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

All right. We're going to get started. Excellent. Welcome, everybody. My name is Ross Sandler, so I head up the Internet team here at Barclays. We're super excited to have the team from Match back for another year. So thank you.

Happy to be here.

Just to start, I'm going to read the safe harbor for Tani, for the lawyers actually. So during this presentation and during the Q&A session, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate or similar statements. These statements are subject to risk and uncertainty. Our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our periodic reports filed with the SEC. Also today, we might discuss certain non-GAAP financial measures. Reconciliation to most directly comparable GAAP financial measures are provided in published materials on our IR website. These non-GAAP measures are not intended to substitute for our GAAP results.

So with that out of the way, maybe you can just update us on like the next 3 years and how that [indiscernible] Yes. Thank you for coming. I thought we would just start with this week's recent news. So we've had some changes at Hinge, Jackie stepping up and the creation of this new Overtone unit. So can you just talk about the transition and how this new unit is structured?

Sure. Yes. I think it's exciting. I think it's a win-win for the company. We announced that we're spinning out a company called Overtone, which is really an AI-first dating service. Think of it as akin to a personal matchmaker of sorts is the product experience. That's going to be led by Justin, who is the Founder and former CEO of Hinge. So yes, I think -- we think it's the right structure for the business...

Oh, this one? Okay, good? Here you go.

Let me just start over real quick. So we announced the spinout of Overtone and that Justin is going to be leaving Hinge. He was the founder to run Overtone, and we've elevated the President and CMO, Jackie to the CEO of the company. I think it's a win-win. I think it's the right structure. Jackie has been with the company for 4 years now. I think she'll take over the reins without a hitch. She was the President for about the last year. So she was instrumental in running the day-to-day operations of Hinge this year, 2025, done a fantastic job. Hinge has hit the numbers, all systems go. So I think she's completely capable, fantastic leader, also very involved in the 2026 planning efforts. So I think it's going to be a very smooth transition there. and she's a capable leader, will do great. We also have a great management team around her at Hinge. I feel really good about that. I think the timing is right, and Justin said that himself. And then on the Overtone sort of structure, look, we've been working on this app. Justin has inside of Hinge for about the last year, made good progress, but still very early. And we came up with the structure for a few reasons. One, we really wanted Justin to be able to go, fast start-up mode as sort of a separate independent company. We also wanted to bring some VCs in to share in some of the risk associated with the start-up like this. We'll be the largest shareholder in the company. We've got an option to buy it down the road if it's successful. And -- but these businesses often take a lot of losses in the early days. So this is a good structure. We don't have to consolidate the results, and we can participate in the upside. So again, I think it's a win-win for the company and the right structure given the situation.

Yes. I mean I think if I remember correctly, Tinder came out of assuming a similar incubator inside of Match and IAC way back in the day. you guys are good at that. Okay. So we're about a year from the Analyst Day. It was actually like the morning of this conference last year. That was a fun day for us. But what I thought we'd do is maybe like take a snapshot of where we are today looking ahead and talk about some of the tailwinds and headwinds in the business as it relates to that multiyear forecast you guys laid out a year ago. So I guess starting with tailwinds, you've been at Match for a number of years. You've also been here from multiple CEOs. So what stands out the most about current pace, focus and operating changes under Spencer since he took over in February?

Yes. I get that question a lot. I particularly got it in the beginning when he first took over back in February, and I was talking about his energy and his experience and the breadth of fresh air and the shift in focus towards users and outcomes, and that's all still true. But I think it's an easier conversation now because we're 10 months in. And I think the record shows what he's been able to do at the company, which has been a lot. And so just look at what we've accomplished so far, we restructured the company, reduced the size of it by 13%. We reorg Tinder into more autonomous product pods. We removed layers of management, 1 in 5 management at Tinder. We've increased product velocity going from shipping every 2 weeks to every 1 week. We've shifted the whole focus of the company really towards one of being users -- myopically focused on user success and outcomes. So like -- he's proven that he's a seasoned, capable leader, and we've accomplished a lot. Now we're still working on the end goal, which is turning MAU around and getting Tinder back to revenue growth. But I think all the steps thus far to get there, he's done a fantastic job. I have been at the company for a long time. 13.5 years now and a lot of CEOs. And I can truly say this is the, I think, the biggest shift I've seen in the shortest period of time under any CEO of the company.

