EX-99.1
7
mtch8-k20201104ex991.htm
PRESS RELEASE OF MATCH GROUP, INC., DATED 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.
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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, 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.
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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 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
