Good morning and welcome to the Match Group First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Lance Barton, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. I hope that everyone is staying safe. We are doing this call remotely for the first time, so joining me from various locations are CEO, Shar Dubey; and CFO and Chief Operating Officer, Gary Swidler. Last night we published our first quarter results along with a shareholder letter which can be found on our Investor Relations website. Before we start though, I’d like to remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. With that, I’d like to turn the call over to Shar.

Thank you, Lance. Good morning and thank you all for joining the call. I hope you’re all staying well. As Lance said, we’re doing this a little bit differently, so hopefully it all goes smoothly. So this morning, I’m just going to share a few quick thoughts. Gary is going to provide a little more color on financials and then we’ll open it up for Q&A. Back in February at the last call, we said we had a great start to the year. All of our brands had exciting plans and we were hoping for another great year under our belt, and then of course COVID happened. We actually started tracking this back in Asia in February, and as you know, we have offices in Seoul, Singapore and Tokyo. Even as we were contemplating closing some of these offices, we were closely monitoring our businesses, particularly our Pairs business and Tinder in those markets. For most of that period, our metrics remained largely unimpacted until around mid-March when the stories from Italy and then Spain followed by Washington, California, New York started coming in, and within about two weeks all of our offices around the world shut down. Fortunately, we had two to three weeks’ head start and we were able to ensure all our employees had the right remote access to our systems, they had the right equipment and tools and we were able to quickly go remote with minimal disruption. It's gone remarkably well thus far. The teams have managed to maintain their connectivity and productivity. In fact, we just did a survey and the vast majority of our employees say they can sustain this for a few more months, if needed. In terms of business impact, between the letter at the end of March and the one yesterday, we’ve tried to explain in a lot of detail what we’re seeing. Engagement is up, especially among young users and particularly among women. We did see softness in new sign-ups and propensity to pay as the pandemic unfolded. Regarding new sign-ups, we think there are three drivers for that. One, if you’ve been resistant to the category, now may not seem intuitively the right time to justify joining. Two, a number of our brands actually rely on word-of-mouth marketing quite a bit. And it becomes harder as social life has come to a standstill. Finally, we did reduce our marketing spend to ensure channels that no longer made sense were eliminated. We also had to make sure none of our creatives were dissonant. In terms of propensity to pay, we first saw the impact in new subscribers, particularly in hard-hit areas and among older demographics. Some of our brands with more older demographics saw double-digit declines in the second half of March. However, once the worst of the news cycles were done, we started seeing some stabilization in all our brands, particularly in North America during April. There are many variables and specific trends by country and city, but in aggregate, all our brands saw some year-over-year growth in first-time subscribers in April. We are also witnessing some declines in the price per payer, particularly on Tinder, both in terms of shifts to lower-priced skews and some declines in à la carte purchases. As we mentioned in the letter, we implemented various product and marketing pivots to ensure we were helping our users navigate these challenging times. Among the changes we’ve seen in the past six plus weeks, I particularly wanted to highlight two positive trends. The first is that women's engagement is up significantly. There’s been a notable positive gender mix shift in both new sign-ups and active users, which is very healthy for a dating ecosystem and should benefit us on the other side. The second positive trend is the increased use of video. We have long believed in the power of video, particularly to reduce the disconnect that happens between having an online conversation and then meeting in person for the first time. In fact, we first launched one-to-one live video back in 2011 when the world was mostly a desktop environment. We’ve attempted to reintroduce video since, but previous attempts did not achieve much adoption. However, as users are now being encouraged to use it, they’re seeing the benefits and are likely to continue using it even after this situation is resolved. Much remains uncertain today, but one thing has become clear: our products fulfill a fundamental human need, and this need has become even more critical now. Social isolation is challenging for human beings, especially if we consider single individuals whose avenues for meeting others, such as school, work, church, parties, and concerts, have all diminished. Imagine if there were also no Tinder, Hinge, Match, or PlentyOfFish. This need is why we’re seeing increased engagement, and despite the short-term challenges, this need is not going to disappear. Over the past few weeks, we’ve heard wonderful stories of how our users are coping during these times. We’ve had couples getting married on video, on rooftops with friends toasting them from other rooftops. We’ve even heard stories about drive-thru weddings. We've learned about individuals who are slowing down and getting to know one another while virtually cooking and spending time together. We've heard about couples who fast-tracked their relationships, moving in together to shelter in place and are having such a good time that they wrote to us expressing their joy. Some individuals have even had their first interactions at a distance while shopping for groceries or in dog parks. All these users who’ve been chatting and video dating make us excited for them to meet on the other side of this. And with that, I’m going to hand it over to Gary.

