8-K
Match Group, Inc. (MTCH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 4, 2020
MATCH GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-34148 | 59-2712887 |
|---|---|---|
| (State or other jurisdiction <br>of incorporation) | (Commission <br>File Number) | (IRS Employer <br>Identification No.) |
8750 North Central Expressway, Suite 1400
Dallas, TX 75231
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (214) 576-9352
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Securities registered pursuant to Section 12(b) of the Act: | ||
|---|---|---|
| Title of each class | Trading Symbol | Name of exchange on which registered |
| Common Stock, par value $0.001 | MTCH | The Nasdaq Stock Market LLC |
| (Nasdaq Global Select Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
Item 7.01. Regulation FD Disclosure.
On November 4, 2020, Match Group, Inc. (“Match Group”) announced that it had released its results for the quarter ended September 30, 2020. The full text of the related press release, which is posted on the “Investor Relations” section of Match Group’s website at https://ir.mtch.com and appears in Exhibit 99.1 hereto, is incorporated herein by reference.
Exhibit 99.1 is being furnished under both Item 2.02 “Results of Operations and Financial Condition” and Item 7.01 “Regulation FD Disclosure.”
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br><br>Number | Description |
|---|---|
| 99.1 | Press Release of Match Group, Inc., dated November 4, 2020. |
| 104 | Inline XBRL for the cover page of this Current Report on Form 8-K |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MATCH GROUP, INC. | |
|---|---|
| By: | /s/ Gary Swidler |
| Gary Swidler | |
| Chief Operating Officer and Chief Financial Officer |
Date: November 4, 2020
Document
Exhibit 99.1
Page 1 of 14
Match Group Reports Third Quarter 2020 Results
Dallas, TX—November 4, 2020—Match Group, Inc. (NASDAQ: MTCH; “Match Group” or “Company”) reported third quarter 2020 financial results today and separately posted a Letter to Shareholders on the Investor Relations section of its website at https://ir.mtch.com.
Q3 2020 HIGHLIGHTS
•Total revenue grew 18% over the prior year quarter to $640 million.
•Operating income was $200 million, an increase of 14% over the prior year quarter for an operating margin of 31%.
•Adjusted EBITDA was $249 million, an increase of 21% over the prior year quarter representing an Adjusted EBITDA margin of 39%.
•Average Subscribers increased 12% to 10.8 million, up from 9.6 million in the prior year quarter. ARPU was $0.62, an increase of 4% over the prior year quarter.
•Tinder Direct Revenue grew 15% year-over-year, driven by 16% Average Subscriber growth to 6.6 million, partially offset by a 1% decline in ARPU.
•Non-Tinder brands collectively grew Direct Revenue 23% year-over-year, driven by growth in ARPU of 13%, Average Subscribers of 7%, and contributions from non-subscriber one-to-many video revenue, which launched earlier this year.
•Year-to-date operating cash flow and free cash flow both grew 11%, to $519 million and $486 million, respectively.
Key Financial and Operating Metrics
| (In thousands, except EPS and ARPU) | Q3 2020 | Q3 2019 | Change | ||||
|---|---|---|---|---|---|---|---|
| Revenue | $ | 639,770 | $ | 541,493 | 18% | ||
| Operating Income | $ | 200,167 | $ | 175,236 | 14% | ||
| Operating Income Margin | 31 | % | 32 | % | (1.1) pt | ||
| Net earnings attributable to shareholders | $ | 132,073 | $ | 108,474 | 22% | ||
| Diluted EPS(a) | $ | 0.45 | $ | 0.52 | (13)% | ||
| Adjusted EBITDA | $ | 249,182 | $ | 205,215 | 21% | ||
| Adjusted EBITDA Margin | 39 | % | 38 | % | 1.1 pt | ||
| Average Subscribers | 10,796 | 9,612 | 12% | ||||
| ARPU | $ | 0.62 | $ | 0.59 | 4% | ||
| YTD Operating Cash Flow | $ | 518,845 | $ | 468,255 | 11% | ||
| YTD Free Cash Flow | $ | 486,469 | $ | 437,982 | 11% |
______________________
(a)Weighted average basic and diluted shares outstanding for all periods prior to the separation of Match Group from IAC/InterActiveCorp (“IAC”) on June 30, 2020 reflect the share position of the Company formerly known as IAC/InterActiveCorp (“Former IAC”). See page 7 for additional information.
See reconciliations of GAAP to non-GAAP measures starting on page 9.
