Match Group, Inc. ($MTCH)

Okay. Good morning, everyone. And we're pleased to have Steven Bailey, CFO of Match Group here at the conference. Thanks for coming. We appreciate it.

I'm just going to kick it off with Tinder. You guys called out improving engagement metrics in 1Q, including improving declines in the Sparks metric. What do you think are the best kind of leading indicators that you're seeing at Tinder that's kind of moving more towards even a stable or potentially reaccelerating trajectory? And yes, start.

We'll start [indiscernible] skipping the safe harbor whole thing. [indiscernible] Would you want to do that or not to do that. I'll keep going. Maybe we can do it at the end. Sorry. Well, no problem. So yes, so look, I think -- here's the way I'm thinking about it. One is it's not just one metric. It's actually the thesis being proven out. So it's the fact that leading indicators are improving to that Sparks and Sparks Coverage, which is a 6-week conversation on meaningful connection. That was always what we thought would move first. And then we said, well, the thesis was that would lead to more lagging indicators or more core user metrics improving. And so we've seen that happen now [indiscernible] improved from minus 10 to minus 7. So that's proving out the thesis that the leading indicators, which is improved product experience are going to translate into more core user metrics improving. Retention has also improved. So that's a core user metric. And then we said that, that would ultimately lead to the core financial metrics improving to what investors ultimately care about. And so we've seen that actually start to happen, too. Payers is a great example of that. Payers improved from minus 8% in Q4 to minus 5%. So that's a pretty marked improvement in Q1. So to me, it's actually the most important thing is that the thesis is starting to be proven out that fix the product, you'll see that first in metrics like Sparks, that will lead to improving user trends. We're seeing that in MAU and retention. That will lead to better financial results. We're already starting to see that in Payers and revenue to where our Tinder revenue is coming better than expected lately, too. So it's more that the sequencing is playing out like we had hoped. That's what I'm most excited about.

And I think it might have been March where it was the first month of new user registration growth since 2024. What demos are maybe driving that new user trend? And what do you view as the biggest driver of these gains?

Yes, that was incredibly exciting to see. First of all, registration is up 1% year-over-year. It's been many, many years since that's happened. So that's another -- a step function change in the right direction. So that's new users downloading the app for the first time using Tinder. And what's really exciting to see is that it's pretty broad-based. I was looking at it just the other day, and it's really across almost, I would say, most cohorts. So it's both men, it's both women. It's largely speaking, both older cohorts and younger users and it's both international and the U.S. It's not every cohort, but it's pretty broad-based, which is fantastic to see. And it's really coming from a combination of, I would say, 3 things. One, and probably the most impactful has been the shift in strategy of the marketing, which is more lower funnel now, more brand perception shifting spend. It's still a combination of both, but we've shifted more heavily to down funnel. That's probably had the biggest impact. More spend just in general, right, Tinder, we spent up about $50 million year-over-year. So that's helping. And then features like double date, really resonating with Gen Z. It's helping that word of mouth flywheel that's so important to the overall equation, too. So it's really those 3 things leading to better right trends, which is fantastic to see.

Yes. that stood out to me like huge of this last quarter. Maybe on the product road map, you've mentioned a few, and we're getting towards the midpoint of the year, but I think as we get towards the back half of the year, what on the product road map is exciting? Or would you call out as something to look for?

I don't want to spill the beans on a super exciting new product road map things in the back half of the year, I'll let Spencer do that. I can talk more broadly, though. I think what I'm most excited about is there's going to be -- there's clearly -- our company, I think, broadly speaking, across the category, a push to more IRL. I think that's going to be a big theme. And we've started to trial it in L.A. It's going very well. We can talk more about that if you want. But there's -- we're going to amp up the IRL connections on Tinder, which is what Gen Z wants. And then sort of a related theme, is more group-type features. So double date has just been hugely successful. 1 in 4 Gen Z women in the U.S. are using it. That's when you pair up with a partner and you swipe on other pairs and you go out on a double date. That's exactly what they're looking for. It's fun. It's lightweight, it's lower pressure. It's perceived to be safer. I think we're going to branch out into even more group type features, I think beyond just a payer, that's a big opportunity for us too.

Yes. Maybe just on the IRL or in real life. So at the product event in March, you guys talked about these events and catering to the younger users that I think you just mentioned. How are these efforts going? And then like do we view this as driving significant revenue over a long period of time? Or is it part of like kind of the marketing and branding funnel for Tinder?

