Business context and reporting period
This is IAC/InterActiveCorp’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2019, filed November 7, 2019—not a standalone Match Group filing. Match Group (MTCH) is a consolidated IAC segment; IAC reported an 80.8% economic interest and 97.5% voting interest in MTCH at quarter-end. Amounts below are U.S. dollars.
Financial performance and position
| Metric | Third quarter 2019 | Change vs. 2018 | Nine months 2019 | Change vs. 2018 |
|---|---|---|---|---|
| IAC consolidated revenue | $1.247 billion | +13% | $3.539 billion | +12% |
| IAC operating income | $185.9 million | +8% | $420.0 million | -3% |
| IAC Adjusted EBITDA | $266.0 million | -0.5% | $715.7 million | -1% |
| IAC net earnings attributable to IAC shareholders | $128.5 million | vs. $145.8 million | $330.7 million | vs. $435.2 million |
| IAC diluted EPS | $1.35 | vs. $1.49 | $3.45 | vs. $4.55 |
| MTCH segment revenue | $541.5 million | +22% | $1.504 billion | +18% |
| MTCH segment operating income | $176.6 million | +26% | $468.3 million | +16% |
| MTCH segment Adjusted EBITDA | $206.1 million | +25% | $564.7 million | +18% |
IAC consolidated operating margin was approximately 14.9% for the quarter (about 15.6% in 2018); Adjusted EBITDA margin was approximately 21.3% (about 24.2% in 2018). MTCH segment operating margin was about 32.6% for the quarter and Adjusted EBITDA margin about 38.1%. Adjusted EBITDA is a non-GAAP measure and excludes stock compensation, depreciation, amortization, and acquisition-related items.
MTCH revenue growth was driven by direct revenue in North America and international markets. Average subscribers rose 10% in North America to 4.7 million and 29% internationally to 4.9 million; total ARPU increased 4%. Tinder was the principal growth driver, with Hinge and Pairs also contributing. For IAC overall, Match and ANGI supplied the largest revenue increases; weaker Applications and Emerging & Other results partly offset growth elsewhere.
IAC generated $688.8 million of operating cash flow in the first nine months, versus $671.7 million a year earlier; investing used $407.3 million and financing provided $535.5 million. Cash, cash equivalents and marketable securities totaled $3.103 billion at September 30. Gross debt principal was approximately $3.543 billion; balance-sheet debt, net of discounts and issuance costs, was $3.112 billion. MTCH had $366.4 million of cash and $1.625 billion of debt principal; its $500 million revolving facility had no borrowings outstanding. IAC cautioned that MTCH and ANGI cash is held by separate public subsidiaries and is not freely available to the parent.
Material changes, outlook, and risks
- MTCH operating costs: Higher in-app purchase fees paid to Apple and Google, hosting and customer-care costs partly offset segment growth. Tinder began offering an alternative Android payment method in Q2; adoption could reduce Google fees, but the filing does not quantify the expected impact.
- Other segments: ANGI revenue grew, but its Adjusted EBITDA fell 24% in Q3, primarily from higher marketing spend and investment in Handy and Fixd Repair. Vimeo losses widened; Dotdash grew. Applications revenue declined 18% in Q3, led by Desktop, while Emerging & Other turned to an Adjusted EBITDA loss.
- Separation proposal: On October 10, 2019, after quarter-end, IAC made a preliminary proposal to a Match Group special committee for a full separation. No transaction was assured; terms, timing, tax treatment, costs, and completion conditions remained uncertain. IAC said it was not then pursuing an ANGI separation while the Match proposal was under discussion.
- Guidance and spending: The filing gives no specific MTCH revenue or earnings guidance. IAC expected 2019 capital expenditures to exceed 2018’s $85.6 million by approximately 65%–70%, mainly for software development and facilities. Management said existing liquidity, expected operating cash flow, and available credit were sufficient for foreseeable requirements, while noting debt and weaker demand could constrain flexibility.
- Platform and impairment exposure: Google generated 15% of consolidated Q3 revenue, down from 19% a year earlier. Chrome Web Store policy changes and Google policy changes negatively affected Desktop’s expected results. Desktop goodwill of $265.1 million and related intangible assets of $28.9 million had fair values near carrying values; a modest decline could trigger impairment.
- Legal and tax matters: The FTC sued Match Group in September over Match.com marketing, guarantee disclosures, cancellations, and chargebacks; it seeks injunctive relief, penalties, restitution, and other remedies. The FTC had previously proposed a $60 million settlement, which was not resolved. DOJ later subpoenaed Match Group records. Tinder optionholders seek at least $2 billion in damages; the court’s partial denial of dismissal was affirmed on appeal, and the company disputes the claims. IAC also reported ongoing tax audits and $68.3 million of unrecognized tax benefits.
- Debt and unusual items: IAC issued $1.15 billion of exchangeable notes in 2019 and MTCH issued $350 million of 5.625% notes, increasing debt and interest expense. Nine-month earnings comparisons were affected by much lower investment gains than in 2018, including Pinterest-related gains in the prior period. Q3 also included a $16.1 million favorable contingent-consideration fair-value adjustment and a tax benefit despite pretax income.
Important facts for investors to verify
- Confirm the filing entity and scope: these consolidated figures are for IAC, while Match-specific figures are segment disclosures.
- Track MTCH subscriber, ARPU, in-app purchase fee, marketing, and legal-cost trends to assess the quality and sustainability of segment growth.
- Review the Match separation proposal’s final terms, tax consequences, costs, timing, and whether it proceeds; it was preliminary and subject to uncertainty.
- Assess the FTC and DOJ matters, Tinder optionholder litigation, and possible exposure; the filing does not provide a clear estimate of probable losses.
- Monitor Google policy changes and Desktop impairment sensitivity, as well as the accessibility of subsidiary cash, leverage, and interest costs.