Match Group, Inc. quarterly report, Q3 FY2021

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

MetricQ3 2021Q3 2020Nine months 2021Nine 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 operationsNot 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.