EX-99.1
2
mtch8-k20210202ex991.htm
PRESS RELEASE OF MATCH GROUP, INC., DATED FEBRUARY 2, 2021
Document
Exhibit 99.1
Page 1 of 14
Match Group Reports Fourth Quarter and Full Year 2020 Results
Dallas, TX—February 2, 2021—Match Group, Inc. (NASDAQ: MTCH; “Match Group” or “Company”) reported fourth quarter and full year 2020 financial results today and separately posted a Letter to Shareholders on the Investor Relations section of its website at https://ir.mtch.com.
Q4 2020 HIGHLIGHTS
•Total revenue grew 19% over the prior year quarter to $651 million.
•Operating income was $213 million, an increase of 17% over the prior year quarter representing an operating margin of 33%.
•Adjusted EBITDA was $245 million, an increase of 13% over the prior year quarter representing an Adjusted EBITDA margin of 38%.
•Average Subscribers increased 12% to 10.9 million, up from 9.8 million in the prior year quarter. ARPU increased 5% over the prior year quarter to $0.62.
FULL YEAR HIGHLIGHTS
•Total Revenue grew 17% over the prior year to $2.4 billion.
•Operating income and Adjusted EBITDA were $746 million and $897 million, respectively, increasing 16% and 15%, respectively, over the prior year.
•Tinder Direct Revenue was $1.4 billion for 2020, an 18% increase year-over-year.
•Operating cash flow and free cash flow grew 22% and 23%, to $789 million and $746 million, respectively.
Key Financial and Operating Metrics from Continuing Operations
(In thousands, except EPS and ARPU)
Q4 2020
Q4 2019
Change
Revenue
$
651,407
$
547,167
19%
Operating Income
$
212,582
$
181,349
17%
Operating Income Margin
33
%
33
%
(0.5) pt
Net earnings attributable to shareholders
$
140,579
$
94,657
49%
Diluted EPS(a)
$
0.48
$
0.46
4%
Adjusted EBITDA
$
245,453
$
216,296
13%
Adjusted EBITDA Margin
38
%
40
%
(1.8) pt
Average Subscribers
10,939
9,809
12%
ARPU
$
0.62
$
0.59
5%
YTD Operating Cash Flow
$
788,552
$
647,989
22%
YTD Free Cash Flow
$
746,176
$
608,954
23%
______________________
(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)
Q4 2020
Q4 2019
Change
Direct Revenue:
North America
$
315,836
$
266,026
19%
International
319,057
268,937
19%
Total Direct Revenue
634,893
534,963
19%
Indirect Revenue
16,514
12,204
35%
Total Revenue
$
651,407
$
547,167
19%
Average Subscribers
North America
5,043
4,637
9%
International
5,896
5,172
14%
Total Average Subscribers
10,939
9,809
12%
(Change calculated using non-rounded numbers)
ARPU
North America
$
0.66
$
0.62
7%
International
$
0.58
$
0.56
4%
Total ARPU
$
0.62
$
0.59
5%
Growth in Average Subscribers was primarily driven by Tinder, Hinge, Meetic, Pairs, BLK, and Chispa. North America ARPU increased primarily due to à la carte features and optimized pricing at Hinge and live streaming video at PlentyOfFish. International ARPU was favorably impacted by the strength of the Euro relative to the U.S. dollar.
Operating Costs and Expenses
(In thousands)
Q4 2020
% of Revenue
Q4 2019
% of Revenue
Change
Cost of revenue
$
173,263
27%
$
142,070
26%
22%
Selling and marketing expense
134,757
21%
100,308
18%
34%
General and administrative expense
74,723
11%
69,003
13%
8%
Product development expense
44,832
7%
38,397
7%
17%
Depreciation
10,987
2%
8,777
2%
25%
Amortization of intangibles
263
—%
7,263
1%
(96)%
Total operating costs and expenses
$
438,825
67%
$
365,818
67%
20%
Total operating costs and expenses increased 20% in total dollars and was flat as a percentage of revenue compared to the prior year quarter. Cost of revenue increased primarily due to an increase of in-app purchase fees and fees associated with live streaming video at PlentyOfFish. Total selling and marketing expense increased due to higher marketing spend across our portfolio. General and administrative expense increased primarily due to increased headcount, partially offset by reductions in travel expenditures. Product development expense increased due to increased engineering-related headcount at Tinder and Hinge.
