Please standby. Your program is about to begin. [Operator Instructions] Good day and welcome to the Match Group report's Q1 2016 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Chief Financial Officer, Gary Swidler. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to our conference call for the first quarter of 2016. This is Gary Swidler, and Greg Blatt is here as well. I'm going to turn the call over to Greg in a second. Just before we get started, just a couple of housekeeping announcements. And the first thing is, we're doing things a little bit differently this time, and there's an investor presentation that was posted on our Web site. We're going to review those slides on the call today. So I want to make sure everyone's been able to access that. And then we'll open it up for Q&A. Before we do all that, I'd like to remind you that during this call we may discuss our outlook and future performance. These forward-looking statements typically may be proceeded by words such as we expect, we believe, we anticipate, or similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. With that, I'm going to turn the call over to Greg Blatt, our Chairman and CEO.

Good morning everybody, welcome. After our last quarter's call we got yelled at by a lot of people for not being as clear in our presentation as we could be. And while I absolutely hate to encourage people to yell at us, we've tried to be as responsive as we could. Hopefully you'll find the new slide format more user-friendly and a little clearer, but we certainly welcome your feedback either on or after the call. Overall, we're very pleased with the quarter. I think I'd be remiss in saying that we were also pleased last quarter too. I think that we got ahead of plan at the IPO. We are executing, I think, pretty much on the mark against it. We've had a few positive surprises, not really any negative surprises, but in general, are sort of on our plan and we feel really confident about our ability to stay on it over the rest of the year and into next year and beyond, where the things are happening like we thought they would. I mean, that's always obviously a good sign. I'm going to run through the slides, I'm not going to spend time on slides, they're self-evident, but I will do sort of a deeper dive on those that could require some voiceover. I think slide three and four are really just the numbers that we've reported in the release. Although slide four shows it pro forma for PlentyOfFish acquisition, which is really the way we look at the business internally. It reflects PlentyOfFish as though we'd owned it in all periods. I think that's the best indicator of the business momentum. Obviously, it makes the numbers a little less spectacular than on slide three, but still very, very solid, and I think the best reflection of…

Thank you. [Operator Instructions] We'll take our first question from Ross Sandler with Deutsche Bank. Please go ahead. Your line is open.

Great, thanks guys. I had two on Tinder, and then one on the core Match brands. So with Tinder, can you guys talk about the conversion from free to paid by country, like is it fairly consistent, or is the U.S. driving a lot of the PMC growth that you're seeing at Tinder? Or I'll just ask a different way, is it broad-based and global, is it lumpy by geo, like how sustainable do you see this current 3x to 4x trajectory of Tinder PMCs? And then how does the retention of those PMCs compare to other dating products? Are these -- I know it's fairly new, but are they sticking around for several months or quarters? And then the -- thank you, by the way, for the new disclosures, they look great, I guess on the core Match side, if you strip out Tinder and PlentyOfFish, it looks like PMCs reversed from declining sequentially each of the two quarters in back-half '15, to now positive. So I guess, as you look out over the next year or two, do you see growth from core Match brands, ex-Tinder, ex-PlentyOfFish? Thanks.

All right, conversion, it certainly varies region-to-region. I would say U.S. and Western Europe are very comparable. When you get to the rest of the world, it's meaningfully less, but the rest of the world is also meaningfully bigger. So we've actually -- it is quite economically relevant to us on the sub side, rest of world. I guess to answer it, certainly less than half of our paying users are in North America, and I actually don't know the quite breakdown between Western Europe and the rest of the world, but the remainder, pretty balanced between Western Europe and the rest of the world. So while conversion is higher in North America and Europe, our MAUs are very, very significant beyond North America and Western Europe. So it is very much a global business. In terms of retention and renewal, Tinder continues to perform better than our other dating products on those two categories. We have added longer package mix over time, and not all those have renewed out yet. And so it's still early, and we're still figuring it out, but everything we know has the Tinder subscribers performing better than our other businesses. In terms of core Match, I think that -- in terms of sequential it's sort of tough to look at it that way, because Q1 is always a good seasonal quarter. So it's not surprising that you see sequential growth in Q4 to Q1. I also think that last year, we had, because we spiked Q1 marketing so dramatically against the norm, you had an even bigger sequential runoff last year in those businesses. So I think it's sort of distortive. I think what I would say is, going back to that Meetic chart, that I used, we think that the year-over-year numbers in those businesses have basically flattened out, and will start to improve. Meaning, the year-over-year comps are basically where they will be for the next couple of quarters, and then start to improve, which we think, real growth coming in the first part of next year. So, again, that's mostly -- we see the signs now. As we've said, we're seeing conversion improvements in these businesses. We're seeing net ads improvement, but just the lag effect between those things, and the runoff of the lower starting PMC numbers. But that means that re-subscriptions and everything else, basically you pay the price for Q2 through Q4 of last year, we pay that price for the first three quarters of '16, and then that sort of rebounds itself out in the back part of this year, and into '17. So, again, we feel really good about the progress, but there is some lag effect just in its manifestation in the aggregate PMC numbers.

Great, thank you.

Thank you. Next we'll move to Doug Anmuth with JPMorgan. Please go ahead. Your line is open.

Thanks, it's Doug. A couple of questions, first, guys, can you talk a little bit more just on the management additions at Tinder, and some of the changes that are taking place there. In particular, the slower rollout just on the advertising, which seems to make sense, just given how well you're monetizing the rest of the business. And then also just where the higher headcount is coming through. And then also if you could talk some of the monetization changes or additions, let's say, that you're considering there over the next couple of quarters, and how we should think about these, as whether they're incremental or more needle-moving kind of things? Thanks.

All right, Doug. On the management, when we -- we started -- when Sean Rad sort of reassumed the role of CEO back in, I guess, August of last year, we made a concerted push to flush out that management team. And I think that we were pursuing a number of different hires in parallel, and they all sort of came together at the same time. We've brought in a new Head of Engineering, a very experienced person, Zillow, Yahoo, various startups. Maria Zhang, she is great. She started a couple of weeks ago. We brought in a new Head of International, Garrick Coelho [ph], who'd been at years for Google and YouTube. And we brought in Pete Foster to run our advertising business really on full Match Group level, but really, Tinder is the business there with the most upside growth potential there. So it's -- while it's a Match Group-level job, heavy focus on Tinder. And then we brought in Ferrell McDonald to run Marketing. So those are all big hires. At the same time, Ryan Ogle, who had run Technology forever, and Jonathan Badeen, who'd run Product stay on in very senior positions; Ryan, now running Product, and Jonathan, now running Strategy, along with Sean. So I think you've got a great fusion of -- again, I've always said that the key to a successful startup becoming a successful company is maintaining all the talent and passion that got you there, while bringing in lots of experience and breadth from other places. And I think so far so good. I think -- you just think about the International piece, you say like, again, most of this business is outside of North America. And until we hired Garrick, we didn't have any dedicated international operations at all. So…

Yes, you did. That was helpful on Tinder, thank you.

Great, Doug. Thanks.

Thank you. Next we'll move to John Blackledge with Cowen Group. Please go ahead. Your line is open.

Great, thanks for the questions. So Tinder, off to a strong start for the year, a million ending subs in the quarter. Can you just flush out the product pipeline for 2Q and the rest of the year? Maybe give some examples of upcoming products that you expect could drive you there, further sub penetration and or engagement? And then also maybe just discuss Tinder MAUs. Are they growing? And how is engagement? And then just off of Match.com, how is the mobile upgrade progressing? Thank you.