I think it's more the latter. It's not -- I don't think it's a big revenue growth driver, at least for now, that's not the focus. It's really changing perception for Tinder away from -- this is hook up app and I'm tired of swipe fatigue to, this is a new people app where I'm finding and making meaningful connections in real life. That we're trying to shift the sort of perception in that direction. And it's what Gen Z wants. They want more in-real-life connections. And Tinder is the largest platform in the world that can make those connections happen. And so that's how I see it. How is it going? Very -- extremely well. That's why I'm saying in the back half of the year, I think you'll see a lot more of it because we piloted it in L.A. with 20 events so far. I think we're going to do 30 -- we'll have 30 done soon, and the feedback has been incredible. The attendance is, I think, at about 85% attendance, which is great. So that's been the problem in the past. We've tried this at look match.com a long time ago. And the issue was like there was always like, yes, yes, yes, I'd love to go to event. But then when it came the day to actually go, people wouldn't show up, right? There's a lot of anxiety. I think the Gen Z generation is different. It's because they've lowered the pressure a bit. They want lower pressure connections. They don't need to find the love of their life at this event, right? They want to go meet new people and see where it goes. And so I think they think about events like through a different lens than prior generations. And so 20 events, really strong attendance. We serve everybody after the event and say, how you like it. The feedback has been incredibly strong. We've been surveying just our broader users in L.A. about just the offering of events. And the results are great. It's something like 50% of Gen Z in L.A. is saying they're interested in going to event, which is great to the interest is there. I think it's 40% of Gen Z in L.A. on Tinder saying events are a really cool feature on Tinder. So the demand is definitely there, and I see us rolling it out much more broadly.

You have a team dedicated to this in L.A.? Or is it just?

Yes, but it's a small team. We have a small team that we borrowed from other parts of the company. What we're going to do is we're not going to curate the events, right? We're going to do this in a scalable way. We want to be the technology platform that makes these connections happen, not an events business. So we're really partnering with other events businesses that already have the event set up and they're curating the event. We're sponsoring it. That's sort of the model we're using. So it actually doesn't take a lot of people to do it. And the cost has been relatively reasonable too. Actually, most of the expense has just been in marketing the event and kind of like what you said, using it as a marketing tool for the broader Tinder product experience more generally.

And we could expect maybe because it seems like it's been initially a pretty good success like maybe we would see it in other markets or something down the road?

Yes. I think we'll talk more about it in the next earnings call, but I think we've got pretty big plans in this area. I think it's going to be a big unlock for how do we win over Gen Z events is definitely part of that.

Right. That's great. Sticking with Tinder. How much progress do you think you've guys made in improving the recommendation algorithm over the last year or so? And do you see like an opportunity to drive further engagement and user experience improvements from recommendation changes?

A couple of things. One, recommendations, I would say, has been the biggest win of the year. Look, if you look at the metrics we just talked about Sparks and retention and what's driving it, I would say the algo changes is about 2/3 of that. And so that's been the biggest one. Combined with features like double date that's changing perception, that's sort of been end marketing, that's been a winning formula. But if you just look at pure A/B test, what's driving metrics, it's retention. And it's coming from better matches and the algos. So that's great to see. And so we get the question a lot, well, okay, was that low-hanging fruit and sort of it's over now. And now you got to come up with something new. And the answer is really no, honestly, I just asked the team and they confirmed for me, we're doing 6 algo tests right now live. So like the core algo changes are not done. We'll keep testing and keep optimizing. What other people also don't realize is it's not just 1 algo. It's many algos across the app for different parts of the experience. And so there's a lot there that could be optimized. But effectively, what we've done so far is really change the weighting of the algorithms, right? We've talked a lot about this from, likes, generating as many likes as possible to generate revenue to more keying off of user outcomes in Sparks, meaningful connections. It might be less likes, but more meaningful connections. That's basically the work we've done so far. And what's been great to see is not only is it improving metrics like retention, but it's not having the revenue hit that we anticipated, right, less of a revenue hit than we anticipated. So that's great. Where we go from here is continued optimization, 6 tests live right now. And then I think the other big unlock that we have -- it's really super early days, is feeding these algos more data and insights so they get better. The trick -- the challenge with Tinder was always there's not a lot of data to go off of, right? Like compared to a Hinge, the profile is much lighter, that's by design, right? And so the algos are working off of a sliver of information about you and your profile and your interactions on the app, right? But we're testing a lot of really interesting AI-driven features. For example, we talked a lot about some of the [ camera ] features we're doing. So there's an ongoing test right now that looks like with your permission, your camera roll, most people have got thousands of photos on the camera roll. Not only can we say these are the best photos for you, which people struggle with. And this is the right order to put them in. But here is what we -- here's insights about you that we've cleaned from your photos, you like to cook, you like the travel, and we're going to start helping people not only fill up their profile better, which is another struggle, but also think about feeding all that information like the meta data on the photos into the algos, can create much better, much better connections and so are much better matches. So I think that's the other big lens of this is how -- how do we get data to feed the algorithms still in a light fun way. With Chemistry, we've tested some of that, where it's like a back and forth Q&A. Let me learn a little bit about you, let me feed it into the algos. That's still a huge opportunity.