Page 2 of 14
Revenue
| (In thousands, except ARPU) | Q3 2020 | Q3 2019 | Change | ||
|---|---|---|---|---|---|
| Direct Revenue: | |||||
| North America | $ | 321,806 | $ | 268,863 | 20% |
| International | 306,460 | 262,086 | 17% | ||
| Total Direct Revenue | 628,266 | 530,949 | 18% | ||
| Indirect Revenue | 11,504 | 10,544 | 9% | ||
| Total Revenue | $ | 639,770 | $ | 541,493 | 18% |
| Average Subscribers | |||||
| North America | 5,112 | 4,695 | 9% | ||
| International | 5,684 | 4,917 | 16% | ||
| Total Average Subscribers | 10,796 | 9,612 | 12% | ||
| (Change calculated using non-rounded numbers) | |||||
| ARPU | |||||
| North America | $ | 0.66 | $ | 0.62 | 8% |
| International | $ | 0.58 | $ | 0.57 | 1% |
| Total ARPU | $ | 0.62 | $ | 0.59 | 4% |
Growth in North America Average Subscribers was primarily driven by Tinder, Hinge, BLK, and Chispa. Growth in International Average Subscribers was primarily driven by Tinder, with growth at Pairs and Meetic also contributing. North America ARPU increased primarily due to increased purchases of à la carte features at Tinder, Hinge, and PlentyofFish, as well as optimized pricing at Hinge.
Operating Costs and Expenses
| (In thousands) | Q3 2020 | % of Revenue | Q3 2019 | % of Revenue | Change | ||
|---|---|---|---|---|---|---|---|
| Cost of revenue | $ | 169,823 | 27% | $ | 138,225 | 26% | 23% |
| Selling and marketing expense | 129,859 | 20% | 113,581 | 21% | 14% | ||
| General and administrative expense | 88,961 | 14% | 68,668 | 13% | 30% | ||
| Product development expense | 39,280 | 6% | 36,609 | 7% | 7% | ||
| Depreciation | 11,221 | 2% | 8,533 | 2% | 32% | ||
| Amortization of intangibles | 459 | —% | 641 | —% | (28)% | ||
| Total operating costs and expenses | $ | 439,603 | 69% | $ | 366,257 | 68% | 20% |
Total operating costs and expenses increased 20% in total dollars and 1% as a percentage of revenue. Cost of revenue increased primarily due to an increase of in-app purchase fees and partner-related costs associated with one-to-many video. Total selling and marketing expense increased due to higher marketing spend to take advantage of favorable marketing rates available in the current environment. General and administrative expense increased primarily due to increased stock-based compensation due
Page 3 of 14
to a modification charge, and increased headcount, partially offset by reductions in travel expenditures. Product development expense increased due to increased engineering-related headcount at Tinder.
Liquidity and Capital Resources
For the nine months ended September 30, 2020, we generated operating cash flow attributable to continuing operations of $519 million and Free Cash Flow of $486 million.
As of September 30, 2020, the Company had $399 million in cash and cash equivalents and $3.5 billion of long-term debt, including $1.7 billion of Exchangeable Senior Notes. The Company’s $750 million revolving credit facility was undrawn as of September 30, 2020. The following table sets forth the trailing twelve-month leverage and trailing twelve-month leverage excluding the Exchangeable Senior Notes on a gross and net basis:
| March 31, 2020 | June 30, 2020 | September 30, 2020 | |
|---|---|---|---|
| Trailing twelve-month leverage | |||
| Gross basis | 4.8x | 4.8x | 4.5x |
| Net basis | 3.8x | 4.6x | 4.0x |
| Trailing twelve-month leverage excluding the Exchangeable Senior Notes | |||
| Gross basis | 2.7x | 2.7x | 2.6x |
| Net basis | 1.7x | 2.6x | 2.1x |
Income Taxes
In the third quarter of 2020 and 2019, Match Group recorded an income tax provision from continuing operations of $24 million and $1 million, for effective tax rates of 15% and 1%, respectively. The tax rate in both quarters benefited from excess tax benefits generated by the exercise or vesting of stock-based awards.
Conference Call
Match Group will audiocast a conference call to answer questions regarding its third quarter financial results on Thursday, November 5, 2020 at 8:30 a.m. Eastern Time. This call will include the disclosure of certain information, including forward-looking information, which may be material to an investor’s understanding of Match Group’s business. The live audiocast will be open to the public on Match Group’s investor relations website at https://ir.mtch.com.
