Match Earnings: Tinder and Hinge Network Effect Is Strengthening

After two consecutive quarters of declining revenue, Match Group MTCH returned to growth, driven by price increases in Tinder, further adoption of Hinge, and improvements in various features. The firm’s decision to not increase Tinder prices in non-U.S. markets was smart, given the higher price sensitivity in those areas. We expect further strengthening of user monetization to more than offset user decline, which we believe will likely return to growth for Tinder in 2024. We also expect the firm’s additional artificial intelligence-based features, such as more content creation tools, to further improve the user count on Tinder and its Match Group Asia apps. We are maintaining our $70 fair value estimate and believe the stock remains attractive.

Total revenue increased 4.4% to $829.6 million, driven by the firm’s higher prices. Growth in Tinder (6%) and Hinge (35%) more than offset declines in Match Group Asia (down 4%) and evergreen and emerging markets (down 5%). Higher prices increased revenue generated per payer nearly 10% year over year, which the firm believes will accelerate during the rest of this year. Match’s network effect should strengthen as monetization improvement continues and the user count returns to growth.

Adjusted operating income increased 5% from last year to $301 million, a 40-basis-point margin expansion, driven mainly by higher revenue and slight expansion in gross margin.

Tinder revenue per user increased 10% from last year, while the higher prices reduced user count 4%. Match’s efforts to improve the app, which include enhancing women’s experiences, and its offering of weekly subscription options, have begun to generate returns as both have driven conversion rates higher and attracted more daily new users to the app. We think the firm’s focus on attracting more Generation Z users later this year could also contribute to the return of user growth, likely in 2024.