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Match Group (MTCH) Tops Q2 Earnings and Revenues, View Solid

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Match Group (MTCH - Free Report) delivered second-quarter fiscal 2018 adjusted earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 36 cents per share. Moreover, the figure increased from the year-ago earnings of 16 cents per share.

Revenues of $421.2 million surged 36% year over year and beat the Zacks Consensus Estimate of $413 million. Excluding the impact of foreign exchange currency revenues came in at $413.5 million. The increased marked the highest revenue growth quarter over quarter since the IPO. Year-over-year growth was primarily driven by 27% increase in average subscriber base and 8% rise in Average Revenue per Subscriber (“ARPU”).

Tinder has been the key catalyst behind the company’s year-over-year revenue growth. Revenues from Tinder soared 136% year over year during the quarter.

Notably, the shares of Match Group have advanced 107.3% over the past one year, outperforming the industry’s rally of 3.6%.

Quarter in Detail

Match Group has one reportable segment namely Dating. Three of its biggest and best known brands are Match.com, OkCupid and Tinder.

During the second quarter, Tinder average subscribers increased 81% year over year and came in at 3.8 million. This marked an increase of 299,000 sequentially and 1.7 million year over year.  Renewal rates for Gold were better-than-expected in the second quarter.

ARPU in Tinder grew 33% year over year, primarily due to Gold adoption and a la carte revenues from subscribers.

During the reported quarter, growth in its ARPU (57 cents) was driven primarily by strength in both North America (up 4% year over year) and international (up 14% year over year). Match, Meetic, PlentyOfFish and OkCupid also registered growth.

About 52% of the company’s revenues come directly from users of its dating services in North America, mostly in the form of membership subscriptions. Online dating has been expanding, as users from more demographics join the fray. Most of Match Group’s users connect from mobile devices, where conversion to paid members is also higher.

Match Group recently announced that it has acquired a 51% stake in Hinge, the NY-based “relationship” app. The company retains the right to buy the remaining shares within the upcoming 12 months.

Hinge had witnessed a whopping surge of 400% in user base in 2017 after Match aided the site to revamp dating, doing away with the “right swipe” option for meaningful real relationships. Buoyed by user growth, the Tinder provider has been increasing its stake in Hinge since then.

Adjusted EBITDA was $176 million during the quarter, up 60% year over year. Adjusted EBITDA margins came in at 42%, up 600 bps year over year.

Balance Sheet

Match Group exited the quarter with cash and cash equivalent balance of $309.8 million, up from $287.6 million reported in the previous quarter. The company had long-term debt of $1.25 billion.

Cash flow from operations was $243.5 million for the six months ended Jun 30, 2018. Free cash flow came in at $228.7 million for the same time frame.

During the first six months, the company repurchased 1.9 million shares and an additional 0.1 million shares in Jul2018, totaling it to 2 million shares. The company had 4 million shares remaining under the previously announced share repurchase program.

Guidance

Match Group anticipates fiscal third-quarter 2018 revenues to be in the range of $430-$440 million. The Zacks Consensus Estimate is pegged at $425.8 million

Adjusted EBITDA is anticipated to be in the range of $160-$165 million.

For fiscal 2018, Match Group raised guidance. The company now expects revenues in the range of $1.68-$1.72 billion (previously $1.6-$1.7 billion). The positive outlook was driven by Tinder, better-than-expected Gold and renewal rates. The Zacks Consensus Estimate is pegged at $1.69 billion.

Adjusted EBITDA is now expected to be in the range of $625-$650 million, up from $600-$650 million guided previously, due to Tinder operating leverage and well-organized marketing spending.

Zacks Rank & Other Stocks to Consider

Match Group carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks worth considering in the broader technology industry are Zillow Group, Inc. (ZG - Free Report) , Fortinet, Inc. (FTNT - Free Report) and Paycom Software, Inc. (PAYC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Zillow Group, Fortinet and Paycom Software are pegged at 5%, 16.75% and 24.82%, respectively.

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