Earnings Call Transcript
Match Group, Inc. (MTCH)
Earnings Call Transcript - MTCH Q1 2025
Operator, Operator
Good day, and welcome to the Match Group First Quarter 2025 Earnings Conference Call. All participants will be in a 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 Ms. Tanny Shelburne, Senior Vice President of Investor Relations. Please go ahead, ma'am.
Tanny Shelburne, Senior Vice President of Investor Relations
Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Spencer Rascoff; and CFO, Steven Bailey. They'll make a few brief remarks, and then we'll open it up for questions. Before we start, I need 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 with the SEC. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the published materials on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results. With that, I'd like to turn the call over to Spencer.
Spencer Rascoff, CEO
Thanks, Tanny. Good morning, everyone. This is my first full quarter earnings call as CEO, and I want to start by saying how proud I am to be here and how energized I am by the opportunity ahead. We are a company with a powerful mission to spark meaningful connections. Our job is to deliver on that mission with urgency, excellence and a consumer-first mindset by building products that reflect how people want to connect today. Over the last 3 months, I have visited many of our offices around the world, spoken with hundreds of employees and gathered insights from thousands of users across our apps. Each conversation with a Match Group team member has reinforced how deeply our people believe in this mission. That mission orientation, combined with our product innovation and platform scale puts us in a strong position to act decisively as we chart the future of personal connection. One of my priorities is evolving Match Group from a collection of independently managed brands into a unified product-led organization that prioritizes innovation and user outcomes and operates as one company, not four divisions to gain the full benefits of our scale and multi-brand portfolio. Today, we announced a reorganization centralizing key functions, including select technology and data services, customer care and content moderation, media buying and international go-to-market functions, while still allowing each brand to maintain their independence and product roadmaps. We've also taken some hard, but appropriate steps today to sharpen our focus, including a planned 13% reduction of our workforce, as well as closing a number of open roles and further tightening operating expenses. These actions position us to achieve more than $100 million in annualized savings, including approximately $45 million of in-year savings in 2025. But more importantly, these changes make us more nimble, more focused and better aligned, enabling faster decision-making, reducing management layers, including around one in five managers overall, so individuals can have greater impact and accelerating our ability to ship products and features that deliver meaningful user outcomes. These savings will enable us to deliver the margin goals we outlined at our December Investor Day, while also providing the ability to invest in ways that we believe will return us to growth. I want to acknowledge the extraordinary contributions from and give thanks to those who will be leaving the company as a result of these decisions. Their hard work helped strengthen our position and make future success more possible. We're acting with urgency, making bold long-term decisions and relentlessly prioritizing user outcomes. The best tech companies operate in product-first builder mode, and this next chapter at Match Group is about getting back to that, fewer layers, faster execution and a culture focused on creating value through innovation. This is a big change, and the company is responding positively to this culture shift. We are already operating with greater clarity, discipline and speed. In fact, our solid financial and operating performance to start the year reflects the focus and resilience of our teams. In Q1, both Match Group total revenue and adjusted operating income came in above the high end of our guidance, driven by business performance that was in line with expectations, favorable foreign exchange trends and ongoing rigorous cost management. Turning now to Tinder, our biggest brand and the number one most downloaded dating app worldwide. We are making tangible progress on our product roadmap and starting to see green shoots. Our priorities at Tinder are to rebuild trust on the platform through a cleaner ecosystem, to deliver better user outcomes and to reenergize the user experience, all of which are foundational to driving long-term engagement and sustainable growth. While our Hinge brand leads the category for those looking for a serious relationship or what we call intentioned dating, Tinder is the leading app for younger users looking for lighter, lower pressure connections. To meet the needs of this Gen Z audience, aged 18 to 27, we're focused on building features that feel more fun and more spontaneous. Our effort is on reducing friction in how people engage with one another and evolving the experience to reflect a broader definition of connection. We're already seeing traction with this approach. Let me give you a few examples of how this is already showing up in Tinder. We recently launched our Double Date feature in several European markets, allowing users to team up with a friend and match with other pairs. It's resonating with our younger audience. Nearly 90% of Double Date profiles are from users under 29 and women using Double Date are three times as likely to swipe right on a pair than on an individual. The feature isn't just driving engagement, it's also growing our audience with nearly 12% of invited users in these markets representing new registrations or reactivations. We plan to launch in several additional European, Asian and Latin American markets soon as we seek to create more fun opportunities for connection. The U.S. launch is planned for later this year. In addition, we launched The Game Game on iOS in numerous markets worldwide. This voice-based experience was out for only the month of April, and it let users practice flirting with an artificial intelligence date to learn to break the ice through humor, storytelling and playful interaction. Approximately three quarters of a million Tinder users played it last month, demonstrating its ability to tackle one of the most common challenges we hear. Just starting a conversation can feel intimidating. In addition to demonstrating our leading edge use case of AI, The Game Game drove significant viral awareness and reconsideration of Tinder and gave us deep insights into how our users interact with voice AI, which will inform future product development. And while we have been utilizing AI and machine learning for years in our core