Match Group, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; filed May 6, 2021. Match Group operates a global portfolio of dating services in one operating segment. The prior-year comparison includes the businesses separated into IAC as discontinued operations, so consolidated net income comparisons are not directly comparable.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $667.6 million | $544.6 million | +23% |
| Operating income | $189.3 million | $137.4 million | +38% |
| Operating margin | 28% | 25% | +3 percentage points |
| Adjusted EBITDA (non-GAAP) | $230.0 million | $174.3 million | +32% |
| Adjusted EBITDA margin | 34% | 32% | +2 percentage points |
| Net earnings from continuing operations | $173.8 million | $157.5 million | +10% |
| Net earnings attributable to Match Group shareholders | $174.3 million | $(202.8) million | Prior year included discontinued-operations loss |
| Diluted EPS from continuing operations | $0.57 | $0.61 | Down 7% |
Revenue growth reflected 12% growth in average subscribers to 11.109 million and 9% higher reported ARPU to $0.64 per day. Direct revenue rose 23%: North America +24% and International +21%. Excluding foreign-exchange effects, revenue grew 19% and ARPU grew 6%. Cost of revenue increased 25%, including higher app-store fees and live-streaming partner costs. Selling and marketing rose 16%, general and administrative expense 11%, and product development 27%. Management attributed operating-profit growth to revenue gains, relatively flat G&A excluding stock-based compensation, and lower intangible amortization; higher stock-based compensation partly offset these benefits.
Cash flow, balance sheet and debt
- Cash from continuing operations was $102.3 million, versus $39.2 million a year earlier. Continuing-operations investing used $10.5 million, principally $10.3 million of capital expenditures; financing provided $18.7 million.
- Cash and cash equivalents were $845.7 million at March 31, up from $739.2 million at year-end. Current assets were $1.204 billion and current liabilities $469.9 million.
- Long-term debt, net, was $3.843 billion; principal debt totaled $3.893 billion. The filing estimates debt fair value at $5.894 billion. The $750 million revolving facility had no borrowings and $749.8 million available; the $400 million Hyperconnect delayed-draw facility was also undrawn.
- Shareholders’ equity remained negative at $(1.214) billion. Operating cash flow was affected by working-capital movements, including a $75.3 million rise in receivables and $40.2 million decline in accounts payable and other liabilities.
Outlook, developments and risks
- Match Group agreed to acquire South Korea-based Hyperconnect for approximately $1.725 billion, subject to customary adjustments. The company expected closing in Q2 2021, subject to regulatory approvals and other closing conditions. Up to half the price may be paid in Match Group shares; the cash portion was expected to use cash on hand and credit-facility borrowings.
- Management forecast 2021 capital expenditures of approximately $80–$90 million, mainly reflecting office and building improvements. No specific revenue or earnings guidance is provided in the supplied filing text.
- Material risks include competition and user retention, marketing efficiency, app-store distribution fees, foreign exchange, cybersecurity and protection of user data, COVID-19 effects, acquisition execution and financing, and uncertainties related to the IAC separation.
- Significant litigation includes Tinder optionholder claims seeking at least $2 billion plus punitive damages; trial was scheduled for November 2021, with related arbitration scheduled for February 2022. The FTC consumer-practices case remained pending after the Supreme Court’s April 2021 ruling limiting the FTC’s ability to seek equitable monetary relief under Section 13(b). The company disputes the claims and says it will defend them vigorously. Other disclosed matters include consumer, securities, derivative, and data-protection inquiries.
- The company early adopted ASU 2020-06 retrospectively. The adoption increased Q1 2020 continuing-operations net earnings by $8.2 million and diluted EPS by $0.02, and increased year-end 2020 reported debt by $306.2 million, principally reflecting convertible-note accounting changes.
Important facts for investors to verify
- Whether Hyperconnect closed on the expected timetable and the final consideration, funding mix, and integration costs.
- Whether subscriber and ARPU growth persisted, particularly after excluding foreign-exchange benefits and separating subscriber growth from monetization.
- Cash conversion and working-capital trends, given the increase in receivables and the gap between net earnings and operating cash flow.
- Debt-service capacity, potential dilution or cash settlement from exchangeable notes, and covenant headroom following acquisition financing.
- Developments and potential exposure in the Tinder optionholder, FTC, and other legal or regulatory matters; the filing states that loss outcomes may be uncertain.