Page 3 of 14
Liquidity and Capital Resources
For the year ended December 31, 2020, we generated operating cash flow attributable to continuing operations of $789 million and Free Cash Flow of $746 million.
As of December 31, 2020, the Company had $739 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 December 31, 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:
June 30, 2020
September 30, 2020
December 31, 2020
Trailing twelve-month leverage
Gross basis
4.8x
4.5x
4.3x
Net basis
4.6x
4.0x
3.5x
Trailing twelve-month leverage excluding the Exchangeable Senior Notes
Gross basis
2.7x
2.6x
2.5x
Net basis
2.6x
2.1x
1.7x
Income Taxes
In the fourth quarter of 2020 and 2019, Match Group recorded an income tax provision from continuing operations of $26 million and $15 million, for effective tax rates of 15% and 11%, 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 fourth quarter and full year financial results on Wednesday, February 3, 2021 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 December 31,
Twelve Months Ended December 31,
2020
2019
2020
2019
(In thousands, except per share data)
Revenue
$
651,407
$
547,167
$
2,391,269
$
2,051,258
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)
173,263
142,070
635,833
527,184
Selling and marketing expense
134,757
100,308
479,907
427,440
General and administrative expense
74,723
69,003
311,207
256,138
Product development expense
44,832
38,397
169,811
151,960
Depreciation
10,987
8,777
41,271
34,355
Amortization of intangibles
263
7,263
7,525
8,727
Total operating costs and expenses
438,825
365,818
1,645,554
1,405,804
Operating income
212,582
181,349
745,715
645,454
Interest expense
(43,306)
(40,580)
(174,791)
(140,570)
Other (expense) income, net
(3,480)
(5,864)
15,861
(2,026)
Earnings from continuing operations, before tax
165,796
134,905
586,785
502,858
Income tax provision
(25,617)
(14,971)
(32,874)
(8,225)
Net earnings from continuing operations
140,179
119,934
553,911
494,633
Earnings (loss) from discontinued operations, net of tax
—
4,338
(366,070)
49,187
Net earnings
140,179
124,272
187,841
543,820
Net loss (earnings) attributable to noncontrolling interests
400
(23,847)
(59,280)
(112,689)
Net earnings attributable to Match Group, Inc. shareholders
$
140,579
$
100,425
$
128,561
$
431,131
Net earnings per share from continuing operations:
Basic
$
0.53
$
0.52
$
2.21
$
2.15
Diluted
$
0.48
$
0.46
$
2.00
$
1.88
Net earnings per share attributable to Match Group, Inc. shareholders:
Basic
$
0.53
$
0.55
$
0.58
$
2.37
Diluted
$
0.48
$
0.48
$
0.49
$
2.08
Basic shares outstanding
266,395
182,598
223,433
181,869
Diluted shares outstanding
294,975
194,969
242,464
194,349
Stock-based compensation expense by function:
Cost of revenue
$
1,058
$
833
$
4,201
$
3,693
Selling and marketing expense
1,297
1,187
5,141
5,112
General and administrative expense
10,789
8,948
59,174
42,863
Product development expense
8,477
7,939
33,752
38,056
Total stock-based compensation expense
$
21,621
$
18,907
$
102,268
$
89,724
Page 5 of 14
MATCH GROUP CONSOLIDATED BALANCE SHEET
December 31, 2020
December 31, 2019
(In thousands)
ASSETS
Cash and cash equivalents
$
739,164
$
465,676
Accounts receivable, net
137,023
116,459
Other current assets
144,025
97,850
Current assets of discontinued operations
—
3,028,079
Total current assets
1,020,212
3,708,064
Property and equipment, net
107,799
101,065
Goodwill
1,270,532
1,239,839
Intangible assets, net
230,900
228,324
Deferred income taxes
224,013
192,496
Other non-current assets
123,524
64,232
Non-current assets of discontinued operations
—
2,830,783
TOTAL ASSETS
$
2,976,980
$
8,364,803
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable
$
29,200
$
20,191
Deferred revenue
239,088
218,843
Accrued expenses and other current liabilities
231,748
182,250
Current liabilities of discontinued operations
