Good morning. And welcome to the Match Group Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Lance Barton, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Match Group CEO, Mandy Ginsberg; and CFO, Gary Swidler, will review the fourth quarter Investor presentation that is available on the Match Group Investor Relations website and then will open it up for questions. But before we start, I’d like to remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded 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. Over to you Mandy.

Thanks, Lance and good morning everyone. As I passed my one-year anniversary as a CEO of Match Group, I wanted to quickly take stock of how we're set up for 2019 and beyond. Our key growth driver Tinder continued to show its strength, with outperformance in Q4 even against a really tough comp from the prior year. Tinder has a robust set of initiatives to drive strong growth for the foreseeable future. It is the go-to dating app for young singles and we continue to cement our leadership among college students while fueling growth in emerging markets like India. While, Tinder rightly gets most of the spotlight. We have a number of other brands that are poised for impressive growth and serve a different demographic or psychographic than Tinder. Hinge, which has seen accelerated growth under our leadership is a differentiated product that has clear momentum and should turn into another star. The recent launch of Ship is resonating strongly with young women and our African American and Latino focused apps continue to grow their user bases impressively. Match and Meetic continues to evolve their product and we think that those brands will see growth again heading into next year as they resonate with serious minded daters in their thirties and forties. OkCupid has shown early traction in India, and Pairs continues to ramp as a leader in Japan. Along with Tinder, these brands give us some solid weapons and a large and growing Asian market. What all this tells you is that we have tremendous amount of exciting product work underway at Match Group. We are driving innovation by incubating new products, advancing our existing ones and acquiring businesses with early traction that we can supplement with our deep experience and best practices. All of which provides us multiple…

Thanks Mandy. We finished 2018 on a high note, capping a very strong year with 30% year-over-year revenue growth and 39% EBITDA growth. We're optimistic we can deliver again for our investors in 2019. I will first review Q4 in detail then discuss 2019 and specifically the Q1 outlook. On Slide 10, you can see that average subscribers reached over 8.2 million in Q4, up 17% year-over-year. Tinder drove our growth again this quarter, with aggregate stability at our other brands. We saw some pressure at Match and Meetic, as we spent down on marketing by about 13%. Our other brands generally performed well. Tinder sequential subscriber growth was stronger than we had expected, as optimizations and merchandising changes drove higher conversion levels and more new subscribers and resubscribers, offsetting much of the impact from a higher than normal number of expiring six and 12 month packages in Q4. The benefits of small optimizations, such as PayWall tweaks or recommendation engine changes that we made in the quarter, give us confidence that we have much more headroom on this front in 2019. On Slide 11, the left hand chart shows the rapid growth in Tinder ARPU over the last two years, up nearly 50%. This has been driven by a number of monetization features, most notably Tinder Gold as well as by strong à la carte sales. The ARPU at our other brands has remained stable over the same period. You can further see that the gap between Tinder's ARPU and the other brand's ARPU continues to narrow, and a Tinder ARPU now approaches the overall Match Group ARPU. In Q4, overall company ARPU was higher by 4% year-over-year, up $0.03 to $0.58. ARPU growth was driven by Tinder, which saw 12% higher ARPU year-over-year. International ARPU was unfavorably impacted…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ross Sandler with Barclays. Please go ahead.

Great, thanks. I guess, Gary or Mandy, it seems like something has improved at Tinder in the – since we spoke 90 days ago, given that – the beat in 4Q and the 1Q guide above the 250K net adds level. And you mentioned, Mandy, product and merchandising changes that drove an uptick in the second half of the quarter. So I guess any additional color on what you're seeing? And then how does the net adds look from a geographic standpoint? Are they coming in kind of across the board? Or is this more on these new markets in Asia? Thank you.