Page 4 of 14
GAAP FINANCIAL STATEMENTS
MATCH GROUP CONSOLIDATED STATEMENT OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| (In thousands, except per share data) | ||||||||
| Revenue | $ | 639,770 | $ | 541,493 | $ | 1,739,862 | $ | 1,504,091 |
| Operating costs and expenses: | ||||||||
| Cost of revenue (exclusive of depreciation shown separately below) | 169,823 | 138,225 | 462,570 | 385,114 | ||||
| Selling and marketing expense | 129,859 | 113,581 | 345,150 | 327,132 | ||||
| General and administrative expense | 88,961 | 68,668 | 236,484 | 187,135 | ||||
| Product development expense | 39,280 | 36,609 | 124,979 | 113,563 | ||||
| Depreciation | 11,221 | 8,533 | 30,284 | 25,578 | ||||
| Amortization of intangibles | 459 | 641 | 7,262 | 1,464 | ||||
| Total operating costs and expenses | 439,603 | 366,257 | 1,206,729 | 1,039,986 | ||||
| Operating income | 200,167 | 175,236 | 533,133 | 464,105 | ||||
| Interest expense | (43,189) | (38,993) | (131,485) | (99,990) | ||||
| Other (expense) income, net | (1,923) | 2,788 | 19,341 | 3,838 | ||||
| Earnings from continuing operations, before tax | 155,055 | 139,031 | 420,989 | 367,953 | ||||
| Income tax (provision) benefit | (23,568) | (1,240) | (7,257) | 6,746 | ||||
| Net earnings from continuing operations | 131,487 | 137,791 | 413,732 | 374,699 | ||||
| Earnings (loss) from discontinued operations, net of tax | 508 | 21,981 | (366,070) | 44,849 | ||||
| Net earnings | 131,995 | 159,772 | 47,662 | 419,548 | ||||
| Net loss (earnings) attributable to noncontrolling interests | 586 | (31,228) | (59,680) | (88,842) | ||||
| Net earnings (loss) attributable to Match Group, Inc. shareholders | $ | 132,581 | $ | 128,544 | $ | (12,018) | $ | 330,706 |
| Net earnings per share from continuing operations: | ||||||||
| Basic | $ | 0.51 | $ | 0.60 | $ | 1.69 | $ | 1.63 |
| Diluted | $ | 0.45 | $ | 0.52 | $ | 1.53 | $ | 1.42 |
| Net earnings (loss) per share attributable to Match Group, Inc. shareholders: | ||||||||
| Basic | $ | 0.51 | $ | 0.71 | $ | (0.06) | $ | 1.82 |
| Diluted | $ | 0.46 | $ | 0.63 | $ | (0.10) | $ | 1.60 |
| Basic shares outstanding | 260,744 | 182,154 | 209,113 | 181,624 | ||||
| Diluted shares outstanding | 289,950 | 193,151 | 225,399 | 194,140 | ||||
| Stock-based compensation expense by function: | ||||||||
| Cost of revenue | $ | 1,007 | $ | 919 | $ | 3,143 | $ | 2,860 |
| Selling and marketing expense | 1,402 | 1,199 | 3,844 | 3,925 | ||||
| General and administrative expense | 26,870 | 10,854 | 48,385 | 33,915 | ||||
| Product development expense | 8,056 | 7,833 | 25,275 | 30,117 | ||||
| Total stock-based compensation expense | $ | 37,335 | $ | 20,805 | $ | 80,647 | $ | 70,817 |
Page 5 of 14
MATCH GROUP CONSOLIDATED BALANCE SHEET
| September 30, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| (In thousands) | ||||
| ASSETS | ||||
| Cash and cash equivalents | $ | 398,884 | $ | 465,676 |
| Accounts receivable, net | 199,682 | 116,459 | ||
| Other current assets | 139,593 | 97,850 | ||
| Current assets of discontinued operations | — | 3,028,079 | ||
| Total current assets | 738,159 | 3,708,064 | ||
| Property and equipment, net | 106,006 | 101,065 | ||
| Goodwill | 1,252,715 | 1,239,839 | ||
| Intangible assets, net | 226,126 | 228,324 | ||
| Deferred income taxes | 236,500 | 192,496 | ||
| Other non-current assets | 110,586 | 64,232 | ||
| Non-current assets of discontinued operations | — | 2,830,783 | ||
| TOTAL ASSETS | $ | 2,670,092 | $ | 8,364,803 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| LIABILITIES | ||||
| Accounts payable | $ | 16,347 | $ | 20,191 |
| Deferred revenue | 240,954 | 218,843 | ||
| Accrued expenses and other current liabilities | 230,894 | 182,250 | ||
| Current liabilities of discontinued operations | — | 588,896 | ||
| Total current liabilities | 488,195 | 1,010,180 | ||
| Long-term debt, net | 3,521,092 | 2,889,626 | ||
| Income taxes payable | 13,147 | 30,295 | ||
| Deferred income taxes | 17,721 | 18,285 | ||
| Other long-term liabilities | 70,258 | 26,158 | ||
| Non-current liabilities of discontinued operations | — | 447,414 | ||
| Redeemable noncontrolling interest | 2,240 | 44,527 | ||
| Commitment and contingencies | ||||
| SHAREHOLDERS’ EQUITY | ||||
| Common stock | 264 | — | ||
| Former IAC common stock | — | 263 | ||
