The Match Group First Quarter 2024 Earnings Conference Call began with a reminder of the risks and uncertainties involved in discussing the company's outlook and future performance. CEO Bernard Kim and President and CFO Gary Swidler then discussed the current challenges and trends in the dating industry, but emphasized their belief in the long-term opportunity.

Dating apps have become the primary way people meet today, and they are designed to bridge the gap between the nostalgic idea of meeting someone organically and the reality of the modern dating scene. Match Group's apps empower people to make meaningful connections and are constantly evolving to create safer spaces for singles to find love. The company has seen significant growth and is on track to generate $1 billion in revenue. Hinge, in particular, has been successful in resonating with intentioned daters and expanding into new demographics.

The emerging brands within the company's portfolio, particularly the gay men-focused app Archer, have achieved significant growth without increasing marketing investment. The HyperConnect team has efficiently deployed resources and is collaborating with other businesses. The company's approach is different from other social platforms, focusing on helping users find real connections and encouraging them to eventually leave the app. Tinder's international reach is unmatched, and the company has taken steps to improve the app's ecosystem and remove users not using it for its intended purpose, which may have contributed to a decline in monthly active users but is in the best interest of the app's long-term success.

Tinder is willing to accept a decrease in monthly active users in order to create a safer and more satisfying dating experience for its users, especially the younger generation. The team is working to improve the product and introduce new features at affordable prices. They are also focusing on improving the efficacy of their current features and using AI to enhance the entire dating journey. The Chief Technology Officer and the innovation team are working closely with the product team to expedite these efforts. With their vast scale and knowledge about relationships, Tinder is well-positioned to take advantage of advances in technology and has become a profitable business in the dating industry.

The company has been working on solving user pain points and believes this will lead to a more valuable experience for users. They are confident that Tinder's momentum will return and see potential for growth in Hinge and their other brands. The company's financial performance in Q1 exceeded expectations, with total revenue up 9% and revenue per payer growing 16%. Tinder and Hinge saw strong direct revenue growth, while other brands experienced declines or modest growth. The company also added new apps to their emerging brands portfolio.

In the first quarter, Archer saw strong user growth and improved app experience. Tinder's direct revenue was $481 million, with a 20% increase in RPP. While there was a decline in monthly active users, this was due to changes in policies and moderation practices to eliminate bad actors and unengaged users. This decline will impact the company's growth for the year, but it is believed to be beneficial for the overall ecosystem. Tinder's payers declined 9% and a la carte revenue was down 13% year-over-year. However, subscription revenue saw a 17% increase due to the increase in RPP.

Match Group's ALC revenue has declined due to user declines and lower average purchase volumes, particularly among its younger user base. However, their Hinge brand continues to perform well with strong revenue and user growth. Match Group is confident in Hinge's monetization potential and expects it to become a $1 billion revenue business. Match Group's Q1 AOI and OI were up and benefited from revenue growth at Tinder and Hinge, but were also impacted by increased marketing expenses and SBC expenses.

In the first quarter, SBC expense increased while the value of employee grants remained flat. There was also a significant increase in depreciation expense due to new software developments. The company bought back $200 million in shares and plans to continue returning at least 75% of free cash flow to shareholders. For the second quarter, Match Group expects a 2-4% increase in revenue, with Tinder's direct revenue remaining flat or slightly increasing. The team is working on implementing new monetization initiatives to improve revenue growth in the future.

In Q2, Tinder is expected to see a decline in payers similar to Q1, but with a slight improvement in sequential payer trends. Other brands are expected to see a 5-7% increase in revenue, with Hinge experiencing significant growth. Match Group's overall AOI is expected to be flat year-over-year, with a 35% margin. Marketing spend will be higher due to increased spending at Hinge, Tinder, and E&E brands. The company has opted into Apple's new App Store policies, resulting in expected savings of at least $5 million per quarter. The settlement agreement with Google is creating some conversion challenges, but improvements are being made. For the rest of 2024, low single-digit revenue growth is expected at Tinder, with the potential for higher growth if certain initiatives are successful. Overall, Tinder is expected to see low to mid-single-digit growth in direct revenue for the full year 2024.

Match Group expects total company revenue growth to be near the lower end of their target range for the full year. They are focused on delivering a certain AOI margin and generating free cash flow in 2024. They also plan to utilize at least 75% of their free cash flow for capital return. Despite a decline in payers, they are confident that Tinder net adds will return to sequential growth in the third quarter due to improved conversion trends.

The company has lowered pricing and introduced weekly subscription packages to improve conversion, but these subscribers tend to stay for a shorter duration. The company is also experiencing declining user base and MAU, so they need to work harder to generate more payers. They expect payers to decline at a similar level in the second quarter, but hope to see a sequential improvement in the third quarter through product initiatives and improving MAU. There has been a lot of noise in the Tinder payer count due to recent changes, but the company expects this to settle down soon.

The speaker discusses the potential for smoother and easier-to-understand payer count information in the future, leading to clearer metrics. They also mention looking forward to reigniting user growth at Tinder and draw on examples from their portfolio of brands, such as OkCupid's freemium model and Hinge's product tear down and redesign, to show the impact of product innovation on user experience and appeal to new demographics. They also highlight how Tinder's mobile phone-based experience was a major innovation for the entire category.

The speaker discusses the impact of the double opt-in feature on women's control in dating apps. They also mention the importance of making big and bold product changes to drive real change. They are confident in their strategy and are maintaining their margin guidance despite lower revenue expectations. In response to a question about investing more in marketing, they emphasize the importance of a resonating product experience and state that they do not see a need to increase marketing for payer growth. Instead, their current marketing efforts focus on improving the Tinder brand narrative and staying top of mind for daters.