Good morning, Ross. Let me try to take a stab at that. So as you know, we talked a lot about the large number of expiring six and 12 month packages that we had in Q4 when we had our last call. And what we basically did was we mobilized very hard. We talked over the time about how much, we think, at Tinder there's room for us to make optimizations and drive subscribers, and we were able to do. We mobilized, especially in the back half of the quarter, and made a number of optimizations that really led to significant conversion improvements, brought in more first-time subscribers and resubscribers. And what that did was, basically, help offset a lot of the expiring six and 12 month subscribers. And so instead of coming in under the 200 level, which is what we thought at the time, we were able to get up to 233 sequential net adds in the quarter. So we're very pleased with the progress that we made. And importantly, what it tells us is we're right about our belief that we have a lot of headroom to keep making those kinds of optimizations, whether it's PayWall changes, whether it's more significant changes, the recommendation engine that drives likes and, therefore, increases conversion. All those things on a platform of the scale of Tinder really moved the needle. And we saw that in Q4, and we have optimism that we're going to see benefits from that throughout 2019. And so while we did spend up in marketing at Tinder in the fourth quarter of 2018, that did help drive things, but the real significant driver of the uptick was the optimization work that we did. And what you see is because we had more significant subscriber growth than we were expecting, that higher level of subscribers carried into Q1. And so as a result of that, we're expecting a higher number of subscribers than our kind of typical average in Q1 as well, probably something approaching 300,000-or-so subscribers. And it really is strength across the board. It's not confined to one particular geography, which I think was the last part of your question. It really is strength across the board on conversion and subscriber growth. Okay. Hopefully, that's helpful, Ross. Next question, please.

Okay. The next question is from Brandon Ross with BTIG. Please go ahead.

Hi, good morning. I actually had one on Hinge. You mentioned its popularity in New York City and London during the prepared remarks. Can you speak to the market share you've seen in those markets and the monetization rates, maybe as a leading indicator for that brand's going? And then maybe what's the strategy for achieving growth from here at Hinge? Is it a city-by-city approach or kind of a national approach? And then just on Tinder, could you just tell us how to really think about subs domestically versus internationally? Any more color you could give on that? Thanks.

Sure, okay. Let me start with Hinge. So the first thing I want to say about Hinge is that we've seen Hinge have this incredible product market fit. So what that means is that people just love the product. And if you talk to users who use the products, there's just really strong word-of-mouth marketing because they're just getting great value out of it. And so as a result of that strong product traction, we're seeing organic growth in large cities, cosmopolitan cities, throughout the U.S. New York, certainly, the strength, it's where it started, but in L.A. and Chicago and San Francisco. And then we're also seeing English-speaking international markets where we're seeing either some traction like Toronto and Sydney. We do think that sort of looking ahead at Hinge over time, there is an opportunity to grow in non-English-speaking cities once the app is translated because at this point, it's just in English. Regarding marketing efforts, we're spending on marketing really around brand and elevating the brand Hinge because in New York, a lot of people have heard about it but there's still relatively low awareness in places across the country, and it's really focused on reaching young millennial men and women, mostly in online channels. So that addresses your question of how are you reaching them. And then the question around monetization, we really haven't focused on monetization on Hinge. In fact, if you use the app, it's not easy to come across rate cards. It's just – we have not really spent a lot of our energy. We'll begin spending a little bit more time and focus in the back half of the year. I mean, as we have sort of proven time and time again that we take best practices and real institutional knowledge and…

Yes, for Tinder.

So let me first say, so domestically, what we've really focused on is the – in the last six months, primarily is college audience. There's 20 million college students in the U.S. We think they're incredibly important audience. They also happen to be vibrant and dating a lot, so very relevant. Turning to international where you see the growth and will continue decision growth, it is a big focus. And I'll touch on a couple of regions. Asia, there’s really social change that's happening in these markets. I mentioned in my remarks that in South Korea and India, we just launched TV ads really to drive increased awareness and we're seeing nice momentum there. And then there are other markets where there's just some really interesting cultural relevance. So Brazil, for example, in the last month or so, the number one pop song on is about media girl on Tinder named Jennifer. And it's been a smash hit, and we've seen a big surge in traffic. But what it tells you is that Tinder is really integrated into the dating culture, and we think there's – we continue to see momentum on that front as well. And then the last thing I'd just say is that not only are we putting marketing dollars into emerging markets, but we're also continuing to put more feet on the streets to make sure that not only can we market from – execute from a marketing standpoint, but we need to continue to adopt the product, everything from login, to profile, to payments geographically, and that's an area that we just haven't focused on until now. And so we do think that the international markets will see momentum in growth, especially since that's where 75% of our addressable audience is.

Thank you.

Okay. The next question comes from Eric Sheridan with UBS. Please go ahead.

Thanks so much. Given the disclosure of Tinder and sort of non-Tinder revenue in the release in the slides, I'm just curious how you're thinking about that non-Tinder revenue. It's been sort of flattish over the last couple of years. Is that going to be an area we should look for continued stability? Or is that an area where you could possibly put marketing dollars to work to stimulate growth? How those brands fit into the broader portfolio? A good update on all of that would be helpful. Thanks so much.

Sure. So let me take a crack at it, Eric. I think that we've been talking about stability for a while now on the non-Tinder brands, and I think that's very fair to point out. I think we view that as kind of the minimum case that we're going to be able to achieve stability. It was important for us to get to that point, and we've gotten there. And our goal is to get that piece of the business growing again. And I think we can accomplish that late this year and certainly into next year. And so that's the goal, and we're mobilizing on a number of fonts to do that. If you unpack kind of what's going on in the non-Tinder brands a little bit more, I think you can kind of think about it in three components. The first is these new emerging growth businesses that we've been talking about, and I include Hinge in that category, I include Ship in that category, which just launched but shows really good user growth out of the gate. Chispa and BLK as well on the Latino and the African-American side. So we have a number of bets that we've made that we think will be able to drive growth for us aside from Tinder. And then, of course, we have big hopes for Hinge in particular, as Mandy talked about. And then when you look at some of our other brands like OkCupid and PlentyOfFish more domestically, although they're starting to branch out internationally as well. And then you've got Pairs in Japan, which has been growing nicely in a market that's really growing very strongly. So we've got some good growth drivers there as well. And then the third piece of it is the Matches and Meetics…

Great, thanks for the color.

Okay, thank you.

Okay. The next question comes from Ben Schachter with Macquarie. Please go ahead.

Congratulations on the great execution. Can you talk about the potential to improve commission rates on the mobile app stores? Is there a way for Match to pay fees that would be more in line with traditional subscription models? Or can you go direct in any way to avoid the commission fees? And related to that, Epic Games recently announced that they're going to be hosting a new app store on Android devices that will only charge developers about 12%. Should we expect that you would try to shift some usage there or to other third-party stores that may evolve around there? Thanks.

Thanks Ben, for the question and for all your good reports on this topic. It's, obviously, a huge topic among developers, given the amount of fees that we pay to Apple and Google. It's something that we're incredibly focused on. If you just look at our Tinder business, at $805 million of revenue in 2018 and growing this year, and you assume we pay pretty close to 30% across the board, it's a massive expense for us. And you know that we make frequent trips to Cupertino to discuss this with Apple and Google as well. And it's something that we are thinking about very carefully. I know that there's a lot of noise being made in the industry, generally by players like Fortnite, by Netflix and the shift that they just announced. So it's something that we're watching incredibly carefully. And it is, of course, not just an issue for us, but it's an issue for everyone. But it's a complicated one. There is certainly real benefits that the stores bring to the table from a distribution standpoint in particular. For our brands, they don't bring us much on the marketing side just because we have such high brand awareness at so many of our brands and the reality is that when people go to the stores, they're searching for a particular app, and so there's not as much benefit. So the 30% to us does feel like a big number compared to the benefits that are being brought, but obviously, as we've sort of a balanced this out, all of our financial assumptions assume that we're going to keep paying that 30% because that's currently the business model. So we're not assuming any relief there but we're watching all these developments, including what you point out as new stores cropping up. And to the extent there are tools that we can use, whether it's new stores, whether it's something else, to reduce the overall 30%, we will certainly focus and try to benefit from that. But so far, we haven't made any significant moves in that direction, but we'll continue to watch this and see how we can benefit from it financially.

Okay. The next question comes from Anthony DiClemente with Evercore ISI. Please go ahead.

Thanks so much for taking my questions. Just one on monetization products and product pipeline. Usually, you have a new monetization product out in the late summer, let's say the third quarter time frame. I think your prepared remarks suggested you'll not have one this year. So I just wanted to get a little bit more behind that and the strategy or timing of future monetization products? And then maybe one more real quick on competition. Can you just, Mandy, give us a characterization of the competitive landscape domestically and internationally? Couldn't help but see the Bumble Super Bowl ads, and you mentioned Bumble in the prepared remarks and the slide. So is that sort of informing your response in marketing spend at least here in the U.S.? Is that what's – is that part of what's driving the marketing strategy to counteract the competition? Thanks.

So, let me give a shot to the first part of your question, Anthony. I think if you look at our Q4 results, which were very strong, it's clear that we're not dependent on a big revenue feature to really drive subs, drive conversion, there's a lot that we can do. And so as we look into 2019, that's going to be a big piece of what we're going to do on the optimization side. And Mandy went through a lot of that in her remarks, so I won't go through it again, but that will be a part of it. We've got some revenue features kind of – what she said was kind of sprinkled throughout the year. So not planning for one big bang in September or something like that as we've done in the last years. It could happen. There's a lot of things on the road map, and we're excited about a lot of different initiatives at Tinder. So we're not committing specifically to that, but we believe we can deliver the number that we put out there without that big bang revenue feature. And we think there'll be incremental things, there'll be things that are a little bit larger than that, and we'll kind of see how the year plays out. But we feel very good about the product pipeline and very good about our ability to deliver what we've said from an outlook perspective without some very significant revenue-specific feature like we've had the last couple of years.

