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Match Group (MTCH) Down 6.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Match Group (MTCH - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Match Group due for a breakout? 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 drivers.
Match Group Beats on Q2 Earnings & Revenues
Match Group delivered second-quarter 2019 adjusted earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 45 cents and improved 19.5% year over year.
Revenues of $497.9 million rose 18% year over year and beat the Zacks Consensus Estimate of $487 million. Excluding the effect of Foreign Exchange, the top line was up 22% year over year. The increase was primarily driven by an improvement of 18% and 2% in average subscriber base and Average Revenue per Subscriber (ARPU), respectively.
Notably, shares were up 3.5%, yesterday, primarily due to better-than-expected second quarter results and encouraging third-quarter guidance. Further, robust Tinder average subscriber growth (up 36% year over year) positively impacted share price. Moreover, Match Group’s stock has gained 62.1% in a year, against the industry's decline of 24.3%.
Quarter Details
Average subscriber base and ARPU were 9.1 million and 58 cents, respectively, at the end of the reported quarter. North America subscriber base increased 9%, while International advanced 27%. Growth in ARPU was driven primarily by strength in both North America (up 4% year over year) and International (up 1%).
In the second quarter, Tinder average subscribers increased 1.5 million year over year and came in at 5.2 million. Sequentially, the same increased 503,000 ARPU, reflecting an improvement of 2% year over year. This primarily came on the back of higher number of Gold subscribers.
Direct revenues from Tinder grew 46% year over year, primarily backed by 39% increase from average subscriber growth and 6% year over increase from ARPU.
Adjusted EBITDA was $203.5 million, up 16% year over year. Adjusted EBITDA margins came in at 41%, down 100 bps year over year. Margins were primarily impacted by higher cost of revenue, partially offset by lower selling and marketing expense as a percentage of revenues.
Total cost and expenses increased 20% year over year to $325.1 million. Selling and marketing (S&M) were up 5.1% on a year-over-year basis. While General and administrative expense improved 47.6% on a year-over-year basis, product development expenses remained flat.
Operating income advanced 15% from the year-ago quarter to $172.9 million. However, operating margin contracted 100 bps to 35%.
Balance Sheet
Match Group exited the second quarter with cash and cash equivalent balance of $266.4 million, up from $224.9 million reported in the previous quarter. The company had long-term debt of $1.6 billion flat from the previous quarter.
Cash flow from operations was $233 million during six months ended Jun 30, 2019. Free cash flow came in at almost $212 million.
During the reported quarter, the company repurchased 0.8 million shares at an average price of $66.79 per share. The company had 1.4 million shares remaining under the previously announced share repurchase program.
Guidance
Match Group anticipates third-quarter 2019 revenues between $535 million and $545 million. Tinder remains the key catalyst. Unfavorable foreign exchange is expected to hurt the top line growth.
Adjusted EBITDA is anticipated to be in the range of $200 million to $205 million.
For fiscal 2020, Match Group expects 1.6 million average subscriber additions at Tinder.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -5.62% due to these changes.
VGM Scores
At this time, Match Group has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Match Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Match Group (MTCH) Down 6.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Match Group (MTCH - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Match Group due for a breakout? 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 drivers.
Match Group Beats on Q2 Earnings & Revenues
Match Group delivered second-quarter 2019 adjusted earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 45 cents and improved 19.5% year over year.
Revenues of $497.9 million rose 18% year over year and beat the Zacks Consensus Estimate of $487 million. Excluding the effect of Foreign Exchange, the top line was up 22% year over year. The increase was primarily driven by an improvement of 18% and 2% in average subscriber base and Average Revenue per Subscriber (ARPU), respectively.
Notably, shares were up 3.5%, yesterday, primarily due to better-than-expected second quarter results and encouraging third-quarter guidance. Further, robust Tinder average subscriber growth (up 36% year over year) positively impacted share price. Moreover, Match Group’s stock has gained 62.1% in a year, against the industry's decline of 24.3%.
Quarter Details
Average subscriber base and ARPU were 9.1 million and 58 cents, respectively, at the end of the reported quarter. North America subscriber base increased 9%, while International advanced 27%. Growth in ARPU was driven primarily by strength in both North America (up 4% year over year) and International (up 1%).
In the second quarter, Tinder average subscribers increased 1.5 million year over year and came in at 5.2 million. Sequentially, the same increased 503,000 ARPU, reflecting an improvement of 2% year over year. This primarily came on the back of higher number of Gold subscribers.
Direct revenues from Tinder grew 46% year over year, primarily backed by 39% increase from average subscriber growth and 6% year over increase from ARPU.
Adjusted EBITDA was $203.5 million, up 16% year over year. Adjusted EBITDA margins came in at 41%, down 100 bps year over year. Margins were primarily impacted by higher cost of revenue, partially offset by lower selling and marketing expense as a percentage of revenues.
Total cost and expenses increased 20% year over year to $325.1 million. Selling and marketing (S&M) were up 5.1% on a year-over-year basis. While General and administrative expense improved 47.6% on a year-over-year basis, product development expenses remained flat.
Operating income advanced 15% from the year-ago quarter to $172.9 million. However, operating margin contracted 100 bps to 35%.
Balance Sheet
Match Group exited the second quarter with cash and cash equivalent balance of $266.4 million, up from $224.9 million reported in the previous quarter. The company had long-term debt of $1.6 billion flat from the previous quarter.
Cash flow from operations was $233 million during six months ended Jun 30, 2019. Free cash flow came in at almost $212 million.
During the reported quarter, the company repurchased 0.8 million shares at an average price of $66.79 per share. The company had 1.4 million shares remaining under the previously announced share repurchase program.
Guidance
Match Group anticipates third-quarter 2019 revenues between $535 million and $545 million. Tinder remains the key catalyst. Unfavorable foreign exchange is expected to hurt the top line growth.
Adjusted EBITDA is anticipated to be in the range of $200 million to $205 million.
For fiscal 2020, Match Group expects 1.6 million average subscriber additions at Tinder.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -5.62% due to these changes.
VGM Scores
At this time, Match Group has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Match Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.