Good morning, and welcome to the Match Group’s Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Bill Archer, Head of Investor Relations and Corporate Development. Please go ahead.

Thank you, operator, and good morning, everyone. Today’s call will be led by CEO, Shar Dubey and CFO and COO, Gary Swidler. They will make a few brief remarks and then we will open it up for questions. Before we start, I need 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. With that, I’d like to turn the call over to Shar.

Thank you, Bill. Good morning, and thank you all for joining the call today. Today, Gary and I are doing this call from our brand-new offices in New York. We had another strong quarter with over 25% year-over-year revenue growth, also a record EBITDA quarter for us. Tinder, in particular, showed real strength, with not only 20-plus percent revenue growth, but also adding a record number of subscribers and payers this quarter. It is a historical high for Tinder, even higher than the quarter when Tinder Gold rolled out. I am also excited to have our first woman CEO at Tinder. Renata has seamlessly taken over the helm there and the team hasn’t missed a beat in their journey to transform the Tinder experience. Explore, which is a new surface area within the Tinder app, rolled out globally a couple of weeks ago. It is a dynamic interface, which allows users to connect with others through new experiences beyond the swipe that used to be Tinder. These experiences can be tailored by market. It keeps Tinder at the center of culture, gives users new reasons to keep coming back, increases engagement and activity. In fact, our successful Swipe Night series in coming to Tinder on Explore in a brand-new series starting November 7, not only is it a very compelling Gen Z hood on its storyline, this time it has a bunch of features like fast chat built-in that should amplify the conversations that follow on Tinder. Hinge had another great quarter across all metrics, doubling revenue again. The one business that is seeing an unexpected softness is the main revenue-driving app at Hyperconnect Azar. It’s had a few months of headwinds in some key markets in Asia, some of it is COVID, some of it is marketing performance, some…

Thanks, Shar. We had strong Q3, with total revenue of $802 million, up 25% year-over-year. Our businesses, excluding Hyperconnect, produced total revenue of $748 million, up 17% year-over-year. Total payers reached $16.3 million in Q3, an increase of 16% from the prior year quarter. Growth was strong in all geographies, up 11% year-over-year in the Americas; 13% in Europe; and 36% in APAC and other, where the count reflects a full quarter of contribution from Hyperconnect. RPP was up 8% year-over-year to $16.06 in Q3, up 5% in the Americas, 6% in Europe and 17% in APAC and other, again, reflecting a full quarter from Hyperconnect, where RPP exceeded $30. Our direct revenue grew 17% in the Americas, 20% in Europe, and 59% in APAC and other, again due to full quarter of Hyperconnect results. APAC and other now comprises approximately 22% of our direct revenue. Tinder was a standout in the quarter, delivering direct revenue of $434 million, up over 20% year-over-year. Tinder has phenomenal payers growth, up 19% year-over-year, adding 1.7 million payers, the most in its history, reaching 10.4 million. Some of this growth did come at the expense of RPP, which grew 1% year-over-year in the quarter. Tinder had a number of conversion wins in the quarter, particularly in the lower-priced subscription tier. Tinder Platinum adoption is ahead of schedule, with total Platinum subscribers reaching nearly 1 million. Tinder engagement also remains very strong with both Swipe activity and daily average messages significantly above pre-pandemic levels. All other brands grew direct revenue 32% year-over-year in Q3. In this group, Hinge was the standout, growing direct revenue over 100%, driven by RPP growth of north of 70% and payers growth of 20%. BLK, Chispa and Upward in aggregate grew direct revenue over 80% year-over-year in Q3. Hyperconnect…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question today comes from Mario Lu with Barclays. Please go ahead.

Great. Good morning. A couple of questions on Tinder. The first one is on payers. So I was wondering if you could provide any additional color regarding the key drivers or regions that attributed to Tinder’s 800,000 sequential payer growth in the quarter? How should we think about the normalized cadence of Tinder payer growth going forward?

Yes, I can take that. So generally, Q3 is a good quarter for payer ads. But this one was in the historically high for Tinder. And it’s across all regions mostly because a lot of the growth in payers in Q3 came as a result of what we normally referred to as under-the-hood revenue optimization. So a combination of merchandising and paywall optimizations drove conversion and payer growth. Some of this increased conversion was in lower-priced tiers, which were dilutive to RPP, as Gary mentioned. The one thing I want to emphasize, we generally always focus on revenue growth. Sometimes it comes through payer growth and sometimes through RPP, sometimes both. And so, we don’t worry too much about the cadence necessarily, but we’re definitely always focused on revenue features to increase revenue overall.

Got it. And just a quick follow-up on the Tinder RPP growth, you mentioned the lower-priced tiers being successful as being one contributor. What about – any color about Platinum still being a contributor to RPP growth? And then any color you can provide regarding the expectations from these new features such as Explore and whether they will accelerate Tinder RPP in the next few quarters? Thanks.

