Will Investors Continue the Love Affair When Match Reports Earnings?

Will Investors Continue the Love Affair When Match Reports Earnings?

They have been professing their affection for the online dating specialist this year.

Danny Vena

Shareholders have been head over heels for Match Group (NASDAQ:MTCH) in 2019. The company, known for its namesake dating site and its flagship Tinder app, has been a favorite of investors this year, and its stock is up more than 70%. Match hit all-time highs earlier this year after posting strong second-quarter results and boosting its guidance for the full year.

The company will have another opportunity to charm investors when it reports the financial results of its third quarter after the market close on Tuesday, Nov. 5. Here are a few areas that will be of interest to shareholders.

A hand holding a smartphone with hearts appearing above.

Image source: Getty Images.

Revenue that continues to grow

In the second quarter, Match generated revenue of $498 million, up 18% year over year, or 22% in constant currency. The results easily surpassed analysts’ consensus estimates of $489 million, while also skating past the high end of management’s guidance, which topped out at $490 million.

For the third quarter, the dating tech company is guiding for revenue in a range of $535 million to $545 million, which would represent growth of 21% to 23% year over year. The analysts’ consensus estimate is $540.57 million, near the midpoint of management’s guidance.

To close out the second quarter, Match raised full-year guidance. The company said it expects meaningful acceleration in revenue in the back half of the year. It is now guiding for year-over-year revenue growth in high-teens percentages, up from the mid-teens it previously forecast.

A strong and improving bottom line

Match reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $204 million for the second quarter, up 16% compared with the prior-year quarter, while also sailing past management’s guidance, which topped out at $195 million. This produced diluted earnings per share of $0.43, a decline of 4% year over year, but ahead of analysts’ expectations of $0.40.

Management is expecting this online romance to continue and is forecasting adjusted EBITDA in a range of $200 million to $205 million, or year-over-year growth between 21% and 24%.

The company also increased its full-year guidance, and is now expecting adjusted EBITDA in a range of $770 million and $800 million, or growth of about 20% versus 2018.

Starry-eyed about Tinder

Tinder is the main reason investors have been swiping right on Match Group. In the second quarter, direct revenue from Tinder grew 46% year over year, while the number of average subscribers grew by more than 500,000, up 39%. This accelerated sequentially from the 38% revenue growth and 36% subscriber growth in Q1, and marked the second-highest-ever sequential increase in the number of average subscribers.

Match is expecting Tinder’s strong growth to continue. The company is guiding for an additional 400,000 subscribers in the third quarter, bringing the total to 5.633 million, an increase of 37% year over year.

Match Group also raised its full-year forecast for subscriber additions at Tinder, and is now expecting to add 1.6 million subscribers this year — up from its previous forecast of 1 million. 

The FTC lawsuit

Late last month, the Federal Trade Commission (FTC) filed suit against Match Group, alleging that the company used fake love-interest advertisements to “trick hundreds of thousands of consumers into purchasing paid subscriptions on Match.com,” while also accusing the company of “deceptive and unfair practices” related to marketing, charge back, and online cancellation practices. 

Match fired back, saying that it had been negotiating with the FTC for nearly a year, and that the regulatory body “misrepresented internal emails and relied on cherry-picked data to make outrageous claims and we intend to vigorously defend ourselves against these claims in court.” 

Investors are hoping these two will just kiss and make up.

 


Danny Vena owns shares of Match Group. The Motley Fool owns shares of and recommends Match Group. The Motley Fool has a disclosure policy.

“>

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *