Good morning, and welcome to the Match Group Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tanny Shelburne, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim; and President and CFO, Gary Swidler. They'll make a few brief remarks and then we'll 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 BK.

Thanks, Tanny. Good morning, everyone, and thank you for joining today's call. I come to work every day energized because I get to work at a company dedicated to helping people find love, happiness, and human connections. That inspiration not only inspires me, but also our teams, and has enabled another strong quarter of strong operating and financial results from Match Group in Q3, highlighted by a second consecutive quarter of record total revenue and AOI. Our businesses have demonstrated that setting clear goals and objectives can not only build momentum in the current year, but also set up our company for a bright future. Tinder is a great example of this. Tinder's business model was built largely on virality, but it's not lost on me how important it is to continue to drive forward with innovative marketing and product initiatives, while also rebuilding the revenue momentum that Tinder has enjoyed for so long, not just in 2023, but for years to come. Looking at 2023 thus far, I deeply believe we made the right decision in prioritizing revenue growth initiatives at Tinder with U.S. price optimizations and weekly subscription packages. While we recognize that these actions have created short-term volatility in Tinder's Payer count, we're essentially resetting Tinder's Payer base at a significantly higher rate, which has enabled double-digit revenue growth one quarter ahead of our initial expectations, and outcome that we're very pleased with. The other component of Tinder's ongoing success is centered on product and marketing initiatives that reignite user growth and improve its brand narrative. We saw great strength through June in terms of total signups and reactivations as a result of the It Starts with a Swipe campaign. However, in late summer, Tinder pulled back its spend on the campaign, and concentrated more heavily into…

Thanks, BK, and hello everyone. Thank you for joining us this morning. The momentum in our financial performance strengthened again this quarter, and we hit our financial target of 10% Tinder year-over-year direct revenue growth one quarter earlier than we'd been expecting. As BK mentioned, we achieved record quarterly total revenue as well as record AOI NOI at Match Group in Q3, a clear demonstration of the financial power of the business. We're pleased by the revenue momentum at Tinder, and also by the exceptional user and revenue momentum at Hinge. Our judicious focus on costs across the company is enabling us to invest in our growth businesses and deliver record profits. Match Group's total revenue for Q3 was $882 million, up 9% year-over-year, compared to up 4% year-over-year in Q2. FX was a notable headwind once again and $10 million more severe than we anticipated at the time of our last earnings call. Tinder outperformed our expectations in the quarter as the revenue momentum we saw from price optimizations in the U.S. and weekly subscriptions continued to deliver. Tinder direct revenue was up 11% year over year at $509 million in Q3. Tinder RPP was 18% year over year at $16.28 due to the U.S. price optimizations and weekly packages. In the U.S., Tinder RPP was up 42% year over year. Tinder's U.S. price increases and the rollout of weekly subscriptions in the U.S. and a handful of key international markets have played an important role in accelerating revenue growth as the year has gone on. These optimizations have increased RPP dramatically and have clearly been revenue-enhancing at Tinder. However, they have also had impact Tinder's payer count this year. Q3, Tinder payers declined 6% year over year to 10.4 million, largely due to the U.S. price increases. Tinder…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from John Blackledge of TD Cowen. Please go ahead.

Great, thanks. Gary, maybe could you discuss further the puts and takes of your initial view on the '24 revenue growth and margin assumptions? Thank you.

Sure, John. Let me give it a shot at unpacking some of that for you in a little detail. I think on the revenue side, the biggest swing factor for 2024 performance is really, of course, related to Tinder; how well the execution continues to be, how much delivery of growth Tinder delivers in 2024. And as we've talked about many times, we feel really good about how the team is executing, the product velocity, the marketing initiatives. And so, we've been planning for this for a while, and we are aware that Tinder needs to deliver in 2024 on both top of funnel and on improving payer conversion and overall payers and revenue. And so that is probably the biggest swing factor as we look at the 2024 revenue guidance. The second factor that I would point to, and we called it out, is the macro environment. We're particularly monitoring Tinder on that front because there's a lot of younger users there with less disposable income. There's a lot of à la carte revenue at Tinder, which tends to be a more discretionary purchase. And so, we're watching to see what happens in the economies globally as we turn the corner in '24. We know the consumer has held on well to this point, but we're increasingly nervous about what's to come in the months ahead. And we're factoring that into our thoughts on outlook for '24 revenue as well. And then you've got the events in the Middle East, the horrific events going on in the Middle East that we're obviously monitoring very closely as well. We quantified the impact of that on our fourth quarter, but obviously much more challenging to get visibility on what's going to happen across the Middle East and what the impact is…

Thank you. Thanks, Gary.