matching algorithm and in trust and safety efforts, we are bringing AI deeper into our product experience. We're testing a new AI-enabled discovery experience in New Zealand that marks a major leap in utilizing AI in a new way to improve dating outcomes. With permission of our users, it takes in more attributes such as insights gleaned from their phone's camera roll and responses to dynamic questions about what they're seeking to generate a curated, personalized daily match. Early signs are promising, and we see this as a clear example of how AI and product innovation can drive more relevant, higher-quality connections and reflects our commitment to reimagining the experience beyond the swipe feature. Each of these features is a clear example of how we're reshaping the experience to better serve our target audiences. We are listening, learning and building with their needs in mind. We are encouraged by our progress to date, and I look forward to sharing more as we move forward. Finally, we continue to invest in our industry-leading trust and safety initiatives to ensure that Tinder and other Match Group apps are the safest way to meet new people. We've been testing several new features aimed at validating the authenticity of users. In test of these features, we've seen a more than 15% reduction in bad actor reports. Last week, we announced another cutting-edge innovation aimed at ensuring user authenticity, our collaboration as the first dating or consumer social company to integrate with World ID. We will start with Tinder in Japan and then plan to roll out to other geographies and brands. Our broad scale global reach, multi-brand portfolio and our ability to invest more in trust and safety than anyone in our category is an advantage that also improves user outcomes. At Hinge, user momentum remains strong, and we're seeing continued great product traction. Since launching globally in late March, our new AI-powered recommendation algorithm has driven a greater than 15% increase in matches and contact exchanges, demonstrating the ability of our investment in AI to significantly improve user outcomes. We're also continuing to enhance in-app coaching, including by providing prompt feedback, an AI-powered feature that suggests improvements to profile prompts in real time in the onboarding flow to increase its impact and its exposure. We're planning to test Warm introductions in the coming months, which will highlight shared interests to improve match quality. With continued innovation, strong brand resonance and global expansion underway, we are confident Hinge is well positioned to continue its leadership in the intentioned dating category. Turning to international expansion. One of Match Group's core strengths is our ability to build and acquire compelling consumer apps. Our strategy has been consistent. First, we establish product market fit, then we monetize. And finally, we scale globally with a proven go-to-market playbook. In 2025, we're leaning into this playbook with a number of global expansion efforts across the portfolio. For example, Hinge is on track to launch in Brazil and Mexico in the second half of this year as it seeks to serve intention daters in new markets. The League is planning to launch in the Middle East and India to meet the demand for premium experiences in these regions. Azar is continuing its U.S. and Western Europe expansion, and Pairs has recently launched in South Korea. These moves highlight our focus on further unlocking growth by extending our reach, and we're confident that by executing our playbook across our brands and new markets, we are well positioned to create long-term value for both users and for our company. Let me close with this. We are in the early days of a transformation. Small focused teams across the company are fueling a wave of innovation from college-focused concepts out of our New York office to a group meet-up experience built by our Korea team, to offline event experimentation in Japan, to changes to the core of the Tinder app. And by leveraging AI, staying relentlessly user-first and moving with speed, we have a real opportunity to reignite and redefine the future of human connection. The impact of deep learning is already reshaping our matching algorithms across the entire company, powering more personalized, more relevant and more effective experiences for our users, and this is just the beginning. The management team and I believe in our mission, I believe in our team, and I believe we will execute to drive growth and ultimately, shareholder value over time. Along those lines, following our last earnings call, just four days into my role, I personally purchased $2 million of Match Group stock at an average price of $34 per share. One quarter later today, my conviction in our mission, our strategy and our team has only strengthened. Given my confidence in our company, I plan to purchase an additional $1 million of stock soon after our trading window opens. Now I'll hand it over to Steve to walk through the financials.
Steven Bailey, CFO
Thank you, Spencer. Hello, everyone. Thank you for joining the call this morning. We're pleased with our start to the year and with our Q1 financial results. As Spencer mentioned, both Match Group total revenue and AOI exceeded the high end of our guidance range in the quarter, driven by business performance that was in line with our expectations, favorable FX trends and ongoing cost discipline. In Q1, Match Group's total revenue was $831 million, down 3% year-over-year, down 1% year-over-year, FX neutral. FX headwinds were $5 million less than we anticipated at the time of our last earnings call. Excluding the exit of our live streaming businesses, total revenue was down 2% year-over-year, up 1% year-over-year FX neutral. RPP grew 1% to $19.07, while payers declined 5% year-over-year to $14.2 million. Indirect revenue was a record quarter, up 31% year-over-year, driven by an increase in spend from our top advertisers. Tinder direct revenue in Q1 was $447 million, down 7% year-over-year, down 4% FX neutral. Tinder payers declined 6% year-over-year to $9.1 million, and RPP declined 1% year-over-year to $16.38. Year-over-year payer declines were impacted by user trends, which are still declining year-over-year, but at a stable rate. Tinder's monthly active users declined 9% year-over-year in Q1. Operating income in the quarter was $193 million, down 8% year-over-year, representing an operating income margin of 42%. AOI in the quarter was $228 million, down 5% year-over-year, representing an AOI margin of 49%. Hinge continued its strong momentum in Q1 with direct revenue of $152 million, up 23% year-over-year, up 24% FX neutral. Hinge's strong download performance continued across both core English-speaking and Western European markets. Hinge maintained its number one ranking across 10 countries and the number two ranking in its Western European