On Tinder, the answer on your product pipeline question is, no, like it's a very competitive phase. We've got lots of competitive ideas. And so I can't layout what the product roadmap is for you. I can tell you that it's pretty robust. We've got a lot of plans. I think on the modernization side, we've certainly have, and we've got a dedicated team that works on modernization. They have their own cadence. We've now gotten to the point; I used to say fairly often, like we're reallocating resources between experience and modernization. That really you won't hear from us very much anymore, in that we've got a dedicated team that is working on Tinder Plus. And they will continue to roll things out. I think there's a mix there of new features, and just optimizing the old features. I mean we basically rolled out Tinder Plus, we then optimized a number of the features, we have an optimized pricing. So a lot of the stuffy, I would say is invisible, but should continue to put upward pressure on the -- or upward momentum on the conversion. And then we also have some new cognizable and identifiable features in Tinder Plus that I think you'll start to see, which again, are sort of built into our outlook for the year; although, again, as I said earlier, every modernization initiative that we've rolled out at Tinder yet has exceeded our expectation. So, including our a la carte product that I hinted out here is really -- we rolled out our first paid a la carte feature, and you never know, and then we rolled it out, and it has been incredibly responsive. So I think there's lots of opportunity there. So I think you will see a cadence on that front.…

That's great. Thank you.

You're welcome. Next question please. Operator?

Yes, thank you. Our next question will come from Jason Helfstein with Oppenheimer. Please go ahead. Your line is open.

Thanks. Two quick ones, can you give us a sense, Greg, of the number of registered users in the platform today on a basis of the MAU, and how that will compare, let's say, to one or two years ago? And then how you think about the pace of conversions from registered to paid over the next few years? Because clearly, historically, you had a very high percent of paid, and obviously with the shift to the premium services you have more registered than you have paid, and kind of tracking that. So if there's any help you can give us on that, I think people would appreciate that. And then secondly, can you go in a little more detail about what drove the marketing efficiency. If there's anything specifically you want to call out that you guys think you're doing better? Thanks.

Okay, first, we're not breaking out the MAU numbers, but I can certainly tell you that our global MAU numbers are dramatically higher today than they were one or two years ago. And that MAU growth continues well. I mean, it's different -- Tinder is a bigger driver of it than Match U.S., for instance, but in aggregate, growing nicely. I think on the conversion side, in some ways you can think about it a little bit like ARPPU, which is the ARPPU trend is coming down. On a global basis, conversion is coming down just because of the mix shift, but within each business conversion is going up. I don't have a systematic way to describe those trends right now. We can certainly think about doing that for the next all. I think that we sort of look at it a little bit differently, which is we do believe that we've got real opportunities to increase conversion within each of our businesses, and to grow users within each of our businesses. And that's sort of the way we're organized, and the way we manage it. I think that just by definition, because of the mix shift, you're going to see users going up, and aggregate conversion going down, along with ARPPU going down, but also marketing expense going down. And that's sort of the ties back into that unit economic slide that I talked about before. So I don't have a great signpost to give you for sort of consolidated modeling over the next four to eight quarters, but we can think about a good way to articulate that for you for next time.

And then on the marketing efficiency?

Jason, there you're focused on the marketing cost being down as a percentage of revenue in the quarter, is that what your question…

Yes. I mean, just like -- I mean there are things that you got to put in place that you're doing better I think now than maybe a year ago, and is there anything you want to highlight that you thought was more visible…

Yes, I think that again a lot of that is mix, right, which is on a consolidated basis, marketing comes down as a percentage of revenue, because -- again, it goes back to that unit economic slide that I talked about, which is the marketing cost per subscriber at Tinder -- and that's inclusive of the app fees that we pay by the way, those numbers. So when you have more of your subs coming from Tinder, you're paying only 26% of much marketing per sub, as you do at Match. So without any marketing efficiency in the way I think about it, which is just getting better at marketing, you see a confident improvement in the relationship between those two metrics just because of mix shift. So that's the biggest diver of that by far. Second, we did improve our marketing. Meetic in particular had a solid year of improving their marketing execution, especially on the online side. And I think that overall we're starting to see signs of improvement in our ability to sort of market efficiently in the emerging mobile marketing channels, which I think continues to be really important for the growth in the hard paywall businesses. But predominantly that efficiency you're seeing is a mix shift from the hard paywall to the soft paywall businesses.