| Former IAC class B convertible common stock | — | 16 | ||
| Additional paid-in capital | 7,296,618 | 11,683,799 | ||
| Retained (deficit) earnings | (8,631,705) | 1,689,925 | ||
| Accumulated other comprehensive loss | (108,111) | (136,349) | ||
| Treasury stock | — | (10,309,612) | ||
| Total Match Group, Inc. shareholders’ equity | (1,442,934) | 2,928,042 | ||
| Noncontrolling interests | 373 | 970,276 | ||
| Total shareholders’ equity | (1,442,561) | 3,898,318 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 2,670,092 | $ | 8,364,803 |
Page 6 of 14
MATCH GROUP CONSOLIDATED STATEMENT OF CASH FLOWS
| Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (In thousands) | ||||
| Cash flows from operating activities attributable to continuing operations: | ||||
| Net earnings from continuing operations | $ | 413,732 | $ | 374,699 |
| Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities attributable to continuing operations: | ||||
| Stock-based compensation expense | 80,647 | 70,817 | ||
| Depreciation | 30,284 | 25,578 | ||
| Amortization of intangibles | 7,262 | 1,464 | ||
| Deferred income taxes | (6,594) | (26,184) | ||
| Other adjustments, net | 57,042 | 22,912 | ||
| Changes in assets and liabilities | ||||
| Accounts receivable | (87,920) | (68,557) | ||
| Other assets | (26,132) | 3,251 | ||
| Accounts payable and other liabilities | 18,281 | 45,711 | ||
| Income taxes payable and receivable | 5,315 | (6,006) | ||
| Deferred revenue | 26,928 | 24,570 | ||
| Net cash provided by operating activities attributable to continuing operations | 518,845 | 468,255 | ||
| Cash flows from investing activities attributable to continuing operations: | ||||
| Net cash used in business combinations | — | (3,759) | ||
| Capital expenditures | (32,376) | (30,273) | ||
| Purchases of investments | (9,115) | — | ||
| Net cash distribution related to Separation of IAC | (3,870,550) | — | ||
| Other, net | (93) | 1,071 | ||
| Net cash used in investing activities attributable to continuing operations | (3,912,134) | (32,961) | ||
| Cash flows from financing activities attributable to continuing operations: | ||||
| Borrowings under the Credit Facility | 20,000 | 40,000 | ||
| Proceeds from Senior Notes offerings | 1,000,000 | 350,000 | ||
| Proceeds from Exchangeable Notes offerings | — | 1,150,000 | ||
| Principal payments on Credit Facility | (20,000) | (300,000) | ||
| Principal payments on Senior Notes | (400,000) | — | ||
| Purchase of exchangeable note hedges | — | (303,428) | ||
| Proceeds from issuance of warrants | — | 166,520 | ||
| Debt issuance costs | (13,517) | (27,815) | ||
| Proceeds from stock offering | 1,421,801 | — | ||
| Proceeds from issuance of common stock pursuant to stock-based awards | 79,528 | — | ||
| Withholding taxes paid on behalf of employees on net settled stock-based awards of Former Match Group and Match Group | (211,958) | (167,183) | ||
| Purchase of Former Match Group treasury stock | (132,868) | (175,736) | ||
| Purchase of noncontrolling interests | (15,827) | — | ||
| Other, net | (15,188) | (25) | ||
| Net cash provided by financing activities attributable to continuing operations | 1,711,971 | 732,333 | ||
| Total cash (used in) provided by continuing operations | (1,681,318) | 1,167,627 | ||
| Net cash provided by operating activities attributable to discontinued operations | 13,630 | 220,511 | ||
| Net cash used in investing activities attributable to discontinued operations | (963,420) | (374,333) | ||
| Net cash used in financing activities attributable to discontinued operations | (110,959) | (196,803) | ||
| Total cash used in discontinued operations | (1,060,749) | (350,625) | ||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 725 | (2,534) | ||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (2,741,342) | 814,468 | ||
| Cash, cash equivalents, and restricted cash at beginning of period | 3,140,358 | 2,133,685 | ||
| Cash, cash equivalents, and restricted cash at end of period | $ | 399,016 | $ | 2,948,153 |
Page 7 of 14
MATCH GROUP EARNINGS PER SHARE
Weighted average basic and diluted shares outstanding for all periods prior to the separation of Match Group from IAC on June 30, 2020 reflect the share position of Former IAC multiplied by the separation exchange ratio of 2.1584.
