The Match Group Fourth Quarter 2023 Earnings Conference Call was led by CEO Bernard Kim and President and CFO Gary Swidler. They discussed the company's outlook and future performance, reminding listeners of potential risks and uncertainties. Kim reflected on the accomplishments and progress made in the past year, including a new operating structure and strong financial growth. The team's focus on execution and innovation has laid the foundation for sustained growth. The year ended with strong revenue growth and a third consecutive quarter of record AOI.

The article introduces Faye Iosotaluno as Tinder's new CEO and expresses confidence in her leadership. The company's goal is to evolve and innovate to meet the expectations of modern daters, with a focus on creating engaging and authentic experiences. The company also aims to foster safe and respectful online communities for all users. The article mentions plans to improve existing dating apps, starting with Tinder and Hinge.

Tinder is using AI to create a more inclusive experience for users, especially for Gen Z and women. They are modernizing the existing swipe feature and adding new gestures for better user engagement. They are also working on features to improve trust and safety for women, as well as curating recommendations. In 2024, they are adopting a fast-fail mentality to prioritize rapid experimentation and testing, with the willingness to pivot and learn from failures. This approach drives their growth and sets new standards for users.

In 2024 and beyond, Tinder and Hinge will undergo significant changes to improve the dating experience. Tinder will focus on transforming the product with AI, while Hinge will use AI to create a more intentional and personalized experience. The central innovation team will also work on launching new brands and improving technology capabilities using AI. AI has already played a strategic role in Match Group's operations and will continue to do so in the future.

The company expects AI technology to greatly improve their apps, creating a safer environment for users to connect. They are making bold changes and expect to see progress in 2024. They will maintain financial discipline and focus on both short-term and long-term growth. The company values customer satisfaction and has seen strong financial performance, particularly from Tinder.

In the fourth quarter, Match Group achieved record AOI and OI for the third and second consecutive quarters, respectively. Total revenue for the quarter was $866 million, up 10% year-over-year. For the full year, Match Group had total revenue of $3.4 billion and AOI of $1.3 billion with a margin of 37%. Tinder direct revenue was up 11% year-over-year, but there was continued pressure on users resulting in a decline in new user registrations and reactivations. Hinge brand performed well with direct revenue growth of 50% year-over-year and Q4 payers up 33%. However, there was a seasonal slowdown in Q4, which was unusual for Hinge.

In the first quarter of 2024, Hinge has seen strong growth in all markets and demographics. Match Group's Q4 AOI was $362 million, up 27% year-over-year, with a margin of 42%. Excluding a $40 million Google settlement, AOI would have been up 13% and margins would have been 37%. Operating income was $260 million with a margin of 30%, or 25% after adjusting for the settlement. Expenses were down 11% year-over-year, with cost of revenue representing 29% of total revenue. App Store fees and selling and marketing costs increased, while G&A costs declined. Product development costs grew due to increased headcount. For Q1 2024, Match Group expects revenue of $850 million to $860 million, with a 2-point year-over-year FX headwind.

In the first quarter, Tinder expects direct revenue to be around $480 million to $485 million, with FX being a 2-point year-over-year headwind. They anticipate RPP and payer trends to be similar to Q4, with a smaller decline in payers. Other brands are expected to bring in $355 million to $360 million, with Hinge showing a 45% year-over-year growth. Match Group expects an AOI of $270 million to $275 million, with overall marketing spend increasing by $30 million year-over-year at Tinder and Hinge. They are monitoring marketing efficacy and can adjust if needed. For the entire year, they anticipate total revenue of $3.565 billion to $3.665 billion, with Tinder's direct revenue being $2.025 billion to $2.075 billion, representing 6% to 8% year-over-year growth.

The company's revenue target for Tinder in 2024 allows for focus on improving the ecosystem, product, and user growth. Modest improvement in user trends is expected, with positive payer growth in Q3 and Q4. Other brands are expected to see 6-10% growth, with a focus on Hinge's core and European markets. Foreign exchange is predicted to have a 1.5-point negative impact on total revenue growth. Indirect revenue is expected to increase by 8% in 2024. The company aims for at least 36% AOI margins, which will depend on revenue growth and investment decisions. Key investment areas include product innovation and marketing for Tinder, with an estimated $30-40 million increase in expenses compared to 2023.

Match Group plans to invest in three key areas to drive growth and improve user experience: AI-related investments in brands and products, product features and testing at Tinder and Hinge, and investment in Hinge to reach a $1 billion top line business. These investments are expected to result in long-term success and a 36% margin, with $100 million being reinvested. Results are expected to be seen this year.

BK expects improvements in product experience at Tinder and Hinge, with AI-driven features being introduced. Apple's changes in App Store fees could result in a $20 million annualized benefit, but this is subject to change and does not include potential benefits from alternative app stores or payment processors. The implementation of the Digital Markets Act in the EU and recent court cases against Apple and Google could lead to further changes in App Store policies globally. The company has not factored in any additional benefits from App Store changes in their outlook, but notes that they have paid $650 million to App Stores in 2023, leaving room for potential reduction.

The company is pleased with their financial results in the second half of 2023 and has plans for solid performance in 2024. They believe they offer a rare combination of revenue growth, profitability, and free cash flow generation. They are open to engaging with shareholders, including Elliott. The company has high confidence in seeing improvement in Tinder's net adds in Q3 and a modest payer growth in Q4.

