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Why Is Match Group (MTCH) Down 3.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Match Group (MTCH - Free Report) . Shares have lost about 3.5% 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 Tops Q4 Earnings & Revenues Estimates

Match Group delivered fourth-quarter 2018 adjusted earnings of 43 cents per share, which surpassed the Zacks Consensus Estimate by 4 cents and was significantly higher than year-ago quarter figure of 29 cents.

Revenues of $457.3 million surged 21% year over year and beat the Zacks Consensus Estimate of $448 million. Year-over-year growth was primarily driven by 17% increase in average subscriber base and 4% rise in Average Revenue per Subscriber (“ARPU”).

Quarter Details

Average subscriber base and ARPU were 8.2 million and 58 cents, respectively, at the end of the reported quarter. North America subscriber base increased 11%, while International jumped 23%. Growth in ARPU was driven primarily by strength in both North America (up 5% year over year) and international (up 4%).

In the fourth quarter, Tinder average subscribers increased 1.2 million year over year and came in at 4.3 million. Sequentially, the same increased 233,000. ARPU grew 12% year over year, primarily on the back of higher number of Gold subscribers and record à la carte revenues.

During the reported quarter, Match Group announced that it has acquired all the remaining shares in Hinge, the NY-based “relationship” app.

Further, the company partnered with the media brand Betches to unveil Ship, an iOS dating app that allows users to help their friends pick out potential dates.

Adjusted EBITDA was $176 million, up 15% year over year. Adjusted EBITDA margins came in at 38%, up 200 basis points (bps) year over year.

Total cost and expenses increased 21.9% year over year to $306.34 million. Selling and marketing (S&M), general and administrative expense and product development expenses increased 20.1%, 19.2% and 19.4% on a year-over-year basis, respectively.

Operating income surged 18% from the year-ago quarter to $151 million. However, operating margin contracted 100 bps to 33%.

Balance Sheet

Match Group exited the fourth quarter with cash and cash equivalent balance of $186.9 million, down from $403 million reported in the previous quarter. The company had long-term debt of $1.52 billion up from $1.3 billion at the end of previous quarter.

Cash flow from operations was $603.5 million in the nine months ended Dec 31, 2018. Free cash flow came in at almost $572.5 million.

During the reported quarter, the company repurchased 1 million shares at an average price of $45.40 per share. The company had 2.9 million shares remaining under the previously announced share repurchase program.

Match Group also paid a special cash dividend of $2.00 per share.

Fiscal 2018 Highlights

Match Group reported fiscal 2018 earnings of $1.61 per share, which was significantly higher than year-ago quarter figure of $1.20 per share.

Revenues of $1.73 billion in fiscal 2018 surged 30% year over year. Direct revenues came in at $805 million, almost double on a year-over-year basis. ARPU went up 23% year over year primarily due to higher number of Tinder Gold subscribers.

Guidance

Match Group anticipates first-quarter 2019 revenues between $455 million and $465 million. Tinder remains the key catalyst. Unfavorable foreign exchange is expected to hurt top-line growth.

Adjusted EBITDA is anticipated to be in the range of $150-$155 million.

For fiscal 2019, Match Group expects mid-teen revenue growth.

Adjusted EBITDA is expected to be in range of $740-$790 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -8.93% due to these changes.

VGM Scores

Currently, Match Group has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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

Match Group has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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