Tanny Shelburne:

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 with the SEC. With that, I'd like to turn the call over to BK.

Gary Swidler:

Thanks, BK, and good morning, everyone. Thank you for joining us today. We exceeded our expectations in Q2 on both the top and bottom line despite some unexpected headwinds. Match Group's total revenue was $864 million, up 4% year-over-year, while our FX neutral total revenue was $892 million, up 8% year-over-year. We experienced $6 million more in FX headwind than we anticipated at the time of our last earnings call. In the quarter, revenue per payer grew 9%, while payers declined 5% year-over-year. Tinder delivered $480 million of direct revenue, up 1% year-over-year, up 4% FX neutral. Tinder payers climbed 8% year-over-year to approximately $9.6 million, an improvement from the 9% year-over-year decline last quarter and above our expectations. Payers were down 78,000 sequentially. Tinder's Q2 RPP increased 10% year-over-year. While growth in subscription revenue at Tinder was solid at 7% year-over-year in Q2, Tinder continued to experience pressure on a la carte revenue, which was down 17% year-over-year in the quarter. Tinder is rolling out various initiatives to address the ALC weakness, including unbundling current features such as Passport and See Who Likes You into ALC to attract users who may not be as open to subscriptions. Both are in test now. Additionally, the team will shortly be testing two new ALC features, one that contextualizes someone's likes and another that helps foster ongoing engagement after matching. As a result, we're optimistic that Q2 will be a trough for declines in year-over-year ALC revenue and that trends will gradually improve in the second half of the year. Hinge direct revenue was $134 million, up 48% year-over-year in Q2. Hinge payers were up 24% year-over-year to nearly 1.5 million while RPP of $30 was up 19% year-over-year. MG Asia's direct revenue declined 4% to $74 million, up 9% on an FX neutral basis. Azar direct revenue declined 1% in the quarter, but was up 14% year-over-year FX neutral despite still not being able to access the Saudi market as its European expansion continued to contribute to results. Payers direct revenue fell 10% in the quarter, but was up 2% year-over-year FX neutral. Evergreen & Emerging brands direct revenue was $161 million, a decline of 8% year-over-year driven by the Evergreen brands, which declined 13% year-over-year, while the Emerging brands collectively grew direct revenue 17% year-over-year in Q2. Focusing on user trends, we saw sequential stability in Tinder's MAU, which were down 9% year-over-year in Q2, as was the case in Q1. MAU at Tinder have now been relatively stable since March. A large decline in MAU began in July of last year, driven in large part by changes we made to Tinder's trust and safety policies to remove people who are not truly on the app to connect that has now begun to stabilize. With much of this impact now behind us and given Tinder's various ongoing product and marketing initiatives, we're confident Tinder's year-over-year MAU declines should continue to moderate as this year passes. Hinge's user growth continues to be very strong across its key markets with 14% year-over-year download growth and 21% year-over-year MAU growth in Q2. The app gained significant share in Q2, ranking as the number two dating app across its collective English-speaking markets in May and June, including number one in the UK, Australia, Ireland and Canada and number three in the US. In its European expansion markets in aggregate, Hinge ranked number two by downloads in June and jumped up the charts in most of the key countries/regions, including France and Germany. Switching to profitability. Match Group Q2 AOI was $306 million, up 2% year-over-year for a margin of 35%. Operating income was $205 million in Q2, down 5% year-over-year for a margin of 24%. Q2 Match Group AOI and OI each benefited from the increase in revenue as a result of growth at Hinge and other brands and lower cost of revenue, partially offset by higher selling and marketing expenses, higher G&A expenses, which was primarily due to the new Canada digital services tax and higher product development costs which was primarily due to increased headcount in product at Tinder. The increase in selling and marketing spend was primarily at Hinge, Tinder and certain Emerging brands, partially offset by declines in marketing spend at other brands in our portfolio. Operating income was further impacted by increased SBC expense due to higher headcount and lower forfeitures of equity awards in 2024 than in 2023 and higher depreciation expense due to increases in internally developed software place and service, including at Tinder and Hyperconnect. In Q2, we repurchased 6.4 million of our shares at an average price of approximately $31 per share on a trade date basis for a total of $197 million. Year-to-date, we have deployed just slightly more than 100% of our free cash flow for repurchases, well above our latest commitment to deploy more than 75% of our free cash flow for buybacks. Since we resumed buybacks in May 2022, we have repurchased 35 million shares or 12% of the then outstanding shares. This would be 28 million shares or 10%, net of newly issued shares for employee equity plans. With our net leverage below our three times target at 2.4 times and $844 million in cash and cash equivalence and short-term investments, we have ample financial flexibility to continue returning at least 75% of our free cash flow to shareholders for the remainder of the year, which remains our objective. For Q3 '24, we expect total revenue for Match Group of $895 million to $905 million, up 2% to 3% year-over-year, which would be 4% to 5% FX neutral. This range reflects the lost revenue from our exit of live streaming, which we estimate will be about $8 million for the quarter, given we are exiting it mid-quarter. Note that FX headwinds for the second half have worsened by about one point since our last earnings call. For both Tinder and the whole company, we currently expect FX to be nearly a two-point year-over-year headwind in the back half of the year. We expect direct revenue at Tinder to be $505 million to $510 million in Q3, roughly flat year-over-year and up approximately 2.5% FX neutral. This range reflects improving year-over-year MAU and payer trends and moderating year-over-year RPP gains. It also reflects the improvement in year-over-year ALC revenue trends I mentioned earlier due to new initiatives in this area. We expect Tinder payers to decline at around 5% year-over-year in Q3, a further improvement from Q2 year-over-year levels, leading to positive sequential payer additions in Q3 of approximately 250,000. We expect continued improvement in year-over-year Tinder payers in Q4, though we expect typical seasonality to impact Q4 sequential payer additions. Across our other brands, we expect Q3 direct revenue of $375 million to $380 million, up 5% to 6% year-over-year, up 7% to 8% FX neutral. Within our other brands, we expect Hinge to deliver approximately $145 million of direct revenue in Q3, year-over-year growth of 35%. And as Hinge strength continues, but it anniversaries the introduction of several impactful monetization initiatives in the back half of last year. We expect Match Group AOI of $335 million to $340 million in Q3, up slightly year-over-year and margin of 37.5% at the midpoints of the ranges which would be stronger than our margins in the first half of the year. We expect overall Q3 marketing spend to be up about 6% year-over-year as we continue to roll out the latest Tinder marketing campaign to play marketing dollars to support our growth brands, including Hinge, Azar and some Emerging brands, but reduce marketing spend at other brands. Our AOI range for the quarter reflects approximately $6 million in employee severance and other charges relating to the exit of live streaming as well as approximately $1 million for Canada's new digital services tax. We expect Q3 OI to be impacted by roughly $50 million of impairments of intangibles and other charges related to the exit of our live streaming services. After accounting for the exit of live streaming services and based on our latest FX expectations, which have worsened by about one point since our last earnings call, we expect Match Group to deliver year-over-year total revenue growth of approximately 5%, up about 7.5% year-over-year FX neutral and Tinder to deliver roughly 3% year-over-year direct revenue growth, up approximately 5.5% year-over-year FX neutral for full year '24. We calculate that had we not elected to exit live streaming and FX headwinds not worsened, we would be on pace to deliver better than 6% total revenue growth for the year. We continue to expect to achieve our payer company AOI margin target of 36% despite incurring approximately $6 million of severance and other charges related to the exit of our live streaming businesses and $9 million of full year cost related to the Canada digital services tax none of which was included in our initial outlook for 2024. I know there is a significant focus on our longer-term consolidated AOI margins and free cash flow, so I want to make sure to outline the key considerations in this regard. As you heard BK talk about, we think the opportunity for our business remains significant and worth investing in particularly at Tinder and Hinge. Our goal is to return the company to sustained revenue growth, which requires us to invest in the product experience and in marketing. We are judicious in how we allocate capital and we'll continue to exercise sound discipline. We believe we're already in the process of making important efficiency moves at our E&E brands and at Hyperconnect, which result in margins more consistent with our consolidated levels. At Tinder and Hinge where we see significant global growth opportunities, we want to put the right building blocks in place around marketing, product and tech, particularly around AI, given how game-changing we think it can be. We believe this will be critical in remaining the leader in helping people spark meaningful connections over the next decade. As we make those important investments, especially in AI talent for which competition is intense. We expect our AOI margins will continue to improve, but only modestly in the near term. Our expectation is that as revenue growth reaccelerates and we remain disciplined on cost, we will see additional expansion in our AOI margins even before any potential relief in app store fees. We fully recognize though that if the top line growth does not materialize as we expect, we'll need to consider all options, including reduced investment and other alternatives. That said, we remain very confident that we're on the right track. Our expectations are to deliver nearly $1.1 billion of free cash flow in 2024. We expect our 2024 AOI to free cash flow conversion level to be elevated compared to prior and future years due to an expected additional app store payment this year and we expect our free cash flow conversion rate to return to more normalized levels in 2025. As I mentioned, we expect to utilize at least 75% of our free cash flow for capital return via buybacks for the remainder of the year. We believe that our current stock price our shares remain the best investment we can make with our capital. Given the opportunities we see in front of us and the current price of our stock, we believe repurchases will be highly accretive and represent a terrific long-term investment. We'll have much more to say on the growth, margin and free cash flow expectations at our Investor Day later this year. With that, I'll ask the operator to open the line for questions.