—
588,896
Total current liabilities
500,036
1,010,180
Long-term debt, net
3,534,706
2,889,626
Income taxes payable
14,582
30,295
Deferred income taxes
17,213
18,285
Other long-term liabilities
86,428
26,158
Non-current liabilities of discontinued operations
—
447,414
Redeemable noncontrolling interest
640
44,527
Commitment and contingencies
SHAREHOLDERS’ EQUITY
Common stock
267
—
Former IAC common stock
—
263
Former IAC class B convertible common stock
—
16
Additional paid-in capital
7,394,646
11,683,799
Retained (deficit) earnings
(8,491,126)
1,689,925
Accumulated other comprehensive loss
(81,454)
(136,349)
Treasury stock
—
(10,309,612)
Total Match Group, Inc. shareholders’ equity
(1,177,667)
2,928,042
Noncontrolling interests
1,042
970,276
Total shareholders’ equity
(1,176,625)
3,898,318
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
2,976,980
$
8,364,803
Page 6 of 14
MATCH GROUP CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Ended December 31,
2020
2019
(In thousands)
Cash flows from operating activities attributable to continuing operations:
Net earnings from continuing operations
$
553,911
$
494,633
Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities attributable to continuing operations:
Stock-based compensation expense
102,268
89,724
Depreciation
41,271
34,355
Amortization of intangibles
7,525
8,727
Deferred income taxes
4,985
(19,608)
Accretion of original issue discount of Exchangeable Senior Notes
44,743
30,429
Other adjustments, net
26,705
12,694
Changes in assets and liabilities
Accounts receivable
(24,213)
(17,861)
Other assets
(33,224)
(24,162)
Accounts payable and other liabilities
24,155
33,741
Income taxes payable and receivable
16,913
(4,161)
Deferred revenue
23,513
9,478
Net cash provided by operating activities attributable to continuing operations
788,552
647,989
Cash flows from investing activities attributable to continuing operations:
Net cash used in business combinations
—
(3,759)
Capital expenditures
(42,376)
(39,035)
Purchases of investments
(9,115)
—
Net cash distribution related to Separation of IAC
(3,870,550)
—
Other, net
(90)
1,064
Net cash used in investing activities attributable to continuing operations
(3,922,131)
(41,730)
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)
—
Net premium on the Exchangeable Senior Notes hedges and warrants
—
(136,908)
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
155,402
—
Withholding taxes paid on behalf of employees on net settled stock-based awards of Former Match Group and Match Group
(211,958)
(203,177)
Purchase of Former Match Group treasury stock
(132,868)
(216,353)
Purchase of noncontrolling interests
(15,827)
(1,650)
Other, net
(15,187)
(73)
Net cash provided by financing activities attributable to continuing operations
1,787,846
654,024
Total cash (used in) provided by continuing operations
(1,345,733)
1,260,283
Net cash provided by operating activities attributable to discontinued operations
13,630
289,949
Net cash used in investing activities attributable to discontinued operations
(963,420)
(287,798)
Net cash used in financing activities attributable to discontinued operations
(110,959)
(254,193)
Total cash used in discontinued operations
(1,060,749)
(252,042)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
5,426
(1,568)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(2,401,056)
1,006,673
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
$
739,302
$
3,140,358
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 December 31,
2020
2019
Basic
Diluted
Basic
Diluted
(In thousands, except per share data)
Numerator
Net earnings from continuing operations
$
140,179
$
140,179
$
119,934
$
119,934
Net loss (earnings) attributable to noncontrolling interests
400
400
(25,277)
(25,277)
Impact from subsidiaries’ dilutive securities
—
(176)
—
