling and marketing expenses, product development, and general and administrative expenses.
Adjusted operating income was $273 million, an increase of 19% from the prior-year quarter, representing an adjusted operating income margin of 34%.
Balance Sheet
As of Mar 31, 2022, Match Group had a cash and cash equivalent balance of $912 million compared with $815.38 million as of Dec 31.
As of Mar 31, 2022, Match Group had long-term debt of $4 billion compared with $3.829 billion as of Dec 31, 2021.
As of Mar 31, 2022, Match Group reported $1.2 billion of exchangeable senior notes and $750 million under its revolving credit facility. The amount was undrawn as of Dec 31.
Guidance
Match Group expects second-quarter 2022 revenues to be $800-$810 million, indicating 13-14% growth from the prior-year quarter’s reported number. The Zacks Consensus Estimate is currently pegged at $833.9 million.
Adjusted operating income for the second quarter is anticipated to be $285-$290 million.
For 2022, Match Group expects revenues to grow 15-20% from the year-earlier quarter’s reported figure.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.28% due to these changes.
VGM Scores
Currently, Match Group has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Match Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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