Nathan Feather:

Hey, everyone. Congrats on the stabilization and Tinder user growth in the quarter. Is there anything outsized that led to that stabilization or more so stacking of a variety of individual improvements? And can you help us contextualize how much of that is due to new user trends versus retention? Thank you.

Operator:

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

Jason Helfstein:

Thanks. Just one question. So has Tinder returned to normal payer seasonality in 3Q now that MAU has stabilized? And how should we be looking at more normal seasonality? Or should we be looking at more normal seasonality in the first half of next year? Thank you.

Jason Helfstein:

Thank you.

Youssef Squali:

Great. Thank you very much. Maybe a two parter. One, BK, can you talk a little bit more about kind of practical green shoots you're seeing from some of the changes you've made and from increased product velocity in Tinder. And maybe, Gary, do you believe, I know you're not guiding quite a bit -- quite yet for '25, but do you believe that the improvement you're seeing in Tinder, if they sustain themselves into next year are enough to get the overall business back to maybe high single-digit, low double-digit growth in 2025? Or do you need to see other drivers maybe to get you there? Thank you very much.

Gary Swidler:

On your question about 2025, I'm going to resist the temptation to provide our outlook now and wait as we typically do until the fall period to do that. But I would say the following, which is we've been pretty clear that 2024 needed to be a year of progress. First, stabilizing things and then starting to show improvement. And I think if you look at the outlook we're providing, and as BK mentioned in his remarks, that's exactly what's happening in the business. We've reached a point of stabilizing users. We think it will get better on a year-over-year basis as we get into the back half of this year. And you can also see the same thing following through in payer trends, as you would expect, stabilization and an expectation for improvement. And so we're checking the boxes here that we expected to check in that regard. And obviously we don't consider that to be enough. We need to get back to improving MAU and improving payers on a year-over-year basis. And so we're going to continue to take those steps. We think that it will continue to improve through this year and into next. And it's incumbent on Tinder to continue to drive its product and marketing efforts to accomplish that, to drive better users, as we said earlier, to have products out there that people are excited about, that they tell their friends about that they return to Tinder for. And as that happens, user growth will increase and ultimately, payer growth will increase. And that is really the key that has to happen. I think we're seeing the green shoots as BK said, the first signs of that. It's still very early and which is why I'm resisting the temptation to go further in our outlook. But we feel good about where we are right now, and we feel like we'll continue to make the progress we need to make to position ourselves for a better 2025.

Operator:

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

Gary Swidler:

Sure, Dan. I'm happy to try to do that. I would say that the momentum on Tinder payers has really been strengthening over the last several months. And when you look at Q2 as a whole on payers, the period was down sequentially by 78,000. But if we look kind of on a month-over-month basis inside that quarter, we've actually seen very solid sequential payer growth from April to May and May to June. And to your question, giving you a little sneak peek into Q3, we've actually seen continued payer strength from June into July. So I believe the sequential payer trends are very positive and that's what's giving us confidence that we're going to be able to have a strong period of sequential net adds for Tinder in Q3. Now it's only one month into the quarter. So I'll caution you, we still got work to do to get through August and September. So we're not done yet. But I believe that we're positioned to deliver on the 250,000 sequential net adds that we provided in our outlook, which would be an improvement in the year-over-year growth rate, which is really what I'm focused on, getting from negative 8% in Q2, which we just reported to something closer to negative 5% in Q3.

Gary Swidler:

You're welcome.

Ken Gawrelski:

Thanks. Good morning, everyone. Appreciate the question. You noted maybe I'm going to draw you out, just try to draw you out a little bit more on 4Q because I know it's on a lot of investor minds. You noted that Tinder payer growth would continue to improve in 4Q from the minus 5% year-over-year in 3Q, but it would also be seasonally weaker than the 3Q plus 250,000 guide quarter-over-quarter. Do you expect Tinder payers to grow sequentially in 4Q based on where you sit today? Thank you.

Ken Gawrelski:

Thank you for the color.

Chris Kuntarich:

Great. Thanks for taking the question. Maybe one around the new swipe gestures in Tinder and the refreshed Explore experience. Could you just frame how big of a product update this is versus the product refresh at the end of last year? And maybe the second part of this question would be, are you assuming any revenue upside from these product efforts in your '24 revenue guide? Thanks.

Gary Swidler:

Maybe just on the part about revenue. I would say we have a lot of features planned to be tested at Tinder in the fourth quarter. They're not really expected to be revenue generators in Q4 for 2024. They're really being tested and positioned for 2025. So our revenue outlook for the year really doesn't depend on these features contributing in any meaningful way to 2024.

Gary Swidler:

You're welcome.

Justin Patterson:

Great. Thank you. Good morning. BK, I was hoping you can touch on the Tinder ecosystem some more. Which inning are you in on improving trust, safety and user outcomes? And how have user perceptions changed over the past year? Thank you.

Operator:

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

Gary Swidler:

Sure, Cory. Why don't I take that one. I know there's a lot of moving pieces to this and it's a little bit complicated. So let me try to step through it. Just to clarify, first of all, we really have two pieces where we have live streaming. We've got a stand-on app, Hakuna, in Asia, which focuses on providing live streaming in Japan and Korea. And then we provide live streaming services alongside some of our dating business in PlentyOfFish primarily in a couple of the other US-based apps. And those are the businesses that we're planning to exit here in the third quarter. And what I would say on live streaming is they basically have the same types of expenses as we see in our other dating businesses. But there's one significant difference, which is we need to provide a revenue share to the live streamers. And that can be 20% or even more of the revenue. And so that's an extra expense that we really don't see in our dating business. And as a result of that, the margins in live streaming are probably in the 20s percent range for a business at that scale versus our dating business, which, as you know, can be 30% or higher from a margin perspective. So there's a significant difference in the economics of the live streaming business versus the dating business. In addition to them having lower margins, it's become much more challenging to grow live streaming in our apps over the last few years because there's been significant competition from very well-funded players including most of the big social media platforms and I, of course, point at TikTok as the most significant dominant player in the space. And so when we entered into live streaming a few years ago and the world was different, it was pre-COVID and everything else, but live streaming at that point, we thought provided an attractive kind of adjacent additional source of revenue for us. And right now, this year, we expected roughly a $60 million revenue contribution from live streaming. But growing that revenue base has become much, much more challenging in the face of the competition and the changed landscape and dynamics that we're facing. And not only that, but to reach the scale that we need to reach, to achieve even reasonable margins from our perspective, was going to take a significant amount of investment for a significant number of years, even in the best case scenario. And so when you boil it down, we felt that these businesses are not strategic to what we do. It's not likely, they're not likely to be revenue growth enhancing and they're likely to be margin dilutive for a long period of time. It makes more sense in our minds to exit those businesses now. And in fact, what we can do is, we can redeploy some of the great talent we have in these businesses into other businesses of ours where we have a much stronger position. And so we made that decision, and we're foregoing the $60 million of revenue which for next year probably will create a one to two point revenue growth headwind for us but these were AOI drags this year. And so when we look at the margin impact for next year, I think we can expect at least a 50 basis points improvement in the margins as a result of exiting these businesses. So we'll factor all that into everything else we're thinking about for next year, but the move to exit now should create a 50 basis point tailwind for us on the margin side. And the only other thing I wanted to make sure people are clear on, and BK alluded to it in his remarks, as a result of our decision to exit live streaming and some other things that we're doing around the portfolio, we're expecting to reduce our workforce by 6%, net of people that were moving into other businesses and that we're retaining. And so that should lead to $13 million of savings, which is on top of the savings that we've already talked about and that we're planning to achieve by full year 2026 from the replatforming at the E&E businesses. So I just want to make sure people understand all the moving pieces around the efficiencies because there are quite a few of them. So I hope that helps answer your question and I appreciate the question.