The following tables set forth the computation of the basic and diluted earnings per share attributable to Match Group shareholders:
| Three Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||
| Basic | Diluted | Basic | Diluted | |||||
| (In thousands, except per share data) | ||||||||
| Numerator | ||||||||
| Net earnings from continuing operations | $ | 131,487 | $ | 131,487 | $ | 137,791 | $ | 137,791 |
| Net loss (earnings) attributable to noncontrolling interests | 586 | 586 | (29,317) | (29,317) | ||||
| Impact from subsidiaries’ dilutive securities | — | (395) | — | (7,334) | ||||
| Net earnings from continuing operations attributable to Match Group, Inc. shareholders | $ | 132,073 | $ | 131,678 | $ | 108,474 | $ | 101,140 |
| Earnings from discontinued operations, net of tax | $ | 508 | $ | 508 | $ | 21,981 | $ | 21,981 |
| Net earnings attributable to noncontrolling interests of discontinued operations | — | — | (1,911) | (1,911) | ||||
| Impact from subsidiaries’ dilutive securities of discontinued operations | — | — | — | (8) | ||||
| Net earnings from discontinued operations attributable to shareholders | 508 | 508 | 20,070 | 20,062 | ||||
| Net earnings attributable to Match Group, Inc. shareholders | $ | 132,581 | $ | 132,186 | $ | 128,544 | $ | 121,202 |
| Denominator | ||||||||
| Weighted average basic shares outstanding | 260,744 | 260,744 | 182,154 | 182,154 | ||||
| Dilutive securities | — | 29,206 | — | 10,997 | ||||
| Denominator for earnings per share—weighted average shares | 260,744 | 289,950 | 182,154 | 193,151 | ||||
| Earnings per share: | ||||||||
| Earnings per share from continuing operations | $ | 0.51 | $ | 0.45 | $ | 0.60 | $ | 0.52 |
| Earnings per share from discontinued operations, net of tax | $ | — | $ | — | $ | 0.11 | $ | 0.10 |
| Earnings per share attributable to Match Group, Inc. shareholders | $ | 0.51 | $ | 0.46 | $ | 0.71 | $ | 0.63 |
Page 8 of 14
| Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||
| Basic | Diluted | Basic | Diluted | |||||
| (In thousands, except per share data) | ||||||||
| Numerator | ||||||||
| Net earnings from continuing operations | $ | 413,732 | $ | 413,732 | $ | 374,699 | $ | 374,699 |
| Net earnings attributable to noncontrolling interests | (59,999) | (59,999) | (78,124) | (78,124) | ||||
| Impact from subsidiaries’ dilutive securities | — | (9,823) | — | (20,107) | ||||
| Net earnings from continuing operations attributable to Match Group, Inc. shareholders | $ | 353,733 | $ | 343,910 | $ | 296,575 | $ | 276,468 |
| (Loss) earnings from discontinued operations, net of tax | $ | (366,070) | $ | (366,070) | $ | 44,849 | $ | 44,849 |
| Net loss (earnings) attributable to noncontrolling interests of discontinued operations | 319 | 319 | (10,718) | (10,718) | ||||
| Impact from subsidiaries’ dilutive securities of discontinued operations | — | (240) | — | (67) | ||||
| Net (loss) earnings from discontinued operations attributable to shareholders | (365,751) | (365,991) | 34,131 | 34,064 | ||||
| Net (loss) earnings attributable to Match Group, Inc. shareholders | $ | (12,018) | $ | (22,081) | $ | 330,706 | $ | 310,532 |
| Denominator | ||||||||
| Weighted average basic shares outstanding | 209,113 | 209,113 | 181,624 | 181,624 | ||||
| Dilutive securities | — | 16,286 | — | 12,516 | ||||
| Denominator for earnings per share—weighted average shares | 209,113 | 225,399 | 181,624 | 194,140 | ||||
| Earnings per share: | ||||||||
| Earnings per share from continuing operations | $ | 1.69 | $ | 1.53 | $ | 1.63 | $ | 1.42 |
| (Loss) earnings per share from discontinued operations, net of tax | $ | (1.75) | $ | (1.62) | $ | 0.19 | $ | 0.18 |
| (Loss) earnings per share attributable to Match Group, Inc. shareholders | $ | (0.06) | $ | (0.10) | $ | 1.82 | $ | 1.60 |
MATCH GROUP COMPONENTS OF INTEREST EXPENSE
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| (In thousands) | ||||||||
| Credit Facility, Term Loan, and Senior Notes | $ | 25,203 | $ | 22,672 | $ | 78,284 | $ | 68,575 |