And AI has been a pretty big catalyst...

Yes. I think AI does a great job of 2 things. One, basically inference, like inferring something about you, that's not explicit, right? The old algos is very like rules based. What are you looking for? What are your rule breakers? And it doesn't infer anything. But now even in that short snippet of your profile without you explicitly saying it, AI is better at inferring kind of what you like, what you dislike? And then two, it's what I said is, it's very good at gleaning information about users in a lightweight way. Like [indiscernible] interacting with ChatGPT, you been everything else. You can have a conversation where it collects data, but it's not taxing on you as a user, whereas in the past, it was like fill out this huge profile to get the data. So I think that's the other place that AI does a really good job in.

And like just faster, like speed, too. Does it -- like does it help with [indiscernible] efficiency perspective relative to if you're tuning up algorithms in the past, like when you weren't deploying AI. I'm just...

It does. We iterate on it faster and it can learn more about you more quickly, who writes. And we've got something in test right now, which is a feature in Tinder where we actually explicitly tell the user, "Hey, look, take your time, go through some of these profiles, swipe right or swipe left because we're learning about you by doing that, especially for women who tend to not swipe right very often. We're asking them to take actions so that AI can quickly lean insight into what they like and what they don't like, which is getting you better matches more quickly. It used to take a few days to figure it out. Now it takes a single session. So you're right.

Maybe just maybe 1 more on Tinder. And I think you touched on it, but I think it was probably 1 of the biggest issues for the platform was just the younger users, Gen Z. And maybe you've already touched on it, but do you think the perception of Tinder with that cohort has changed over the past year or so with all of the things that you guys are doing and is there more kind of room to go there with -- again, with that younger cohort?

It is changing, but the job is not done. Clearly, we have a -- we've got further to go. How we know it's changing. Well, first of all, let me take a setback. The first thing is, does Gen Z want to meet new people. Like that's the first question to ask. And so we've asked that and surveys in many different ways. And effectively, the survey results, 80% of GenZ -- our survey results say 80% of GenZ want to get into meaningful connections. So the want is there. They just want to do it in a different way. And I think the sort of headline is lower the pressure a lot from where it used to be. And so they want to get in connection. They want to do a different way, and we're trying to build the products to do that. And I think what we're seeing -- I'll just give you a couple of stats that we're building our confidence in it's working is I mentioned this earlier, double date is a feature where 25% of GenZ women in the U.S. are using it. And they're using it at far higher rates than millennials or older cohorts of users. The other, I think, probably best that metric that we've given so far is retention of U.S. GenZ women or how long they're staying on the app when we talk about good churn and bad churn, right? Good churn is you met someone you left the app. We want that all day long. Because that means you come back when you're single again and you tell your friends and we get the word of mouth. What we're trying to do is reduce bad churn, right? Bad churn is, I'm not meeting new people on this app, so I'm not going to use it anymore. And we've started to see that. U.S. women Gen Z are -- retention is up 3 points year-over-year. That's year-over-year improvement in retention, and it continues to improve. So that's telling us that what we're doing is working. There's really 2 things we're doing. One is the app is more effective. It just works better, right? That's the algos. And two, we're starting to change perception with features like double date and with features like IRL. So I do think it's starting to work. We used to talk a lot about Tinder perception as well. We track this metric if you remember. It was like it's Tinder hookup app. And we use that to measure brand marketing efficacy. And so I just looked at that the other day, that's continued to meaningfully decline. And so I do think perception is changing. And we're starting to get Gen Z to reconsider Tinder. The other good, I guess, good status as a survey result is that about half of Gen Z women say double date is a defining feature of Tinder. So these features are starting to work. But it's going to take a little bit more time to really get back to growth. I think we're on the right path.