Ygal Arounian:

Thanks. Good morning, guys. I want to shift to Hinge. We got a lot of questions from investors on Hinge's strengths and how to think about the difference there or the better than industry-level strength that we've seen consistently at Hinge. We're seeing acceleration here again this quarter. Can you -- I know you touched on it on the call a little bit, but can we expand on that a little bit. How much of what you're seeing is kind of simple market expansion, monetization expansion versus product initiatives and factors? What do you think the biggest product factors have been and what you're seeing there in the strength? And how does that inform the product road map that you're laying out for Hinge? Thanks.

Operator:

The next question comes from Shweta Khajuria of Wolfe Research. Please go ahead.

Bernard Kim:

I can take the Starboard section, but we've had some initial interactions with Starboard, which were typical with interactions that we've had with other potential investors. Then as you all know, on July 15, they shared that they were a large shareholder and published a letter. Now we believe that the topics raised by Starboard are already key areas of focus for our teams and are things that we have actually heard from other significant shareholders as well. These three areas are returning Tinder to growth, improving margins and returning more capital to shareholders. We've been taking significant steps in all three of these areas, including investing in Tinder product and marketing to drive growth, reducing headcount and undertaking tech replatforming to drive margins and then redeploying 75% of our free cash flow to buy back shares. We continue to look forward to engaging with all of our shareholders and then getting their input on how we can continue to drive shareholder value.

Shweta Khajuria:

Okay. Thanks, BK. Thanks, Gary.

Operator:

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

Gary Swidler:

Thanks, Ben. Let me jump in and take that. Look, I think that 75% plus return is the right level for the company to commit to and that remains our stated commitment. But the Board evaluates the right amount for us to be deploying for buybacks on an ongoing basis. They are very involved in this aspect of the business. They look at our share price. They look at our business outlook. They look at a variety of factors and we try to make a determination of what the right level to buy back is. And as you rightly pointed out, we bought back just over 100% through the first half of the year. So we've been more aggressive. And obviously that was in part because our share price in our mind was very low relative to the opportunity we see for the company over the coming years. So it's not an immediate one quarter thing, but we think over the long-term, we're going to feel good about having bought a lot of stock back at these levels. And so we factor all of that in and we'll continue to do so as we move forward. As far as the dividend goes, it's an interesting question. As you're probably aware, some very successful large growth companies have implemented dividends over the last little while. And we think it's a logical thing to do as a component of the capital return. So dividends working alongside buybacks to drive return for shareholders. It's something that we have thought about and continue to think about, but we don't think that now is the time to do it and we're steadfastly focused on buybacks at this point in time. So that is unchanging at the moment. But if there's updates in our thinking, we'll certainly convey it to you all.

Gary Swidler:

I think we have time maybe for one more question after Ben. So why don't we just try to get that in here quickly.

Curtis Nagle:

Great. Thanks so much for squeezing me in. So just returning back to Hinge. How do we think about the gross prospects and timing and I guess probability in that $1 billion plus in revenue, outperformed in 2Q, 3Q guide ahead? In the letter, I think you said you're now targeting to be the number two brand that's new. To me, I think, it suggests you're more confident in growth. So is that fair and just how should we think through all that?

Operator:

The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

Gary Swidler:

Thanks, BK, and hello, everyone. Thank you for joining us this morning. Our business demonstrated strong financial performance to start the year with FX-neutral results coming in ahead of our expectations.

Benjamin Black:

Great. It'd be great to hear what's giving you confidence that Tinder net adds will return to sequential growth in the third quarter, despite the steady decline in payers we're seeing today. And is there something that you're seeing maybe as it pertains to conversion trends that you can point us to that is providing this optimism?

Operator:

The next question comes from Nathan Feather with Morgan Stanley.

Bernard Kim:

Thanks, Nathan, for that question. Sure. We have a lot of great examples across the portfolio of products that show true evolution. We've consistently seen that true product innovation can lead to material impacts on the user experience. We know that this can appeal to new demographics and expand the total industry. Our portfolio of brands, which have existed for more than 10-plus years, is a major benefit.

Operator:

The next question comes from Ken Gawrelski with Wells Fargo.

Bernard Kim:

Great question, Ken. Like we said earlier, it's really the product experience that needs to resonate, first and foremost. While marketing is a component of top of funnel growth, it needs to be combined with evolving product experience that resonates with users.

Jason Helfstein:

Maybe I'll ask, and some of this you did allude to, but maybe elaborate. So what's changed specifically since February at Tinder, which is driving the low to mid-teens -- or low to mid-teen revenue -- or the low to mid-single-digit revenue growth versus the prior 6% to 8% as subs are still expected to turn positive in the third quarter?

Gary Swidler:

Sure. Why don't I take a shot at that, Jason? So a couple of things have changed. I mean, one, our year-over-year payer growth expectations have come down a little bit, right? We had the negative 9% in the first quarter, and we're predicting something similar. We'd like to see obviously improvement in that metric.

Christopher Kuntarich:

Great. Maybe one around your product efforts. Last year was more focused on pricing, and now that focus seems to be shifting towards product tweaks that should be driving more conversion events.

Bernard Kim:

I'll take that one. Last year, we implemented a number of monetization initiatives, which we know how to do really well, and we have a great team behind it. That drove short-term revenue growth at Tinder.

Operator:

The next question comes from Dan Salmon with New Street Research.

Operator:

The next question comes from Justin Patterson with KeyBanc.

Cory Carpenter:

Gary, could you expand on how you're planning to maintain your 36% or better margin target this year, despite the softer revenue outlook? And more broadly, are there any incremental areas you've identified to reduce costs?

Operator:

The next question comes from Ygal Arounian with Citi.

Bernard Kim:

Great question. Gen Z and women, and women's experience, in particular, is our top priority. They are literally the most critical demographic for all dating apps. We know that women need to feel empowered and respected when they're on our apps. We have a series of initiatives to improve outcomes for women to make sure they're getting great matches.

Jian Li:

A couple. First, if you can talk about the macro assumptions that came to this guide. Are you assuming that what you're seeing today in macro persist? And any improvement in payer growth has purely driven off, say, pricing optimization on product development?

Gary Swidler:

So let me jump in and take some of those. I mean, first of all, at Archer, I would just point out, it's a pre-revenue business. So really, what's happening is that we're seeing strong user growth. We haven't yet gotten to the point where we're monetizing that business.

James Heaney:

In the letter, you reiterated your confidence in sequential payer growth in Q3 and slowing user declines in the back half of the year. So I'm just curious what this would imply for Q4 payers and things that you can talk about Q1.

Operator:

The next question comes from Curtis Nagle with Bank of America.