One of the jobs you have that's tough as a CFO is gearing the Street towards metrics that you find and that we can find is most important. So I know we aren't optimizing Tinder for payer growth or RPP. So how do you convince us, the investment community to move off of that metric given that we've been on it for so long? And if you had to pick one metric for us to focus on at Tinder for the next like 3 years, what would that be?

Yes. I think, look, it goes back to what I just said. RPP and payers is a little bit of a lagging indicator. What we're really looking at is -- and there's ways to improve those metrics that help short term, but maybe hurt long term. And so what Spencer has really come in and said is, yes, sure, we can increase price maybe or we can increase conversion a little bit, drive those metrics up. And we did a lot -- we've done a lot of that at Tinder over the years. But if it's not in the service of the user, if it's not increasing the value proposition or leading to better outcomes on the app, it's a little penny-wise pound foolish. And so he's sort of shifted the narrative towards let's focus on the user first getting them more outcomes on the app. And by the way, Hinge has done this the whole time, and you've seen the success it's driven. And so the idea is Tinder should be using the same lens, too. That will then lead to a few things, improve retention on the app. We know if you're getting more outcomes, you're getting into more conversations early on in your experience with Tinder, your retention is higher. That is a fact. And it also indirectly helps because if you have a great experience on the app, when you do get in that relationship and maybe decide to get off the app for a while, you're going to tell your friends about it, that drives reconsideration and user growth from that regard. And then the other factor in all this is because we're an episodic sort of business is when that relationship doesn't work out, which often is the case, you're going to come back to Tinder again. And so by focusing on that first -- on outcomes that will lead to MAU growth that will then give us a stable, if not growing user base to optimize around, the revenue and the RPP and the payers will come rather than just trying to optimize payer penetration and RPP on a shrinking user base, you can only do that for so long. And so that's sort of the shift in focus. And then the metric is the Spark metric, which we talked about a quarter ago, which is effectively a proxy for outcomes. And so the Spark metric is a 6-way conversation, a 6-way back and forth, which when you run the regression on it is -- and you look at sort of the curve, the six-way point is sort of where the curve flattens out in terms of predictability and leading to an outcome, which is a real connection. And so we went with that metric. We were using contact exchange, we talked about a couple of quarters ago. The reason we've moved away from that a little bit is because, first of all, Sparks is pretty predictive of contact exchange. And Contact Exchange had a little bit of -- some issues. For example, in Europe, you can't use AI to read people's messages from a privacy perspective. So we can't -- we're not even allowed to see did you share a contact. And in some of our features like double date, what we were seeing in user behavior was they're not really exchanging contacts. They're actually just saying, "Hey, let's meet here because it's a group date and then dealing with the logistics off the app. So Sparks, we feel is the best metric. We're using it internally, sort of kicking the tires on it, and then we'll decide exactly how we give that to you guys externally in terms of quarterly reporting.

Got it. Okay. And back to tailwinds. So you guys mentioned on the last call, this spring event that a potentially new Tinder or some new unveil comes out. So should we look at this in the context of your multiyear plan as the start of the resurgence phase in terms of MAU and revenue growth? Or is this kind of the back half of the revitalization phase? And I mean, to the degree you can talk about the spring event.

Right. Yes. The spring -- I would think of it as an update on the progress we're making on the revitalization phase. And the reason we're doing it is because we just can't -- we're making a ton of progress on the product with a lot of new features and a lot of new tests -- and it's really hard to share all that on an earnings call, for example. So the idea is share it in a lot more detail so all of you understand the progress being made in that second phase, the revitalization phase that we think will lead to the resurgence phase, it's still sometime in '26 or '27. That's the way to think about it.

Got it. Okay. And then shifting to headwinds or potential headwinds. So face check, we've talked about that in recent calls. This weighs on MAU by low single digits, I think you guys said. Are there other trust and safety or user outcome initiatives that could create near-term friction to MAU or headwinds to revenue? And why are these trade-offs the right long-term choice?