That's great. Let's go to -- pivot over to a platform that's growing very nicely, Hinge. You recently maintained the $1 billion revenue guide for 2027. Maybe just talk about like product-led growth drivers there as we get through this year and into next year? What's kind of working? And what are the biggest growth drivers?

Yes. I mean phenomenal growth, 28% revenue growth in Q1. They're on track to deliver the full year expectations we put out earlier in the year and on the path to $1 billion in 2027 with expanding margins. So incredibly strong results there. There's a few things. One, I think the growth is coming from a number of areas. One is there's a long runway on monetization in core markets. They still monetize far lower than Tinder. That's a misconception. I think there's some confusion because if you just look at the external results, we break it down with RPP and payers and [indiscernible] value, you look at Hinge. It's like, well, RPP is double what Tinder is. So that monetization opportunity is not there. That's not really the right way to look at it. You really have to look at it from like a revenue per MAU perspective, which bakes in payer penetration and RPP. And if you look at it that way, and the other benefit I have in looking at the internal data is, I can sort of look at it apples-to-apples, right? And I can control for the geo mix of those 2 businesses. So Tinder's RPP impaired penetration gets weighted down because it's so global. In these other international markets monetizes less than the U.S., where Hinge's more concentrating in those core markets that tend to monetize higher. So basically, if you control for all that, there's still a long runway to go for monetization improvement by Hinge in core markets. So I think that's going to drive some growth. Europe is also still pretty early days from a monetization perspective, and growing extremely strong. I don't know if we've said this -- I don't think we said this in earnings, but if you just look at revenue growth in European expansion markets, it's 100% year-over-year the last 3 quarters, which is massive growth. And still a long runway to go if you look at it relative to Tinder. And then third is -- and I think probably most importantly, at this point in its growth trajectory is it continues to resonate in every new market [indiscernible]. So it's the #2 or #3 dating app in Mexico and a couple of other countries in South America where it just entered in Brazil. And so that's just another continent that it's resonating in. And so it's building our confidence in its ability to just be a global brand, right? And so then the question becomes, okay, well, when is it -- so it probably is going to resonate in Asia, too. It resonate in Europe, it resonate in South America. It's resonating core inland [indiscernible] markets. it's probably going to work in Asia, too. And that's a huge market that's just completely untapped. I mean, Japan is one of the biggest markets in the world just from a dollars perspective. And so worth, to be honest, talking more and more now about, okay, we're going to get -- we're sort of -- we're going to get to the $1 billion through basically momentum. I mean we got to keep executing. So, how do we get to the $2 billion. That's kind of where the lands have shifted, which I think is because we see, okay, this could be a global brand. So that's super exciting. And then the last thing I would just say about Hinge that I think is important is we've, in a way, kind of learned from the Tinder mistakes a little about. And they are myopically focused on product innovation. And so they're not letting the foot off the gas on, okay, we've got the user growth, so let's shift all the focus to monetization. It's a really balanced road map between monetization and true product innovation, which is necessary to keep -- to get back to category growth, right? And so you see that in this last quarter where we rolled out 3 super interesting new product features. There's a friends product -- feature fronts take that brings your friends into the experience and helps them give insights about you and the profile. There's a feature called signals that we're working on, that, adds basically, you could earn a badge through good behavior that is a feature that really will resonate with women. So we're really innovating on the product, too. I think at a really good pace to help -- so that's just -- that is the way to long-term sustainable growth. Product -- continued product innovation and investment combined with monetization and the global appeal, I think there's a long runway to go there.

That's awesome. How do we think like -- so if Tinder trends continue and things continue to improve and then Hinge has a lot of runway and great growth right now. Like over a 3- to 5-year period, how do the -- how do you see the brands coexisting within Match?