Gary Swidler:

So just -- we don't have a lot of time, but I'll try to answer that relatively quickly. On the Hinge headcount, I did mention we are making significant investments there. It's primarily in product development.

Bernard Kim:

Thanks, Gary, and thanks, everyone, for joining today's call. Gary and I appreciate your questions, and thank you so much for your interest.

Operator:

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

Tanny Shelburne:

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 with the SEC. With that, I'd like to turn the call over to BK.

Gary Swidler:

Thanks, BK, and hello, everyone. Thank you for joining us this morning. Our business demonstrated strong financial performance again this quarter. Tinder once again delivered double-digit year-over-year direct revenue growth as did the company as a whole. We achieved record quarterly AOI for the third consecutive quarter and record OI for the second consecutive quarter, further evaluating the steps we've taken to strengthen the business. Match Group's total revenue for Q4 was $866 million, up 10% year-over-year, an acceleration from 9% year-over-year in Q3. For the full year, Match Group delivered total revenue of $3.4 billion, up 6% year-over-year with AOI of $1.3 billion, representing margin of 37%. Excluding the $40 million we received as part of the Google settlement, full year AOI margins would have been up 80 basis points compared to 2022, meeting our goal of flat or better year-over-year AOI margin. Q4 Tinder direct revenue was up 11% year-over-year at $493 million. Tinder RPP was up 21% year-over-year at $16.49 due to the effects of the US price optimizations and weekly packages we rolled out earlier in 2023. We did see a continued pressure on users at Tinder both in the US and globally, during the November and December holiday months, resulting in a mid-single-digit year-over-year decline in new user registrations and reactivations in Q4. Q4 Tinder payers declined 8% year-over-year to 10 million, slightly below our expectations. For the year, Tinder delivered direct revenue of $1.9 billion, up 7% year-over-year with AOI margins in excess of 50%. Our Hinge brand continued to perform very well. Hinge direct revenue growth accelerated to 50% year-over-year, a further 6-point acceleration over Q3. Hinge Q4 payers were up 33% year-over-year to 1.4 million, while RPP of over $28 was up 13% year-over-year in Q4. For the full year, Hinge delivered direct revenue of $396 million, just shy of our $400 million target primarily due to slower top-of-funnel growth in Q4 than we were anticipating. Historically, Hinge has not seen a seasonal slowdown during Q4 like many brands see. This Q4, for the first time, Hinge did see that seasonal slowdown. That said, Hinge has had a very strong start to 2024 in terms of top-of-funnel in every market and among virtually every age and gender cohort. So there's been a clear bounce back. Match Group Q4 AOI was $362 million, up 27% year-over-year, including $40 million that was returned to us as part of the Google litigation settlement for margins of 42%. Excluding the $40 million, AOI would have been up 13% year-over-year, and margins would have been 37%. Operating income was $260 million in Q4 for a margin of 30%, 25% after adjusting out the impact of the Google settlement. Q4 2022 included an impairment of intangibles of approximately $100 million, and OI margin would have improved 3.5 points if not for the impairment in 2022. Overall expenses, including SBC expense, were down 11% year-over-year in Q4, down 5% excluding the Google settlement. Excluding the settlement, cost of revenue, including SBC expense, grew 5% year-over-year in Q4 and represented 29% of total revenue, down 1 point year-over-year. Excluding the settlement, App Store fees increased $17 million year-over-year, 20 basis points as a percent of total revenue in the fourth quarter. Selling and marketing costs, including SBC expense, increased $32 million or 25% year-over-year in Q4, primarily due to increased spend at Tinder. Selling and marketing spend was up 2 points as a percentage of total revenue at 18%. G&A costs, including SBC expense, declined 2% year-over-year in Q4 and 2 points as a percent of revenue to 12% as legal and professional fees declined by $11 million year-over-year. Product development costs, including SBC expense, grew 21% year-over-year in Q4, primarily as a result of higher compensation expense due to increased headcount at Hinge and Tinder and were up 1 point as a percent of total revenue at 11%. For Q1 2024, we expect total revenue for Match Group of $850 million to $860 million, up 8% to 9% year-over-year. We expect FX to be a 2-point year-over-year headwind in Q1. At Tinder, we expect direct revenue to be $480 million to $485 million, up 9% to 10% year-over-year in Q1. Again, we expect FX to be a 2-point year-over-year headwind. We expect RPP and payer year-over-year trends to be broadly in line with what we saw in Q4, with Q1 demonstrating less than half the sequential decline in number of payers than we saw in Q4. Across our other brands, we expect direct revenue of $355 million to $360 million, up 7% to 8% year-over-year. Within our other brands, we expect Hinge to deliver approximately $120 million of direct revenue in Q1, year-over-year growth of approximately 45%. We believe that macroeconomic conditions and consumers' willingness to spend has remained relatively stable since our last earnings call. We have not seen any additional impact on our subscription or ALC revenue. We expect Match Group AOI of $270 million to $275 million in Q1, representing year-over-year growth of 6% and margin of 32% at the midpoint of the ranges. We expect overall Q1 marketing spend to increase by approximately $30 million year-over-year collectively at Tinder and at Hinge compared to the levels these brands were spending at in early 2023 as we seek to reinvigorate user growth at Tinder and continue the stellar user growth at Hinge in both core and European expansion markets during our peak season in the first quarter. That said, we continue to monitor closely for marketing efficacy and can pull back if we don't see the desired results. We entered 2024 with solid revenue momentum and believe we're positioned to deliver total revenue of between $3.565 billion and $3.665 billion, representing year-over-year growth of 6% to 9%. At Tinder, we expect direct revenue of $2.025 billion to $2.075 billion or growth of 6% to 8% year-over-year. We believe this revenue target for Tinder provides the new leadership with sufficient room to focus on ecosystem improvements, product improvements and user growth initiatives to drive sustainable long-term growth. Our outlook assumes modest improvement in Tinder user trends over the course of 2024 but not yet a return to year-over-year user growth. We expect payer growth to improve through the year, achieving positive sequential payer net adds in Q3 and positive year-over-year payer growth by Q4. Across our other brands, we expect direct revenue to be $1.480 billion to $1.530 billion or 6% to 10% year-over-year growth. Within our other brands, at Hinge, we expect direct revenue of $535 million to $545 million, which represents growth of 35% to 38% year-over-year with a continued focus on driving share gains in Hinge's core and European markets. We've assumed FX to be a 1.5-point headwind to full year '24 total revenue growth. We expect 2024 indirect revenue of approximately $60 million, up approximately 8% year-over-year. For 2024, our current anticipation is for AOI margins to be at least 36%. Our margin will largely depend on the various brands' levels of revenue growth and how we calibrate certain investments that are critical to achieve our organic growth plans. There are several key investment areas that are impacting margins that we'd like to call out. The first is at Tinder in both product innovation and marketing. As we reinvent the Tinder experience, we're putting substantial incremental resources into product to improve the experience and cater better to women and Gen Z and in marketing to build a better brand narrative and higher awareness of the new and improved experience. For 2024, we estimate $30 million to $40 million in incremental Tinder expense from increased product innovation and marketing spend in '24 compared to '23. The second is AI-related investments in key brands and the development of new AI-centric products, as we believe AI can help improve our users' experience and bring resistors into the category, as well as potentially expand our TAM. We have a long list of product features being rolled out at Tinder and Hinge, as well as plans to test new and different products that leverage AI throughout 2024. Our current expectations for incremental 2024 AI-related spend of $20 million to $30 million across Match Group. And finally, investment in Hinge. We're confident that Hinge can be a $1 billion top line business, and it has an ambitious plan over the next few years to build off its well-regarded product and the traction it has achieved in all markets entered. While we anticipate significant operating leverage in this business long term, during this hyper-growth phase, we're managing the business to roughly flat AOI margins in 2024 to ensure we're continuing to invest in the product innovation, expansion markets and brand to help us realize Hinge's full potential. In dollar terms, that means that $40 million to $50 million incrementally is going into Hinge's product and marketing in 2024 compared to 2023. All three of these investment areas are elective and can be calibrated as this year proceeds. Because of the cost reduction actions and natural operating leverage of our business, we're able to target margins of at least 36%, while reinvesting roughly $100 million into the three key investment areas, which we expect to not only help us deliver growth this year, but position us for long-term success, specifically to, one, achieve sustained user, payer and revenue growth at Tinder; two, to capitalize on Hinge's full potential; and three, to ensure that we're the ones who introduce the next great innovation in the business of connecting people. Importantly, we expect to begin to see tangible results from this investment this year, not necessarily full payback on a dollar basis. But as BK outlined, we expect to see better product experience at Tinder, including improved satisfaction among women and Gen Z, and Hinge making progress on delivering its revenue goals and expanding market share. We also expect to see AI-driven features in our core brands, as well as in new experiences. We're positioned to make these investments and move our business strategically forward, while holding our already attractive margins approximately flat year-over-year. As some of you may know, Apple recently announced changes to their App Store fee policies in response to the upcoming implementation of the Digital Markets Act in the European Union on March 6. We continue to analyze these changes and our preliminary estimate is an approximately $20 million annualized benefit. However, Apple's new policies are merely a proposal and could change materially over time. We expect any savings that we achieved from Apple's changes will help us meet or exceed our margin objective for the year. Given the March implementation date, we don't anticipate significant Q1 impact. Our $20 million annualized estimate does not include the benefit from use of alternative app stores or payment processors nor have we included any benefits from policy changes in geographies outside the EU, which would be substantial for us. We have said before that the DMA was likely to lead to changes to App Store policies in the EU and likely globally. We have seen the first brick fall in this regard, and we expect more to come. This is in addition to the recent decision by the US Supreme Court in the Epic versus Apple case and Epic's win versus Google in its antitrust case. We have not included any further benefits from App Store changes in our outlook at this time as we want to watch how all of this continues to evolve, though we would point out that the $650 million we paid to App Stores in 2023 provides ample room for reduction. We're pleased by the financial results we achieved in the back half of 2023 in terms of both revenue growth and profitability. We have plans in place to deliver solid 2024 financial performance while enabling marketing and product initiatives to lead to improved user growth and position the business for sustained long-term growth. We continue to believe that Match Group provides a rare combination of revenue growth, stellar profitability, and substantial free cash flow generation. We have plans in place to supplement our shareholders' return with significant return of capital via share repurchases or potentially other means. We believe few, if any, companies in our space offer this combination of attributes to shareholders. With that, I'll ask the operator to open the line for questions.

