Match Group, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 5, 2021. Match Group operates a global portfolio of dating and social-discovery brands, including Tinder, Hinge, Match and OkCupid, in one operating segment. Unless stated otherwise, amounts below are in U.S. dollars.
Key financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $707.8m | $555.5m | $1,375.4m | $1,100.1m |
| Operating income | $209.9m | $195.6m | $399.2m | $333.0m |
| Operating margin | 30% | 35% | 29% | 30% |
| Adjusted EBITDA (non-GAAP) | $262.6m | $227.8m | $492.7m | $402.1m |
| Adjusted EBITDA margin | 37% | 41% | 36% | 37% |
| Net earnings from continuing operations | $140.0m | $141.4m | $313.9m | $298.9m |
| Net earnings (loss) attributable to Match Group shareholders | $140.9m | $74.9m | $315.1m | $(127.9)m |
| Diluted EPS from continuing operations | $0.46 | $0.54 | $1.04 | $1.15 |
| Operating cash flow from continuing operations | Not separately stated | Not separately stated | $350.8m | $275.9m |
Revenue, margins and operating trends
- Q2 revenue increased 27%; reported growth was 25% for the first half. Excluding foreign-exchange effects, growth was 23% and 21%, respectively.
- Q2 direct revenue rose 27%. Average monthly Payers increased 15% to 14.969 million and revenue per payer (RPP) increased 10% to $15.46. For the first half, Payers rose 13% and RPP rose 10%.
- Q2 regional direct-revenue growth was 25% in the Americas, 28% in Europe and 31% in APAC and Other. Europe’s reported increase included favorable currency effects; excluding FX, Europe direct revenue grew 16% in Q2.
- Management attributed growth chiefly to payer gains across brands. It said Hinge and Tinder contributed to Americas growth; Tinder was a primary driver in Europe; and Tinder, Pairs and Hyperconnect contributed in APAC and Other.
- Cost of revenue remained 27% of revenue, but rose 30% in Q2, primarily reflecting higher app-store fees, live-streaming partner costs and hosting fees. Selling and marketing rose 42% in Q2 as marketing activity increased with economies reopening; it was 18% of revenue versus 16% a year earlier.
- Q2 general and administrative expense increased 66% to $113.4m, including higher compensation and stock-based compensation, legal and professional fees, and $3.5m of Hyperconnect acquisition-related professional fees. Total Q2 stock-based compensation was $42.4m versus $22.1m.
Liquidity, cash flow and debt
- At June 30, cash and cash equivalents were $236.5m, down from $739.2m at year-end; short-term investments were $12.5m. Current assets were $634.5m and current liabilities $578.0m.
- First-half operating cash flow from continuing operations was $350.8m. Investing activities used $873.5m, including $840.9m of net cash for Hyperconnect and $32.4m of capital expenditures. Financing activities provided $23.6m. Cash declined by $502.7m during the half.
- Long-term debt was $3.893bn principal, or $3.846bn net of unamortized discounts and issuance costs, compared with $3.841bn net at year-end. No revolving-credit borrowings were outstanding; $749.8m of the $750m facility was available. The $425m term loan and senior and exchangeable notes comprise the debt.
- Total shareholders’ equity was negative $135.1m. Management identified cash, operating cash flow and facility availability as principal liquidity sources, while noting debt may constrain financing and investment flexibility.
Material changes, outlook and unusual items
- Hyperconnect acquisition: Completed June 17 for an accounting purchase price of $1.75bn net of cash acquired, funded with $840.9m net cash, 5.9 million Match Group shares and $22.6m of seller withholding taxes payable in Q3. The preliminary purchase-price allocation added $1.722bn to goodwill; final valuation remained pending.
- Comparability: Q2 2020 included the pandemic-related reduction in marketing and other spending, while Q2 2021 reflected reopening-related marketing and cost increases. The 2020 comparison also includes discontinued operations related to the IAC separation: Q2 2020 had a $34.6m discontinued-operations loss versus $0.5m of earnings in Q2 2021; the first-half comparison was a $366.6m loss versus $0.5m of earnings.
- 2020 other income included a favorable $35.0m legal settlement, partly offset by bond-redemption losses. In 2021, first-half other expense included $1.1m of foreign-currency losses. These items affect year-over-year comparisons.
- The company early adopted ASU 2020-06 on January 1, 2021, retrospectively. Adoption changed reported interest expense, debt and diluted EPS presentation; it did not affect operating cash flow.
- Outlook: No revenue or earnings guidance is provided in the supplied filing text. Management expected 2021 capital expenditures of approximately $80m–$90m, mainly for office leasehold improvements and building improvements.
- Management cited competition, user retention and monetization, marketing efficiency, app-store distribution fees, currency movements, cybersecurity and user-data protection, COVID-19 effects, acquisitions and the IAC separation among risks to results. It noted that actual results may differ materially from forward-looking statements.
Contingencies and governance
- In the Tinder optionholder litigation, plaintiffs amended their claimed damages to more than $5.6bn; trial was scheduled for November 2021, with related arbitration scheduled for February 2022. Match Group disputes the claims and says it will defend vigorously.
- The FTC consumer-practices case and related securities and derivative suits remained matters to monitor. The FTC case had been stayed; after the Supreme Court’s April 2021 decision limiting the FTC’s ability to seek equitable monetary relief under Section 13(b), the filing did not report a final resolution.
- The company also disclosed a Tinder age-tiered pricing class action, a congressional inquiry into online dating services, and an Irish data-protection inquiry into Tinder. Management stated that it was cooperating with the inquiries and that it believed the claims were without merit where stated.
- Management said disclosure controls were effective at quarter-end and that no material change to internal control over financial reporting occurred during the period. It reported no company share repurchases in Q2.
Important facts for investors to verify
- Whether Hyperconnect delivers the expected strategic and financial benefits, and the final allocation of its $1.75bn purchase price.
- Whether payer and RPP growth continues, particularly after adjusting for foreign exchange and the transition to the company’s revised operating metrics.
- Whether expense growth—especially marketing, app-store fees, G&A and stock-based compensation—continues to outpace revenue and pressure margins.
- Cash generation and liquidity after the acquisition, alongside debt service, exchangeable-note dilution or settlement exposure, and covenant restrictions.
- Developments in the Tinder optionholder litigation, FTC matter, privacy inquiry and other disclosed legal and regulatory proceedings.