Dating app company Match (NASDAQ:MTCH) reported results in line with analysts' expectations in Q3 FY2023, with revenue up 8.9% year on year to $881.6 million. However, next quarter's revenue guidance of $860 million was less impressive, coming in 3.79% below analysts' estimates. Turning to EPS, Match made a GAAP profit of $0.57 per share, improving from its profit of $0.44 per share in the same quarter last year.
Is now the time to buy Match? Find out in our full research report.
Match (MTCH) Q3 FY2023 Highlights:
- Revenue: $881.6 million vs analyst estimates of $880.4 million (small beat)
- EPS: $0.57 vs analyst estimates of $0.53 (6.7% beat)
- Revenue Guidance for Q4 2023 is $860 million at the midpoint, below analyst estimates of $893.8 million
- Free Cash Flow of $278.2 million, up 45% from the previous quarter
- Gross Margin (GAAP): 71%, up from 69.5% in the same quarter last year
- Payers: 15.7 million, down 0.8 million year on year
"We’ve been focused on two key sets of initiatives in 2023. First, we’ve encouraged the teams at each of our businesses to sharpen product and marketing execution and achieve clearly defined operating and financial objectives. Second, we’ve emphasized innovation, with our teams collaborating globally to build AI-driven features that we believe will help solve key user pain points and bring new users into the category," said CEO Bernard Kim.
"While our collective efforts have put the Company on much improved footing, there is still much work to be done to sustain this momentum, especially amid an uncertain macro backdrop. We’re confident our accomplishments thus far in 2023 have laid the groundwork for an even stronger future ahead for Match Group. Our energy levels are high, our objectives are clear, and we have the right team to keep delivering results for shareholders".
Originally started as a dial-up service before widespread internet adoption, Match (NASDAQ:MTCH) was an early innovator in online dating and 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, what movie they watch, or even finding a date, online consumer businesses are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have further increased usage and stickiness of many online consumer services.
Match's revenue growth over the last three years has been mediocre, averaging 13.4% annually. This quarter, Match reported mediocre 8.9% year-on-year revenue growth, in line with what analysts were expecting.
Guidance for the next quarter indicates Match is expecting revenue to grow 9.39% year on year to $860 million, improving on the 2.47% year-on-year decline it recorded in the same quarter last year. Ahead of the earnings results, analysts covering the company were projecting sales to grow 11.5% over the next 12 months.
While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. See it here.
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 11.7% annually to 15.7 million. This is decent growth for a consumer internet company.
Unfortunately, Match's users decreased by 0.8 million in Q3, a 4.85% drop since last year.
Key Takeaways from Match's Q3 Results
Sporting a market capitalization of $9.47 billion, Match is among smaller companies, but its more than $712.8 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.
It was a mixed quarter for Match. Its revenue beat analysts' expectations, driven by better-than-expected ARPU. That growth, however, was offset by subscriber churn. This churn can be attributed to management's significant price increases, a new strategy the team implemented at the start of the year. Management has also taken measures to make the company more efficient, enabling it to beat Wall Street's adjusted operating income and EPS estimates. Looking forward, Match's revenue guidance for next quarter underwhelmed and investors are curious if the company's subscriber base will stabilize after the pricing initiatives. Overall, the results could have been better. The company is down 3.35% on the results and currently trades at $33.44 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.
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The author has no position in any of the stocks mentioned in this report.