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

Okay. Thank you for taking my question. Could you please provide a high-level overview of the top-of-mind product and feature investment areas for Tinder that you think will have maximum impact on payer growth next year? Thanks a lot.

Thanks, Shweta, for that question. I can take that one. There's a lot going on with our Tinder team. And this is our daily grind, but we continue to evolve the product experience that resonates with our users. And we're continually listening to what Gen Z says and wants out of our product. And we have to, daily, continue to improve our experience and surprise and delight our daters. When it comes to payer penetration, in '23, we reset the RPP levels. So, we have to be continually mindful of new ways to drive monetization and payer penetration at the same time. And maybe I can give a couple of examples. I see two key areas of potential new revenue opportunities at Tinder. Today, our merchandizing is very Western-centric. We believe that there are real opportunities in international markets to tweak our monetization approach to drive more payer penetration by offers and servicing built specifically for those markets and cultures. Additionally, like I mentioned earlier, I believe à la carte is another area of focus for us. Our two primary ALC products were launched over seven years ago. So, I think now is the perfect time to revisit those and add to the portfolio of ALC products. We've also seen great success with weekly package [offerings] (ph) with our younger users. We believe this can actually -- these learnings can translate well into our ALC offerings, especially with our current economy. As I mentioned earlier, only 15% of our à la carte users are non-subscribers. So, I think there is actually a big opportunity for us to drive new payers into our paying ecosystem. Like Gary mentioned, we are in the middle of our 2024 planning, and we plan to share more, as we typically do, in early 2024. Thanks for the question.

Thanks, BK.

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

Great, thank you very much, and good morning. I was hoping you could comment on when you think weekly payers can get back to more normal growth? You alluded to less sequential volatility within the letter, but curious if you have a more [clear view] (ph) there. And then related, as we're a few more months into this now, I would love to hear you comment on just your learnings on accretion and lifetime value from these weekly plans? Thank you.

I just want to make sure I understood your question, Justin. You asked about weekly payers returning to year-over-year growth or payers, more broadly, at Tinder?

Yes. Sorry for the confusion there. Payers more broadly, since we have the weekly volatility within there, unless I assume that's going to normalize sometime next year. A – Gary Swidler: Okay, understood. Thanks for the question. I just want to maybe set a little bit of context before I dive into the specifics of your question. And if I'm not mistaken, I think this is probably my 32nd earnings call and probably on all 31 that have come before this one, I've talked about how the company focuses on revenue growth, not specifically on payer growth or revenue per payer growth. And our goal is to drive sustainable, strong revenue growth through a combination of payer growth and RPP growth. And in some years, the product roadmap tends to be more heavily focused on payer growth. And in some years, the product roadmap tends to be more focused on RPP growth and we're somewhat agnostic. I understand that, investors prefer to see a better balance between payer growth and RPP growth. And we want to be able to deliver that. And certainly this year has been outsized on the RPP side versus the payer side. Because of conscious decisions we made, we looked at the level of pricing in the marketplace and we felt that Tinder had not been price optimizing for the last couple of years, which led to a big opportunity this year to price optimize in the U.S. market. And so, we did a big focus on making that happen. And you can see in the RPP numbers and particularly in the RPP increase that we've seen in the U.S. that there was significant room to adjust pricing in '23. And we've done that, which has enabled the company to go from zero or essentially flat…

Great, thank you.

The next question comes from Cory Carpenter of J.P. Morgan. Please go ahead.

Thank you. Can you expand on your decision to settle the Google lawsuit before trial, just how you think about this outcome for Match, and then, more specifically, Gary, could you talk about the financial impact embedded in your 2024 outlook from this? Thank you.