| Exchangeable Senior Notes | 17,986 | 16,321 | 53,201 | 31,415 | ||||
| Total Match Group interest expense | $ | 43,189 | $ | 38,993 | $ | 131,485 | $ | 99,990 |
Page 9 of 14
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
MATCH GROUP RECONCILIATION OF NET EARNINGS TO ADJUSTED EBITDA
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (Dollars in thousands) | ||||||||||||
| Net earnings (loss) attributable to Match Group, Inc. shareholders | $ | 132,581 | $ | 128,544 | $ | (12,018) | $ | 330,706 | ||||
| Add back: | ||||||||||||
| Net (loss) earnings attributable to noncontrolling interests | (586) | 31,228 | 59,680 | 88,842 | ||||||||
| (Earnings) loss from discontinued operations, net of tax | (508) | (21,981) | 366,070 | (44,849) | ||||||||
| Income tax provision (benefit) | 23,568 | 1,240 | 7,257 | (6,746) | ||||||||
| Other expense (income), net | 1,923 | (2,788) | (19,341) | (3,838) | ||||||||
| Interest expense | 43,189 | 38,993 | 131,485 | 99,990 | ||||||||
| Operating Income | 200,167 | 175,236 | 533,133 | 464,105 | ||||||||
| Stock-based compensation expense | 37,335 | 20,805 | 80,647 | 70,817 | ||||||||
| Depreciation | 11,221 | 8,533 | 30,284 | 25,578 | ||||||||
| Amortization of intangibles | 459 | 641 | 7,262 | 1,464 | ||||||||
| Adjusted EBITDA | $ | 249,182 | $ | 205,215 | $ | 651,326 | $ | 561,964 | ||||
| Revenue | $ | 639,770 | $ | 541,493 | $ | 1,739,862 | $ | 1,504,091 | ||||
| Operating income margin | 31 | % | 32 | % | 31 | % | 31 | % | ||||
| Adjusted EBITDA margin | 39 | % | 38 | % | 37 | % | 37 | % |
MATCH GROUP RECONCILIATION OF OPERATING CASH FLOW ATTRIBUTABLE TO CONTINUING OPERATIONS TO FREE CASH FLOW
| Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (In thousands) | ||||
| Net cash provided by operating activities attributable to continuing operations | $ | 518,845 | $ | 468,255 |
| Capital expenditures | (32,376) | (30,273) | ||
| Free Cash Flow | $ | 486,469 | $ | 437,982 |
Page 10 of 14
MATCH GROUP RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE, EXCLUDING FOREIGN EXCHANGE EFFECTS
| (Dollars in thousands, except ARPU) | Three months ended September 30, | ||||||
|---|---|---|---|---|---|---|---|
| 2020 | Change | % Change | 2019 | ||||
| Revenue, as reported | $ | 639,770 | $ | 98,277 | 18% | 541,493 | |
| Foreign exchange effects | (3,085) | ||||||
| Revenue Excluding Foreign Exchange Effects | $ | 636,685 | $ | 95,192 | 18% | $ | 541,493 |
| (Change calculated using non-rounded numbers, rounding differences may occur) | |||||||
| ARPU, as reported | $ | 0.62 | 4% | $ | 0.59 | ||
| Foreign exchange effects | 0.00 | ||||||
| ARPU, excluding foreign exchange effects | $ | 0.62 | 4% | $ | 0.59 | ||
| International ARPU, as reported | $ | 0.58 | 1% | $ | 0.57 | ||
| Foreign exchange effects | (0.01) | ||||||
| International ARPU, excluding foreign exchange effects | $ | 0.57 | —% | $ | 0.57 | ||
| (Dollars in thousands, except ARPU) | Nine Months Ended September 30, | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | Change | % Change | 2019 | ||||
| Revenue, as reported | $ | 1,739,862 | $ | 235,771 | 16% | $ | 1,504,091 |
| Foreign exchange effects | 16,370 | ||||||
| Revenue Excluding Foreign Exchange Effects | $ | 1,756,232 | $ | 252,141 | 17% | $ | 1,504,091 |
| (Change calculated using non-rounded numbers, rounding differences may occur) | |||||||
| ARPU, as reported | $ | 0.60 | 2% | $ | 0.58 | ||
| Foreign exchange effects | 0.00 | ||||||
| ARPU, excluding foreign exchange effects | $ | 0.60 | 3% | $ | 0.58 | ||
| International ARPU, as reported | $ | 0.55 | (1)% | $ | 0.56 | ||
| Foreign exchange effects | 0.01 | ||||||
| International ARPU, excluding foreign exchange effects | $ | 0.56 | —% | $ | 0.56 |
Page 11 of 14
DILUTIVE SECURITIES
Match Group has various tranches of dilutive securities. The table below details these securities and their potentially dilutive impact (shares in millions; rounding differences may occur).
