Match (NASDAQ:MTCH) Reports Sales Below Analyst Estimates In Q1 Earnings

Kayode Omotosho /
2023/05/02 4:18 pm EDT

Dating app company Match Group (NASDAQ:MTCH) fell short of analyst expectations in Q1 FY2023 quarter, with revenue down 1.44% year on year to $787.1 million. Match made a GAAP profit of $120.7 million, down on its profit of $180.6 million, in the same quarter last year.

Is now the time to buy Match? Access our full analysis of the earnings results here, it's free.

Match (MTCH) Q1 FY2023 Highlights:

  • Revenue: $787.1 million vs analyst estimates of $794.1 million (0.87% miss)
  • EPS: $0.42 vs analyst estimates of $0.40 (5.23% beat)
  • Revenue guidance for Q2 2023 is $810 million at the midpoint, below analyst estimates of $822.5 million
  • Free cash flow of $100.5 million, down 53.1% from previous quarter
  • Gross Margin (GAAP): 69.5%, down from 70.4% same quarter last year
  • Payers: 15.9 million, down 400 thousand 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.

Sales Growth

Match's revenue growth over the last three years has been mediocre, averaging 14.7% annually. This quarter, Match reported a rather lacklustre 1.44% year on year revenue decline, missing analyst expectations.

Match Total Revenue

Guidance for the next quarter indicates Match is expecting revenue to grow 1.95% year on year to $810 million, slowing down from the 12.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 10.5% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As a subscription app, Match generates revenue growth by growing both the subscriber base and how much each subscriber spends over time, on average.

Over the last two years the number of Match's paying users, a key usage metric for the company, grew 25.3% annually to 15.9 million. This is a fast growth for a consumer internet company.

Match Payers

Unfortunately, in Q1 the number of paying users decreased by 400 thousand, a 2.45% drop year on year.

Key Takeaways from Match's Q1 Results

Sporting a market capitalization of $10 billion, more than $578.3 million in cash and with positive free cash flow over the last twelve months, we're confident that Match has the resources it needs to pursue a high growth business strategy.

Payers beat and despite some slower growth near term, the company stated that "Total Revenue and Tinder Direct Revenue can both exit 2023 with double digit Y/Y growth", which means acceleration in revenue growth. On the other hand, it was less good to see that the revenue growth was weak and both the revenue and adjusted operating income guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a complicated quarter for Match. The company is up 4.14% on the results and currently trades at $36 per share.

Match may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.