(5,889)
Net earnings from continuing operations attributable to Match Group, Inc. shareholders
$
140,579
$
140,403
$
94,657
$
88,768
Earnings from discontinued operations, net of tax
$
—
$
—
$
4,338
$
4,338
Net loss attributable to noncontrolling interests of discontinued operations
—
—
1,430
1,430
Net earnings from discontinued operations attributable to shareholders
—
—
5,768
5,768
Net earnings attributable to Match Group, Inc. shareholders
$
140,579
$
140,403
$
100,425
$
94,536
Denominator
Weighted average basic shares outstanding
266,395
266,395
182,598
182,598
Dilutive securities
—
28,580
—
12,371
Denominator for earnings per share—weighted average shares
266,395
294,975
182,598
194,969
Earnings per share:
Earnings per share from continuing operations
$
0.53
$
0.48
$
0.52
$
0.46
Earnings per share from discontinued operations, net of tax
$
—
$
—
$
0.03
$
0.03
Earnings per share attributable to Match Group, Inc. shareholders
$
0.53
$
0.48
$
0.55
$
0.48
Page 8 of 14
Twelve Months Ended December 31,
2020
2019
Basic
Diluted
Basic
Diluted
(In thousands, except per share data)
Numerator
Net earnings from continuing operations
$
553,911
$
553,911
$
494,633
$
494,633
Net earnings attributable to noncontrolling interests
(59,599)
(59,599)
(103,401)
(103,401)
Impact from subsidiaries’ dilutive securities
—
(9,999)
—
(25,997)
Net earnings from continuing operations attributable to Match Group, Inc. shareholders
$
494,312
$
484,313
$
391,232
$
365,235
(Loss) earnings from discontinued operations, net of tax
$
(366,070)
$
(366,070)
$
49,187
$
49,187
Net loss (earnings) attributable to noncontrolling interests of discontinued operations
319
319
(9,288)
(9,288)
Impact from subsidiaries’ dilutive securities of discontinued operations
—
(240)
—
(67)
Net (loss) earnings from discontinued operations attributable to shareholders
(365,751)
(365,991)
39,899
39,832
Net earnings attributable to Match Group, Inc. shareholders
$
128,561
$
118,322
$
431,131
$
405,067
Denominator
Weighted average basic shares outstanding
223,433
223,433
181,869
181,869
Dilutive securities
—
19,031
—
12,480
Denominator for earnings per share—weighted average shares
223,433
242,464
181,869
194,349
Earnings per share:
Earnings per share from continuing operations
$
2.21
$
2.00
$
2.15
$
1.88
(Loss) earnings per share from discontinued operations, net of tax
$
(1.64)
$
(1.51)
$
0.22
$
0.20
Earnings per share attributable to Match Group, Inc. shareholders
$
0.58
$
0.49
$
2.37
$
2.08
MATCH GROUP COMPONENTS OF INTEREST EXPENSE
Three Months Ended December 31,
Twelve Months Ended December 31,
2020
2019
2020
2019
(In thousands)
Credit Facility, Term Loan, and Senior Notes
$
25,153
$
23,146
$
103,438
$
91,720
Exchangeable Senior Notes
18,153
17,434
71,353
48,850
Total Match Group interest expense
$
43,306
$
40,580
$
174,791
$
140,570
Page 9 of 14
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
MATCH GROUP RECONCILIATION OF NET EARNINGS TO ADJUSTED EBITDA
Three Months Ended December 31,
Twelve Months Ended December 31,
2020
2019
2020
2019
(Dollars in thousands)
Net earnings attributable to Match Group, Inc. shareholders
$
140,579
$
100,425
$
128,561
$
431,131
Add back:
Net (loss) earnings attributable to noncontrolling interests
(400)
23,847
59,280
112,689
(Earnings) loss from discontinued operations, net of tax
—
(4,338)
366,070
(49,187)
Income tax provision
25,617
14,971
32,874
8,225
Other expense (income), net
3,480
5,864
(15,861)
2,026
Interest expense
43,306
40,580
174,791
140,570
Operating Income
212,582
181,349
745,715
645,454
Stock-based compensation expense
21,621
18,907
102,268
89,724
Depreciation
10,987
8,777
41,271
34,355
Amortization of intangibles
263
7,263
7,525
8,727
Adjusted EBITDA
$
245,453
$
216,296
$
896,779
$
778,260
Revenue
$
651,407
$
547,167
$
2,391,269
$
2,051,258
Operating income margin