Thank you.

Thank you. Next we will move to Eric Sheridan of UBS. Please go ahead. Your line is open.

Thank you very much for taking the question. And I appreciate all the additional disclosure. I wanted to go back to slide seven in the presentation. And I'm just getting a little bit of some of the trends that we're seeing on that slide. Do you think you have sort of a natural feeling that you'll hit in terms of mobile versus desktop on the branded registrations by platform? I wanted to also understand a little bit how you think mobile conversion as a percentage of desktop also continues to traject [ph] through '16, but also beyond '16? And then last would be as you look at mobile conversion versus desktop, how does that inform how you spend a dollar of marketing and how you think about the relative ROI between channels when you look out of the business over the next couple of years? Thanks, guys.

All right. On the graph on the bottom-left, which is brand regs by platform, first I want to be clear that brand regs effectively excludes online marketing. You traditionally think of it was online marketing. So, brand regs are word-of-mouth and television basically. And this sort of reflects I think sort of the device habits of our user base, right, so this is where marketing isn't focused on any one channel. This should reflect the general, like, what percentage of our users tends to do most of their stuff on desktop versus mobile? Right now you're seeing about a 77-23 split. Anyone's guess, again I continue to think that desktop is not going away, at least not you know, rapidly. There will always be a use for desktop, and people use it. So whether that 77 gets to 83 or 84, it's not going 92 quickly, I think. So I think that trajectory has slowed down a fair amount. On the online reg, this number can jump around a little bit, because again we're trying to open up more and more mobile paid channels. And so that number we would actually like to see -- that's one where we want to push that harder and harder, because we will only spend where it's ROI positive. So that can jump around a little bit. In terms of the gap, the 63% gap, I think that the GAAP has been -- look, I guess people have different opinions about this. The gap I think has been a very useful sort of device for looking at the impact to our business over this period of rapid shift. I think if you assume that the rapid mix shift has sort of slowed dramatically, then really what we care about at this point is simply…

Thank you so much.

Thank you. Next we will move to Dan Salmon with BMO Capital Markets. Please go ahead. Your line is open.

Hey guys, good morning. Two questions, first for Greg, I think it was last week or the week before you launched the Tinder Social initiative test in -- with a small group of users in Australia, could you maybe just tell us a little bit more about what the milestones you are looking at for that test, and maybe expand a little bit more on the big picture opportunity there? And then just a second one for Gary in the outlook slide under the forecast updates, you mentioned some changes to the tech migration to Match Affinity, maybe just give us a little bit more color there, and any other important initiatives on the back-end that are going on? Thanks.

Sure. I think, look, it's a test, it is strategically meaningful and it's the first sort of product change that we've introduced, it sort of lays the foundation for a broader product experience than the traditional one-on-one dating experience. And so, in that respect it's important. At the same time, it's also very complicated. You launch a test like this, and the first thing you're looking at is making sure that you've done no harm. You introduce something like that into what is a very powerful and successful ecosystem, and you want to do it slowly, you want to do it carefully, you want to see whether the intended consequences on all the core behaviors. So that's really where we're right now. I think obviously the positive stuff is obvious, you want to increase engagement, you want to increase usage, you want to increase new sign-ups, and you want to continue improve and create new used cases for the product experience. But it's very early. You introduce something like this into the ecosystem and there is a potential for good and bad, and I think you know, we're one week in, and so, we have certainly nothing to report at the moment. It's complex. And we're excited about the overall direction, but very circumspect in terms of this specific sort of future iteration as to whether or not it is going to start completely move us in that direction or not, certainly we'll have a lot more to say about it on the next call.