Thanks, Shar. We’ve included most of the financial details in our letter and press release, so I’m only going to highlight a few key points. All things considered, we had a very respectable Q1 with 17% year-over-year revenue growth, 19% ex-FX as the virus impacted our trends in March. EBITDA increased for the quarter by 11% year-over-year to $172 million. We were able to reduce our deferred costs, including some marketing and legal expenses in the last few weeks of March. Tinder showed solid user trends in Q1. The business added 1.3 million subscribers year-over-year, a growth rate of 28%, and grew direct revenues by 31%. Our non-Tinder subscribers were roughly flat year-over-year in Q1 and these brands generated 2% direct revenue growth. Revenue and subscriber growth at Tinder and the non-Tinder brands were negatively impacted by the effects of the virus. The impact was most notable in our brands that have an older subscriber base, including OurTime, Meetic, and Match, which initially saw significant impacts from the virus. Brands like OkCupid and Hinge, which have a higher concentration of users in densely populated markets with severe outbreaks, such as New York City and London, also experienced a greater initial impact from the virus. Despite this, Hinge, OkCupid, Pairs, Chispa, and BLK all contributed solid year-over-year subscriber growth in Q1. Hinge’s pricing optimizations led to rate and revenue improvement, but with conversion declines, a trend we expect to persist this year. Our separation from IAC remains on track to close by the end of the second quarter, subject to the satisfaction of the closing conditions. We've set our virtual shareholder meeting for a vote on June 25. The strategic rationale for the separation that we laid out in December remains fully intact. Despite all the stock price volatility since December, the exchange ratio has barely moved, so the transaction looks pretty much the same as it did when we signed. As a result of the virus impact on our EBITDA, we expect to end Q2 with slightly higher leverage, just below 5x net leverage, and will delever a little more slowly than we had originally anticipated. Given our strong free cash flow generation, we're confident this leverage level is manageable for us. We still expect to be under 3x net leverage in 18 months. Like many companies, we have run numerous scenarios about the outlook for the remainder of the year. It’s difficult to be precise about the full year right now given all the uncertainty regarding the virus and the lockdowns. As you know, subscription businesses like ours tend to hold up a little better as conditions soften but may not bounce back as quickly as some other types of businesses, although our à la carte revenue portion can. We provided an outlook for Q2, which shows year-over-year revenue growth, but a slight percentage decline sequentially. As a subscription business, the effects of a slower March and April in terms of new users and first-time subscribers will continue to be felt through Q2. We expect Q2 EBITDA to be close to flat when compared to last year, if you add back the $7 million of separation-related costs we expect to incur in Q2 2020. We generally don't adjust for these costs when we report, so we expect our reported EBITDA next quarter to be down by around the amount of the separation costs. As a result of the crisis, many advertisers have left the market, leading to a decline in rates and making our ad spend more effective. Therefore, we’re planning to continue spending where we see solid opportunities to drive subscriber growth, even at the expense of near-term margin. In general, while we’re deferring some non-critical hiring and being judicious with costs, we intend to keep investing in our businesses because we know people are increasingly engaging with our products and are eager to date in real life again. While the short term may be choppy, longer term we’re very confident in our ability to achieve solid growth for our shareholders. With that, I’ll ask the operator to open the lines for questions.

We will now begin the question-and-answer session. The first question today comes from Nick Jones of Citi. Please go ahead.

Great. Thank you for taking my question. Just one, I guess it’s probably a little nuance. Can you give an update on what trends you’re seeing in the country, states, regions, cities where social distancing measures are loosening and businesses are starting to reopen?