markets overall in the quarter. Payers grew 19% year-over-year to 1.7 million, driven by strong user growth. RPP grew 3% to $29.90, driven largely by subscription price optimizations across several core markets. Operating income was $29 million in the quarter, up 55% year-over-year, representing an OI margin of 19%. AOI was $43 million, up 47% year-over-year, representing an AOI margin of 28%. E&E's direct revenue was $149 million, down 12% year-over-year, down 11% FX neutral, driven by the Evergreen brands decline of 15% year-over-year, partially offset by a 3% year-over-year increase at emerging brands. Ex-Live, E&E direct revenue was down 8% year-over-year, down 7% year-over-year FX neutral. E&E is executing on its consolidation plans and is on track to migrate Plenty of Fish and Meetic, its final two brands later this year. Payers declined 16% year-over-year to $2.4 million, while RPP rose 5% year-over-year to $20.76. In Q1, E&E delivered operating income of $7 million, down 61% year-over-year, representing an OI margin of 4%. AOI of $29 million was down 25% year-over-year, partially due to the timing of marketing spend for an AOI margin of 19%. Match Group Asia delivered direct revenue of $64 million, down 11% year-over-year, down 7% FX neutral. Ex-Live direct revenue was down 2% year-over-year, up 3% FX neutral in Q1. Azar direct revenue was down 1% year-over-year, up 5% year-over-year FX neutral as it continued executing on its European and U.S. expansion efforts. Payer direct revenue was down 3% year-over-year, flat year-over-year FX neutral, driven by ongoing stability in the Japanese market. Across Match Group Asia, payers increased 5% year-over-year to 1 million. While RPP declined 15% year-over-year to $21.23, partially due to FX impacts. Operating income was $3 million in the quarter, representing an OI margin of 5% and AOI was $19 million, up 43% year-over-year, representing an AOI margin of 30%. Operating income and AOI benefited from a tax reserve release in the quarter. Moving to profitability. In Q1, total company operating income was $173 million, down 7% year-over-year, representing a margin of 21% and AOI was $275 million, down 2% year-over-year, representing a margin of 33%. Looking at costs, including stock-based compensation expense, total expenses were down 2% year-over-year in Q1. Cost of revenue decreased 8% year-over-year and represented 29% of total revenue, down 1 point year-over-year, driven by lower IP fees and reduced variable expenses from the shutdown of our live streaming services mid last year. Selling and marketing costs decreased $8 million or 5% year-over-year due to lower marketing spend at Tinder and Match Group Asia and was flat as a percent of total revenue at 19%. General and administrative costs increased 5% year-over-year, up 1 point year-over-year as a percent of total revenue to 13%, driven primarily by severance and other employee compensation-related expenses. Product development costs grew 4% year-over-year as a result of higher stock-based compensation expense, primarily at Tinder and Hinge and were up 1 point as a percent of total revenue to 15%. Depreciation and amortization increased by $1 million year-over-year to $32 million. Turning to the balance sheet. Our gross leverage was 2.8 times and net leverage was 2.4 times at the end of Q1. We ended the quarter with $414 million of cash, cash equivalents and short-term investments on hand. In Q1, we repurchased 6.1 million of our shares at an average price of $32 per share on a trade date basis for a total of $195 million and paid $48 million in dividends, deploying over 135% of our free cash flow for capital return to shareholders. We maintain our commitment to return 100% of free cash flow to shareholders through share buybacks and the dividend. In late January, we repaid the $425 million outstanding balance on our term loan with cash on hand. Now turning to guidance. We expect Q2 total revenue for Match Group of $850 million to $860 million, down 2% to flat year-over-year. This range assumes a 1-point year-over-year tailwind for FX and a 1-point year-over-year headwind for the exit of Hakuna and other of our live streaming businesses. Excluding FX and E-Live, we expect total revenue to be down 2% to down 1% year-over-year. We expect Match Group AOI of $295 million to $300 million in Q2, representing a year-over-year decline of 3% and AOI margin of approximately 35% at the midpoint of the ranges. We expect costs associated with the restructuring of our operations to be $17 million in the quarter. Excluding these restructuring costs, we expect AOI to increase year-over-year by 3% and AOI margins to be approximately 37% at the midpoint of the ranges. Our full-year 2025 Match Group total revenue guidance of $3.375 billion to $3.5 billion remains unchanged. Our full-year results could be impacted by macroeconomic conditions or changes in FX rates, both of which remain volatile and difficult to predict. Our business is not directly subject to tariffs. And because a significant portion of our revenue is derived from subscriptions, which tend to be stickier than impulse purchases like a la carte, our business has historically been relatively resilient to macroeconomic impacts. We've seen some impacts to ALC revenue in the past, especially at our brands with younger users or those with less discretionary income, and we've started to see some impacts to ALC revenue at Tinder in recent weeks, which we are monitoring closely. We are prepared to take pricing, merchandising or other actions to minimize the impact to our financial performance should these trends persist. The recent decline in the dollar relative to other major currencies helped our Q1 results, and we expect FX to be a tailwind to year-over-year total revenue growth in Q2, helping to offset any consumer spending-related headwinds. We expect Match Group AOI to be within the previously disclosed full-year guidance range of $1.232 billion to $1.278 billion on an as-reported basis and roughly in the middle of the range when excluding approximately $25 million in costs associated with the restructuring of our operations. We now expect stock-based compensation expense in 2025 of $280 million to $290 million, meaningfully lower than the range we provided at our last earnings call due to restructuring of our operations and our continued focus on managing headcount and stock-based compensation expense. As Spencer outlined, we've taken meaningful steps to become a flatter, more efficient product-first organization. We expect these changes to help us achieve our margin goals, excluding costs associated with the restructuring of our operations and better position the company to weather any macro headwinds. We expect them to also greatly improve product execution and accelerate innovation, which in turn should lead to improved growth and shareholder value over time. Now let's open it up to Q&A.