Shweta Khajuria:

Okay. Thank you for taking my question. BK, anything you can comment on Elliott's stake in the company and your conversations with them thus far? And then my follow-up is for Gary. Gary, could you please provide more color on your level of confidence in Tinder net adds turning positive in third quarter and a positive year-over-year payer growth in the fourth quarter? Thanks a lot.

Gary Swidler:

And then, Shweta, on your questions around Tinder net adds, I think as we said in the letter and in our remarks, we have high confidence that we're going to see sequential improvement in Tinder by Q3 on the net add side and that we will get some modest payer growth year-over-year by Q4. And that's a combination of a few things, most notably the product and marketing initiatives we have that are -- that have been put in place through the course of 2023 and into 2024, which we think will drive the level of growth we need to achieve those goals of sequential net adds in Q3 and then payer growth year-over-year in Q4. And it's a series of things, not just one specific thing that we're relying on or expecting to drive that. It's a series of improvements and initiatives that Tinder has in the plans. And so we think that will culminate in achieving the goals around payer net adds by the middle of this year.

Lauren Schenk:

Great. Thanks. Just looking back on 2023, what do you believe caused Tinder user growth to be negative despite the incremental marketing spend? And how will the marketing message evolve in 2024, if at all? And then just one on the 1Q EBITDA guide. It was about $25 million below the Street. Is that just the incremental marketing push you've been speaking about, or are there other drivers there that we should take into account? And how should we think about the cadence of Tinder marketing spend through 2024? Thanks.

Lauren Schenk:

Great. Thank you.

Chris Kuntarich:

Great. Thanks for taking the question. Can you just talk a little bit more about what those early learnings have been around the Tinder product refresh and how that is really tying into the marketing spend for Tinder that you're talking about this year? Thanks.

Operator:

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

Gary Swidler:

Sure. Let me take that, Justin. So we do see seasonality in most of our apps, especially the larger ones, in the period in kind of November and December. That's typical. We see it at Tinder. We see it at other brands, because users in many parts of the world tend to focus on the holiday season, and they pull back from their dating activities in that period. And then what we tend to see is right after Christmas through Valentine's Day, we actually see a very strong period. That's our peak season from right after Christmas to Valentine's Day when people start looking for love. And so that's kind of the cadence that we typically see in the business. We haven't seen that historically at Hinge, but I think now that the business has achieved some reasonable level of scale in some of the core markets like the US, we are starting to see that seasonality like we do at Tinder and other brands. And so I'm expecting that we'll see that going forward. But 2023 was the first time that we've seen that. The good news is that, that is in the rearview mirror for us at this point. Hinge got off to a very strong start in January, kind of picked off -- picked up where it had left off before the holiday period. We've seen really good strength in all the geographies where it operates across all gender and age cohorts. And so we're very pleased with what's happened thus far in January. And that's very encouraging because when a brand gets off to a strong start in the peak season, it tends to bode well for its performance for the rest of the year. And so we're happy to see that, and we're looking forward to Hinge performing well in 2024.

Zach Morrissey:

Great. Thank you. I appreciate the color on the Tinder's kind of product road map for this year that provided in the letter. And I wanted to, kind of, focus more on this a la carte opportunity that you stated. So can you share any kind of preliminary details on the kind of new a la carte offering products that you have planned for the second half of this year? I mean how that may differ versus kind of what is currently offered in the app. And then do you see this more as a payer penetration or monetization driver for this year? Thanks.

Operator:

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

Bernard Kim:

Thanks, Ben, for the question. Now over the last 18 months, Faye has been a real partner to me. She's so passionate about Tinder and knows the business and product inside out. We've stabilized and returned Tinder to revenue growth. And I believe that Faye is only going to accelerate that momentum. The team is fully aligned and clear on their goals. Faye has been instrumental in shaping our road map. And now as CEO, she is pushing forward with modernizing the product, boosting development speed and bringing vital leadership. And her focus will be particularly in enhancing women's experience and the overall ecosystem health at Tinder. She will share more of our plan later this year, but the core focus is clear

Mark Kelley:

Great. Thanks very much. I just have one, probably for BK. A lot of AI commentary in the note and in your prepared remarks. I guess, my question is, is the goal to have like a unified AI infrastructure on the back end that will be utilized across the portfolio, or do you think there are unique needs across each individual brand where it makes sense to maybe modify those AI capabilities? And I guess second to that, I know you gave us guidance for the full year in terms of margins, but any cost implications that we should be aware of? Thank you.

Operator:

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

Gary Swidler:

Why don't I jump in and take that one? So as BK said, we've got a lot of exciting AI initiatives planned for Tinder, for Hinge and for new products as well that we're going to roll over the course of 2024. So we do have very high expectations for delivery of all these products and features that we think they will enhance the user experience. And so I think it's logical to think that they would benefit RPP, because it will be a better experience, people should see more value in the product and be willing to pay more. But I would tell you that at this point, given that it's still very early in the evolution of these various products and features, we haven't included any notable revenue in our 2024 outlook from the AI efforts. As BK mentioned, we've put in all of the costs, which we've estimated at $20 million to $30 million, so we can go hire people, do the work to build out these different products and features and roll them out over the course of the year. But we are waiting on the revenue side. Now you might view that as a conservative assumption, and it very well could be. But I think at this point in time, it's the right thing to do. And we'll obviously continue to update what we're seeing from the AI initiatives as the year progresses.