Sure. I can take that. As you look at the geographic effects, it’s been rather interesting and there are obviously lots of different stories. Broadly, we’ve been thinking about this as all markets falling into one of three categories. The first bucket includes the severely impacted markets. I would categorize Italy, Spain, and New York in that group. These markets had the largest impact on our business and have been the slowest to recover. The second group of markets includes those with low or moderate impacts from the virus. While they had some restrictions, they’ve never really locked down; I would include Sweden, South Korea, a number of states in Central and Southern U.S. in this bucket. Most of these markets barely saw any impact. Then there is a larger part of the remaining markets, which are somewhat in between, where the impacts haven’t been as severe as those in Italy, Spain, and New York, but they did enter much more restrictive lockdowns. These markets saw a real impact during the heavy news cycle, but have since stabilized and recovered. They include most of the U.S., except states on the two coasts, the Nordics, Germany, etc. There are exceptions, for instance, Japan, which we first thought was in our second bucket of less impacted regions, but after the cancellation of the Olympics and the emergency restrictions, we are now seeing a moderate impact there, so we call it in our third bucket. Markets like India, Brazil, and several South Asian markets were more impacted in April than they were in March. About your question regarding trends when businesses are reopening, two markets we’ve been watching closely are Germany, which loosened some restrictions a couple of weeks ago, and Georgia in the U.S. In Germany, Tinder, Meetic, and even OkCupid, which is smaller there, have seen some positive trends. Georgia has also seen some nice trends, but it’s too early to make any conclusions; it’s hard to tell how much and how long this may last.

Great. Thank you.

The next question comes from Dan Salmon of BMO Capital Markets. Please go ahead.

Hi. Good morning, everyone. Shar, maybe return to the two big ideas you mentioned about female engagement and video. One must imagine that those two things are correlated. I wanted to ask a big-picture question regarding the challenge of always enhancing the female experience. How important do you think video might be in that? For example, does it make sense to require a video pre-date before ever meeting in person? And if you could talk about some of the more important video initiatives across the platform, I know you touched on a few things, but what would be some of the milestones for those? Thanks.

Sure. Yes, women engagement is a metric that we always strive to enhance through our product and marketing efforts because it is one of the most beneficial elements for the ecosystem. We have always believed in the potential of live video technology over the years. We’ve tried numerous times, but the adoption has consistently disappointed. Last year, as we saw people becoming a bit more comfortable with video, we prepared to leverage it when we felt consumers were ready. Two particularly innovative initiatives we launched around video last year were for one-on-one and one-to-many experiences. The one-on-one video platform, called Ablo, was rich with capabilities like icebreakers and moderation. The moment this lockdown began, we quickly applied our learnings from Ablo to our other platforms. Currently, we have already rolled it out on Match and Pairs in April, and we plan to launch it on Meetic and Hinge soon and have Tinder testing it in June. The one-to-many live video experience has also been expedited in our rollout and is now fully functional on POF and Twoo. I am optimistic this time it will stick. I firmly believe that a half-date over video is a great and safe way to increase the quality of initial meetings.

That’s great. Thank you very much.

The next question comes from Brian Fitzgerald of Wells. Please go ahead.

Thanks. This might be a follow-up to Dan’s question, but as you mentioned, video is becoming more important on your platforms, both for communication and content consumption with features like Swipe Night. Can you share some insights into the cost structure for that? Are you using cloud resources, and how is that evolving, perhaps moving to multi-cloud or finding forward commitments to manage costs as video demand increases?

Hi, Brian. It’s Gary. Yes, we are using third-party providers all on the cloud to handle video. There are many third-party providers that have emerged over the last few years who have benefited from economies of scale, significantly driving down costs. It has become far more economical than it was a few years ago, and the technology has improved considerably. We’re already working with a few and are exploring relationships with others. We will see how this evolves as we grow video usage. If it makes sense at some point to shift some of this in-house, we could consider it. But for now, utilizing third parties is a cost-effective and efficient approach. As you noted, on the one-to-many front, we’ve done that through specific partnerships as well. Overall, we feel good about our strategy. This approach offers us the flexibility we need, and we’ll evaluate how use ramps up and respond accordingly. We’re negotiating various rates and structures, carefully managing costs since we aren’t monetizing one-on-one initially. We believe the long-term benefits to the ecosystem by taking on these costs will be significant and eventually self-financing. We are optimistic about that. Once we get more sophisticated with increased usage, we see opportunities to monetize either directly or indirectly through increased subscriptions, which we think will also help cover costs. There may be some short-term cost impacts, but we believe in our strategy and approach, aiming to achieve a profitable business model over time. That’s how we envision handling video.

All right, thanks, Gary.

The next question comes from Doug Anmuth of JPMorgan. Please go ahead.

Thanks. I wanted to circle back on the increased engagement that you’re seeing with females, particularly those under 30. Can you talk about whether these are mostly existing users or if you’re also adding new users within that demographic? Given the importance of this group, what highlights can you share regarding your plans to retain these users or convert them into paying subscribers?

