Match Group, Inc. (MTCH) Earnings Call Transcript & Summary

Yes. Look, we've done this in a pretty smart way, I think, a pretty scalable way. We've partnered with existing events providers. We're not curating these events on our own. We're not putting a lot of money into creating the events. The events are there. We're partnering with events aggregators or events companies that already have the events and are looking to fill seats, and we've got the users to do that. So most of the dollars, we've got a couple of development teams working on it. So there's a sort of a trade-off there that could be working on other things, but we think events is the right place to have them. We've got a small events sourcing team, and it's less than 10 people, so it's relatively manageable and we will scale up quite well. And then most of the spend is on the marketing side, co-promotion and marketing the events themselves. We're -- as we sort of just mentioned, this is not about getting as many of our users to go to an event as possible per se. Obviously, we want users to go to events, but it's a bigger strategy than that. It's changing perception and reconsideration for all users. And what will likely happen is a small percentage of users will actually go to events, but a lot of them will think about Tinder through a different light because it has events. And we've seen that with, like you said, 70% of Gen Z are interacting with the events page. They're coming back week after week. That shows there's interest. A smaller percent are actually going to the events. I think that will go up over time, but they like the idea of this is what they want. And so I think it's a powerful message for changing reconsideration. And then the economics, the unit economics are pretty good and scalable. I think the economics for the user are very good, right? Because one issue that I think the company and the industry faces is that just -- while the $20 a month you pay to be on the app is not really all that much money if you're meeting new people, the $200 you got to spend on a dinner in New York is a lot of money. I think that is a constraint for Gen Z. Events offers a better value prop to users. 30% of the events are free. Those that cost money cost about $30 a month versus the dinner in New York, that's far more expensive. You're meeting not just 1 person and hoping it turns out well. You're meeting lots of people and having a good time kind of no matter how it turns out. You're often bringing a friend with you, which lowers the pressure. So I think it's exactly what users are looking for and helps bridge the sort of economic gap for the user themselves. So those are all reasons why we're really excited about the events in the broader social push overall.

Love it. Let me turn to Hinge. So Hinge MAU is up 13%, payer up 17% this past quarter. As we approach this kind of $1 billion revenue target and both your core markets mature, but your newer international markets continue to emerge, how do we think about the growth algorithm, whether that's audience growth, payer penetration, some pricing potentially? And how do you think about that mix changing maybe this year and into next year -- for the loaded question.

Well, there's a few good ones in there. Let's take the sort of payer RPP mix first. What we've seen over the last few years is a heavier growth on the payer side than the RPP side. I think that will continue for the foreseeable future, including in 2027. There's a couple of reasons for that. One is the international markets or the expansion markets are growing faster than the core markets, and they're usually a lower-priced market on the outset. So that puts a little pressure on RPP and drives more conversion and payer growth. I expect that dynamic to continue. And then the second reason is this lower price tier that we can talk about, which we're testing, that will affect all markets, but core in particular, that will drive more payer conversion than RPP. And so I think that, that mix will be kind of similar in '27 than it was in '26, which is sort of the mix we want. In terms of growth and the mix between international and core markets, one way to think about it is this year, obviously, the growth rates are much higher in expansion markets and in core markets where they're a little bit more flat. But the quantum of revenue being generated by core markets versus international expansion markets is similar like in a dollar term. I think that will probably continue in '27 as well. So I don't think the sort of algorithm is going to change all that much. In the core markets, if we want to just stay there for one second and talk about growth within core, revenue growth is still quite strong. User growth has flattened out a little bit. We spent a lot of time looking at this. We think there's a lot of opportunity to continue to grow in core markets. One is on the monetization side. They monetize -- Hinge monetized at lower rates than Tinder in core markets. The RPP is higher than Tinder, but the payer penetration is much lower. So there's room to grow that payer penetration rate in core markets for sure. And then two, Hinge is more scaled and maturing in certain markets to some extent. But if you look at it, let's just take the U.S., it's mature in liberal coastal cities. It's mature in New York. It's mature in San Francisco, it's mature in L.A. If you sort of dig in, there's a lot of room for growth still in those middle America markets, southern markets, maybe more conservative parts of the country. They under-index versus Tinder greatly. And so I think there's a big opportunity to just have a Hinge appeal to a broader swath of the U.S. than just the markets that they really kind of got started in. So that gives us confidence. And then if you break it down by age, for example, there's still a lot of opportunity in a little bit older segments. They've done very well with Gen Z. But as you get into the mid-30s into the 40s, there's still a big opportunity there where an app like Hinge that's higher intent can appeal to that population, too. So I think between going after those underpenetrated demographics and geographies plus opportunities on the monetization side, we'll see pretty strong core growth in '27 as well.

Yes, makes a lot of sense. Touching on the monetization just a little bit more. I know you referenced the lower-priced subscriptions. Can you walk us through just a little bit more of the rationale behind that decision? And what early learnings from that could you potentially apply to Tinder as well?

