Dating app company Match Group (NASDAQ:MTCH) reported Q2 FY2023 results beating Wall Street analysts' expectations, with revenue up 4.41% year on year to $829.6 million. Guidance for next quarter's revenue was also better than expected $880 million at the midpoint, 1.71% above analysts' estimates. Match made a GAAP profit of $137.3 million, improving from its loss of $32.4 million in the same quarter last year.
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Match (MTCH) Q2 FY2023 Highlights:
- Revenue: $829.6 million vs analyst estimates of $811.5 million (2.23% beat)
- EPS: $0.48 vs analyst estimates of $0.45 (7.69% beat)
- Revenue Guidance for Q3 2023 is $880 million at the midpoint, above analyst estimates of $865.2 million
- Free Cash Flow of $191.9 million, up 90.8% from the previous quarter
- Gross Margin (GAAP): 69.8%, in line with the same quarter last year
- Payers: 15.6 million, down 0.8 million year on year
Match.com was an early innovator in dating apps and was actually launched as a dial-up service before widespread internet adoption. Match (NASDAQ:MTCH) today has a portfolio of apps including Tinder, OkCupid, Match.com, and Hinge.
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to or what movie they watch, or finding a date, online consumer businesses today are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have increased usage and stickiness of many online consumer services.
Match's revenue growth over the last three years has been mediocre, averaging 14.1% annually. This quarter, Match beat analysts' estimates but reported lacklustre 4.41% year-on-year revenue growth.
Guidance for the next quarter indicates Match is expecting revenue to grow 8.7% year on year to $880 million, improving on the 0.96% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results, analysts covering the company were projecting sales to grow 10.6% over the next 12 months.
The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.
As a subscription-based app, Match generates revenue growth by expanding both its subscriber base and the amount each subscriber spends over time.
Over the last two years, Match's users, a key performance metric for the company, grew 18.6% annually to 15.6 million. This is solid growth for a consumer internet company.
Unfortunately, Match's users decreased by 0.8 million in Q2, a 4.88% drop since last year.
Key Takeaways from Match's Q2 Results
With a market capitalization of $13 billion, a $740.9 million cash balance, and positive free cash flow over the last 12 months, we're confident that Match has the resources needed to pursue a high-growth business strategy.
It was good to see Match's strong revenue guidance for next quarter, which topped analyst expectations. We were also glad that its earnings growth outperformed Wall Street's expectations. On the other hand, there was a decline in its user base. Overall, this was a still a good quarter for Match. The stock is up 12.7% after reporting and currently trades at $52 per share.
Match may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.