Yes, sure. We’re as excited about this increased women’s engagement as the questions I’m receiving indicate. We’ve mentioned seeing some weakness in new users overall, but among all demographics, younger female users have generally been the least impacted; in fact, in some cases they've even increased. So the enhanced engagement among women and young women is coming from both new and existing users. Our hypothesis for this is that the pace of dating varies by age and gender, and as the pressure to meet in person has reduced during the pandemic, women have felt more comfortable engaging actively on our platform. We expect some of this increased activity may dissipate when life returns to normal, but we’re learning valuable insights and our teams are diligently working to adapt our product to ensure we retain this engagement. While I can’t disclose too much detail, we are closely monitoring this area.

Thank you.

The next question comes from Eric Sheridan of UBS. Please go ahead.

Thanks so much. I hope all is well with the team. Maybe building off Doug’s question and expanding beyond just one gender or age demographic, what learnings have you gathered so far that may influence how you allocate marketing dollars, be it by degree, dollars, or even channels that you might expect a higher return on investment for acquisition, retention, and reengagement, now and in the future?

Let me tackle that and we can go from there. It's been an interesting landscape for marketing since the pandemic struck, Eric. Initially, our natural reaction was to pull back, which we did quite significantly back in March. We’ve been adjusting since then and are having many discussions about our marketing approach moving forward. Advertisers have withdrawn significantly in many areas, and we’re witnessing extraordinary returns on our marketing investments right now. Therefore, we're trying to capitalize on this. We’re ramping up our marketing spend quickly in April. Our flexible approach allows us to analyze returns effectively, thereby pivoting and adjusting strategies as needed, and this flexibility will guide us through the year. On the acquisition side, our businesses like Meetic and Match, focusing on TV and online platforms such as Facebook, have very strong opportunities with adequate returns. In Japan, we’ve noticed new social networks emerging and increased usage, which offers further prospects. For the year, I'm not expecting a dramatic increase in our marketing spend, but we have reserves set aside for marketing if the situation remains favorable for customer acquisition. We acknowledge that if travel and other sectors remain shut down and we see strong customer acquisition potential, we will capitalize on it, even at the expense of some margin initially. We have substantial room, especially internationally, to increase our brand awareness and understanding of the dating category. That’s our focus. PlentyOfFish has shown momentum, particularly in live streaming, where we haven’t invested a lot in marketing recently but might do so in the future. The Hinge business is starting to generate revenue and we see it as a potential growth driver in the second half of the year. We’re monitoring everything closely and adjusting week by week. We have the flexibility to respond to the changing landscape.

Great. Thanks for the color.

Okay.

The next question comes from Ross Sandler of Barclays. Please go ahead.

Ross, are you there? It doesn’t sound like we have Ross. If you wouldn’t mind, let’s move to the next question.

Certainly. The next question comes from Jason Helfstein of Oppenheimer. Please go ahead.

Thanks. Two questions. First, how should we think about renewal rates or churn as we exit this quarter and into the next? And second, coming out of COVID, has your outlook for investment in Asia and India for 2021 or 2022 changed?

Let me start, and Shar, please jump in if you’d like. Regarding renewal rates, it's a key factor we've been monitoring closely. As people have confronted lockdowns, we wondered if our renewal rates would be affected. So far, across our brands, we haven’t seen any significant changes in renewal rates. They’ve remained stable, which is encouraging, but we will continue to monitor that closely, especially as lockdowns persist. So far, we’re feeling optimistic, and we assume this trend will continue through Q2 and possibly beyond this year, though that factor remains a potential risk. As for our long-term strategy regarding Asia, our optimism for that market hasn’t diminished. There continues to be significant population growth, and we’re focusing on building out our Muslim business in several Asian markets and expanding our matrimony services in Japan. We believe there’s an extensive market to capture. As Shar mentioned, the impacts from the viral outbreak vary across regions, leading to different recoveries. India is facing significant challenges currently, and while it is a vital market for us, it is likely to face difficulties in bouncing back quickly. Conversely, Japan showed resilience initially, but circumstances have shifted, prompting more cautious consumer behavior. Southeast Asia presents a mixed picture. Overall, while we will track how the pandemic progresses, our strategic aim remains on track.

Thank you.

The next question comes from Kunal Madhukar of Deutsche Bank. Please go ahead.

Hi. Thanks for taking the question. I'm curious about the guidance, especially considering your April growth of 9%. Extending that into the rest of the months indicates a somewhat flat revenue outlook for Q2. What assumptions informed your guidance? A quick point regarding February growth of 23% ex-FX; is that the kind of run rate we should anticipate on a normalized basis?