Cory Carpenter:

Thanks. Anything you would call out or highlight on the Tinder product road map that you think could be particularly impactful in driving that Tinder payer turnaround in second half? And Gary, just to clarify, the $20 million App Store benefit, is that included in the guide, or is that something that would be upside? Thank you.

Gary Swidler:

And then on the DMA question, Cory, we've got this margin floor in our financial outlook. And so the $15 million, that would probably accrue in 2024, because we're saying, it's $20 million annualized. So if you say, it's three-quarters, let's call it, $15 million. That obviously helps us achieve our margin target or even gives us an ability to exceed the margin target as the year goes on. And so it's helpful in that regard to kind of push us maybe at the top end or higher than kind of what people might be expecting. And so it's definitely a positive from our perspective. Obviously, we've got a lot of investment going on, and so we'll have to think about whether any of that should be reinvested. But ultimately, I do think it's a $15 million positive for the year.

Youssef Squali:

Thank you. Hi, guys. So the company has been talking about steps to reduce duplicative functions and migrate the Evergreen & Emerging Brands onto one technology platform to consolidate the brands onto a single stack. Where are you in that process? What kind of cost savings or margin impact are you baking in, in 2024? And ultimately, how much do you anticipate to be deriving from that over time? Thanks a lot.

Operator:

The next question comes from Ross Sandler with Barclays. Please go ahead.

Gary Swidler:

Yeah. So it's one of the reasons why in answering Cory's question, is it included or not, there's still a lot of uncertainty around this. I think if you just do the straight calculation as we understand the policy changes that Apple put in place, you get to that $20 million number for a full year. But I think there's still a lot of questions. As you point out, Spotify has raised questions and concerns. Microsoft has raised them. Others have raised them, and so you have to decide whether to opt into this or not. We have not yet done so. And so we're still considering what this all means, which is why just kind of putting it into the guidance or not is not exactly the way this all works. And so we're still looking at it, making sure we understand it. And frankly, if you understand the dynamics of all this, this is what Apple has proposed complies with the Digital Markets Act in Europe. The European Commission actually has to accept that this proposal complies and that and of itself is far from assured. And so I think that will continue to play itself out over the next weeks or months as we get to that March 6th deadline. So we'll see how this all plays out. From our perspective, the good news is that we expected the DMA to lead the changes on the App Store side, and we started to see that. And it's hard for us to fathom that it will end there because even if the changes that Apple has proposed are what goes into place in the EU, if you're a consumer in the US or you're a consumer in the UK right next door to the EU, you start to wonder, well, why are customers in the EU getting benefit, and we're not getting the same benefits. And so if you're the government in those jurisdictions, you'd say, well, our citizens deserve the same benefits as what we're seeing in the European Union. And so that's why in my remarks, I said we think it's the first brick. I think there's more to come. And just so you have an order of magnitude in your mind, we probably get five or six times the savings if the Apple changes as currently proposed were to be implemented in the rest of the world because while we have a relatively small percentage of our revenue in the European Union that comes from iOS, we've got a lot in the UK, we've got a lot in North America. And so there's really significant benefits in those jurisdictions if these policy changes are made. So that's where the significant benefits to us really would be, either further changes to the policies or expansions of the geographies. And I think both of those things are very, very possible. The impact of further change on Google is not nearly as dramatic as the Apple side. I think that's where we could see really meaningful steps forward. And we're excited to see kind of where this goes because we've been waiting for this for a long time, and this is the first tangible movement that we've seen from the regulators. And as I mentioned in my remarks, that's on top of some of the other things that have happened from a court perspective, which look like they're going to open up the ability to use other app stores, which again is very significant for us or other processors for payments as well, which again is very significant for us. So, there's a lot of moving pieces to this. What we can quantify today is the $20 million based on the changes that have been made, but I think you have to think a little bit more broadly about what's more likely to happen here over the next little while.

Brad Erickson:

Yes. Thanks for squeezing me on. One of the questions we've been getting from investors a lot lately is just, given the impact you've seen on these pricing optimizations on Tinder, just curious if you'd ever consider any sort of like alternative path there on pricing in 2024, maybe rolling things back, et cetera, as a way to get payers back on earlier? And then maybe just to clarify as well, you talked about the RPP growth to Tinder, I think, looking out to the second half of the year. And it sounds like maybe AI could be having something to do with that. But then yes, you were pretty clear that like AI is not really in the forecast. Maybe if you could just reconcile that a bit. Thanks.

Gary Swidler:

All right. I want to thank everybody for joining us this morning. I think we're right at time. We appreciate it, as always, and we look forward to seeing everyone again next quarter. Thank you so much.

Tanny Shelburne:

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.

Gary Swidler:

