It has been about a month since the last earnings report for Match Group (MTCH). Shares have added about 6.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Match Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Match Group Q4 Earnings And Revenues Increase Y/Y
Match Group reported fourth-quarter 2020 diluted earnings of 48 cents per share, which increased 4% from the year-ago quarter’s figure.
Nevertheless, fourth quarter revenues of $651.4 million increased 19% year over year.
Continued momentum at Tinder and solid performances of other apps like Hinge, Pairs and OkCupid drove the top line. Excluding the effect of foreign exchange, the top line rose 17% year over year to $641.5 million, driven by rise in average subscriber base.
Notably, activity and engagement across all brands has been high since the COVID-19 outbreak, especially across western markets.
For 2020, revenues of $2.391 billion increased 17% year over year.
Performance in Details
For the fourth quarter, average subscriber base increased 12% to 10.94 million and average revenues per user (ARPU) were up 5% year over year to 62 cents. Growth in subscriber base was driven by continued momentum in apps like Tinder, BLK, Hinge, Meetic, Pairs and Chispa. The company continues to expand operations for apps like OkCupid across international markets.
Direct revenues from North America were up 19% to $315.8 million, while for International markets, direct revenues also increased 19% to $319.1 million for the fourth quarter.
North America subscriber base climbed up 9% to 5.04 million, while International advanced 14% to 5.9 million in the quarter under review.
North America ARPU increased 7% to 66 cents, while International ARPU increased 4% to 58 cents in the fourth quarter.
Improvement in North America ARPU was driven by addition of ala carte features and price optimization for Hinge app and increases in live video streaming for PlentyOfFish app. Internationally, growth was driven by favorable forex movement.
The company continues to upgrade its operations to cater to evolving consumer preferences. The company is focused on its Ablo app, which is a non-dating app, to help people make friends around the world. Match Group is also directing significant resources to revamp tech capabilities to support video streaming as video date trend gains momentum.
The company also expects its Hawaya app, which is a Muslim community-focused app, to continue to gain traction in India and Southeast Asia.
Direct revenues from Tinder increased 18% year over year to $1.4 billion in 2020. Direct revenues from non-Tinder brands collectively increased 16% on a year-over-year basis in 2020. In the fourth quarter, Direct revenues from non-Tinder brands rallied 28%.
Markedly, Hinge’s revenue improved threefold on a year-over-year basis in 2020. The global downloads for Hinge were up 63% year over year in 2020.
For the fourth quarter, adjusted EBITDA was $245.5 million, up 13% year over year. However, adjusted EBITDA margin contracted 180 basis points (bps) year over year to 38%.
Total operating costs and expenses increased 20% year over year to $438.8 million in the fourth quarter. This was driven by increase in cost of revenues, selling and marketing expenses, product development as well as general and administrative expenses, partly offset by reduced spend on travel.
However, total operating costs and expenses, as a percentage of revenues, remained unchanged on a year-over-year basis and came in at 67% in the reported quarter.
In the fourth quarter, operating income advanced 17% from the year-ago quarter’s tally to $212.6 million. Operating margin contracted 50 bps to 33%.
Balance Sheet & Cash Flow
As of Dec 31, 2020, Match Group had cash and cash equivalent balance of $739.2 million compared with $399 million as of Sep 30, 2020. As of Dec 31, 2020, the company had long-term debt of $3.53 billion compared with $3.52 billion as of Sep 30, 2020.
As of Dec 31, 2020, the company also reported $1.7 billion of exchangeable senior notes. The company had $750 million under its revolving credit facility as of Dec 31, 2020. The amount was undrawn as of Dec 31.
For 2020, the company generated operating cash flow of $789 million compared with $648 million for 2019. For 2020, free cash flow was $746.2 million compared with $609 million in 2019.
Match Group expects first-quarter 2021 revenues of $645 million to $655 million.
Adjusted EBITDA for the first quarter is anticipated in the range of $210-$215 million.
For 2021, Match Group projects revenues to be in the range of $2.75-$2.85 billion.
The company also expects to surpass $1 billion for adjusted EBITDA in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
Currently, Match Group has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Match Group has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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