Sure. So, first of all, I would say that we're pleased with the outcome of the settlement. Getting the litigation resolved from our perspective is a good thing. There's always uncertainty when you're going into a trial, and we feel good that we've been able to provide shareholders with certainty around this topic for at least the next few years. And more importantly, we've been able to provide our users with a choice of billing, which is something that we have consistently said is critical to our users, something that we want to be able to provide, and we're happy that we have the opportunity now to provide user choice billing to our consumer base, so we think that's a real positive. Now, unfortunately, the terms of the settlement are confidential, so there's not a ton of detail that we can go into but let me try to unpack some of the pieces for you. And if you go back all the way to October of 2021 that's where Google wanted to start implementing the change in their billing policies, and we're sitting here now more than 2 years later, effectively, and Google had asked us to escrow $40 million against the incremental costs from October 21 through the lawsuit, and as part of the settlement, we basically said we basically agreed that we won't owe any amounts prior to the end of this year, and so what that means is everything that we've been processing on credit cards for the last two-plus years there's no incremental fees owed, and I think if you go back to our earnings release in May of 2022, we estimated that the change in policy was probably about a $6 million per month cost, and so you can probably do the math on those…

I'd like to add a couple more points, and Gary, that was a great summary of where we are. I feel now that we're, like today, starting and going forward, I feel like we're in a good place with Google, and it really reduces the amount of distractions that we've had as a team, and we can really focus together on growth. I view this as a reset of our relationship, and it helps our partnership with Google on many fronts, from marketing, to surfacing on their store, to promotion of our brands, and then, being at the table to really collaborate around innovation, AI, cloud opportunities. I believe that this can significantly benefit our business, and we look forward to actually working much closer with Google on many of these different fronts. We're also very confident now with our relationship with Google that we'll help our brands continue to innovate, but also improve the ability to reach Android users worldwide. And we can focus day-in and day-out on how we can grow together and drive product innovation.

The next question comes from Benjamin Black of Deutsche Bank. Please go ahead.

Good morning, and thanks for taking my question, and thanks for the disclosure on Hinge, and actually specifically on Hinge. Could you talk about some of the initiatives that have supported this recent momentum that we're seeing? Also, I'd be curious to hear if you anticipate a similar headwind to payers from the launch of weekly subscriptions like you've seen with Tinder. And then, lastly, in the past, you said you expect Hinge to be a billion-dollar business over the next few years. Given the strong fundamental trends that you're seeing right now, could you perhaps give us an update on your thoughts as to when that milestone could be hit? Thank you.

Thanks for the question, Benjamin. I can take this one. Hinge is a great product and has a super clear brand narrative that continues to resonate in English-speaking markets, along with the European markets that we've just expanded to. They've really done a great job of focusing on single high-intent daters and has tremendous momentum and fantastic word of mouth. The combination of natural and driven user growth alongside monetization initiatives is driving accelerating revenue growth. The team continues to build on this position of strength. To answer your question on weekly subs, the weekly subs at Hinge is actually similar to that at Tinder, but it's less apparent because of Hinge's continued top-of-funnel strength. Like Gary mentioned, we continue to believe that weekly subscription packages were the right decision for the company and are a strong driver of revenue growth, and it's what daters want. Now, to tackle your $1 billion question, we expect Hinge to generate $400 million in direct revenue this year, and we expect a 35-plus percent growth rate for next year. So, we're basically adding about $140 million-plus in revenue for next year. If we extrapolate that growth rate as well as the revenue that we're adding, we can get to about $1 billion in maybe 4 to 5 years. Thanks for the question.

Thank you.

The next question comes from James Heaney of Jefferies. Please go ahead.

Thanks for taking the question. Just one for Gary, are the Tinder U.S. price increases still impacting the sequential payer growth in Q4, or is it really just the weekly subscriber turn dynamic and the weaker top-of-funnel, just wanted to put a finer point on that. Thanks.

Sure. Just to make sure that everybody understands, like you do, James, the way we implemented the U.S. price optimizations at Tinder in the U.S. was that not everybody saw the price changes immediately. It's only after you turn for a period of time as a subscriber, as a payer, that you see the higher prices. And so, the effect of that is sort of moving its way through the Tinder payer base on a gradual basis. I would tell you that by now, probably a majority, maybe 60% or so, of Tinder payers have seen the higher prices. So, there's still a tail of people who are going to see them over time. And so, there's still a modest sequential impact from all that in Q3. I expect there'll be a slightly more modest, I guess, impact on that in Q4. And that will continue and keep declining as an impact, but still be there as a lingering impact for the next few quarters. But it is fairly modest. Frankly, it's why you can't really see it on the chart that we have on page 13 of the shareholder letter. , it's such a small impact. And so, it's modest, but it's still there and will continue to be so for a bit longer now. And I would just say on the sequential impacts generally, you've got the impact from the U.S. price increase at Tinder, which is this modest impact that is continuing. And then, obviously, we've had the impact from the weekly subs. I think the impact from the weekly subs that we've introduced in 2023 will largely be neutralized by the end of this year. So, that's not an ongoing lingering effect into next year, as is the case with the U.S. price optimizations. Now, I do want to point out that we're going to continue to optimize prices, introduce weeklies in other markets. They're going to be smaller markets than the U.S. or some of these key international markets. But optimizations are something that Tinder is meant to be doing at all times. We didn't do it for a while in the U.S., and we played catch up this year. But in general, there's an always on kind of optimizations. There's opportunity to roll out weekly subs and price optimizations in other markets. And so, we'll do it. But because it's going to be in smaller markets, the effects of that will be much more modest over time. This year was the bigger shock to the system. And we're working our way through that, and we should be through that very soon. So, I think that should be encouraging for everybody.