Yes. First of all, Face check is, I think, phenomenal. It's been hugely impactful. It's reduced exposure to bad actors by 60%. We've never seen that with a trust and safety feature before. And you're right, we think it's going to cause a couple of points of impact to revenue, but that's well -- a worthwhile trade-off. We've optimized that down from about 10 points, which is where we started out in Canada a year or so ago. So we've really done a good job there. There's not another new trust and safety feature in the road map that we think will have a similar impact. It's an ongoing battle. So it's a little hard to predict. But right now, we're focused on rolling out Faceheck more broadly. And actually, this past -- a few days ago, we've rolled it out now across the U.S. at Tinder in its entirety. So that's a big step forward. Where we might see a little bit of MAU pressure or the revenue pressure is more likely to come from some of the other user tests we're doing. So the Project Aurora test in Australia, features that basically drive user outcomes potentially at the impact of a little bit of short-term revenue and maybe even some users, which -- a good example would be algorithm changes that shift the weighting towards user outcomes and away from just getting likes to as many people as possible to get them to convert on the likes to paywall. Some of that. But again, we're being smart about it. We're testing it in confined markets to understand the impacts. We'll be very clear about what we think those impacts will be. We talked about $14 million potential in Q4. The reality is we're trying to be conservative in those estimates because we don't want to hold the product teams back. In the past, they were afraid to take bold leaps because they were sort of confined by this revenue sort of objective. What we've actually seen, which I think is good, is a lot of these tests aren't as impactful as we think. There's offsetting benefits. And so we'll have to see how that plays out, but we'll be very transparent in terms of guidance and those things.

Cool. And a potential massive tailwind for you guys next year, which you talked about is we've got about $100 million potentially in the bank, so to speak, from the App Store fee changes that you could potentially redeploy in customer acquisition or product changes like you just described. How much of that do you think gets reinvested back into the business versus allowing it to drop to the bottom line?

So we said $90 million last.

A little bit from Google that.

Right. That's true. Yes, depending on how Google evolves, that's true. It could be more. Yes, look, I would think about it this way. We're going to do what we think is right. We're going to make the necessary investments to ensure Tinder's long-term success and to optimize for long-term EBITDA and free cash flow and shareholder value. And that's the process we're going through right now as part of the 2026 annual planning process that we're sort of in the middle of. And we'll use tests like Project Aurora and other sort of tests we have going on right now to inform the 2026 plan. That's how I think about it. The good thing is it gives us a lot of optionality, obviously. So we feel like we've got plenty of optionality to do what's right for the business long term.

Okay. Another headwind, I mean, you guys get this question a lot, so I would just kind of throw it out there high level. But there's this perception that the Tinder product might need to be changed somewhat dramatically to cater to the Gen Z dating pool. You've rolled out things like Double Date, College modes. How many more new modes do we need at Tinder? And how big of a departure do you think you need in terms of the end state of the product from its user experience?

Look, I think we need to take some bold swings. Incremental improvements to the app alone are not going to be enough. But we also -- I don't see us moving away from the core swipe experience either anytime soon. I think the way -- if ever, I think the way to think about it is how can we augment what makes Tinder great, what Tinder is known for to meet the needs of -- particularly of Gen Z and Gen Z women. And so Modes is a great example of that. Modes is not replacing the swipe. Modes is allowing more customization, an experience that's more akin to what Gen Z is looking for while keeping the core swipe mechanic that has made Tinder so popular. I do think there will be more modes, and we're working on those. We've got College. We've got Double Date. We've got more to come. There's lots you could think about. But I think it's a clever way to sort of keep what makes Tinder so great, but also provide an improved product experience that's -- what Gen Z is looking for. I think there are a few other things we're doing, Chemistry is another great example. So Chemistry takes it one step further, right? Mode is a way to sort of filter the swipe experience. Chemistry is separate and apart from the swipe experience. And so think of it as a second tap. So I can go in the app and say, do I want to swipe or do I want a more curated set of AI-driven matches and giving -- that's a feature that Gen Z, women, in particular, I think, are going to love. And so the goal is that is to augment what makes Tinder great, but in bold ways. And when all these little things ladder up, improved algos, better recommendations, better outcomes, together, it's a new product experience that lives up to the expectations that Gen Z has put on the dating app on Tinder and the category at large.

