Match Group, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; filed November 8, 2021. Match Group operates a global portfolio of dating and social-discovery brands, including Tinder, Hinge, Match, and Hyperconnect. Interim results are unaudited.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $801.8m | $639.8m | $2,177.2m | $1,739.9m |
| Operating income | $220.6m | $200.2m | $619.8m | $533.1m |
| Net earnings from continuing operations | $130.9m | $140.1m | $444.8m | $439.0m |
| Diluted EPS from continuing operations | $0.43 | $0.47 | $1.46 | $1.59 |
| Adjusted EBITDA (non-GAAP) | $285.3m | $249.2m | $778.0m | $651.3m |
| Cash from continuing operations | Not presented in the filing text for the quarter | $666.9m | $518.8m |
- Q3 revenue grew 25%; direct revenue rose 25%, payers increased 16% to 16.3m, and revenue per payer rose 8% to $16.06. APAC and Other direct revenue grew 59%, with Hyperconnect a major contributor.
- Q3 operating margin was 28%, down from 31%; Adjusted EBITDA margin was 36%, down from 39%. Cost of revenue increased to 29% of revenue from 27%, reflecting Hyperconnect, app-store fees, compensation, and hosting costs.
- Q3 net earnings from continuing operations declined despite higher revenue and operating income, principally reflecting other expense, including the exchangeable-note repurchase-related derivative loss. For the nine-month comparison, 2020 total earnings were also affected by a $366.1m discontinued-operations loss; continuing-operations earnings were broadly comparable.
- Nine-month investing cash outflow was $916.0m, primarily the $863.3m net cash cost of the Hyperconnect acquisition; capital expenditures were $52.8m. Cash, cash equivalents, and short-term investments totaled $523.2m at quarter-end, versus $739.2m at December 2020.
Financial position and material changes
- At September 30, 2021, long-term debt, net, was $3.848bn (gross principal approximately $3.892bn); cash and short-term investments were $523.2m. The company had $749.6m available under its $750m revolving facility and no revolver borrowings.
- Total assets rose to $4.894bn from $3.046bn at year-end, mainly reflecting Hyperconnect goodwill and acquired intangibles. Shareholders’ equity remained negative at $60.8m, improving from negative $1.413bn at year-end.
- Hyperconnect was acquired on June 17 for an accounting purchase price of $1.75bn, funded with cash and 5.9m newly issued shares. Purchase-price allocation remained preliminary.
- Effective January 1, 2021, Match Group early adopted ASU 2020-06 retrospectively, changing convertible-debt and diluted-EPS accounting. Reported comparative periods reflect the adoption.
Outlook, risks, and unusual items
- Management expected 2021 capital expenditures of approximately $80m–$85m. The filing provides no specific revenue or earnings guidance.
- After quarter-end, on October 4, the company completed a transaction to repurchase approximately $414m principal of 2022 Exchangeable Notes for approximately $1.5bn, issue $500m of 3.625% notes due 2031, issue 5.53m shares, and receive approximately $201m net cash from unwinding related hedges and warrants. The filing expects a $24.0m fourth-quarter gain from settlement-related derivative fair-value changes.
- Q3 other expense included a $38.6m loss from the embedded derivative associated with the note repurchase agreements and a $5.2m inducement expense, partly offset by hedge-and-warrant settlement gains. The filing reports total Q3 other expense of $39.2m.
- Material risks cited include competition, user acquisition and retention, app-store distribution fees, foreign exchange, cybersecurity and protection of user data, international operations, COVID-19, and integration and expected benefits of Hyperconnect.
- Litigation remains a contingency. Tinder optionholder claims seek more than $5.6bn; the company recorded no loss provision and disclosed possible exposure ranging from nominal to $2.5bn. The filing also describes FTC, consumer, securities, derivative, and data-protection matters; management says it believes the claims are without merit and intends to defend them.
- Management stated disclosure controls were effective at period-end and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- How Hyperconnect contributes to growth, costs, integration progress, and the final purchase-price allocation.
- Underlying payer and revenue-per-payer trends by region, separating organic growth from acquisition and foreign-exchange effects.
- Cash generation, capital needs, and debt-service capacity following the October note repurchase and new 2031 borrowing.
- The status and financial exposure of the Tinder optionholder litigation and other legal and regulatory proceedings.
- The effect of stock-based compensation, exchangeable-note dilution, and non-GAAP adjustments on per-share results and margins.