Operator, Operator
Thank you. We will now begin the question-and-answer session. And the first question will come from Nathan Feather with Morgan Stanley. Please go ahead.
Nathan Feather, Analyst
Hey, everyone. Thanks for the question. Interested to hear given the cost reduction actions you just announced, can you help us think through how you're balancing investment and efficiencies to maximize productivity and product velocity? Thank you.
Spencer Rascoff, CEO
Yeah. Thank you for the question. So what we announced today were fairly deep cuts, $45 million of in-year savings, $100 million of annualized savings, primarily from labor, and now we turn our attention to OpEx where we think we can find even more savings. That, on top of those numbers, is about a 15% reduction in stock-based compensation expense, which is about $45 million a year of annualized SBC. The cuts today really had two goals. The first was to create a more nimble organization to break down silos to create more of a unified Match Group, and a number of the organizational changes associated with the cuts speak to that. The second goal was to cut deeply enough that we could feel confident in hitting the Investor Day targets and also reinvest for growth. So the nature of your question was about the reinvestment. So to provide a little more clarity there, we're basically taking these savings and turning around and investing them in international expansion, both in terms of product development as well as customer acquisition for a variety of brands, including Tinder, Hinge, The League, Pairs, Azar and others. We're also investing in the GameL segment through product and customer acquisition. And third, we're continuing to invest in Tinder product as well. So I'd say, to summarize, these cuts, they make us increasingly confident in our Investor Day targets. They allow us to leave full-year guidance unchanged, and they also allow us to reinvest for growth.
Operator, Operator
Your next question will come from Cory Carpenter with JPMorgan. Please go ahead.
Cory Carpenter, Analyst
Hi, thank you and good morning. Spencer, you've certainly enacted a lot of change in your first few months. Hoping you could talk about your priorities for the company and how you may do things differently, while still standing behind the Investor Day targets you just mentioned. Thank you.
Spencer Rascoff, CEO
Thanks, Cory. Yes, it's been a busy first couple of first 100 days or so. So firstly, I'd say I've been incredibly impressed with the quality of the team here and their mission focus and their desire to innovate. I'm also increasingly confident in our ability to improve user and consumer and even media perception of the category. I think this category is fixable. I feel like we've made a lot of progress in the first 100 days reducing red tape and reducing process and changing a culture away from analysis paralysis and creating a renewed sense of urgency, breaking down barriers and really driving culture shift at the company, including a prioritization of our users. In terms of my priorities, my first priority is operating as one Match Group so that each of our brands from Meetic to Pairs to Azar to our affinity brands to, of course, Tinder and Hinge, so each of our brands can benefit from the combined scale of Match Group. That is new news. This company was not acting like one company. It was acting like many different individual apps, many of which are subscale. And Match Group brings enormous scale and technology and other benefits to the table. And so my number one priority is making sure that we reap the benefits of one Match Group. My second priority is growing Tinder audience, and we took a huge step forward today with the changes that we're making, which we'll probably talk more about here later in the Q&A. But changes in org structure, speed, product strategy, product positioning, a lot is changing at Tinder. Number three, my third priority is to help Hinge continue its growth in the intentional dating category. Hinge is doing amazing and making sure that Hinge continues to benefit from Match Group overall, so Hinge can continue to achieve its mission. That's a key priority for me. And then finally, and sort of overarching all of these other more tactical priorities, where I spend much of my time and attention and focus is on employee engagement and company culture, creating urgency, driving innovation, creating accountability. I view that my greatest use of my time is to make the more than 2,000 people that work here better. So I'm driving a high degree of urgency. I'm operating in founder mode. I am locked in, and we're off to a really good start so far.
Operator, Operator
The next question will come from Ygal Arounian with Citi. Please go ahead.
Ygal Arounian, Analyst
Good morning, everyone. Regarding the cost reductions and reinvestment, we're implementing a $100 million annual run rate in cost savings, which has boosted our confidence in achieving the margin targets set for Investor Day while allowing for reinvestment. Can you explain what has changed since December when these targets were established? Is there a sense that more investment in products is needed to drive better growth? I'm trying to get a clearer picture of this situation. Additionally, I would like to discuss the product developments related to Tinder and the broader concept of connection. Spencer, in your letter and remarks, you mentioned some of the products currently aimed at achieving this. Could you elaborate on how the product roadmap might evolve to enhance this in the coming years? Thank you.
