A month has gone by since the last earnings report for Match Group (MTCH Quick QuoteMTCH - Free Report) . Shares have added about 3.8% in that time frame, underperforming 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 Q3 Earnings Decline Y/Y, Tinder Drives Top Line Growth

Match Group reported third-quarter 2020 earnings of 45 cents per share, which declined 13% from year-ago quarter’s figure.

Nevertheless, revenues of $639.8 million increased 18% year over year.

Continued momentum at Tinder and solid performances of Hinge, Pairs and OkCupid has driven top-line growth. Excluding the effect of foreign exchange, the top line rose 18% year over year to $636.7 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.

Quarter Details

Average subscriber base increased 12% to 10.8 million and average revenues per user (ARPU) were up 4% year over year to 62 cents.

North America subscriber base climbed 9% to 5.1 million, while International advanced 16% to 5.7 million. Improvement in subscriber base in North America was driven by Tinder, Chispa, Hinge, and BLK. Internationally, growth was driven by Tinder as well as Pairs and Meetic apps.

North America ARPU increased 8% to 66 cents, while International ARPU increased 1% to 58 cents. North America ARPU was driven by increased purchases of à la carte features at Tinder, PlentyofFish and Hinge. Also, streamlining of pricing for Hinge app added to North America ARPU growth.

The company continues to expand operations across international markets. The company rolled out Tinder Platinum (test version) subscription service to 10 countries. It expects to launch the subscription service to more countries in the fourth quarter of 2020. The company recently unveiled Upward, which is a Christian community-focused app.

Moreover, robust Tinder average subscriber increased 16% year over year came to 6.6 million that contributed to the quarterly results. However, Tinder APRU dropped 1% in the third quarter.

Direct revenues from Tinder increased 15% year over year. The company launched Swipe Night series across 24 countries in September 2020 and relaunched the feature in the United States. The Swipe Night feature aided Tinder boost daily usage, with viewership hitting 15 million driven by traction in the Swipe Night series.

Direct revenues from non-Tinder brands collectively increased 23% on a year-over-year basis. Non-Tinder brands witnessed 13% growth in ARPU as well as 7% increase in average subscribers and contribution from non-subscriber one-to-many video revenues.

Markedly, Hinge’s ARPU was up more than 100% on a year-over-year basis in the third quarter. The launch of two à la carte features boosted Hinge ARPU growth.

Moreover, Match Group owned dating app — Plenty of Fish — saw 5.5 million users for its one-to-many live streaming service, which encourages members to practice social distancing while dating amid the coronavirus pandemic.

Adjusted EBITDA was $249.2 million, up 21% year over year. Adjusted EBITDA margin expanded 110 basis points (bps) year over year to 39%.

Total operating costs and expenses, as a percentage of revenues, expanded 100 basis points (bps) on a year-over-year basis and came in at 69% in the reported quarter. This was driven by increases in selling and marketing expenses, and general and administrative expenses, partly offset by reduced spend on travel.

Operating income advanced 14.2% from the year-ago quarter’s tally to $200.2 million. Operating margin contracted 100 bps to 31%.

Balance Sheet & Cash Flow

As of Sep 30, 2020, Match Group had cash and cash equivalent balance of $399 million compared with $129.3 million as of Jun 30, 2020. As of Sep 30, 2020, the company had long-term debt of $3.52 billion compared with $3.53 billion as of Jun 30, 2020.

As of Sep 30, 2020, the company also reported $1.7 billion of exchangeable senior notes. The company had $750 million under its revolving credit facility as of Sep 30, 2020. The amount was undrawn as of Sep 30. 

For nine months ended Sep 30, 2020, the company generated operating cash flow of $518.9 million compared with $468.3 million in the nine-month period ended Sep 30, 2019. For nine months ended Sep 30, 2020, free cash flow was $486.5 million compared with $438 million in the nine-month period ended Sep 30, 2019.

Guidance

Match Group expects fourth-quarter revenues of $640 million to $650 million. Adjusted EBITDA is anticipated in the range of $235-$245 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -15.63% due to these changes.

VGM Scores

At this time, Match Group has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #4 (Sell). We expect a below average return from the stock in the next few months.