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 payers were down by 56,000 sequentially in Q3 as weekly subscribers in the U.S. rolled off, partially offset by the addition of weekly subscribers in several key international markets. The sequential impact on Q3 payers from U.S. pricing optimizations was modest and far less than in Q2 as a majority of U.S. members had already been subject to the higher pricing. Tinder top-of-funnel trends, which includes new registrations and reactivations of lapsed users weakened slightly in Q3. Tinder pulled back on some It Starts with A Swipe brand marketing spend in late July and early August, electing to concentrate efforts on several key marketing initiatives in the back-to-college season in late August and September, which affected top-of-funnel trends in Q3. In the U.S., new users were down 6% year over year in September compared to June when they were down 2% year over year. That said, over that same period new users consisting of women 18 to 29 years old did not see the same step back, demonstrating the impact of Tinder's sharper focus on younger women. Our Hinge brand continues to perform exceptionally well. Hinge grew direct revenue 44% year over year, a 9 point acceleration over Q2. Hinge experienced strong user growth in both core English-speaking markets and its European expansion markets, leading to 37% year over year download growth in Q3. Hinge Q3 payers were 33% year over year at over 1.3 million while RPP of nearly $27 was up over 8% year over year again in Q3. Our Match Group Asia business saw a direct revenue decline 5% year over year to $77 million in Q3, but it was up 2% FX neutral. At Hyperconnect, Azar grew direct revenue 20% year over year as implementation of a new AI driven matching algorithm continued to drive meaningful increases in engagement and conversion. While Azar has been a real bright spot, Hakuna payers saw year over year direct revenue declines in Q3. The Japanese market continues to experience sub-par user growth although we have seen some recent improvement as a result of the new T.V. ad campaigns. At our Evergreen and emerging brands, direct revenue declines moderated to 3% year over year, which was a notable improvement compared to Q2 which itself was better than Q1. Indirect revenue was $15 million in Q3. Up 3% year over year driven by an increase in ad impressions. Q3 adjusted operating income or AOI was $333 million after just surpassing $300 million for the first time ever last quarter. It was up 17% year over year, representing a margin of 38%. Up 3 points year over year. Operating income was up 16% year over year to $244 million in Q3 for a margin of 28%. Up 2 points year over year. Overall expenses including SBC expense were up 7% year over year in Q3, but down 2 points as a percent of total revenue. Cost of revenue including SBC expense grew 3% year over year and represented 29% of total revenue. Down 2 points year over year as live streaming cost declined $6 million year over year. App store fees increased $19 million year over year, half a point as a percentage of total revenue. The quarter included a final $3 million escrow payment to Google in July. Selling and marketing cost including SBC expense increased $24 million or 18% year over year. Primarily due to increased spend at Tinder and at Hinge as it continue to expand internationally, offset by lower spending at multiple other brands. Selling and marketing spend was up 1 point as a percent of total revenue at 17%. G&A costs, including SBC expense, declined 6% year-over-year, and dropped 2 points as a percentage of total revenue to 12% as legal and professional fees declined by $9 million year-over-year. Product development costs, including SBC expense, grew 7% year-over-year, primarily as a result of higher compensation expense due to increased head count at Hinge, and were flat as a percentage of total revenue at 11%. Depreciation was up 62% year-over-year, or $7 million to $17 million, primarily due to an increase in internally developed software placed in service. Interest expense increased $4 million, or 10% year-over-year in Q3, to $40 million. Primarily due to higher interest costs due to the floating rate structure of our term loan. While interest income increased $7 million, given higher rates we're earning on our cash balances. Our gross leverage was 3.3 times trailing AOI, and net leverage was 2.7 times at the end of Q3, below our target of less than three times. We ended the quarter with $713 million of cash, cash equivalents, and short-term investments on hand. During the early part of the quarter, we repurchased $6.7 million of our common shares at an average price of approximately $45 per share, totaling approximately $300 million. Through September 30, 2023, we have reduced outstanding shares by 2.8% from our beginning of the year share count. Net of shares issued under employee equity programs. We now have $667 million remaining on our $1 billion share buyback program, providing ample ability to continue to buy back shares. As we discussed in the letter, the company has minimal capital expenditures and significant free cash flow generation. We disclosed in May that we intend to return at least 50% of our free cash flow to shareholders via buyback or other means. We intend to use the remainder of our free cash flow, first to invest in our businesses, which continue to be the best way to drive shareholder value. As we have shown with newly incubated apps like Chispa, BLK, and now Archer, as well as with various new product initiatives, we're confident we're funding the right new bets through our P&L. But M&A has always been a meaningful component of our strategy as well. And we intend to maintain financial flexibility to pursue M&A as a second use of free cash flow. I want to emphasize though that the bar for M&A is high. And we expect acquisitions will be in our category or near adjacent and consistent with our stated mission or of tech capabilities that we need to help accelerate delivery of our mission. If we do not find compelling acquisition opportunities, we expect to return the remaining excess capital to shareholders as well. Turning to our financial outlook for Q4 '23, we expect total revenue for Match Group of $855 million to $865 million up 9% to 10% year-over-year. This range reflects $27 million more of FX headwinds than we had anticipated at the time of our last earnings call, as well as risk that our brands will not generate a portion of the approximately $7 million quarterly revenue that we derive from Israel, given the ongoing events there. It also reflects approximately $3 million less than we previously expected because of trends we are seeing in our ad sales business. Where we've seen a number of advertisers delay or pull scheduled Q4 campaigns. Also note that Q4 tends to be a weaker quarter sequentially than Q3, as data start to focus on the holiday season in November and December. We expect FX to be less than a 1 point year-over-year headwind in Q4. That said, we continue to expect significant FX volatility as we've seen over the past three months. At Tinder, we expect direct revenue to be up approximately 11% year-over-year in Q4, a second consecutive quarter of double-digit year-over-year direct revenue growth, and again reflecting seasonal trends. We expect FX to be less than a 1 point year-over-year headwind. Our outlook attempts to factor in the likely impacts of a weakening consumer, as well as the resumption of U.S. student loan repayments on Tinder's more discretionary a la carte revenue. We expect Tinder RPP to increase year-over-year in Q4 at slightly greater levels than in Q3, and Tinder payers to decline slightly more year-over-year than in Q3. The additional year-over-year payer decline reflects the late summer weakness in Tinder's new user and reactivation trends. In Q4, we expect Tinder's sequential payer count to be negatively impacted as weekly package subscribers continue to fall out of the payer count, but without the offsetting benefit of the initial rollouts of weekly packages in large markets that we had in Q2 and Q3. We estimate this to be more than a 200,000 negative sequential impact to payers. We expect Hinge to deliver meaningfully accelerating year-over-year direct revenue growth again in Q4, driven by continued strong performance in English speaking markets, continued European expansion, and various monetization initiatives. We remain confident that Hinge's momentum will lead it to deliver approximately $400 million of direct revenue in 2023. We expect MG Asia direct revenue to be down mid-single-digits year-over-year in Q4. We expect similar year-over-year direct revenue growth rates for Hyperconnect payers in Q4 as in Q3. We expect our evergreen and emerging brands direct revenue to decline mid-single-digits year-over-year in Q4, with continued strong growth at the emerging brands. We expect indirect revenue to be down modestly year-over-year in Q4, given the weakening ad demand with advertisers pulling or delaying several campaigns. We expect AOI of $305 million to $310 million in Q4 representing year-over-year growth of 7% to 9% and margin of 36% at the mid points of the ranges. We expect overall marketing spend to increase modestly year-over-year in Q4, with a meaningful increase at Tinder and some of our newer growth apps, including Archer and The League. For full-year 2023, Match Group is on pace to achieve approximately 5% top-line growth and deliver slightly better AOI margins than we did in 2022, consistent with our recent expectations. Our Q4 and full-year 2023 results do not include the impact of the settlement with Google that was reached yesterday. We expect to enter 2024 with momentum to deliver 10% plus year-over-year total revenue growth early in the year. The most critical component to maintaining that level of revenue growth for the full-year will be the ability of Tinder's ongoing marketing and product initiatives to deliver as the impacts of the '23 optimizations anniversary. At the moment, we feel confident in the team's execution and believe the most likely outcome is for full-year, '24 year-over-year total revenue growth in the high single-digits. But we want to allow Tinder's execution momentum to build for another quarter before pinpointing a precise '24 year-over-year total revenue growth expectation. We also want to continue to monitor the volatile macro environment to assess that impact on our outlook. These factors could drive our revenue growth outlook positively or negatively. We've assumed FX to be a two point headwind for full-year '24 total revenue growth, but that also could change materially given current macro conditions. We believe we can deliver AOI margins at least at the same level as we expect to deliver in '23. There are a few anticipated margin headwinds that are out of our control, including App Store fees and compliance costs related to the EU's Digital Services Act. There is also some uncertainty around digital services taxes in certain markets, such as Canada, which would affect AOI. We have attempted to incorporate the impact of the Google settlement into our '24 margin outlook. We are currently deep in our planning process for '24. We're contemplating investments in innovation and particularly in AI to drive new sources of monetization, resolve user pain points to increase our product's value, and potentially build new apps that can deepen our TAM penetration. We're also carefully analyzing the appropriate level of marketing spend to drive user growth at Tinder, Hinge, and some of our newer apps. We expect spend reductions in other areas to help offset the impact of increased spend in these areas. We also expect to limit hiring to positions that are vital to driving growth. Our current expectation is for Tinder to deliver direct revenue growth in a high single-digit range next year, through a combination of RPP growth and improving year-over-year payer growth throughout the year. We expect the non-Tinder brands to collectively deliver direct revenue growth in a high single-digit range in '24. At Hinge, we expect similar year-over-year direct revenue growth as in '23, in excess of 35% and a continued focus on driving share gains in its core and European markets. We're pleased by the momentum we've seen in the business over the past two quarters. It is the result of a lot of hard work from many people across the portfolio. We're confident that this momentum will carry into 2024. Importantly, our setup entering next year is much better than it was for 2023. While we're happy with the progress, there is still a lot to do, especially at Tinder. We're delivering stronger user trends and sustained payer and revenue growth is paramount, and in product innovation across the portfolio, particularly in harnessing AI capabilities to increase adoption of our products and drive higher monetization. With that, I'll ask the operator to open the line for questions.

John Blackledge:

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.

John Blackledge:

Thank you. Thanks, Gary.

Shweta Khajuria:

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.

Shweta Khajuria:

Thanks, BK.

Justin Patterson:

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.

Justin Patterson:

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.

Justin Patterson:

Great, thank you.

Cory Carpenter:

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.

Bernard Kim:

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.

Benjamin Black:

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.

Benjamin Black:

Thank you.

James Heaney:

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.

Operator:

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

Bernard Kim:

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.

Ygal Arounian:

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?