Let me address that, and Shar, chime in if you'd like. On the guidance, it’s key to understand the subscription business’s dynamics. Events in March and April, particularly related to new user sign-ups and first-time subscribers, affect our performance through Q2. You can’t isolate just one month; the subscriber duration spans multiple months. Thus, we will be feeling the effects of the new user sign-up trends through the quarter. Given the trends we observed in March and April, we evaluated them brand-by-brand, attempting to forecast what we expect for May and June. From our analysis, our view of the quarter is very much influenced by April’s results. We've made an effort to provide guidance informed by all of this data, but forecasting here won’t be easy due to the rapidly shifting trends. However, absent any significant changes post-April, our projections for the quarter are reflective of these trends. In regards to our longer-term growth expectations, we’ve consistently aimed for growth in the mid-teens to low-twenties. Despite the uncertainty, we maintain our confidence in returning to those trends when conditions normalize. Therefore, while some softness throughout 2020 may linger into 2021, we believe our business can still grow at our previously noted rates in the long run.

Thanks, Gary.

The next question comes from Benjamin Black of Evercore ISI. Please go ahead.

Great. Thanks for the questions. As we face record unemployment claims and considering that dating products generally rely on consumer discretionary spending, how do you anticipate navigating a deeper recession?

I can address that. We’ve been contemplating this. If we reflect on the last financial downturn in 2008-2009, the dating industry, including Match, fared well, even growing significantly during those years. We achieved wins in product and marketing then, although our business was smaller back then with a limited geographic presence. This current situation feels different due to the global scale of the impacts and the blend of livelihood and existential insecurity. While the exact effects remain to be seen, one constant is the persistent human need for relationships. I often cite Maslow's hierarchy of needs; right above food, shelter, and security is love and relationships. Relative to other avenues for meeting people, such as concerts and events, our platform is a more cost-effective and efficient solution to form connections. This balance is something we believe will positively influence our business.

Great. Thank you.

The next question comes from Brent Thill of Jefferies. Please go ahead.

Good morning, Shar. Long-term, could this shift intensify the transition to online dating as we attract many first-time users who might convert, creating a tailwind as we emerge from this?

Yes. One thing we've collectively done during this pause is reevaluate our priorities. The significance of relationships and human connection has become increasingly important. With schools, concerts, parties, and events becoming harder to access, our products can offer a more compelling alternative for those previously reticent to engage with dating apps. Our services present an efficient way for users to connect without the necessity to step outside their homes, which enhances our appeal and could increase market penetration over time.

Just a quick follow-up for Gary regarding Hinge monetization. Can you walk through your current status and when you foresee that occurring?

We have indeed made significant progress on Hinge monetization this year and feel optimistic about its growth. Our pricing optimization initiatives are enhancing revenue, although they entail some conversion declines, a trend we expect to continue. Hinge is on track to meet the expectations we set initially, with more developments in both subscription and à la carte offerings slated for rollout throughout the year.

And the last question today comes from Ross Sandler of Barclays. Please go ahead.

Hi Gary, can you hear me now?

Yes. I was a little worried about you before. Are you okay?

Yes, as good as I can be, I guess.

Yes, I understand.

So my question is about the product pipeline that you mentioned is still on track for Tinder in 2020. Considering all the behavioral changes you've observed, how does that influence your revenue product prioritization for this year? How is your approach toward subscribers versus ARPU evolving? You mentioned pay-as-you-go and other elements prior to COVID; how has your strategy shifted regarding Tinder revenue products?

Gary, I can address that. Ross, in times of change, you've seen us react already. We are actively trying to harness and capitalize on the key trends regarding women’s engagement and the utility of video, which has adjusted our development roadmap. However, our intention to continue building and testing features remains consistent with our original plans. Although we might encounter noticeable pressure during these lockdown periods, particularly on some forms of monetization, we anticipate a rebound as we emerge from this situation. We remain committed to pushing forward on our roadmap as planned. We will test and delay certain full rollouts if conditions aren’t favorable, yet as it stands, our plans haven’t changed significantly regarding our product roadmap.

Okay, great. I think we’re going to leave it there. Thanks everyone for joining us and stay safe. Hopefully, we’ll not have to do a call from multiple locations next quarter, and we’ll be back to fully normal ways of doing things. So thanks again for joining and we’ll see you all next quarter.

Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.