Steven Bailey, CFO
Thank you for the question, Ygal. I'll address the first part. The Investor Day targets regarding margins remain unchanged, as we previously stated our intention to improve margins by 50 to 100 basis points per year over the next few years. However, we have accelerated some of our cost reduction plans. We did not anticipate a restructuring to meet our 2025 margin objectives. By hastening these plans with urgency, we have maintained our commitment to achieving 36.5% margins, excluding one-time costs for 2025, which is the target we set in February. This also allows us to invest in critical areas needed to drive the expected revenue growth over the next couple of years. So that’s how I view our margin targets and reinvestment strategy.
Spencer Rascoff, CEO
Yes. So basically, I came in here and said, why do something in 2027 that we could do in 2025. And we lit a fire under the team here, and we pulled forward a lot of organizational changes, cost reductions, reorganization, reshaping and restructuring of how the company operates. And that pulled forward savings, which now we're reinvesting. Regarding Tinder, today's changes, they rightsized the team. So we are reducing 18% of the Tinder org. We're removing 24% of managers at Tinder, and that creates a much more nimble, more accountable team. From a leadership standpoint, we're also taking the ASL, the Art and Science Lab team, which was a standalone innovation function, and we are putting those folks directly into the Tinder org, and that brings a new burst of energy innovation, technical excellence, product excellence into Tinder, which is going to be terrific. Just focusing on product velocity for a moment. By many measures, such as code commits or experiments that we have in flight, we're operating at about twice the pace as we were just a couple of quarters ago. And we've had two great quarters of really good product momentum. I mentioned in the prepared remarks, the early success of double dating and the daily curated AI drop. We have an exciting college roadmap as well. So I feel a high degree of confidence in the Tinder roadmap. There is definitely a high degree of urgency, I can assure you. These turnarounds take time, though. This is a product-led turnaround. And we've seen other companies like Snap or Pinterest or even Uber build innovative products that take time in order for their ecosystem to absorb them. Product-driven turnarounds are difficult, but they are possible to do at scale. And today, we took a big step forward in terms of moving that ball down the field.
Operator, Operator
The next question will come from Shweta Khajuria with Wolfe Research. Please go ahead.
Shweta Khajuria, Analyst
Thank you for taking my questions. Let me ask two, please. One is about App Store changes and their potential impact. Are you making any changes across your apps to allow for alternative routes? If so, have you tested them, and what are you seeing? Any update on that would be helpful. My second question is regarding your thoughts on potential pricing changes or other adjustments if the macro environment worsens. Could you provide some information on that? Thank you very much.
Spencer Rascoff, CEO
Yes. Thanks for the question. Why don't I take this one? Thanks for the question. Appreciate it. So on IAP, yes, we're encouraged by the court's decision in the Apple versus Epic case, which allows link outs to web purchases without incurring IP fees. I think it's a win for consumer choice and a win for developers. When we saw the news last week, the teams quickly sprang into action. Most of our brands in the U.S. have submitted app releases at this point. We're testing a number of things, including discounted offers on web, CRM and push campaigns, web payment options on rate cards. And we'll share those learnings across the portfolio, which is a unique strength of ours. Apple did file an emergency motion yesterday on parts of this ruling, including commissions. So we're going to have to see how that plays out. They are currently still approving app submissions. So we're going to have to see how the appeals process plays out and whether these policy changes are put permanent. But for now, we are acting with urgency and have submitted app releases across most of our apps. The way I would think about opportunity sizing is this: about 45% of our revenue is in the U.S., two thirds of that is in Apple's App Store for which we pay Apple about a 27% commission on average. So if we were to shift just 10% of App Store purchases to web, that would save us approximately $25 million in fees, assuming same conversion rates and before any discounting. So it could be very meaningful for us. And again, we're going to have to see how this thing plays out. We haven't included any of it in our guidance, but I think it does offer some meaningful potential upside. On the second part of your question on macro, let me just remind everybody, we talked about a little bit about this in the prepared remarks. Our business is relatively recession-resilient historically, not entirely recession-proof though. Subscription revenue tends to hold up quite well, which is the vast majority of our revenue, as most of you know, but we have seen some impacts to ALC revenue in the past at brands with younger users or those with less discretionary income like Tinder, for example. And so over the past few weeks, we've just started to see some early signs of weakening Tinder ALC trends among younger users in particular. So it's still early. We're watching it closely. We're prepared to take pricing, merchandising or other actions to limit its impact. And if some of you might recall, we did a similar - we took a similar tact a couple of years back when we faced some sort of consumer weakness, and we're able to do things like reduce the bundle size of a la carte offerings like Boost, effectively offer lower incoming price points that are more palatable to consumers that are feeling a pinch in their pocketbook. I'd also say that the restructuring efforts we announced today do position us to weather potential macro headwinds. So I think we're in fairly good shape. The last thing I would say is we're not seeing any of these macro headwinds across the subscription revenue base at Tinder or at any of our other brands thus far, including Hinge, where we haven't seen any of it either. Thanks for the question.
Shweta Khajuria, Analyst
Thank you. That was very helpful.