Yes. There's a few things we've looked at and thought about. One, most large-scale dating apps have a 3-price tier system, right? Tinder -- that's the case for Tinder. That's the case for Bumble, Hinge [indiscernible] too, makes sense to add 3rd, like there's a precedent there. Hinge is also higher priced than those other apps. And so there -- the fact that they're a higher price point, which makes sense for a more higher intent dating app leaves more room for a lower price tier than maybe you would see it like a Tinder, which that 3rd tier they added was actually a higher price tier and a lower price tier. So that's part of it. And then two, what I think is really interesting is the tier there is going to be focused on women in particular. That's a huge untapped opportunity for the category as a whole. The category has done very well, finding ways to add value for men, see who likes you, unlimited likes, those are men value prop features, not so much what women are looking for. So it will be a really interesting -- as you asked what can we learn from this test. I think that will be where a lot of the learnings come from. Can we create features that women value? And is that an unlock to increase payer penetration across the business of the category as a whole?

Perfect. I would like to take a minute to open it up to the audience for any questions. Otherwise, I can keep going. All right. No problem. Let's move on to the App Store economics. So alternative payment savings expected to now reach $130 million. That's up $20 million. Could you break down the -- what has driven the additional upside and expected IAP savings this year? And given the changes in the landscape, any update on where things stand with the Apple versus the Google App Stores?

Yes, this is moving quickly. So I spend a lot of time tracking this very closely. So let me give you an update because there have been a few changes since even the earnings call about a month ago. Let's just kind of go platform by platform. Google, no change since the last earnings call. They basically rolled out their own global fee structure. It's not subject to court approval in the U.S. anymore. Unfortunately, for us and other developers, it doesn't offer much incentive or ability to offer alternative payments. The economics -- it's not very economical for us to do it. When we run the numbers and look at it, we will offer that to customers, but it's maybe about a $5 million benefit, we think, to the bottom line relative to the world we've been working in within -- for Google over the past couple of years. So a little bit disappointing, quite frankly, but at least we've got some certainty about where that's headed. Now could it change? Could the DMA come out in Europe and say, this is not good enough, Google, you have to do better? Of course. But for now, they've rolled out a global policy that goes into effect kind of between the end of this year and into next year across the globe. And it's basically one consistent policy. Apple has taken a different approach. They have a jurisdiction by jurisdiction fee structure that's quite hard for developers to follow, but there has been a little bit of new news there since earnings. Two things. One, as it relates to the Apple versus Epic court case that's ongoing in the U.S., they propose to the courts a 15% fee on alternative payments, which is less than the 30% fee you pay for in-app purchases, but -- or more than the 0% we're paying today aside from the credit card fees. It's now in the court's hands. The court needs to decide what they think an appropriate fee is. They can agree with Apple. They can say, no, we think it's a different fee. And so we just have to see how that plays out. And we expect the court to sort of say something later this year or early next year. And until then, at 0%, we'll continue to take advantage of it, but we'll have to see how it plays out. And then in Europe, that happened in mid-August, they made that announcement. And then in August, about a few days later, they made an announcement on European fee structure where, I don't know, somewhat ironically, they increased the fees for in-app purchases in Europe by 3 or 4 points. So that's a bad guy for us relative to the fee structure we had before, but they did offer more optionality around alternative payments. The economics aren't great, but they are better than. It's a similar 15% fee for link out web purchases. So now it's on us to try to optimize around alternative payments in Europe, which we haven't done in the past to try to reduce the impact of that higher fees on in-app purchases, and we'll sort of have to see how that plays out. But if we stood there and did nothing, it would be a negative to us for 2027. So those are some of the things going on. But the big one, which is Apple App Store fees in the U.S., still 0% on alternative payments, and that won't change until the court rules, we think, sometime later this year or early next year.

It must be challenging to navigate that environment. I'm sure spend less time on this channel alternative payments.

Ultimately, what we want is user choice, right? We want users to be able to choose between different forms of payment, and we want economics that make sense for developers like us, and we hope that the courts and the regulators get there.

Perfect. Let's move to E&E maybe briefly. E&E direct revenue down 17%, continued pressure, obviously, from Azar. As you continue to kind of evolve the portfolio mix with [indiscernible], BLK, Upward, but also bringing on incremental investments, do you think about E&E more broadly over time as maybe a growth opportunity or really a free cash flow and profit driver?