So, let me take the competition one. So if you think about the competition, looking back over my tenure, I mean, it's been a incredibly competitive industry, really in every market. There's a couple of global players. We also see a ton of local players. And the constraint is not building an app, the constraint is really getting to scale. Very few players have done that. Asking about how we view our position in the market, we feel great competitively, just because we've got so many strong products in the category and can compete in both domestically and internationally. And just to step back, if you look at our products, Tinder, for example, is in sort of a league of its own. It grew to scale so significantly and is maintaining great leadership position. And then Hinge, which I talked a little bit about, it's gaining ground, particularly in the sort of serious space, and it is taking share in that serious space market in the domestic market. And we're excited about what we see, and we think it is definitely a contender to continue to increase momentum in a space where Tinder is a little bit younger, a little bit more casual and Hinge is a little bit older and more serious. And then it is other products that we're introducing in international markets, for example, OkCupid, which I mentioned, has showed some interesting traction in India. So we don't think about a single competitor. And you asked me specifically about the Bumble question and the Super Bowl. So I'll tell you, it definitely seems like Bumble is spending a large amount of money and marketing dollars in celebrity endorsements, especially looking at sort of the Super Bowl ad. It's our belief and my belief in particular, as being a career-long marketer, that spending millions and millions of dollars on one ad in our category just doesn't have sustainable impact on the business. And what I can tell, we're looking at, based on U.S. downloads post the Super Bowl and India downloads after a big celebrity push, our belief is reinforced. On the flip side, there are opportunities to grow without big marketing dollars. So OkCupid, with very minimal marketing spend, has seen just really tremendous momentum in the Indian market, which is really exciting by adapting the product and getting people to talk about the product through these really interesting, provocative questions embedded into the product. So it's not always spending a lot of dollars that drive traction, but just spending them in a really smart way. And then that said, we're always evaluating areas of opportunity to invest in marketing, especially to drive awareness for these brands. But as you all know, we are pretty measured and prudent in our marketing approach. Q - Thanks a lot.

The next question comes from Brent Thill with Jefferies. Please go ahead.

I had a question for Mandy and Gary. For Mandy, you're coming off 30% growth in 2018, yet that growth is staying in the mid-teens in 2019. Can you just talk a little bit about what the assumptions you're taking into play here and the potential headwinds and tailwinds that you're considering? And for Gary, just on North American subs, that was down sequentially in the fourth quarter. It's the first time we've seen that in two years. Can you just talk a little bit about what was the play on that sequential decline in North America?

Sure, why don’t I take a crack at your question? And if I miss something, Mandy can certainly jump in. So if you – first of all, let me handle the North America, subs declined substantially. First of all, it is important to point out that Q4 tends to be our weakest quarter from a seasonality standpoint. So that's a factor in the sequential comparison. But as I pointed out, we did spend down at Match on the marketing side, in particular. And that really is the business that's responsible for the trend that you're noticing. So it's not a Tinder trend, it's a Match trend because of the decline in marketing. And we just think that given both what's going on from a TV efficiency standpoint and also because we're in the middle of making significant product changes, it really wasn't the quarter to go hard on the marketing side at Match. And so we saw the flow-through effect on revenue and subs from that. And as the year progresses and we make the changes in the product we want to make, we'll dial back up marketing and dial back up subs and revenue. So you're probably going to see that trend that you're referring to on the North America subs persist for a quarter or two as we make those changes at Match. And then I think it will rebound nicely as we get towards the end of this year. So that's an important thing, I think, for people to factor in. But we have confidence that that's going to be the trajectory. As far as what we're seeing going from 30% kind of revenue growth in 2018 to what we're saying is mid-teens in 2019, I think there's a few things to keep in mind. First of…

Thank you.

The next question comes from Dan Salmon with BMO Capital Markets. Please go ahead.