The next question comes from Lauren Schenk of Morgan Stanley. Please go ahead.

Hey, everyone. This is Nathan Feather on for Lauren. Can you talk about the seasonality of Tinder marketing within 3Q and to what extent, if any, it impacted payer growth during the quarter? And then maybe taking a step back more broadly, how should we think about the lag time between marketing user growth and revenue growth? Thank you.

Thanks for the question. When we originally launched, it starts with a Swipe campaign, we planned to have multiple phases throughout the year. So, seasonally with Tinder, end of July, going into August tends to be slower months for Tinder. So, we took the opportunity between these phases to refresh the content for the balance of the year. It's important to note that during this time period, we're still targeting young women, and we did not see the same pullback in new users with this demo. We expect to take an overall step back in new users and have some impact of payers in Q4, which we've already articulated. We have learned a lot from this. I'm pushing the team now to have a consistent, steady beat on marketing going forward, especially in our larger markets. In that time period, we're also able to reallocate some spend into our college outreach marketing and the launch of our Matchmaker feature. Both of these campaigns integrated well-known rappers and targeted our Gen Z demographics was closely knit in with product innovation at the same time. As you can all see, these campaigns have created a tremendous amount of buzz and excitement around the product and are a key part and ingredient to retelling the Tinder narrative. Thanks for the question.

The next question comes from Ygal Arounian of Citigroup. Please go ahead.

Good morning, guys. What's about Tinder Premium and early signage sheets in that? And then what contribution is expected in booking 4Q and in the preliminary outlook for next year?

I can take that one. I'm really proud of the product that the team has built and launched into the market. The amount of invites for Select that have gone out are still at a very low level. Tinder and the team have been working really hard to optimize the onboarding process and help users and Select members really understand the value proposition. So, we're continuing to iterate, learn from our users, and we'll continue to ramp up the number of invites. We do continue to feel optimistic about the financial potential of the product, and we believe that it will continue and we can generate tens of millions of dollars of revenue in the next year.

The next question comes from Dan Salmon of New Street Research. Please go ahead.

Hi, great. Good morning, everyone. So, I've got a two-part question here. I just want to kind of circle back on macro a little bit. I know you mentioned the impact of higher interest rates, the conflict in the Middle East, in the shareholder letter, but could you elaborate a little bit on what you see as deterioration in macro condition, especially in light of considerable GDP growth and a resilient consumer in the U.S.? And then second related part, because we just circled back a little bit on the impact of student loan repayments, it sounds like it's one of the things impacting à la carte, but it also seems like there's some changes to how younger users engage with à la carte in the first place. So, perhaps you can parse that a little bit more? Thanks. A – Gary Swidler: Sure. Let me give that a try, Dan. I think on the student loan repayments, this was first announced in July that there was going to be a resumption. And we have been watching the trend at Tinder à la carte since then. And we have seen some weakness in U.S. versus the rest of the world where this is obviously not an issue. On the Tinder à la carte revenue, it's probably one or two points of annual growth that it's costing. And we are looking at the cohorts from an age perspective people at Tinder that we would expect would be impacted by potentially having student loans to start repaying again. And that's where we can see that there is that impact. So, we have enough data global versus U.S. and by age cohort that we can try to estimate what the impact is. And we do think there is some. It started in July…

I think we are at time. Hopefully that was helpful, Dan and for everyone else's questions, thank you for asking this morning. We appreciate everyone joining. And we look forward to talking to everyone again on our next earnings call for Q4 which will be at the end of January and early February. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. And you may now disconnect.