Match Group, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 6, 2022. Match Group operates a global portfolio of dating and social connection brands, including Tinder, Hinge and Match, in one operating segment.
Financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $798.6 million | $667.6 million | +20% |
| Operating income | $207.8 million | $189.3 million | +10% |
| Operating margin | 26% | 28% | Down 2 percentage points |
| Adjusted operating income | $273.3 million | $230.0 million | +19%; margin 34% in both periods |
| Net earnings attributable to Match Group | $180.5 million | $174.3 million | +4% |
| Diluted earnings per share | $0.60 | $0.57 | +5% |
| Cash from operating activities | $232.5 million | $102.3 million | +$130.2 million |
Direct revenue was $783.8 million, up 20%; indirect revenue, principally advertising, was $14.8 million. Average payers rose 13% to 16.3 million and revenue per payer increased 6% to $16.00. Revenue growth excluding foreign-exchange effects was 24%.
Cost of revenue increased 32% to $236.2 million, or 30% of revenue versus 27% a year earlier. Selling and marketing rose 5%; general and administrative expense rose 15%; product development rose 42%. Increased amortization also reflected Hyperconnect acquisition-related intangible assets.
Financial position and liquidity
- At March 31, cash and cash equivalents were $912.4 million and short-term investments were $8.7 million, compared with $815.4 million and $11.8 million, respectively, at year-end.
- Debt principal totaled $3.960 billion, including $84.9 million of 2022 exchangeable notes classified as current. Debt, net of discounts and issuance costs, was $3.916 billion. Cash and short-term investments less debt principal imply approximate net debt of $3.039 billion.
- The $750 million revolving credit facility had no borrowings and $749.6 million available. The $425 million term loan bore interest at 2.22% at quarter-end.
- Operating cash flow was $232.5 million; investing cash use was $14.7 million, mainly capital expenditures; financing cash use was $116.6 million. Financing outflows included $97.0 million of employee tax withholding on net-settled awards and $47.7 million to settle exchangeable notes, partly offset by $32.1 million from note hedges.
- Shareholders’ equity was negative $121.8 million. The company reported total current assets of $1.234 billion and current liabilities of $1.074 billion.
Material changes and management commentary
- Americas direct revenue grew 16%, Europe 14%, and APAC and Other 38%. Payer growth, Tinder and Hinge performance, and the 2021 Hyperconnect acquisition contributed to growth; currency movements reduced reported international results.
- Management attributed rising cost of revenue partly to Hyperconnect and higher app-store fees as more revenue came through mobile app stores. Excluding Hyperconnect, selling and marketing expense declined due to lower marketing spend at multiple brands.
- Management expects 2022 cash capital expenditures of $65 million to $75 million. It stated it expects operating cash flows to meet future obligations and plans to pay $441 million in 2022 to settle the Tinder optionholder litigation and related arbitrations.
- On May 2, 2022, after quarter-end, the board authorized repurchases of up to 12.5 million shares. The program may be suspended or discontinued; no company shares were repurchased during Q1.
- No formal revenue or earnings guidance is provided in the supplied filing text. Management cautions that interim results may not indicate full-year results.
Risks, contingencies and unusual items
- The $441 million Tinder optionholder settlement is a material expected 2022 cash payment. The filing says the settlement resolves claims in trial and arbitration.
- The FTC lawsuit against Match.com continued in part: the court dismissed certain claims and monetary-damages requests, but denied dismissal of other claims. The company says it will defend the remaining claims.
- Other disclosed litigation includes a securities class action, shareholder derivative claims, a Tinder pricing case, and regulatory inquiries concerning data privacy. Management says it believes the claims are without merit; unfavorable outcomes could nevertheless affect the company.
- Key stated business risks include competition, user retention and acquisition, reliance on third-party app stores and related fees, foreign-exchange movements, cybersecurity and user-data protection, international operations, and execution of acquisitions.
- Interest expense rose 10% to $34.9 million, primarily reflecting the 2021 issuance of 3.625% senior notes. Foreign-currency translation reduced comprehensive income, with a $45.8 million quarterly translation loss.
Investor verification priorities
- Confirm the timing, cash funding and final terms of the $441 million Tinder litigation settlement.
- Track payer and revenue-per-payer trends by region, especially the contribution from Tinder, Hinge and Hyperconnect, and distinguish reported growth from foreign-exchange-adjusted growth.
- Monitor app-store fees and other cost growth against revenue, given the decline in GAAP operating margin despite higher adjusted operating income.
- Review debt maturities, interest-rate exposure, covenant limits and available revolving-credit capacity, including settlement of the 2022 exchangeable notes.
- Assess progress and potential costs in the remaining FTC and other legal or regulatory matters, and any use of the new share-repurchase authorization.