Good morning everyone, two question. Mandy first I think Swipe Surge rolled out late in the year and would love to just hear a little bit more on that product. How you see it rolling out more broadly and globally? And how you're thinking about merchandising? And then second, you spoke a little bit about some of the sort of individual opportunities in the emerging markets, like OkC in India. But just maybe to take it up a little bit of a higher level, could you just review the sort of competitive approach in emerging markets where, in some cases, sort of broader social media apps sort of act as the base layer of the internet as opposed to an operating system or a browser, and some of that social activity kind of bleeds together between dating and family and friends and otherwise? The common question is, Facebook sort of creeps into the market. What are the sort of different dynamics? And how social media and dating apps usage maybe different in emerging markets? And how you approach it? Thanks.

Okay, great. Let me take the first one on Swipe Surge. So Swipe Surge we launched not too long ago globally on IoS. So we still haven't – it's still developing on Android. So we're planning on launching on Androids, which is going to be great because that's a very large portion of our audience. What Swipe Surge is doing is it's, of course – in the product itself, it's telling people when there's high traffic when there's a lot of activity. And as I mentioned, it's kind of like telling people the bar is full or the club is hopping. So once people show up, there's just a lot more activity. And what that activity does is it allows people to increase messaging and increase matches. So we actually see double-digit increase in likes in messaging. And also just the response times are really quick because people are sort of – are in the club or the bar, so to speak. So I think that covers the Swipe Surge question. So let me address the other question you had just around underpenetrated markets and emerging markets. So as I talked about, if you look at the TAM, it's like a huge number. 75% of our market is outside of North America and Europe, which are more mature markets. And what you mentioned, which is you talked about what's happening with social media, but I think even what's more pronounced is that there's this massive cultural shift around dating because you're dealing with people in their 20s, they're the first generation that's dating. Their parents didn't date. And so the phenomenon is really sort of changing things. I'll give you an example. Japan is a really interesting example of this. We've been operating in Japan for, I don't know, a decade or so, maybe more, and it's only been in the last couple of years where we've seen acceleration, and it is due to this eroding stigma. And this also just happens to be a market where there's just people are also willing to pay. And it's also a market, interestingly enough, where people really want to date outside their social circles. And so for each of these markets, we really have to make sure we understand what's happening culturally. And the momentum is there, and for us, it's more about making sure that we're sort of there to capture that momentum. So when it comes to Tinder in some of these markets because we're – they're still early on dating, Tinder is starting to find and leading the conversation around dating, and you see this in several markets. And that's why I do think it's really important as we are in these markets, it's not just about marketing messages but make sure that we start to adapt the product so it's more relevant for these markets that are just sort of early on in the journey.

The next question comes from John Blackledge with Cowen. Please go ahead.

Just on Tinder ARPU maybe, Gary, what's the expectation for ARPU growth in 2019 and kind of key drivers, mix drivers? And then also on Tinder, just a la carte as a percent of total Tinder direct revenue? And then if you can give the mix of a la carte Tinder subs versus nonpaying Tinder users? Thank you.

Okay. We're running a little bit tight on time, so let me try to answer those questions quickly. On Tinder a la carte, it remains about 30% or so of direct revenue. That's been pretty consistent now for a few quarters, and so that's kind of where we stand there. From an ARPU perspective, I said mid-single digits for Tinder as 2019 happens. I think that's what we're looking at. I think there's a few components of that. We've been able to drive Gold mix up significantly and obviously, that adds to ARPU. I think that will continue to be a component of it. Obviously, as the percentage has gotten higher and higher, it's tougher to drive more and more Gold mix. But I think there's still more room on that front, and that will help drive. On the a la carte front in particular, which you raised, when you think about Tinder, there's really kind of two features on the a la carte side that are really driving things, right, with Boost and Super Likes. And I think you could imagine a much broader, longer menu of a la carte features that could be appealing at Tinder. So that is an area that we're focused on in 2019 and beyond for Tinder. I think there's room there. And then something that we talked about frequently is the ability to optimize price at Tinder. Country-by-country, market-by-market basis, based on a number of factors, I think when we look at it, as we talked about before, pricing is a bit of a blunt instrument at Tinder. We haven't been that refined or sophisticated on it, and we are very sophisticated on it at a number of the other brands. And so we need to get more sophisticated on Tinder. We've got a team focused on that, and I think we'll make good progress on that over 2019. So those are the three drivers I think, that contribute to our confidence that we're going to be able to drive Tinder ARPU up single digits as 2019 progress. So I’m going to leave it there, just given the time, but hopefully, that answers your questions, John.

We appreciate everyone joining the call again this quarter, and we look forward to talking to you all on the next call. Thank you very much.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.