Yes. I always harp back to the gem, which we rolled out a few quarters ago, which I think is a simple way to think about it, where our brands fit on sort of 3 axis, focus, fun and familiarity. And focus is Hinge, fun is Tinder, familiarities a lot of the E&E brands that we talk about that are a little bit more demographically focused. And there's really a place for all of them. And we're going to ensure that remains the case. A good example is IRL is applicable to both Hinge and Tinder, right? And they both have a GenZ user base. But it's going to look -- it's looked very different. How that sort of manifests itself in the app looks very different, right? So there's an IRL experience, which is the third product feature that Hinge has just rolled out, that basically gets you out on a date right away. It gets you in IRL with a connection. And the -- but with the way it does it is very different than the Tinder events product strategy we just talked about. It's more a drop-down, you match with someone, you got to say, do you want to go straight to a date? Where would you like to go coffee, dinner, whatever, pick a time, okay, let's meet. And that let's get rid of it back and for chatting and let's just go out on a date. That's IRL for Hinge. That's way different than the IRL for Tinder, which is let's go to an event and sort of just hang and see what happens. And so we'll keep those paths pretty separate and distinct. And the last -- the couple of other points I would make is it's a multi-app category, right? Users are using 3 to 4 apps at a time. So there's no reason why someone can't be on Tinder and Hinge. That's actually what happens quite frequently. And we think there's a huge opportunity around cross-sell and bundling and just making better use of our portfolio of brands. It's a strategic advantage we have. We haven't done a lot on. So we do have an internal project called Mercury, which is cross sell. It's generating $20 million, $30 million a year in revenue already, which is you're on BLK, and we show you an ad for Tinder and we say, would you like to join Tinder too and it's one click profile transfer. So I think that's the path forward is keeping these apps unique and distinct and then offering -- and then providing offerings that only we can around bundling and cross-sell that a lot of our competitors can't.

Okay. We -- I have time for a couple more questions here, so I'm going to try to go quick because I have a lot more to get through, but...

I'll try to get quicker answers too.

No, no, no, that's great. The Sniffies just staying with like the brands. You invested in Sniffies. How should we think about it? Can you just remind people roughly, minority stake?

Yes. I'll give you the 1-minute answer. $100 million of our investment, large minority stake, off balance sheet, not consolidated, #2 player in the non-heterosexual male category, which is the largest demographic segment in the category. Just look at Grinder and their market cap and how well they've done. We think there's a path to make it #1. And that's why we've invested in it. We're going to help support it with trust and safety. We're going to work together to get back in the App Store with a safe for work product. And we're super excited. It has great brand residence, huge following, 3 million MAU, founders are great, and we're going to do it in a way where we're playing the supporting role, but we're not going to sort of mess up what all the great things they've done as being like independent founder-led business. So that's the strategy. I think it's super exciting. We're shutting down Archer that was a bet we made, just hasn't found the product we're going to fit that we wanted, and so this is a better bet for us.

Okay. I want to hit margin and capital allocation. On the margin, 200 bps of margin expansion guide at the midpoint, just talk about just the drivers for margin, and then I'll finish with capital allocation?

Thank you. I think capital allocation is underappreciated part of the story. Margin in 1 minute is, first of all, you're giving us -- first of all, there's a lot of onetime costs in 2025. So you really have -- which we've been explicit about. We're extremely clean with our EBITDA definition more so than most companies. So we try to call it out. But if you sort of strip all those onetime costs out, margins are basically flat year-over-year [Audio Gap] the headcount reductions we've made, but we plot it back into growth, which has been a great strategy for us. We've effectively created $100 million of headcount-related savings. $125 million-ish in IPP-related savings, $225 million that we plowed back into Tinder and Hinge product and marketing. Where it goes from here, is it's mostly structural too. It's not -- but I think ultimately, my goal is to get growth back. I'm thinking about long-term adjusted EBITDA, not necessarily margins for the particular margins. And the way I always say that the best way -- the easiest way to generate margin expansion is revenue growth, right? Just because of the operating leverage in the business. So if we can get Tinder and the brands back to better growth, which we think we can over the next couple of years, that will give us lots of optionality to expand margins further.

That's great. Let's close with capital allocation. I mean, Match is an incredible free cash flow generator. You guys have been super disciplined with capital allocation in recent years. So just -- yes, just a couple -- like a minute on how you see capital allocation?

Yes. I mean we think of it as like the coiled spring analogy, right? What we're -- we're coiling the spring up by working hard to turn around Tinder and get free cash flows back to growth. They've been about flat for the last few years, right, which is still $1.1 billion of free cash flow. And we're buying back shares all along. And so we've reduced share count outstanding. We think we'll reduce it 5% to 7% over each year over the next few years, like a CAGR sort of rate. And when we get through the end of this, the share count is a lot lower, the cash flow starts to grow, and it's a coiled spring that just generates fantastic free cash flow per share and returns. And free cash per share was up in the 20% year-over-year growth last year. It will be in the high teens this year. It's just phenomenal. I think people don't appreciate it. It's a big part of the overall turnaround story.

Right. That's great. All right. So I think we're out of time. Thank you so much.

Thank you.