Operator, Operator
The next question will come from John Blackledge with Cowen. Please go ahead.
John Blackledge, Analyst
Thanks. Two questions. First on Tinder, any way to think about Tinder's paying user trajectory as we work through the year? And then second question, Spencer, you mentioned a little bit earlier addressing potential OpEx savings after this restructuring announced today. Just curious if you could expand a little bit there. Thank you.
Steven Bailey, CFO
Yes. Thanks for the question. On payers, as you know, it's not a metric we're specifically focused on. We're focused on improving user trends, MAU trends, which will in turn lead to improved revenue trends. So that's really the focus of the management team and of Tinder specifically. But what I would say is we don't expect let me start with MAU trends. MAU trends continue to decline. They declined about 9% in Q1, which is a similar rate of decline that we've seen in the past handful of quarters. So still declining but at a stable rate. That is leading to payer declines, of course, which are also continuing to decline at a relatively stable rate as well. And so what we're focused on doing is turning around improving those MAU trends through product innovation that will lead ultimately to payer improvement and revenue. I wouldn't expect payer trends to grow this year. I'd expect those trends to continue to decline, but likely at a stable rate like we're seeing with MAU until some of the product innovation work bears fruit. On OpEx, yes, as Spencer mentioned, the focus of the last 3 months was on reorganizing the company and reaping not only headcount savings, but reorganizing the company to be leaner, faster and better set up for success. We have now shifted our focus to OpEx where we think there are a number of opportunities. We talked about IP fees as well just a few minutes ago. And so we're looking across the entire cost base for ways to do things better, smarter and faster. And so I think you'll see some of those savings come through, not necessarily in '25, but as we head into '26. And again, either helps us achieve the margin expansion targets we set out over the next 3 years or gives us more room to reinvest in the business.
Spencer Rascoff, CEO
Yes. Just one other thing to add. For example, just to kind of combine two threads here, the thread around operating like one Match Group and the threat around looking at OpEx savings. In the cost reductions that we announced today, we did not take down marketing spend at all. However, we are looking at unifying our marketing measurement across the company. We already unify our media buying for certain types of digital advertising, but we haven't unified marketing measurement. And we think there's a lot of opportunity as one Match Group to start looking at the efficacy of marketing spend cross-brand at a central level, and that should drive savings and synergies as well.
Operator, Operator
The next question will come from Curtis Nagle with Bank of America. Please go ahead.
Curtis Nagle, Analyst
Terrific. So just a couple of ones for me. Would you be able to elaborate just on the surge in advertising in 1Q? I guess was there something you specifically did? What drove it? And would you expect this to sustain for the year?
Steven Bailey, CFO
Yes. Thanks for the question. We did have - it was a record quarter for advertising, which was fantastic to see. We saw really strong demand from advertisers around the Valentine's Day holiday, which was great, and we had a few large of our larger advertisers spend quite a bit of money with us in the quarter. I would not expect it to continue. We're not changing our full-year guidance for advertising revenue, which is approximately flat year-over-year. So I would think of it as a really good quarter. We'll take it, but not a sustained change for the business. And then, of course, we always have to keep in mind that the macro effect on advertisers, too. So we'll have to see how the macro environment plays out over the rest of the year and what impact, if any, that has on advertising revenue. Thanks for the question.
Operator, Operator
The next question will come from Ben Black with Deutsche Bank. Please go ahead.
Ben Black, Analyst
Great. Thanks for taking my question. So Spencer, can you just dig in a little bit into what you're seeing in New Zealand for Tinder and AI discovery? Are Match rates improving? Are you seeing a lift to sort of dating outcomes? And then I guess, relatedly, you touched on this in the letter, but in your prepared remarks, but how are you finding the data that you need to power your AI efforts? And then secondly, your competitor, Bumble last night spoke about pulling back on marketing, particularly performance spend. I'd be curious to hear how that potentially impacts you? Is this sort of a time to double down and pick up users? Or does it generally not necessarily have an impact on your business? Thank you.
Spencer Rascoff, CEO
Yes. So what we are testing in New Zealand and coming soon to other countries is a daily drop. So a single bespoke AI-driven match. And this is important for two reasons. Number one, the quality of the match is driven by AI because by the user inputting more information about themselves, answering questions and also sharing access to their camera roll, which is a window to your soul. And so the quality of the matches are better through that than our traditional also AI-driven algorithm. But more importantly, it's changing the perception of how users consider Tinder. And if you think about the double dating feature and this single daily drop in tandem, you start to understand how we're trying to change how people think about Tinder. For a decade, Tinder has been an infinite card stack where you swipe left or swipe right to assess the essentially attractiveness of the photo that you're looking at. And we are - and that worked well 10 years ago when there was more of a hookup culture, when smartphones were new and when there was novelty around that type of feature set. But as millennials aged up and as Gen Z entered into our sweet spot, that product has less resonance and Tinder has less product market fit today than in the past. And we think that by adding new ways to use Tinder, including a daily drop and also a double dating feature and other features in our roadmap, we'll start to change user perception of Tinder. So I'm definitely encouraged by the specific data coming out of the daily AI drop, including around the quality of the matching. But more importantly, I'm excited about the ways that we can change brand perception of Tinder, which is the first step in arresting our MAU declines and returning to traffic and audience growth. Steve, I'll let you answer the question about performance marketing.