Sure. So yes, the RPP dilution came because some of the conversion features helped payer growth in the lower tier – lower-priced tiers. But Platinum has been exceeding our expectations. Gary said close to 1 million at the end of September. We’ve actually now passed that. And it will continue to be a driver of RPP growth. In terms of Explore, it is new. It’s only been out for a couple of weeks, but we have early evidence of this. And we expect the Explore experiences should increase engagement and reactivation. And this, in turn, ought to provide more revenue optimization opportunities over time, both in terms of conversion as well as RPP growth, meaning both conversion from new payers but also a la carte revenue opportunities on – through that interface.

That’s helpful. Thanks, Shar.

The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.

Thanks. Maybe just dig a little more deeper, so as far as the fourth quarter acceleration in Tinder direct revenues, just maybe talk about like what’s driving the confidence for that plus 25%? Thank you.

Sure, Jason. It’s Gary. I’ll take that. I would say generally, Tinder has really been performing very strongly and increasingly strongly as the year has gone on. And the engagement with the product is really even well stronger than it was pre-pandemic. So we really feel good about the dynamics overall at Tinder. And what we’re expecting is that in Q4, we’re going to see both payer and RPP growth. The momentum that we had on the payer growth should continue into Q4. So I’m expecting a similar level of year-over-year payer growth in Q4 as we saw in Q3. And I think we will also be able to achieve some RPP growth as well, which we didn’t see as much in Q3, but I think we will see that in Q4. So when you combine the additional RPP growth with similar level of payer growth, you’re going to get overall direct revenue growth in kind of approaching the mid-20s at Tinder, as I said earlier. So we feel very good about that. The one thing that I just would remind people is that seasonally, Q4 tends to be weaker for Tinder around payer growth. Especially when we’ve seen a very strong Q3, it does make kind of the sequential payer increase more challenging. So that’s the thing we are expecting to see from a sequential perspective in Q4, but year-over-year, I am expecting similar levels of growth on payers as what we saw in Q3. And just last reminder would be, we don’t really manage the business specifically around RPP growth or payers growth. We’re looking for direct revenue or overall revenue growth. So we don’t get as focused on one metric versus the other. There is obviously trade-offs as we saw in Q3, but we continue to manage to drive a strong level of revenue growth and we’re positioned to do that in Q4.

Thank you.

The next question comes from Cory Carpenter with JPMorgan. Please go ahead.

Yes. Thank you. On the app store, certainly a lot of moving parts, but based on what we know today, Gary, is there any further guidance you could provide on the way to frame future app store just as we head into 4Q and 2022? Thank you.

Shar, do you want to take that one?

Yes. You know what, I’m going to take the opportunity to talk about the app store a little bit more broadly and all the puts and takes that we’re seeing and what we think is likely to happen. So you know there has been a flurry of activity on the app store front, particularly in the last few months. South Korea became the first country to outlaw mandatory IF. Additionally, at this point, there are either active investigations, litigation or proposed legislation across the globe, including countries in Europe, UK, Japan, India, Australia and the U.S. So here’s what we see at a practical level. Google appears to be complying with the South Korea law. That does not seem to be the case with Apple yet. Google has reduced its fees on subscriptions, but not on a la carte from 30% to 15%, which is going to be effective January 1, 2022. Now recall, Google had a while ago announced that they will be enforcing mandatory IF, and they delayed that decision to March 31, 2022. And we are as of now unsure where they stand on that policy change. Interestingly, for – it’s been a while since the Apple and Google app store economics are not in sync. And so we have to see how Apple responds to the Google change in rates for subscription. All the anti-steering provision injunction ordered by the judge on the Epic case, Apple has appealed it, but – and they have not yet communicated how they intend to comply with it. So all that to say, there was a lot of things sort of have happened, happened, about to happen. It is meaningful for us. As we said in the letter, our 2021 IFPs are expected to be north of $550 million, and…

Thank you.

The next question comes from Shweta Khajuria from Evercore ISI. Please, go ahead.

Okay. Let me try two, please. Possible to please comment on recent development related to the lawsuit and your position on the case? And then the second question is, could you please talk about the trends you’re seeing in APAC, particularly in Japan? And you touched on Korea, but generally in APAC and the recovery in that region and what is baked in your 2022 top line growth guidance? Thank you.