The company is expecting growth in the next few years due to product and marketing initiatives, with a focus on Tinder. They believe these initiatives will lead to sequential net adds in Q3 and payer growth in Q4. In 2023, negative user growth was attributed to a new brand narrative that takes time to build, and the company plans to continue investing in marketing. The 1Q EBITDA guide is slightly below expectations due to increased marketing spend, and the company plans to continue this through 2024.

The company saw good user growth improvement in the first half of the year, but it reverted back to previous levels in the second half. However, key metrics for the brand campaign showed improvement, particularly among younger women. The brand campaign has been well received and the company plans to continue investing in it. However, user growth is primarily driven by product innovation, and marketing needs to be aligned with product improvements. The company plans to heavily invest in marketing in the first quarter to drive users back to the app after a refresh, which may have caused a gap in expectations from sell-side analysts.

The recent product refresh for Tinder has shown promising early results, with over 80% of daily users adopting dark mode and a 15% adoption rate for prompts and quizzes. These features are optional, but provide more ways for users to engage. The team is undergoing a product modernization and will continue to monitor and adjust their marketing strategy accordingly.

The approach of testing features independently before combining them has led to valuable learning for Tinder. This has informed their fail-fast strategy for 2024. The company is also focusing on their marketing strategy, with plans to adjust spend levels to highlight new product features. During the Q&A portion of the earnings call, there was a question about the slowdown in Hinge during December and what drove the reacceleration. The company explained that they typically see seasonality in most of their apps during the holiday season, but this is the first time they have seen it in Hinge. They expect to see this seasonality going forward as the app gains more scale in core markets like the US.

The company is pleased with the strong start Hinge has had in January and expects it to perform well in 2024. The focus is now on Tinder's a la carte offerings for the second half of the year, which will bring more value to users. The company is exploring new ALC features and will test them to see which ones are most popular with daters.

The company is working on improving their portfolio of brands and collaborating with Tinder on tests. They plan to introduce a new offering in the second half of the year. The new CEO, Faye, has been a strong partner and will focus on modernizing the product, boosting development speed, and improving the experience for women. The current CEO, Bernard Kim, will continue to work on other projects within the portfolio.

Bernard Kim, Match Group's Chief Product Officer, is heavily involved in exciting innovation sprints across the company. However, he is also committed to maintaining a strong partnership with Faye and the Tinder leadership team to continue driving growth for the app. During a Q&A session, he discusses the importance of AI in the company's future and how it will improve user experiences. He also mentions that each brand within the Match Group portfolio will have its own AI strategy tailored to its specific needs.

The company has a central innovation team working on moonshot ideas and incubating new products. The team at Hyperconnect is also supporting these initiatives. The company is investing $20-30 million in AI innovation, which they believe will drive enduring strength, better experiences, and future growth. There are high expectations for AI contributions in 2024, but no notable revenue has been included in the outlook yet. AI is expected to benefit RPP through enhancing the user experience.

BK is confident in Tinder's product roadmap and believes it will drive a turnaround in Tinder payers in the second half of the year. The company has seen double-digit revenue growth in the past two quarters and is optimistic about future results, with a focus on marketing and product initiatives. They expect Tinder payers to turn positive in Q3 due to these efforts.

The company is working on monetization strategies and experimenting with unbundling premium features. They have a margin floor in their financial outlook and expect to accrue $15 million in 2024. They are also working on reducing duplicative functions and consolidating brands onto a single technology platform, which will result in cost savings and increased efficiency.

The company is reducing duplication in their marketing and customer care functions, leading to cost savings. They are also consolidating their technology platforms, which will result in significant cost savings and a 10-point margin improvement in their E&E business. This will allow them to reinvest the savings into growth businesses within the company. The process is complex and risky, but they are taking deliberate and careful steps to ensure success. The full benefits of these changes will be seen by 2026.

The company is reinvesting the money from platform consolidations and is carefully considering the impact of the App Store fees and changes. There is still uncertainty around the issue and the company has not yet decided whether to opt in or not. Other companies, such as Spotify and Microsoft, have raised concerns about the fees. The $20 million number mentioned is based on the current policy changes by Apple, but there are still questions and considerations to be made. The proposed changes by Apple comply with the Digital Markets Act in Europe.

The European Commission's acceptance of Apple's proposed changes to the App Store is uncertain and will continue to be debated. However, even if the changes are only implemented in the EU, it could lead to further changes in other jurisdictions, which would have a significant impact on the company's revenue. Google may also see changes, but they would not be as significant as those for Apple.

The speaker expresses excitement about recent regulatory developments and court rulings that could potentially have a positive impact on the company's revenue. They mention a $20 million increase in revenue and discuss potential future changes to pricing and growth strategies. However, they clarify that their main focus is on overall revenue rather than specific metrics.

The company plans to focus more on payers in the coming months, as they believe it will have a greater impact on their product roadmap. They are aware of the industry's focus on payers and have enough in their roadmap to achieve payer growth in the third and fourth quarters. They expect a better balance between payer growth and revenue growth by the end of the year. They will not go to extreme measures to drive payer growth, but will see a natural balance as the year progresses. The conference has now ended.

This summary was generated with AI and may contain some inaccuracies.