Got it. You mentioned this earlier, but Sparks being this key metric that you guys are going for to determine the positive user outcome. As coverage of Sparks continues to rise, when do you expect that to translate into either aggregate MAU retention and ultimately revenue?

Yes, I did talk a little bit about it. We know Sparks leads to better retention, better word of mouth. And so it will improve MAU, like we can see that today. It's difficult to say exactly when. That takes a little bit of time and depends on how quickly and how dramatically we can improve that metric. And there's sort of 2 ways we're looking at it. One is Sparks coverage, which is of our users we have today, how many are getting into these meaningful connections as a percentage and then just Sparks overall. And so we've seen good improvement in Sparks coverage. Spencer has talked about that a little bit on the earnings calls. That's the first step. That should ultimately lead to -- but Sparks themselves are still down, users are still down. We expect -- if we can drive user outcomes, that will translate into improved MAU trends, but we haven't sort of put a quarter on it yet. We're trying to do it as quickly as possible and in a thoughtful sort of a long-term way.

Okay. So it could potentially have a little impact on MAU.

I think -- yes, the way to think about the impact on MAU, it's a little bit nuanced. Sparks themselves leads to better retention and better MAU. But algorithm changes that prioritize sparks or outcomes over likes and revenue could actually have a little bit of a negative impact to MAU. Likely, what would happen is it would help women retention, it would improve the women experience. Today, if we're just getting as many men as many likes as possible, the women experience on the other side is not the best. They're sort of getting flooded with men they might not want to really actually connect with. If we flip the script and we optimize more towards meaningful connections and outcomes, the women's experience improves, but some men might not get as many likes as they used to, and that retention might fall off. And so we're willing to make that trade-off. And that's where this gets a little bit bumpy, and we need to sort of test our way through it. So I expect there to be some short-term noise, but long term, it's definitely the more sustainable approach.

Okay. And on the tailwinds, you mentioned earlier Project Aurora. Obviously, that's a big topic. sounds like it's a whole new UI, coupled with a new marketing plan and potentially like post rollout, you're driving better growth and better retention, but potentially a lower, albeit acceptable margin. Is that the right way to think about it? And just broadly thus far with Australia, what have you guys learned?

Yes. I think it's still early. We're rolling out as many features there as quickly as possible. There are more rolling out as we speak. I wouldn't think of it as an entirely new UI like there's the old Tinder and now there's the new Tinder. It's more of what I talked about a little bit ago, which is augmenting the experience, but we're doing it all in one place. So it's adding modes. It's reimagining some of the See Who Likes You mechanics. It's adding chemistry, and it's coupling that with marketing spend because marketing can't play the lead role in this turnaround, but it definitely has a support role to play. And I think the early signs are -- we've seen some early green shoots there, and we're happy with the progress we're making. And we're going to use it to inform our 2026 plan, and that's sort of what we're in the middle of right now.

Got it. Okay. And if we step back to MAU and we kind of talk about that relative to some of the ecosystem safety and trust initiatives that you've done, do you believe that there's still a lot more cleanup to be done within the 47 million-ish that you talked about at the Analyst Day in terms of total MAU? Or is that like we're at the right baseline?

I think the trust and safety work doesn't end. It's an ongoing battle. It's always going to be a high priority for us. It's always going to be a big area of investment because it's actually the #1 barrier for users entering the category, concerns -- perceived concerns about trust and safety. And the bad actors don't quit. They don't go away. I do think face check is a huge leap forward. Like I said, 60% reduction and exposure to bad actors. But it's not like we have -- we can stop there. I don't expect -- I don't foresee anything in the road map or coming down the pike that's some meaningful cleanup effort like we had a couple -- a year or 2 ago, a couple of years ago. But there's always going to be this ongoing battle. And we're never going to say tamp down on trust and safety efforts because it could create a little noise in them to do, that would be foolish. But no, there's not a Facebook -- face check version 2 alternative or other product feature coming down the pipe that I expect to have a material impact on.

Got it. Okay. And you started the conversation with Hinge and the change. I mean, Hinge's business has just been on fire, has been for a while. So I guess, high level, you guys have talked about this before, but what did they get right that Tinder has gotten wrong? And then as you look into '26, what are the biggest growth initiatives for Hinge?