Sure. Let me take a crack at that. On the litigation, unfortunately, there is really not much that we can say about that right now. It’s an active litigation, jury – it’s a jury trial. And the jury selection started at the beginning of this week, and opening statements are going to be next Monday, this coming Monday. So this is occurring right now here in New York. And look, there is always uncertainty in a jury trial, but we feel extremely good about our position and that the plaintiff case is meritless. And we’re going to go in and defend ourselves vigorously. So we will be watching that as it plays out over the coming weeks. As far as the APAC trends go, I can say a lot more about that. And what I would say is, really, Japan is the biggest area of focus for us in Asia because that is our number two market. We derive significant revenue in the Japanese market. And really, they only recently lifted their fourth state of emergency. They had the Olympics, and after the Olympics, they had pretty significant spike in COVID from their perspective. And they have taken some pretty significant actions and really some restrictions on dining and other socializing really only lifted last week. So that geography continues to be impacted by COVID in a pretty significant way. And we have not yet seen a return to normal levels of socializing in that market. And that is impacting our business in a significant way. We have the number one and number two apps in Japan in Pairs and Tinder. And so we have meaningful presence there. Notably, the trends are not just affecting us. They are affecting all the dating apps in that market. But because we are…

Okay, thank you, Gary.

You are welcome.

Next question comes from Dan Salmon with BMO Capital Markets. Please, go ahead.

Great. Good morning, everyone. I’d just like to follow-up a little bit on the change to your revenue outlook for Hyperconnect and perhaps just expand a little bit on the near-term trends you’re seeing there across both of the apps? I know there was a little bit of color in the letter, but anything else that you could add would be great? And then just more broadly, any material change to your mid to long-term outlook for the opportunity for that business? Thanks.

Alright. Let me take a crack at that one, too, and Shar can certainly jump in. But as I went through and I make sure I mentioned as well, there are really kind of three things that have led to the lower-than-expected revenue for Hyperconnect. And it’s really focused on the main revenue-generating app Azar, which is a one-to-one video experience. The first is COVID. Hyperconnect and Azar have significant presence in Asia and the Middle East. And as I just talked about, COVID continues to be an issue in many of those markets. And you’ve got a lot of people living at home with their family, spending a lot of time at home. And it has changed the interaction of the consumer with the one-to-one video chat app at Azar. And so we’re looking to evolve the app in ways that change the experience and make it more conducive in the current environment. I think that’s kind of the first piece of it. The second piece of it is on the marketing front. Azar, there is a lot of performance marketing as we’ve talked about in other context. The marketing environment has become both more competitive and also more challenging as a result of changes that Apple has made around IDFA. So that’s the second piece of what’s going on. And then the third piece is they have had some product initiatives that have been delayed, and the take-up has not been as quick as we had hoped. And so there is some product things that are happening there as well. So, all three of those things have impacted the Azar performance, the Hyperconnect performance. I would tell you that we are not happy at all that we missed our expectations for Q3 and that we had to lower…

Great. If I could just follow-up on one thing, Gary, you mentioned the impact on performance marketing and ATG on that asset, but I don’t think you mentioned it as being material to the rest of your business around the world. Is that a function of you relying – that business relying a little bit more on performance advertising, app install ads, that type of thing to drive new users, whereas maybe Tinder, Hinge and the others tend to be a bit more viral in nature?

Yes. I mean it varies by our business depending on what the marketing approach is. So, as you rightly said, Hyperconnect is feeling it because their marketing approach is impacted by the elimination of IDFA. We are feeling it in other parts of our business, too. We are feeling it at Match and Meetic, which are significant marketers as well and reliance on marketing. We found good, creative ways to work around it to some extent and offset some of the impact. But there is still impact in businesses that rely heavily on marketing. So, all of that baked into our numbers and our performance that you are seeing for this year and our outlook for Q4 and into next year, we have included all of that. It’s not very significant to us, but there is some impact. And we are not able to outrun it completely, but through creativity and some good solves and adjusting channels and so forth, we are able to offset some of the impacts. So, all of our numbers include the impact, but it is a new fact of life that we are dealing with across our business. And our marketing teams are doing a great job finding a way to offset it wherever they can.

That’s great. Very helpful. Thank you.

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

Good morning. On Hinge, great growth. I am curious kind of if you could describe the next chapter of the rollout for Hinge in – I think everyone is enjoying the deleted commercials you have got going.

Thanks, Brent. Yes, we have been super excited about Hinge, and it’s been a great growth driver for us. But it’s still, as I have said before, only exists in select English-speaking markets. And much of that growth has been user growth in those markets and some really good work they have done this year on monetization. They still have ways to go in these markets as well as on monetization. But one of our key strategies for next year is for Hinge to enter non-English speaking markets. We are planning to build translation and localization capabilities. We are going to start the international expansion for Hinge next year. It will likely begin in some markets in Europe and then a more broader global rollout over time. As you mentioned, their marketing campaigns and particularly, the design to be deleted tagline has really resonated with consumers. And the Hinge team continues to differentiate themselves on the product. And we do think that product experience Hinge is building is very well suited for international markets. So, next year is going to be exciting for Hinge.