Yes. I think the reality is it's hard to talk about E&E as one monolith. It's true that most apps are now on one platform, which I think is a big unlock going forward. But different brands within that sort of portfolio within a portfolio are in different stages of their life cycle and deserve different levels of investment. And so really, what we've been doing is looking at brand by brand, what makes sense. Spencer has really leaned in here. We've defined what our priority brands are, those that deserve investment in marketing and in development and in headcount and those that should share from the -- should gain from the shared platform capabilities, right? If we get a win on the shared platform, all brands benefit from that, but maybe don't get as much brand-specific investment as some of the other ones with a bigger competitive moat or with a better opportunity to get back to growth. And so we've done that. I think that's been a helpful exercise. And the other thing we've done is for those priority brands like the Match.com, like the BLKs, like the Upwards, we're crystallizing their brand positioning. What customer does Match.com, who is the target customer? How are they positioned? And what should that message be? And how should the product serve them? And we're also bringing in some of the same philosophy we had at Tinder around driving meaningful connections and sparks and a real focus on the user to the E&E portfolio. I think the strategy will benefit those brands over time. I think certain brands within the portfolio will get back to growth, going back to your question. I think the collection of brands as a whole at E&E will probably still decline in '27 as a whole. But again, I think certain apps, Azar could certainly get back to growth, Pairs could be growing and certain apps within that traditional E&E bucket could get back to growth, too.

Could you elaborate quickly on the brands you're prioritizing, specific kinds of demographics or geographies, user cohorts?

It's brands that we feel have a competitive moat, have staying power, have brand equity. And so I mentioned most of them, Match.com, Upward, BLK, The League, Azar, Pairs. And then we'll spend a little bit less time and effort on brands like OkCupid, for example, not that we won't invest in them. They'll, like I said, gain in the -- any rollout of improvements we make across the shared platform, but we're just going to invest a little bit less in marketing and in brand-specific resources. Same holds true for a brand like Plenty of Fish. So I think trying to spread our time, management capacity and investment across all these brands in the portfolio equally was the wrong strategy. So we've kind of crystallized where we want to focus, which I think is the right call.

Makes sense. Anybody else in the audience have a question?

You've got a new CEO, Jackie Jantos at Hinge. I suppose what are sort of her key strategic priorities? What are the areas and parts of the markets that she's targeting? And focusing on?

Yes, a few things. One, she is new to CEO, although it's been a little while now, but she's not new to the company, and she's been there for a long time and worked very closely with Justin, who is the founder and it was a well-orchestrated and planned sort of succession. I think it went very well. She's got a marketing background. She's worked for some of the biggest brands in the world, and I think brings a real strategic eye to the consumer, which I appreciated. The strategy has not changed from what it was before her taking the reins at the highest level. It's a real focus on staying true to the ethos of Hinge, which is the app designed to be [ deleted, ] staying true to a brand that's for high-intent users, prioritizing product innovation and investment. I think of late, we've been talking a lot more about how do we get the category back to growth. Hinge is the brand, is one of the brands to do it. It's a brand that resonates really well with Gen Z, and it gives a lot of users what they're looking for in terms of a product experience. So we're talking more about how do we not only win back lapsed users, but how do we really get new users to enter the category and what role can Hinge play. And one area, for example, that we're focusing a lot on is trust and safety. It's always been important, but it's one of the biggest barriers to entry. And what role can Hinge play in really leveling up trust and safety to break down some of those category barriers and get singles to try dating apps for the first time. So that's some of the areas of focus. We're spending a lot of time. She's spending a lot of time focused on the core markets. We understand that the Hinge equation for long-term growth is both continued growth in the core markets and geographic expansion. And so I mentioned a lot of the things we're thinking about on the core market side, but he's very involved in all that. And then I think the second or the last thing that we've been focused on and she's been focused on as the CEO is where does Hinge go next? What does the next geographic market look like? Is there an opportunity to expand into Asia? What countries will we go into? What time line would there be? And how do we make sure we do it right? How do we make sure the product is customized or localized to meet the sort of expectations of users in India or Japan and really that methodical approach to geographic expansion that worked in Europe, how do we use that same playbook to win over Latin America and Asia over the next couple of years because that's how we get Hinge not only to the $1 billion, but beyond that.

Last 20 seconds maybe, capital allocation. Getting in the back half. But as you return Tinder to growth, does that change your capital allocation strategy?

No, it doesn't. I think what we've been really good at is cutting costs in nonstrategic areas. We did the reduction in force and with the reorg that I think has not only reduced cost, but sped up innovation. We've saved a lot of money in alternative payments. We'll continue to sort of juggle the changing landscape there and do the best we can to save as much money as possible and then reinvest that organically to make sure Tinder and Hinge are getting the investments they need. That while giving 100% of free cash flow back to investors through buybacks and the dividend. We'll do more than $1 billion this year, and we plan to give 100% back, maybe not in any 1 quarter, but certainly over time. So I think it's a powerful combination. Buybacks, reducing shares outstanding while turning around Tinder, I've called the coiled spring before. I think as we get at the other end of this, it will be really a powerful value creation formula for investors over time.

Perfect. Let's end on that coiled spring. Thank you very much for being here today.

Thank you. Appreciate it.