A month has gone by since the last earnings report for Match Group (MTCH - Free Report) . Shares have added about 5.1% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Match Group Tops Q1 Earnings & Revenues Estimates
Match Group delivered first-quarter 2019 adjusted earnings of 49 cents per share, which surpassed the Zacks Consensus Estimate of 33 cents and was significantly higher than the year-ago quarter figure of 26 cents.
Revenues of $464.6 million rose 14% year over year and beat the Zacks Consensus Estimate of $464 million. Excluding the effect of Foreign Exchange, the top line was up 18% year over year. The increase was primarily driven by 16% increase in average subscriber base and 4% rise in Average Revenue per Subscriber (ARPU).
Average subscriber base and ARPU were 8.6 million and 60 cents, respectively, at the end of the reported quarter. North America subscriber base increased 10%, while International jumped 23%. Growth in ARPU was driven primarily by strength in both North America (up 3% year over year) and International (up 5%).
In the first quarter, Tinder average subscribers increased 1.3 million year over year and came in at 4.7 million. Sequentially, the same increased 384,000. ARPU grew 2% year over year, primarily on the back of higher number of Gold subscribers.
During the reported quarter, the company realigned management to focus on the key opportunity in Asia, India and Japan.
Adjusted EBITDA was $155.1 million, up 13% year over year. Adjusted EBITDA margins came in at 33%, 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 17% year over year to $345.8 million. Selling and marketing (S&M) were flat on a year-over-year basis. General and administrative expense and product development expenses increased 27% and 39% on a year-over-year basis, respectively.
Operating income surged 6% from the year-ago quarter to $118.8 million. However, operating margin contracted 200 bps to 26%.
Match Group exited the first quarter with cash and cash equivalent balance of $224.9 million, down from $186.9 million reported in the previous quarter. The company had long-term debt of $1.6 billion up from $1.52 billion at the end of previous quarter.
Cash flow from operations was $92.5 million during the quarter. Free cash flow came in at almost $82.6 million.
During the reported quarter, the company repurchased 0.2 million shares at an average price of $56.99 per share. The company had 2.3 million shares remaining under the previously announced share repurchase program.
Match Group anticipates second-quarter 2019 revenues between $480 million and $490 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 $190 million to $195 million.
For fiscal 2019, Match Group expects 1 million average subscriber additions at Tinder.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 17.14% due to these changes.
Currently, Match Group has a nice Growth Score of B, though it is lagging a bit 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 bottom 20% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Match Group has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.