Steven Bailey, CFO
Sure. The way I would think about it is this, performance marketing plays an important role in some of our brands, namely our E&E brands like match.com. And there, we take a very rigorous ROI-driven approach. So if the ROIs aren't meeting our thresholds, we don't spend the dollars, and that's been our approach for many years now and will continue to be our approach going forward. For our brands like Tinder and Hinge, performance marketing plays a very small part of the total marketing spend. And so we really don't have a situation where we're driving a lot of traffic through performance that we need to reassess. It's really brand marketing at both Tinder and Hinge that's driving organic traffic, and that's something we're going to continue to do as long as it makes sense for us. Thanks for the question.
Operator, Operator
The next question will come from Ken Gawrelski with Wells Fargo. Please go ahead.
Ken Gawrelski, Analyst
Two for Spencer, if I may, please. First, Spencer, how would you assess the health of the overall online dating industry? If we’re still facing industry challenges, how effective do you believe Match can be in generating improved momentum through company-specific product innovation, particularly with your largest brands? And then for your second point, Spencer, you mentioned the increased product velocity you’re observing internally regarding the code base. What external indicators can you share that we should look for to track your progress? Thanks.
Spencer Rascoff, CEO
Let me address the second part of your question first. There aren't enough external monitors available for measurement. I believe MAU is the best metric. I wish you could see user sentiment, which is a precursor to MAU. If MAU were hypothetically stable, but users within our ecosystem felt more satisfied and connected with the brand and its features, that would be a leading indicator for MAU improvements in a few months. However, you lack that visibility. The best external metric would be related to audience insights. As for the category, online dating is currently facing challenges. The good news is these challenges stem from our own actions. I truly believe Tinder, as the category leader, sets the tone. The issues in the category are primarily due to a lack of innovation and a failure to adapt to the preferences of younger users, especially Gen Z. We see a division forming: the intentional dating category, led by Hinge, and the spontaneous user interactions, where Tinder leads. However, we need to enhance the perception of the category. Firstly, we must improve trust and safety, which is fundamental and within our control. By making Match Group apps the safest means to meet new people, we can start changing category perception. Secondly, we need to innovate by prioritizing users over short-term revenue and profit, a departure from our historical approach that has been detrimental. The struggles of the category are partly due to our failure to focus on user outcomes. We must create lower pressure environments for Gen Z users to interact, aligning with their expectations. We also need to revisit foundational aspects of our product. The swipe mechanism is just one of many ways users can engage with Tinder, and over time, other methods will gain importance. Looking at other categories like ridesharing, they faced significant challenges not long ago. There was a time when getting into a stranger's car felt risky due to trust and safety concerns. Then, a new CEO with a focus on innovation came in, prioritized trust and safety, expanded into new areas like quality car services and food delivery, and successfully transformed user perception of Uber, the category leader, and consequently the entire category. This change began with a shift in company culture, which led to innovation and improved user outcomes, ultimately driving revenue, profit, and shareholder value. This is the approach we are taking at Tinder and Match Group, and if we execute well, we can alter how the category is perceived and positively influence investor sentiment.
Operator, Operator
The next question will come from Jason Helfstein with Oppenheim. Please go ahead.
Jason Helfstein, Analyst
Thank you for taking my question. I’d like to explore the 9% decrease in Tinder's monthly active users. Can you clarify how much of that drop is intentional, such as removing bad actors from the platform, or if it relates to traffic that shows low conversion rates, leading to decisions about where to invest resources? Additionally, in the long term, there has been a conversation about whether the business should focus more on revenue and EBITDA, similar to Netflix, rather than disclosing user and payer metrics. Spencer, do you think that sharing all this data hinders your ability to make the best long-term decisions for the business? Thank you.
Spencer Rascoff, CEO
Thanks, Jason. Great question. And you and I had this discussion at Zillow for many, many years around our number of paying advertisers, our number of real estate agent advertisers and whether that was a good metric to disclose. And of course, you know and other analysts on the call who cover both companies know that I always explained that, that was not a great metric, and I regretted that we disclosed it when we went public. And then, of course, over time, we sunsetted it. So to answer your specific question, does the fact that we disclose payers prevent us from making the right long-term decisions? The answer on that is no, because I am making the right long-term decisions around the product and the payer number is an output of that. And if that goes up, okay, if that goes down, okay, like we're driving this business towards long-term sustainable profitability, shareholder value creation, et cetera. And as Steve already answered, we don't run the business to short-term decisions or even the payer count number. Would it be easier if we didn't disclose it? I don't know. It doesn't really affect decision-making, so it doesn't bother me that much. Regarding the audience and whether some of the declines are due to bad actors and so it's desirable. I don't have a great answer to that. I would say some of the decline is intentional and desirable, but certainly not all of it. And I'm working like mad and the team is working like mad to grow Tinder audience, the right kind of audience, of course. I mean we could grow the wrong kind of audience quite quickly, and we're not going to do that. But I guess the easiest way to describe it would be some of the decline is due to intentional bad actor removals, but not most of it. So I look forward to the days when Tinder is flat and then up in terms of audience, and we've improved trust and safety at the same time.
