Q2 2024 Earnings Summary
- Tinder's user base and retention are stabilizing and improving, driven by a combination of product initiatives and strong marketing efforts, leading to better user outcomes and increased user engagement. Ongoing trust and safety enhancements have significantly improved brand perception among key demographics, with a nearly 50% increase in women aged 18-30 perceiving Tinder as a place to find meaningful connections and a 20% reduction in the hookup stigma.
- Hinge is experiencing remarkable growth and is on track to become a $1 billion-plus revenue business, with continued investment in product innovation, marketing, and global expansion. The app is moving up in rankings across various countries, and with less than 10% of its revenue from European markets, there is significant opportunity for future growth as they integrate AI to enhance user experiences.
- Match Group is improving margins and returning significant capital to shareholders, by exiting non-strategic and margin-dilutive businesses like live streaming, expecting at least a 50 basis points margin improvement next year. They have aggressively repurchased over 100% of free cash flow in the first half of the year, believing their stock represents a terrific long-term investment at current price levels.
- Match Group is exiting its live streaming businesses, including Hakuna and live streaming services within some dating apps, due to increased competition from well-funded players like TikTok and lower margins compared to their dating businesses. This exit will reduce revenue by approximately $60 million next year, creating a 1-2 percentage point revenue growth headwind.
- Tinder's payer growth has been declining, with a year-over-year decline of 8% in Q2 and an expected decline of 5% in Q3. The company admits that achieving sequential payer growth in Q4 is a "fairly tall order", indicating challenges in reaccelerating growth.
- Despite plans to improve margins by measures such as reducing the workforce by approximately 6%, Match Group is facing pressure from investors like Starboard to return Tinder to growth, improve margins, and return more capital to shareholders, highlighting ongoing concerns about the company's performance and shareholder value creation.
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Tinder Payer Growth Guidance
Q: How confident are you in the 250,000 sequential increase in Tinder payers for Q3?
A: Gary Swidler explained that Tinder has been seeing strengthening momentum in payer trends, with solid sequential payer growth month-over-month through Q2 and into July. They expect a 250,000 sequential net add in Q3, improving the year-over-year decline in payers from negative 8% in Q2 to negative 5% in Q3. This confidence is based on continued improvements in user trends and marketing efforts. -
Tinder Growth Prospects and 2025 Outlook
Q: Can improvements at Tinder drive high single-digit to low double-digit growth in 2025?
A: Gary Swidler indicated that while it's early to provide a 2025 outlook, they expect continued progress at Tinder, with stabilized and improving users and payers positioning them for a better 2025. They aim to get back to improving MAU and payer growth year-over-year, driven by product and marketing initiatives, leading to better performance next year. -
Exit from Live Streaming Business
Q: What's the rationale and financial impact of exiting the live streaming business?
A: Gary Swidler explained that live streaming had lower margins due to revenue shares paid to streamers, with margins around 20% compared to dating business margins of 30% or higher. Growing live streaming faced increased competition from well-funded players like TikTok. Exiting the business, which contributed $60 million in revenue but was margin-dilutive, will result in a 50 basis points improvement in margins next year. They will redeploy talent to other areas. -
Hinge's Growth and Path to $1 Billion
Q: What drives Hinge's strong growth, and how likely is it to reach $1B revenue?
A: Bernard Kim stated that Hinge is on track to become a $1 billion-plus revenue business, driven by product innovation and global expansion. Less than 10% of Hinge's revenue comes from Europe, indicating significant growth potential. Gary Swidler added that their confidence in Hinge is increasing due to rising user trends and Hinge's differentiated product in the market. , -
Capital Allocation and Share Repurchases
Q: How are you approaching capital returns and potential dividends?
A: Gary Swidler stated that while they have a commitment to return at least 75% of free cash flow to shareholders, they have returned over 100% in the first half due to share price levels. They continue to focus on share buybacks, and although they've considered dividends as part of capital return, they remain focused on buybacks at this time. -
Conversations with Starboard Value
Q: Can you comment on your interactions with Starboard?
A: Bernard Kim mentioned initial interactions with Starboard were typical, and the topics raised—returning Tinder to growth, improving margins, and returning capital to shareholders—are already key areas of focus. They continue to engage with all shareholders to drive shareholder value. -
Tinder Product Updates and Revenue Impact
Q: What is the impact of new Tinder features like vertical swiping?
A: Bernard Kim is excited about introducing vertical swiping to enhance profile discovery, but such significant changes require thorough testing. Gary Swidler noted that these features are being positioned for 2025 and are not expected to contribute meaningfully to 2024 revenue. -
Trust and Safety Improvements at Tinder
Q: How far along are you in improving trust and safety at Tinder?
A: Bernard Kim emphasized that trust and safety efforts are ongoing and critical, with no endgame. They are making decisions focused on better user outcomes and are seeing improved brand perception among women aged 18 to 30, with a nearly 50% increase in viewing Tinder as a place for meaningful connections and a 20% decrease in the hookup stigma. -
Seasonality Trends and Q4 Expectations
Q: Do you expect Tinder payers to grow sequentially in Q4?
A: Gary Swidler explained that due to seasonal patterns, Q4 typically sees sequential weakness after a strong Q3. While they aim for continued year-over-year improvement in payers, achieving sequential growth in Q4 would be challenging due to holiday seasonality impacts. -
Details on Tinder's Progress and Green Shoots
Q: What specific improvements are you seeing at Tinder?
A: Bernard Kim noted that the turnaround at Tinder is in progress with momentum. They are making behind-the-scenes improvements like recommendation changes, increasing user engagement, and strong marketing initiatives like the Olympics campaign leading to increased swipe activity. Product and marketing integration is yielding positive results.
Research analysts covering Match Group.