33
%
33
%
31
%
31
%
Adjusted EBITDA margin
38
%
40
%
38
%
38
%
MATCH GROUP RECONCILIATION OF OPERATING CASH FLOW ATTRIBUTABLE TO CONTINUING OPERATIONS TO FREE CASH FLOW
Twelve Months Ended December 31,
2020
2019
(In thousands)
Net cash provided by operating activities attributable to continuing operations
$
788,552
$
647,989
Capital expenditures
(42,376)
(39,035)
Free Cash Flow
$
746,176
$
608,954
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 December 31,
2020
Change
% Change
2019
Revenue, as reported
$
651,407
$
104,240
19%
547,167
Foreign exchange effects
(9,958)
Revenue Excluding Foreign Exchange Effects
$
641,449
$
94,282
17%
$
547,167
(Change calculated using non-rounded numbers, rounding differences may occur)
ARPU, as reported
$
0.62
5%
$
0.59
Foreign exchange effects
(0.01)
ARPU, excluding foreign exchange effects
$
0.61
4%
$
0.59
International ARPU, as reported
$
0.58
4%
$
0.56
Foreign exchange effects
(0.02)
International ARPU, excluding foreign exchange effects
$
0.56
1%
$
0.56
(Dollars in thousands, except ARPU)
Twelve Months Ended December 31,
2020
Change
% Change
2019
Revenue, as reported
$
2,391,269
$
340,011
17%
$
2,051,258
Foreign exchange effects
6,412
Revenue Excluding Foreign Exchange Effects
$
2,397,681
$
346,423
17%
$
2,051,258
(Change calculated using non-rounded numbers, rounding differences may occur)
ARPU, as reported
$
0.60
3%
$
0.58
Foreign exchange effects
0.00
ARPU, excluding foreign exchange effects
$
0.60
3%
$
0.58
International ARPU, as reported
$
0.56
—%
$
0.56
Foreign exchange effects
0.00
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
1/29/2021
Share Price
$139.86
Absolute Shares
267.4
Vested Options
Match Group Options
$13.90
2.3
Match Group Options, converted from Former IAC Options
$23.40
2.5
Total Dilution - Vested Options
4.8
Unvested Options and Awards
Match Group Options
$20.64
1.5
Match Group RSUs and subsidiary denominated equity awards
4.7
Total Dilution - Unvested Options and Awards
6.2
Outstanding Warrants
Warrants expiring on January 1, 2023 (11.8 million outstanding)
$68.22
6.0
Warrants expiring on September 15, 2026 (6.6 million outstanding)
$134.76
0.2
Warrants expiring on April 15, 2030 (6.8 million outstanding)
$134.82
0.2
Total Dilution - Outstanding Warrants
6.5
Total Dilution
17.5
% Dilution
6.2%
Total Diluted Shares Outstanding
285.0
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 December 31, 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, all of which 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 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 currencies, and unfavorably impacted as the U.S dollar strengthens relative to other 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.
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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, we remit the required tax-withholding amounts from our 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 (i) acquired indefinite-lived intangible assets, which consist of trade names and trademarks, and (ii) goodwill, which 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
North America - consists of the financial results and metrics associated with users located in the United States and Canada.
International - consists of the financial results and metrics associated with users located outside of the United States and Canada.
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.
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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 February 3, 2021, 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 expected benefits of the separation, any litigation arising out of or relating to the transaction, the tax treatment of the transaction, and the impact of the separation 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