Operator, Operator
The next question will come from Chris Kuntarich with UBS. Please go ahead.
Chris Kuntarich, Analyst
Maybe just going back to the trust and safety dynamics. Any update to be sharing around mandatory face photos and how we should be thinking about a potential rollout in the U.S.? And then just one quick follow-up. I think you had been assuming 2.5 points of FX or headwind in the full year guidance. I think it's 1 point of tailwind in 1Q. Any update there?
Spencer Rascoff, CEO
So on the topic of trust and safety, I just want to reiterate how foundational this is, and this is work that never stops for us. We must make Match Group apps be the safest way to meet new people, and we devote enormous resources that's manpower, technology over hundreds of millions of dollars to driving trust and safety and improved user outcomes. The mandated liveness check that we're testing, which is basically a short face video and selfie in a couple of markets, takes time for the ecosystem to settle when we introduce new features, especially new trust and safety features because we need time for the audience, the other folks that are using the apps in those geographies to recognize that there's a higher degree of safety there. And it drives higher Net Promoter Score from our existing users. It drives better word of mouth. So because we're a two-sided marketplace with local network effects, this isn't a simple A/B test that you can just say, 'Oh, should the button be blue or red?' This is something that the ecosystem has to digest. So, and also on our end, we need time to mitigate any negative impacts of those tests, whether it be financial or otherwise. So I guess I would just say we are acting with care and consideration, but no lack of urgency on this issue. I don't have any specific updates on rolling that particular feature out more broadly, but we're working very hard on this and acting with urgency even though it's been live for a couple of months now, and we have not rolled it out further.
Steven Bailey, CFO
Certainly. FX trends have improved significantly for our business as the U.S. dollar has weakened against most major currencies. This positively impacted our Q1 results and is also expected to benefit Q2 results, effectively counteracting any macroeconomic challenges. Looking at the full year, we utilize forward curves, which indicate a much weaker dollar than anticipated back in February when we established our full-year guidance. Consequently, all else being equal, this would enhance our full-year reported expectations. However, considering the early signs at Tinder and the uncertainty in the broader macroeconomic landscape, we are adopting a cautious stance. These two factors have led us to maintain our guidance for the full year; while the declining dollar provides some assistance, we remain careful regarding potential macro impacts on the business as we assess how things develop.
Operator, Operator
The next question will come from Youssef Squali with Truist. Please go ahead.
Unidentified Analyst, Analyst
This is Robert Taylor on for Youssef Squali. I'm just curious, what does a rollout in a new market typically look like in terms of additional costs in the first couple of years, user growth and then the ramp of revenues?
Steven Bailey, CFO
It varies by brand, but typically involves a couple of million dollars in spending, influenced by the level of customization needed and the cost of acquisition we plan for that market. While it's not insignificant, it also isn't extremely major. The complexity of each country plays a role as well. For instance, Pairs, which is the top dating app in Japan, just entered the Korean market. We utilized the Match Group Asia go-to-market team, which was already promoting Tinder and our other brands in Korea. This created great synergies with minimal additional headcount costs for the market entry. There is a small extra cost for marketing as we establish local network effects in Korea. Additionally, there are product development costs for adapting Pairs for the Korean audience, but these are covered by the core business. Overall, the incremental costs were quite low. We have applied this strategy globally across more than 15 brands, and it remains a major focus for us in 2025 and 2026 for the markets where our brands have yet to establish a presence.
Operator, Operator
Our final question today will come from Dan Salmon with New Street Research. Please go ahead.
Dan Salmon, Analyst
Maybe an appropriate one to wrap up the call with. But Spencer, obviously, some changes at the Board level here recently with some changes in seeing - excuse me, to see Kelly Campbell join, Alan Spoon exit formally expanding the size of it. Would love to just hear your thoughts on how those changes help improve the broader strategy for the company over the long term? And then just any update you can give us on your dialogue with, I don't know if we call them activist investors or maybe publicly active investors. Would just love to hear if there's anything you can add to that about where your dialogue sits. Is that largely with Stephen? Does that reach up to your level or even to the board? Any color would be great.
Spencer Rascoff, CEO
Sure. Thank you for the question. I am very excited about Daryl and Kelly joining the board. They both bring exceptional consumer expertise. Daryl is the founder of two leading digital tech companies and has an impressive background in product engineering. He is skilled in both technology and performance marketing. Kelly also has a remarkable marketing and product background in technology and consumer media. They will both add valuable expertise to our board. I will miss Alan, who has been a fantastic director, and I appreciate everything he has contributed over the years. However, I am confident that Daryl and Kelly will be excellent directors as well. As for our relationship with shareholders, everything is good. I am actively engaging with all key shareholders, including those you mentioned, and I look forward to learning from them and hearing their perspectives on the business. I have always enjoyed engaging with shareholders and research analysts, and I find these conversations to be insightful. I am eager to continue these engagements with all shareholders, whether they are activist or not. So I think that we'll wrap up the call. Thank you very much. I look forward to speaking with you all again very shortly. Have a great day. Thanks.
Operator, Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.