Yes. I think it's this -- I guess they've done 2 things. One, a focus on the user and user outcomes. It's the app designed to be deleted. That's been a successful recipe and one that we think Tinder can learn from as we've discussed today. I think the second thing they've done really well is they've balanced the road map. They've done a really, really good job of making sure a large portion of the product road map is centered on product innovation, maybe not things that are going to drive revenue next quarter, but that continue to evolve the app and meet the needs of users. That, I think, has been a huge recipe for success. I think Tinder, it just had such dramatic growth, no marketing spend, part of the cultural zeitgeist, biggest app in the industry. We probably focus a little bit too much on monetization and not enough on sort of laying the seed for longer-term innovation. Hinge has learned from that and not made the same mistake, and I think that's showing in the results. And in terms of '26, it's going to be a little bit more of the same. It's going to be a balanced road map around product innovation. They're sort of at the forefront of AI in the category, and that won't change either. They've had a lot of success with features like prompt feedback and others around sort of AI coaching. And then there's room for continued optimization around monetization as long as it's increasing the value proposition there. And then the third component is obviously geographic expansion. And so they've done a great job expanding into Mexico and Brazil, but there's more room to go there. And so we'll talk more about the ongoing expansion plans at Hinge, but that will help plant the seeds for growth, not so much in '26, but '27 and beyond.

Okay. And on the headwind side, you mentioned rolling out Face Check in other properties. Where are you on that initiative? And how material could that be to the overall business?

Yes. We're racing ahead at Hinge and at some of our other major brands, and the plan is to roll them out there as quickly as possible. We'll test it. And I don't foresee a 1-year test because that's the beauty of our portfolio, right? We can learn from what Tinder learned and expedite rollouts in other brands. We've obviously penciled out some preliminary numbers. I expect it to have some impact on those brands, but not material. I think the bulk of it will be at Tinder, and we've kind of sized that and these other rollouts won't be sort of material to the overall company.

Got it. Okay. And then on top of funnel, you guys showed some data at the Analyst Day that had -- on one hand, it was like 220 million no app daters. And then there was 30 million of the previous Tinder, Hinge churned daters. Which do you view as the bigger opportunity in the near term between the no appers and resurrecting some of that 30 million?

Yes. Well, the numbers say the bigger opportunity is the 220 million. The nuance there -- I think they're both opportunities. I think the nuance is it's easier to drive reconsideration, right? So for the 30 million people who have been on these apps have been on Tinder and have used it, what we need to do is a lot of what we've been talking about, improve the product experience, get the word-of-mouth flywheel going and just -- and evolve the product up to where they're like, okay, it is new, it is different. It's worth reconsideration. So I think -- and marketing can play a big role in that, too. So I think that's really the near-term opportunity. The $220 million is more of the medium, long-term opportunity that shows there's still a lot of room to go here in this. We're -- if you look at our MAU, remember, there's duplicates in there because we've got people on multiple apps. And if you were to dedu that number, that -- the 250 million in total is a big number for us. We could double the company if we chip away at that. So yes, I think the reconsideration is the near-term opportunity. The new category entrants is a little bit of a long-term opportunity. That is where the product innovation comes in. And that is where AI can play a role and marketing, too. I think Hinge has done some really interesting work on the marketing side that tries to explain to those who haven't tried online dating why now might be the right time.

On this topic of like the 220 million and then just non-appers, there's a theory out there that direct messaging is a format that Gen Z feels more comfortable using and is a potential competition for you guys. So how do you respond to that secular bear case that the younger demographic just wants to DM in these other social apps and not use an actual dating product?

Well, I'll tell you what our data shows. We do a quarterly survey of singles in the U.S. that get out a lot of these questions. And what we see is it's not stealing share from dating. It's actually -- it's sort of like what the bars and the church and your parents' friends were before the digital age alternative to online dating. Now social media is another alternative. And there are some use cases that it does happen. We don't see it replacing online dating as a category. We're much more effective. We're thinking about it every day. So it happens, but it's not -- it's clear in our data, it's not stealing share that we can see.

Okay. That's great. I think we're out of time. We're going to leave it there, but thank you very much for coming.

Yes. Thank you.

Yes. Thank you again.

Appreciate it.