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Why Is Match Group (MTCH) Down 16.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Match Group (MTCH - Free Report) . Shares have lost about 16.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

Match Group Q3 Earnings Miss, Revenues Increase Y/Y

Match Group reported third-quarter 2021 earnings of 43 cents per share, which declined 8.5% from the year-ago quarter’s figure, missing the Zacks Consensus Estimate of 60 cents.

Revenues of $801.8 million increased 25% year over year, beating the Zacks Consensus Estimate of $801.2 million. Continued momentum in Tinder and impressive performances of other apps like Hinge drove the top line.

Excluding the foreign exchange impacts, the top line rose 25% year over year to $798.1 million.

Hyperconnect, which was acquired in the previous quarter, contributed $53 million to the company’s revenues. Excluding Hyperconnect, the top line increased 17% year over year to $748 million.

Activity and engagement across all brands have been high since the COVID-19 outbreak. However, the company noted that some countries in Asia, which are important markets like Japan, were witnessing slow COVID recovery.

Quarter in Details

In the third quarter, the number of total payers increased 16% to 16.3 million. The number of total payers from the Americas, Europe, and the Asia Pacific (APAC) and Other increased 11%, 13% and 36%, respectively, on a year-over-year basis.

Total revenue per payer (RPP) increased 8% year over year to $16.1 million. Region-wise, RPP from the Americas, Europe, and APAC and Other increased 5%, 6% and 17%, respectively.

Direct revenues from the Americas were up 17% to $393.6 million. Direct revenues from Europe increased 20% to $217.7 million, while APAC and Other reported a 59% surge in direct revenues to $174.4 million.

Direct revenues from Tinder jumped 20% year over year. The total number of payers for Tinder rose 19% year over year to 10.4 million, while Tinder RPP increased 1% in the third quarter.

Direct revenues from non-Tinder brands collectively increased 32% on a year-over-year basis. Non-Tinder brands witnessed 12% growth in the total number of payers to 5.9 million as well as an 18% increase in RPP.

In the third quarter, revenues from Hinge skyrocketed 100% year over year, with RPP growth of more than 70%.

Operating Details

Adjusted EBITDA was $285 million, up 15% year over year. The adjusted EBITDA margin contracted 340 basis points (bps) year over year to 36%.

Total operating costs and expenses increased 32% year over year to $581.2 million in the third quarter. The upside can be attributed to the increase in the cost of revenues, selling and marketing expenses, product development, and general and administrative expenses.

As a percentage of revenues, total operating costs and expenses expanded 380 bps year over year to 72% in the reported quarter.

Operating income advanced 10% from the year-ago quarter to $220.6 million. Operating margin contracted 380 bps to 28%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, Match Group had cash and cash equivalent, and a short-term investment balance of $523.2 million compared with $248.9 million as of Jun 30, 2021.

As of Sep 30, 2021, the company had long-term debt of $3.848 billion compared with $3.846 billion as of Jun 30, 2021.

As of Sep 30, 2021, it reported $1.7 billion of exchangeable senior notes and $750 million under its revolving credit facility. The amount was undrawn as of Sep 30.

For the nine months ended Sep 30, 2021, the company generated an operating cash flow of $667 million and a free cash flow of $614 million.

Guidance

Match Group expects fourth-quarter 2021 revenues to be $810-$820 million, indicating year-over-year growth of 24-26%.

Adjusted EBITDA for the fourth quarter is anticipated to be $285-$290 million.

For 2021, Match Group expects revenues of $3 billion, up 25% year over year. Revenues from HyperConnect are expected to be $125-$135 million.

For 2021, Match Group expects adjusted EBITDA to be closer to $1.06 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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