| Average. Exercise Price | 10/30/2020 | |
|---|---|---|
| Share Price | $116.78 | |
| Absolute Shares | 266.0 | |
| Vested Options | ||
| Match Group Options | $13.32 | 2.4 |
| Match Group Options, converted from Former IAC Options | $23.40 | 2.9 |
| Total Dilution - Vested Options | 5.2 | |
| Unvested Options and Awards | ||
| Match Group Options | $20.41 | 1.9 |
| Match Group RSUs and subsidiary denominated equity awards | 4.8 | |
| Total Dilution - Unvested Options and Awards | 6.7 | |
| Outstanding Warrants | ||
| Warrants expiring on January 1, 2023 (11.8 million outstanding) | $68.22 | 4.9 |
| Warrants expiring on September 15, 2026 (6.6 million outstanding) | $134.76 | — |
| Warrants expiring on April 15, 2030 (6.8 million outstanding) | $134.82 | — |
| Total Dilution - Outstanding Warrants | 4.9 | |
| Total Dilution | 16.9 | |
| % Dilution | 6.0% | |
| Total Diluted Shares Outstanding | 282.8 |
The dilutive securities presentation above is calculated using the methods and assumptions described below; these are different from GAAP dilution, which is calculated based on the treasury stock method.
Options — The table above assumes the option exercise price is used to repurchase Match Group shares.
RSUs and subsidiary denominated equity awards — The table above assumes RSUs are fully dilutive. All performance-based and market-based awards reflect the expected shares that will vest based on current performance or market estimates. The table assumes no change in the fair value estimate of the subsidiary denominated equity awards from the values used for GAAP purposes at September 30, 2020.
Exchangeable Senior Notes — The Company has three series of Exchangeable Senior Notes outstanding. In the event of an exchange, each series of Exchangeable Senior Notes can be settled in cash, shares, or a combination of cash and shares. At the time of each Exchangeable Senior Notes issuance, the Company purchased call options with a strike price equal to the exchange price of each series of Exchangeable Senior Notes (“Note Hedge”), which can be used to offset the dilution of each series of the Exchangeable Senior Notes. No dilution is reflected in the table above for any of the Exchangeable Senior Notes, of which only the 2022 Exchangeable Senior Notes are currently exchangeable, because it is the Company’s intention to settle the Exchangeable Senior Notes with cash equal to the face amount of the notes; any shares issued would be offset by shares received upon exercise of the Note Hedge.
Warrants — At the time of the issuance of each series of Exchangeable Senior Notes, the Company also sold warrants for the number of shares with the strike prices reflected in the table above. The cash generated from the exercise of the warrants is assumed to be used to repurchase Match Group shares and the resulting net dilution, if any, is reflected in the table above.
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PRINCIPLES OF FINANCIAL REPORTING
Match Group reports Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, and Revenue Excluding Foreign Exchange Effects, all of which are supplemental measures to U.S. generally accepted accounting principles (“GAAP”). The Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow measures are among the primary metrics by which we evaluate the performance of our business, on which our internal budget is based and by which management is compensated. Revenue Excluding Foreign Exchange Effects provides a comparable framework for assessing the performance of our business without the effect of exchange rate differences when compared to prior periods. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Match Group endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. We encourage investors to examine the reconciling adjustments, which we describe below, between the GAAP and non-GAAP measures. Interim results are not necessarily indicative of the results that may be expected for a full year.
Definitions of Non-GAAP Measures
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements, as applicable. We believe Adjusted EBITDA is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. The above items are excluded from our Adjusted EBITDA measure because they are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes certain expenses.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenues. We believe Adjusted EBITDA margin is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Adjusted EBITDA margin has certain limitations in that it does not take into account the impact to our consolidated statement of operations of certain expenses.
Free Cash Flow is defined as net cash provided by operating activities from continuing operations, less capital expenditures. We believe Free Cash Flow is useful to investors because it represents the cash that our operating businesses generate, before taking into account non-operational cash movements. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. Therefore, we think it is important to evaluate Free Cash Flow along with our consolidated statement of cash flows.