The speaker explains that there has been a decrease in revenue growth at Tinder due to a decline in payer growth and increasing economic weakness. They also mention that product initiatives are expected to improve this in the third quarter. The focus is on long-term growth rather than short-term goals.

The company is facing challenges with declining MAU and underperforming monetization initiatives, which has put more pressure on revenue than expected. They are implementing initiatives to drive revenue growth and improve MAU, but these efforts have been delivering less than expected. They need to see both year-over-year payer growth and revenue per payer growth to achieve year-over-year revenue growth. The focus has shifted from pricing to product tweaks that will drive conversion events, but it is unclear how much impact these changes will have on revenue.

Last year, the company focused on implementing monetization initiatives which drove short-term revenue growth at Tinder. However, to achieve long-term growth, they need to improve the product to better satisfy women and Gen Z. This is a bigger undertaking and less certain than implementing monetization strategies. They are confident in their team and have planned initiatives to improve the product and drive user, payer, and revenue growth over time. The AI photo selector on Tinder will be launched more widely in the summer, and the company is also focusing on AI development across all of their apps with the help of Hyperconnect and Will Wu.

The speaker discusses their excitement for AI and photo selector, which will be implemented by the Hyperconnect and Tinder teams to improve the dating experience. They explain how creating a profile can be a barrier for daters and how AI can help overcome this. They mention how the photo selector has helped them personally and how it can showcase different aspects of a person's personality. The speaker believes that this will lead to better matches and conversations. They also mention their plans to expand the use of AI in the dating journey. In a question from an analyst, they are asked about the potential for Hinge to reach $1 billion in revenue and discuss the margins around this goal.

The speaker explains that Hinge's margins are expected to be in the high 20s percent range for the year, which is about the same as last year. This is due to investments in marketing and people, which will lead to revenue generation and eventually improve margins. The speaker is confident that Hinge will eventually reach company levels of margins as it continues to scale and make investments.

The speaker discusses the potential for Hinge margins to improve as the business scales, but notes that they will likely always be below Tinder's margins due to the latter's high brand awareness. They also mention that the company is investing more in marketing for Tinder, which is why the gap in margins is closing. The speaker believes that Hinge will eventually reach company-level margins, assuming no changes in app store fees. They also mention that they are maintaining a 36% or better margin target for the year, despite a softer revenue outlook, and are constantly looking for ways to reduce costs.

The company was prepared to achieve 36% margins even at the lower end of their revenue range, but if there is a deterioration in performance, they may have to take additional actions. They would first look at adjusting corporate overhead and then marketing expenses, but these could potentially impact revenue generation. The company is currently making investments in innovation bets, which may be margin dilutive in the early years.

The company is constantly reevaluating their bets and looking for ways to improve revenue growth. They aim to generate improved trends and avoid taking further cost actions. They are focusing on improving the product for women and Gen Z, as these demographics are crucial for dating apps. This includes initiatives to empower and respect women on their apps. The company is also addressing safety concerns and expects improvements over time.

The speaker discusses the aggressive approach to removing bad actors on Tinder, which led to a loss of 2 million MAU but was necessary for the health of the ecosystem. They also mention upcoming changes, such as requiring face photos, which may impact MAU but are important for user experience. The question then shifts to macro assumptions and any potential improvements in payer growth, as well as a question about E&E and Archer.

The company is seeing strong user growth in their pre-revenue business, Archer, and plans to monetize it soon. The Emerging brands portfolio consists of various demographic apps that are generating revenue, with Archer expected to contribute to this in the future. The Evergreen brands are experiencing moderate declines as the company manages them to a reasonable level.

The company is experiencing declines in their Evergreen brand, but their emerging brands are generating enough revenue to offset the losses. They are working to reduce redundancies and drive strong margins in the E&E brand, and have estimated a cost reduction of $60 million. They are not assuming significant changes in the macro environment for the rest of the year, but are making adjustments to their offerings to cater to a tougher economic climate. They have done this before and are looking at similar changes to adapt to the current economic climate, especially among younger users at Tinder.

In response to a question about payer growth and user declines, Gary Swidler reiterates the company's confidence in sequential payer growth in Q3 and slowing user declines in the back half of the year. He explains that they are expecting improved year-over-year payer growth as the year goes on, but that the weaker trends at the beginning of the year make the path to achieving this goal tougher. He clarifies the difference between new users and payers, stating that improved trends in users and new users will ultimately drive payer growth.

The company expects to see improved payer growth in the second half of the year due to product initiatives and a cleanup of the app ecosystem. This should also lead to improved revenue growth in the long term. They are executing a four-prong strategy through Tinder to achieve this goal. Some headcount growth is expected in Hinge, primarily in product development. There may be some risk of cannibalizing subscription revenue with the a la carte offerings, but the company has a significant investment plan for headcount overall.

The company is experiencing a significant increase in headcount costs in the first quarter, but this is expected to normalize over the course of the year. The main areas of investment in headcount are Hinge, Tinder, and central innovation AI efforts. The company is cautious about the potential cannibalization of subscription revenue by a la carte options, but is actively managing this balance. They have a number of a la carte initiatives planned for Tinder in the back half of the year, which they expect to result in revenue growth and a higher percentage of a la carte revenue for Tinder.

The speaker expresses gratitude for the questions and interest in their business. They are excited about the opportunities ahead and look forward to continuing the conversation. The conference has ended and the operator thanks attendees for participating.

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