Thanks.

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

Great. Thanks. Just one question, what are the puts and takes for top line growth to be above kind of the initial guide of around 20% year-over-year growth? Thanks.

So John, I would say there is probably two key things to think about that could drive 2022 top line higher than what we have discussed so far. The first thing is we have some really bold and big initiatives planned for Tinder next year, especially around virtual goods and some other areas as well. And the outlook that we have given doesn’t assume a meaningful step function impact, a home run or really meaningful impact from any of those initiatives. So, we are waiting to see as we roll these initiatives out how they evolve, how they perform, and then we can adjust accordingly depending on that. But the way we approach our outlook is to not factor in something that’s kind of off the charts unexpected that we haven’t seen previously or have – or don’t have reasons to expect. So, we will see how it goes, and we obviously always update as we see improving trends in the business. And the second thing is around COVID, and I am sure we are all tired of talking about it and hearing about it and everything else. But the reality is the dating category as a whole remains impacted by the fact that people’s socializing behaviors, how much they are going out, how much they are meeting other people, how much risk they are going to take in going out with people has not returned to pre-COVID levels. I am sure you and everyone else on the phone knows this from their own experiences. You are going out more than you were, but not as much as you used to. You are traveling more, but not as much as you used to. And so we are waiting to see how the behavior has evolved and where we get to…

Thank you. Thanks so much.

The next question comes from Youssef Squali with Truist. Please go ahead.

Great. Thank you for taking the questions. Two, please. Actually, just to double-click on that last question, Gary. I was wondering if you can maybe expand on what’s baked into your mid to high-teens growth, particularly around payers and RPP for Tinder and non-Tinder brands? And then have your labor cost increases had any – or has labor cost, not yours, but just labor cost increases had any material impacts on your operations so far? I think you called out in the letter that you may choose to invest further in attracting and retaining talent next year. Any more color there would be super helpful. Thank you.

Yes. I mean, on the second question around labor costs, we like many companies, are seeing a very competitive job market, especially for tech talent, especially for engineers. It varies by market, but there certainly are markets where we are seeing a significant amount of pressure. And we are having to react to that and want to protect our franchise. We want to retain our key talent and then hiring new talent, either to grow the business or as a replacement for people who may leave has become much more competitive, and costs are going up. So, we have seen that occur throughout 2021. And right now, we don’t see any significant shift in that trend as we head into 2022. So, you never know what the future holds, but sitting here today, as we have put together our initial outlook for 2022, we are assuming that those trends are going to persist. And we are going to need to continue to invest in our talent to continue to build the business we want to build. And we are prepared to do that because that is long-term critical to our business and its success. So, that is something that we are dealing with as many companies are, and we will continue to be thoughtful around it. As far as your first question, the mid to high-teens growth, I described a little bit about something that could drive to the upside. And look, our expectation is for Tinder to continue to perform very, very well, for Hinge as it both expands into international market, non-English speaking markets. But also, there is significant opportunity for it in its current markets. So, we think both businesses should drive significant levels of growth next year. We have talked about the more established brands growing…

That’s good color. Thanks Gary.

The next question comes from Justin Patterson with KeyBanc. Please go ahead.

Great. Thank you. Good morning. I wanted to go back to virtual currency and the virtual goods ecosystem. How should we envision the pace of just that rolling out over time? And then when you look at the trading mechanics and just more virtual goods as a whole, what are the fundamental elements you need to get right to scale that and just create an efficient economy? And then the final point about that, how should we think about sizing that opportunity, the incrementality of the business over time? Thank you.

I can take that, Gary. Okay. So, the virtual currency or the coins is something we think of as an infrastructure thing that’s going to be necessary eventually for virtual goods. And that particular component is currently testing, and we should have it sorted out in the next few months. Now, virtual goods, the team is working on a very Tinder-specific version of virtual goods that will help users with both self-expression as well as the ability to stand out, particularly in a one-to-many surface area that explore experiences will enable. And so the way we envision virtual goods is it is something that users will be able to collect as well as give and gift to others. And so there is a lot of – in addition to this virtual currency, which is going to be a big component of what enables virtual goods, we do have to get the categorization of the goods and the design of it right. We have to create a value structure and a currency for these goods. And most importantly, to build the right experience that allows users to showcase them on the app in the right way. And so all of that is the plan for 2022. And the plan is we build all of this out, test it out, learn it, refine it, work out the teams in a couple of markets. And then if we get this right, I do think this could be a multiyear revenue vector for Tinder, which doesn’t exist today. And so a lot of work done, but we are very optimistic that this is going to be a really fun thing on Tinder.

Thank you.

I think that was the last call for us. Thank you all very much. Have a wonderful holiday season, and thanks again for joining us today.

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