And then Dan, in terms of the tech migration; as we kind of talk here of what happened in 2015 and plan for '16, the way we looked at it was you know, when you look at Match, the tech platform was a pretty big distraction to the lot of resources, a lot of people's time. And I think just given where we're and given the mobile shift, we decided that we should push off doing more of the tech migration around Match Affinity, and really focus on execution of that business as well, and try to drive sub growth at that business. And so that's the rationale for that. That's what we've done. And then the slide kind of lays out there will be some more costs in Q2 to finish that up, and then there really won't be much cost after that for the remaining tech migration.

Yes. I think just -- it's been a very big project, it's been very modular, meaning, we postponed one part of it, which is sort of a final piece, which was migrating the Match Affinity business on to the Match platform, but all the rest of it is going to have been completed, and we drive meaningful benefit from it, meaning we will completely rebuild the Match back-end, the Match front-end, create an API that allows the Match back-end to speak effortlessly to the Match desktop web, the Match mobile web, the iOS, the Android app, all of that creates dramatic efficiency. It allows us to deploy former resources on sort of product development as opposed to replicating the back-end part of product development that we had to replicate on each device over and over, so, big impact there. We brought it new management for these businesses, and again, what's the point of bringing new management if you don't listen to them? And their view was to re-prioritize a little bit for the balance of this year, and push that back off, and we'll either do it next year or we will sort of close the -- create the efficiency in a different way. I think other things that happen as part of that project, just to note, we took our European business from seven offices down to three offices. We did major tech -- not nearly as major, but we basically created the same sort of efficiencies in terms of API and reducing redundancy on the Meetic platform as well. So, lots and lots, we migrated Latin America on to the Match platform in the fall, so, lots and lots headwind done and there is still ongoing work to complete it. Yes, I was just giving a note, we also migrated the FriendScout business on to the Meetic platform. So this was a big, big project. All we're doing is really sort of indefinitely postponing one piece of it, which may or may not ultimately happen, but we'll have gotten by the time we're done, which should be by the end of this year. We'll have gotten the vast majority of the expected benefits out of the project. So I don't want to focus too much on the one part that we've pushed off.

Okay, great. Thanks very much for the details.

We probably have time for one or two more questions, operator.

Thank you. Next we will move to Heath Terry with Goldman Sachs. Please go ahead. Your line is open.

Great, thanks. I just wanted to -- since a lot of the other questions we'd have been answered, I just wanted to take a little bit more into the Meetic example, because I think it's really interesting on the turnaround you guys have seen there; can you give us a sense for what happened with pricing over this period, and whether or not how much if at all that was a lever? And then, the chart starts couple of years or three years ago, right up you guys did the Massive Media acquisition into Meetic, I'm just curious how much of an impact the attrition of Match's users had on that initial decline, and if were to look at this just purely you know, maybe excluding the acquisitions on a like-for-like basis, would it look any different?

Thank you. We'll focus on last point first. I'm not sure I heard -- it was right after the what acquisition?

Massive Media, when you guys bought Twoo.

