Match Group, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022; filed August 5, 2022. Match Group operates a global portfolio of dating and social connection brands, including Tinder, Hinge, Match and Hyperconnect. It reports one operating segment.
Financial and operating results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $794.5 million (+12%) | $707.8 million | $1,593.1 million (+16%) | $1,375.4 million |
| Operating income (loss) | $(10.1) million | $209.9 million | $197.7 million | $399.2 million |
| Net income (loss) attributable to Match Group shareholders | $(31.9) million | $140.9 million | $148.7 million | $315.1 million |
| Diluted EPS | $(0.11) | $0.46 | $0.50 | $1.04 |
| Adjusted Operating Income (non-GAAP) | $285.7 million (+9%) | $262.6 million | $559.0 million (+13%) | $492.7 million |
Q2 adjusted operating margin was 36%, versus 37% a year earlier; GAAP operating margin was negative 1%, versus 30%. Six-month adjusted operating margin was 35%, versus 36%; GAAP operating margin was 12%, versus 29%. Adjusted Operating Income excludes stock-based compensation, depreciation, and acquisition-related amortization and impairment, among other items.
- Revenue drivers: Q2 direct revenue rose 12% to $780.2 million. Payers increased 10% to 16.4 million and revenue per payer (RPP) increased 3% to $15.86. APAC and Other direct revenue grew 32%, Europe 6%, and Americas 9%. On a constant-currency basis, reported revenue growth was 19% for Q2 and 21% for the first half.
- Profit and unusual items: A $217.4 million impairment of Hyperconnect trade name and technology intangibles, reflecting lower outlook, foreign-exchange impacts and higher discount rates, drove the Q2 GAAP operating loss. Q2 cost of revenue rose 25%, including higher app-store fees and a $5.0 million Google Play litigation-related escrow amount. Product development expense increased 66%, reflecting Hyperconnect and higher compensation and staffing.
- Cash flow: First-half operating cash flow from continuing operations was $20.0 million, down from $350.8 million. The company cited a $476.1 million decrease in accounts payable and other liabilities, largely due to the $441 million Tinder optionholder litigation settlement and payment timing. Investing cash use was $25.5 million, compared with $873.5 million in the prior-year period, which included the Hyperconnect acquisition. Financing cash use was $335.4 million, including $191.0 million of treasury-stock purchases, $101.1 million of employee tax withholding, and $94.3 million to repurchase 2022 Exchangeable Notes; $52.6 million of hedge-settlement proceeds partly offset these uses.
- Liquidity and debt: At June 30, cash and cash equivalents were $463.7 million and short-term investments $9.2 million, down from combined $827.2 million at year-end 2021. Current assets were $804.8 million and current liabilities $627.7 million. Debt principal totaled $3.934 billion; reported current and long-term debt, net of discounts and issuance costs, totaled approximately $3.891 billion. The $750 million revolving facility had $749.6 million available and no borrowings. The $425 million term loan’s rate rose to 3.19% from 1.91% at year-end.
Material changes, outlook and risks
- Revenue growth reflected Tinder and Hinge performance and the inclusion of Hyperconnect, acquired in 2021; foreign currency movements reduced reported growth. Management attributed payer gains in APAC and Other to Tinder and Hyperconnect. Cost pressures included app-store fees and increased product-development compensation.
- The company paid $441 million in June 2022 to settle the Tinder optionholder litigation and related arbitrations. It had repurchased 2.9 million shares for $215.5 million during the first half under a new 12.5 million-share authorization; 9.3 million shares remained available as of August 1.
- Management expected 2022 cash capital expenditures of $65 million to $70 million. The filing provides no specific revenue or earnings guidance. Management stated it believed operating cash flows were sufficient for future obligations, while noting debt could constrain financing and investment flexibility.
- Under its agreement with Google, Match Group committed $40 million to escrow, with scheduled payments through July 2023. The company also faces Google counterclaims seeking damages and a declaration that Google may remove its apps from the Play Store. Match Group disputes those claims.
- Other legal and regulatory matters include the FTC lawsuit concerning Match.com practices, securities and derivative litigation, a Tinder age-pricing class action appeal, and an Irish data-protection inquiry. The FTC added Match Group, LLC as a defendant in an amended complaint filed July 19, 2022. Management says it will defend the claims; outcomes remain uncertain.
- Key stated risks include competition, user monetization and acquisition, foreign exchange, third-party distribution fees, cybersecurity and user-data protection, international operations, acquisitions, and litigation. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- How much of revenue and payer growth is organic versus attributable to Hyperconnect, and how foreign-exchange effects evolve.
- Whether Hyperconnect’s outlook stabilizes and whether further impairment charges arise.
- The sustainability of adjusted operating income growth given rising app-store costs, product investment and stock-based compensation.
- Cash generation after the litigation settlement, share repurchases and debt-related payments, including the approaching October 2022 maturity of the remaining $58.9 million of 2022 Exchangeable Notes.
- Developments in the FTC and Google proceedings, the $40 million escrow commitment, and other contingencies; the filing does not establish final outcomes or total potential exposure for all matters.