Match Group, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 4, 2022. Match Group operates a global portfolio of dating and social brands, including Tinder, Hinge, Match and OkCupid. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $809.5 | $801.8 | $2,402.7 | $2,177.2 |
| Operating income | $210.6 | $220.6 | $408.4 | $619.8 |
| Operating margin | 26% | 28% | 17% | 28% |
| Net earnings attributable to Match Group shareholders | $128.7 | $131.2 | $277.4 | $446.4 |
| Diluted EPS | $0.44 | $0.43 | $0.94 | $1.46 |
| Adjusted Operating Income (non-GAAP) | $284.2 | $285.3 | $843.2 | $778.0 |
- Q3 revenue increased 1% as reported, or 10% excluding foreign-exchange effects. Direct revenue rose 1% as reported; indirect revenue fell 11%. Average monthly payers increased 2% to 16.5 million, while revenue per payer was essentially flat at $16.02.
- Nine-month revenue increased 10% as reported, or 17% excluding foreign-exchange effects. Nine-month Adjusted Operating Income increased 8%, although GAAP operating income declined 34%.
- Nine-month cash from continuing operations was $300.5 million, down from $666.9 million. Investing used $61.4 million; financing used $646.3 million. Cash, cash equivalents and restricted cash fell $424.8 million to $390.8 million. The operating cash-flow decline included the timing and payment of legal settlement-related liabilities.
- At September 30, cash and cash equivalents were $390.6 million, short-term investments were $7.7 million, and net long-term debt was $3.834 billion. Total debt principal was $3.919 billion. The $750 million revolving facility had $749.6 million available and no borrowings; the $425 million term loan carried a 4.69% rate.
- Current assets were $705.5 million and current liabilities $601.7 million. Shareholders’ equity was negative $698.5 million, including $482.0 million of treasury stock and substantial accumulated foreign-currency translation losses.
Material changes and unusual items
- Q3 operating income declined 5%, while Adjusted Operating Income was approximately flat. Higher in-app purchase and hosting costs and increased product-development expense were partly offset by lower marketing spend and revenue growth.
- Nine-month results included a $217.4 million impairment charge on Hyperconnect trade-name and technology intangibles. Management cited lower expected revenues and cash flows, foreign-exchange effects and higher discount rates. This contributed to the year-over-year decline in GAAP operating income.
- Match Group paid $441 million in June 2022 to settle the Tinder optionholder litigation and related arbitrations. The filing reports the payment as a major factor in the decline in accounts payable and other liabilities.
- The company repurchased 7.2 million shares for $482.0 million during the first nine months under a 12.5 million-share authorization; 5.3 million shares remained available as of October 31, 2022. The Inflation Reduction Act’s 1% excise tax on net stock repurchases takes effect after December 31, 2022.
- The remaining $44.3 million principal of the 2022 Exchangeable Notes was settled with cash in early October, after quarter-end.
Outlook, risks and contingencies
- No specific revenue or earnings guidance is provided in this filing. Management expected 2022 cash capital expenditures of $57 million to $62 million and stated it believed operating cash flows were sufficient to meet future obligations.
- The company agreed to place $40 million into escrow under its agreement with Google concerning Google Play billing; $8.1 million had been paid into escrow by September 30, 2022, with scheduled payments through July 2023. Match Group also reported ongoing antitrust litigation with Google and Google counterclaims, which the court declined to dismiss.
- Other material legal matters include the FTC lawsuit concerning Match.com practices and an FTC investigation related to OkCupid data-privacy representations. The filing says the company intends to defend these matters; outcomes remain uncertain. The Tinder optionholder claims were settled, and plaintiffs appealed dismissal of the separation-related derivative and stockholder action.
- Management identifies competition, user growth and retention, marketing effectiveness, foreign-exchange fluctuations, third-party distribution and payment fees, cybersecurity and privacy, acquisitions, and litigation as risks. The stronger U.S. dollar weighed on international reported revenue and payer monetization.
- Interest expense rose 16% in Q3, reflecting higher LIBOR on the term loan and the 2021 senior-note issuance. The filing also notes that indebtedness may constrain financing and investment flexibility.
Important facts for investors to verify
- Whether user and payer trends at Tinder and Hinge can sustain revenue growth, particularly given declines at some other brands and weakness in reported APAC revenue per payer.
- Underlying operating performance apart from the Hyperconnect impairment, and the assumptions supporting Hyperconnect’s future cash-flow and asset valuations.
- Cash generation and liquidity after the $441 million settlement, share repurchases, debt service and Google escrow payments.
- Debt maturities, interest-rate exposure and compliance with credit-agreement covenants; the $44.3 million 2022 notes settlement occurred after quarter-end.
- Developments and potential financial consequences in the Google, FTC, privacy and other legal matters, as well as the effect of currency movements and stock-repurchase excise tax.