We look at Free Cash Flow as a measure of the strength and performance of our businesses, not for valuation purposes. In our view, applying “multiples” to Free Cash Flow is inappropriate because it is subject to timing, seasonality and one-time events. We manage our business for cash and we think it is of utmost importance to maximize cash – but our primary valuation metric is Adjusted EBITDA.
Revenue Excluding Foreign Exchange Effects is calculated by translating current period revenues using prior period exchange rates. The percentage change in Revenue Excluding Foreign Exchange Effects is calculated by determining the change in current period revenues over prior period revenues where current period revenues are translated using prior period exchange rates. We believe the impact of foreign exchange rates on Match Group, due to its global reach, may be an important factor in understanding period over period comparisons if movement in rates is significant. Since our results are reported in U.S. dollars, international revenues are favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S dollar strengthens relative to other foreign currencies. We believe the presentation of revenue excluding foreign exchange effects in addition to reported revenue helps improve the ability to understand Match Group’s performance because it excludes the impact of foreign currency volatility that is not indicative of Match Group’s core operating results.
Page 13 of 14
Non-Cash Expenses That Are Excluded From Our Non-GAAP Measures
Stock-based compensation expense consists principally of expense associated with the grants of stock options, RSUs, performance-based RSUs and market-based awards. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method. Performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period). To the extent stock-based awards are settled on a net basis, the Company remits the required tax-withholding amounts from its current funds.
Depreciation is a non-cash expense relating to our property and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.
Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as customer lists, trade names and technology, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
DEFINITIONS
Direct Revenue - is revenue that is received directly from end users of our products and includes both subscription and à la carte revenue.
Indirect Revenue - is revenue that is not received directly from end users of our products, substantially all of which is advertising revenue.
Subscribers - are users who purchase a subscription to one of our products. Users who purchase only à la carte features are not included in Subscribers.
Average Subscribers - is the number of Subscribers at the end of each day in the relevant measurement period divided by the number of calendar days in that period.
Average Revenue per Subscriber (“ARPU”) - is Direct Revenue from Subscribers in the relevant measurement period (whether in the form of subscription or à la carte) divided by the Average Subscribers in such period and further divided by the number of calendar days in such period. Direct Revenue from users who are not Subscribers and have purchased only à la carte features is not included in ARPU.
Leverage on a gross basis - is calculated as principal debt balance divided by Adjusted EBITDA for the period referenced.
Leverage on a net basis - is calculated as principal debt balance less cash and cash equivalents divided by Adjusted EBITDA for the period referenced.
Page 14 of 14
OTHER INFORMATION
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release and our conference call, which will be held at 8:30 a.m. Eastern Time on November 5, 2020, may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that are not historical facts are “forward looking statements.” The use of words such as “anticipates,” “estimates,” “expects,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: Match Group’s future financial performance, Match Group’s business prospects and strategy, anticipated trends, and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: competition, our ability to maintain user rates on our higher monetizing dating products, our ability to attract users to our dating products through cost-effective marketing and related efforts, foreign currency exchange rate fluctuations, our ability to distribute our dating products through third parties and offset related fees, the integrity and scalability of our systems and infrastructure (and those of third parties) and our ability to adapt ours to changes in a timely and cost-effective manner, our ability to protect our systems from cyberattacks and to protect personal and confidential user information, risks relating to certain of our international operations and acquisitions, certain risks relating to our relationship with IAC post-separation, the impact of the outbreak of COVID-19 coronavirus, and the risks inherent in separating Match Group from IAC, including uncertainties related to, among other things, the costs and expected benefits of the proposed transaction, any litigation arising out of or relating to the transaction, the expected tax treatment of the transaction, and the impact of the transaction on the businesses of Match Group. Certain of these and other risks and uncertainties are discussed in Match Group’s filings with the Securities and Exchange Commission. Other unknown or unpredictable factors that could also adversely affect Match Group’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, these forward-looking statements may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of Match Group management as of the date of this press release. Match Group does not undertake to update these forward-looking statements.
About Match Group
Match Group (NASDAQ: MTCH), through its portfolio companies, is a leading provider of dating products available globally. Our portfolio of brands includes Tinder®, Match®, Meetic®, OkCupid®, Hinge®, Pairs™, PlentyOfFish®, and OurTime®, as well as a number of other brands, each designed to increase our users’ likelihood of finding a meaningful connection. Through our portfolio companies and their trusted brands, we provide tailored products to meet the varying preferences of our users. Our products are available in over 40 languages to our users all over the world.
Contact Us
Lance Barton
Match Group Investor Relations
(212) 314-7400
Justine Sacco
Match Group Corporate Communications
(212) 445-5088
Match Group
8750 North Central Expressway, Dallas, TX 75231, (214) 576-9352 https://mtch.com