This has nothing to do with Twoo. So Twoo is excluded from these numbers. This is purely core Meetic dating. It excludes the FriendScout acquisition. It includes -- it excludes the Meetic Affinity brand that we sort of had to runoff on. So this is purely like-for-like, think of it as the Match.com of Europe. Okay? So this is -- all that is excluded. I think in terms of rate, again, there's been some -- just see, rate -- we're pretty confident throughout this period, I'm looking at it now, this is all -- this is local currency, right, so there is no FX in this that I'm looking at. Yes, on a local currency basis, I will say the Q3 2014 rate was identical to the Q4 2015 rate. So there was a little bit of -- it went up a little bit during this period and then back on a little bit, again, driven mostly by the mix of discounting and package mix and all that sort of -- so pricing was definitely not a meaningful driver of this. The biggest driver of it was we improved conversion, we improved marketing efficiency, I mean, it was just -- there was always a million things going on, but these are businesses where -- look, Meetic, when we bought Meetic back in 2011, it was in a trough, and we built it out and then it sort of stumbled a little bit, and Match had a big stumble four or five years back on the execution front. The core lessons of marketing creative, marketing tactic, product -- theory product execution, all of that stuff is -- I know it's complicated in any business, but -- and I'm probably bias, but I think it's complicated here, especially at large scale. And I think that they just really stepped up their execution, and everything started hitting, and there is no magic bullet or smoking gun. They just did better. And again, we brought a new management there, I want to say the late part of 2013, and that leads to continuity, and just good execution. And they're on a really good run, and we feel really confident that again, you know, not to get prior management, the turnaround in the North American business, we think we hit our low-point in Q3 '15. So the turnaround started then, but we brought in new management and I think that Mandy and Shar, I think they're amazing in execution, and I think that we feel really good that this trajectory will replicate itself in the North American businesses.

Great, thank you.

You're welcome. We're going to take one last question, operator.

Thank you. We will take our final question from Peter Stabler from Wells Fargo. Please go ahead. Your line is open.

Thanks. Two quick ones from me, first of all, Greg, I'm wondering if you could comment a little bit on the advertising landscape for your other brands, the non-Tinder brands. Most of us on the call pay pretty close attention to that, and we've seen a kind of a divergence in performance. So I'm just wondering some comments there. Secondly, Greg, could you remind us your exposure to app store taxes and strategies to mitigate those? Thanks.

Taking suggestions on tactics to mitigate themselves, anyone has a good idea for how to avoid paying Apple. They're 30% open to them. I think that -- the numbers are obviously built into the number we've talked about, if you go to the app store, if you go to the unit economic slide we did, where we talked about sort of the soft paywall businesses being at 26% of the acquisition cost of the hard paywall. That's inclusive of the app store fees. So for instance, Tinder pays us 30% sort of payment on every subscriber has, but that is built into those numbers. I think again, if you sort of aggregate marketing costs and the app store fees, you got marketing costs coming down dramatically as a percentage of revenue, you've got app store fees increasing as a percentage of revenue, I think the net of all of those is margin improvement overall, but they're sort of going in two different directions. I think on the advertising side, if I understood your question, sort of ex-Tinder, you were saying there was a divergent; I think you mean that our ad revenue in those business is not growing as fast as the market generally.

I guess what I meant, Greg, is across the landscape we're seeing share being taken back, you know, large scale data-driven, great execution, and then we've seen other platforms kind of languishing. So just wondering if you can give us a little bit of color on the trends you're seeing in…

Sure. I think, again, we obviously just brought in -- we just brought in new management. We're scaling that operation meaningfully. I absolutely believe our execution will get much better, and that we will become more relevant. And so, I think when you talk about sort of better data, we're in the process, you know, we have all of this data right now. We don't have a central technology system that harnesses it, allows us to monetize it; it allows us to get the advantage of it, all of that is underway. I think of -- an also a big driver really, you go back to that sort of mobile mix slide, the reality is that not unlike a lot of other businesses, our desktop business has monetized on an advertising side much better than our mobile business. And so, over the last three years as you've seen this rapid shift from desktop to mobile, which we focus on the conversion side, it also had a negative impact on the ad revenue side, where businesses like Match, and Meetic, and OkCupid et cetera, they're in the priorities of what they do. And as they have sort of scrambled to keep up with this mobile shift, there is no question that the ad side has been a very bottom priority as, again, conversion and everything else. So I think it has not been a great period for us on the ad side, driven by, first, did not being a big focus, and be the mobile mix shift, I think mobile mix shift is mostly behind us. We now have real focus and real leadership, and I do expect it to improve meaningfully in the periods to come.

Thanks, Greg.

You're welcome.

Thanks everybody. We will talk to you next quarter.

Thank you. This does conclude today's conference. You may disconnect at anytime, and have a great day.