Business context and reporting period
Important scope note: The supplied filing is IAC/InterActiveCorp’s consolidated Form 10-Q for the quarter ended March 31, 2019, not a standalone Match Group 10-Q. IAC consolidates Match Group and reports its segment results here; the filing does not provide a standalone Match Group balance sheet or cash flow statement. Amounts below are in U.S. dollars.
IAC’s businesses include Match Group, ANGI Homeservices, Vimeo, Dotdash, Applications and Emerging & Other. IAC held an 80.4% economic interest and 97.5% voting interest in Match Group at quarter-end.
Financial and operating results
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| IAC consolidated revenue | $1.106 billion | $995.1 million |
| Operating income | $79.9 million | $90.0 million |
| Net earnings attributable to IAC shareholders | $88.7 million | $71.1 million |
| Adjusted EBITDA (non-GAAP) | $190.6 million | $188.4 million |
| Cash provided by operating activities | $102.9 million | $152.0 million |
Revenue grew 11%; operating margin fell to about 7.2% from 9.0%, while Adjusted EBITDA margin was about 17.2% versus 18.9%. The $63.6 million income tax benefit, compared with a $29.0 million benefit in Q1 2018, reflected primarily excess tax benefits from stock-based awards; it materially supported reported net earnings.
Match Group segment: Revenue rose 14% to $464.6 million and Adjusted EBITDA increased 13% to $155.1 million. Direct revenue increased in North America and internationally, driven by average subscriber growth to 4.4 million and 4.3 million, respectively, primarily from Tinder. Total ARPU was flat: North America ARPU rose 2%, offset by a 3% international decline, partly from currency movements. Segment operating income was $118.8 million, up 6%.
Cash, liquidity and debt: IAC consolidated cash and cash equivalents were $2.217 billion at March 31, 2019; cash, cash equivalents and restricted cash totaled $2.219 billion. Consolidated long-term debt, net, was $2.332 billion, versus $2.246 billion at year-end 2018. Match Group’s reported debt principal totaled $1.625 billion, including its $425 million term loan and $1.2 billion of senior notes; it had no borrowings under its $500 million revolving facility. IAC reported no outstanding borrowings under its own or ANGI’s revolving facility. IAC cautions that Match Group and ANGI cash is not freely available to the parent.
Material changes versus the prior comparable period
- Match Group revenue growth was a major contributor to consolidated growth; ANGI revenue increased 19% to $303.4 million. Emerging & Other revenue fell 13%, partly reflecting prior-year business sales and the transfer of Daily Burn.
- Consolidated operating income declined 11% despite slightly higher Adjusted EBITDA. Higher stock-based compensation, intangible amortization and contingent-consideration adjustments contributed to the decline.
- Operating cash flow decreased by $49.1 million, principally with working-capital effects, including an $88.4 million increase in accounts receivable.
- Match Group issued $350 million of 5.625% senior notes due 2029 and used proceeds in part to repay its credit-facility borrowings. Match Group debt net of discounts and issuance costs increased to $1.602 billion from $1.516 billion.
- IAC adopted lease accounting requirements on January 1, 2019, recognizing $172.6 million of right-of-use assets and $217.0 million of lease liabilities at March 31; adoption did not affect reported earnings or cash flows.
Outlook, commentary, risks and unusual items
- IAC expected 2019 capital expenditures to be approximately 55%–65% above 2018, driven by corporate spending, ANGI software development and Tinder office expansion. IAC also expected approximately $23 million of payments during 2019 toward a 50% aircraft interest.
- Management stated existing liquidity, expected operating cash flows and available facilities should fund foreseeable operating needs, capital expenditures, debt service and commitments. It also identified weaker demand, indebtedness and the possible need for additional financing as risks. No specific Match Group revenue or earnings guidance is provided in the supplied text.
- Google generated $195.8 million, or 18% of IAC consolidated revenue, compared with $211.3 million, or 21%, a year earlier. The agreement was amended to extend through March 31, 2023, subject to specified termination rights beginning in 2020; Google policy changes remain a business risk.
- Match Group’s selling costs include rising app-store fees. The filing also cites risks involving competition, advertising markets, user acquisition, privacy and cybersecurity, regulation, foreign exchange and the ability to retain partners and service professionals.
- Unusual items include an $8.1 million pretax loss on Vimeo’s hardware-business sale, included in other income (expense), and large stock-based-award tax benefits. IAC reported a Tinder optionholder lawsuit seeking at least $2 billion, which IAC and Match Group dispute. The FTC had proposed resolving its Match.com investigation for $60 million plus business-practice changes; Match Group considered the requested payment excessive. Bumble’s initial lawsuit was dismissed with prejudice, but Bumble asserted counterclaims in Match’s separate intellectual-property litigation in April 2019, which IAC and Match Group say they will contest.
- The filing states disclosure controls were effective and that no material change in internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- Whether a separate Match Group filing is needed for standalone financial statements; this filing presents IAC consolidated results and Match Group segment data.
- Match Group’s subscriber, ARPU and Tinder growth trends, including the effect of app-store fees and currency movements.
- The terms, debt-service implications and covenant headroom following Match Group’s $350 million note issuance and credit-facility repayment.
- The status and potential financial impact of the Tinder optionholder litigation, FTC matter and Bumble counterclaims; outcomes and exposure are uncertain.
- Whether IAC’s elevated planned capital expenditures, stock-award withholding cash requirements and working-capital movements affect liquidity or future cash conversion.