Operator:

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

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 when it was first announced. We have been watching it through October when the bills came around and now people had to start paying them here in November. So, it's definitely something to watch and something trying to factor into our Q4 and 2024 outlook. And I think we have been able to do that. So, that's one factor. On the other side that you mentioned -- the other thing that you mentioned, around the resiliency of the consumer, of course, you are right that the consumer has held on well through the course of this year. And GDP growth in most recent quarter has been very strong. And that's all correct. I think what we are focused on though is are we kind of getting to the end of the consumer strength. And we are starting to see signs as we look at macro data around savings rates, around credit card delinquencies and things like that that indicates to us that there is some potential risk around the consumer. So, sitting here trying to prognosticate what's going happen in our business and with consumer for 2024, I think the trends that we are seeing around some evolving consumer weakness leads us to be cautious about 2024 and to try to factor in some possibility that the consumer really does weaken over the course of '24. It feels like a prudent thing to do right now as we are providing initial outlook. I am more than happy to be wrong on that and for some day to come back and say you guys were to too conservative, that didn't happen in the economy. And things ended up being stronger than expected in '24. But I think that right now kind of taking into account all the factors that we know, it does indicate to us that being a little bit more prudent on our expectations around the consumer makes sense. And given that we have a lot of consumers at Tinder who are on the younger side who tend to have less discretionary income, we could feel a little bit of that impact. And so, we have tried to factor that in. If it ends up not been the case, then I would say there is upside to our expectations for next year.

Operator:

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

Tanny Shelburne:

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.

Gary Swidler:

Thanks, BK, and hello, everyone. Thank you for joining us this morning. Our financial performance in Q2 improved dramatically as a result of the strategy we implemented when BK became CEO in mid-2022. In particular, the focused product and marketing initiatives at Tinder have really started to deliver financial results. We firmly believe the momentum there plus continued strong performance at Hinge and thoughtful operating adjustments and financial discipline across the company position us well for the future in terms of growth, profitability, and free cash flow. Match Group's total revenue for Q2 was $830 million, up 4% year-over-year. This represented record quarterly total revenue for Match Group. FX was a notable headwind once again and $3 million more severe than we anticipated at the time of our last earnings call. Total revenue for Match Group would have been $844 million, up 6% year-over-year on an FX-neutral basis. Q2 direct revenue, which is revenue we earn directly from our users, was $816 million, up 5% year-over-year, 6% FX neutral. This was driven by a 10% year-over-year improvement in RPP to $17.41, while total payers were down 5% year-over-year to 15.6 million. On an FX-neutral basis, Q2 RPP was up 12% year-over-year company-wide. Tinder outperformed our expectations in the quarter as the revenue momentum we saw from price optimizations in the U.S. and weekly subscriptions over delivered. Q2 Tinder direct revenue was up 6% year-over-year at $475 million, up 7% FX neutral. Tinder RPP was up 10% year-over-year at $15.12 due to the U.S. price optimizations and weekly packages. Tinder saw solid year-over-year subscription revenue momentum throughout Q2 with June direct revenue growth reaching 8% year-over-year. Tinder payers declined 4% year-over-year, 184,000 sequentially, as the price optimizations in the U.S. led to conversion declines. After testing pricing changes in Canada, the U.K., the EU, Australia, and Japan in Q2, Tinder opted to leave pricing largely unchanged in those markets as prices there were largely already optimized, but did roll out weekly packages there. Tinder also saw improved new user and reactivation trends in the U.S. in the quarter following the launch of the new marketing campaign "It Starts with a Swipe", and we saw lifts in other geographies as well. The lift has been pronounced among females and younger users, Tinder's focused demos. Many of Tinder's upcoming initiatives are aimed at further strengthening top-of-funnel in key markets around the world. Our Hinge brand continues to perform very strongly. Hinge grew direct revenue 35% year-over-year, an 8 point acceleration over Q1. Hinge experienced strong user growth in both core English speaking markets and its European expansion markets, leading to 50% year-over-year download growth. Hinge payers were up nearly 25% year-over-year at nearly 1.2 million, while RPP of over $25 was up over 8% year-over-year in Q2. Our MG Asia business saw direct revenue decline 4% year-over-year in Q2, a vast improvement from double-digit year-over-year decline in Q1. Direct revenue was up 3% FX neutral. At Hyperconnect, Azar grew direct revenue 24% year-over-year as implementation of a new AI-driven matching algorithm led to meaningful increases in engagement and conversion. Azar also saw some stronger-than-expected seasonal trends in Q2. While Azar has been a real bright spot, Hakuna and Pairs saw year-over-year direct revenue declines in Q2. The Japanese market continues to experience subpar user growth. Although we're optimistic that being able to start to market on TV this fall could improve trends. At Evergreen & Emerging, direct revenue declined 5% year-over-year, which was also a notable improvement compared to Q1. The Emerging brands, including Chispa and BLK, continue to grow direct revenue strongly year-over-year. Indirect revenue was $13 million in Q2, down 7% year-over-year, but consistent with Q1's total, as prices per ad impression declined year-over-year. Operating income was $215 million in Q2 for a margin of 26%. Q2 adjusted operating income, or AOI, was $301 million, exceeding $300 million for the first time ever. It was up 5% year-over-year, representing a margin of 36%. Q2 AOI and margins were above our expectations, as Tinder outperformed and we continued to achieve cost savings across the company. Overall expenses, including SBC expense, were up 4% year-over-year in Q2, excluding depreciation and amortization/impairment of intangibles. We incurred approximately $6 million of severance and similar costs in the quarter. Cost of revenue, including SBC expense, grew 4% year-over-year and represented 30% of total revenue, flat year-over-year. App Store fees increased $18 million year-over-year, including the $8 million escrow payment to Google. The last required escrow payment of approximately $3 million was made in July. Selling and marketing costs, including SBC expense, increased $11 million or 9% year-over-year, primarily due to increased spend at Tinder and at Hinge as it continued to expand internationally, offset by lower spending at multiple other brands. Selling and marketing spend was flat as a percentage of total revenue at 16%. G&A costs, including SBC expense, declined 3% year-over-year and dropped 1 point as a percentage of total revenue to 13% as legal and professional fees declined. Product development costs, including SBC expense, grew 9% year-over-year, primarily as a result of higher compensation at Tinder and Hinge, and were flat as a percent of total revenue at 11%. Reduction in force and capitalizing more product development costs in Q2 than in the prior-year quarter, mostly at Tinder and our Emerging brands, helped lower these expenses in the quarter. Interest expense increased 12% year-over-year in Q2, primarily due to the floating rate structure of our term loan, but interest income also increased meaningfully given higher rates we're earning on our cash balances. We ended the quarter with $741 million of cash, cash equivalents, and short-term investments on hand. Our gross leverage was 3.4 times trailing AOI and net leverage was 2.8 times at the end of Q2, below our target of less than 3 times. We repurchased 1 million of our common shares in May and June at an average price of approximately $32 per share, totaling approximately $33 million, which utilized a small portion of the recently implemented $1 billion share buyback program. We began buying back shares in the open window after our last earnings call, but we weren't able to buy back as many shares as we had intended over the past three months due to the strong stock price run up, which occurred after the window had closed. We will revisit buybacks again after this call, mindful of our updated capital allocation policy. For Q3 '23, we expect total revenue for Match Group of $875 million to $885 million, up 8% to 9% year-over-year. We expect a significant acceleration of year-over-year RPP growth in Q3 compared to Q2, particularly at Tinder due to the U.S. price optimizations and weekly packages. We expect FX to be less than a 2 point year-over-year tailwind in Q3. At Tinder, we expect direct revenue to be up close to 10% year-over-year, with FX slightly more than a 2 point year-over-year tailwind. This level of growth would be a quarter ahead of our expected pace. The building momentum gives us confidence in achieving solidly double-digit year-over-year direct revenue growth at Tinder in Q4. We expect Tinder payers to decline mid-single digits year-over-year and to be down sequentially in Q3, but by less than in Q2. This is better than we had been anticipating, in part due to the decision not to implement pricing optimizations in several international markets. We estimate that Q3 sequential payer additions would be positive, absent the effects of U.S. price increases and weekly subscription packages globally. The year-over-year payer decline is also due to Tinder's new user trends still being below desired levels, as well as the fact that pricing changes are still rolling through the U.S. payer base. While user trends have improved notably over the past few months, we remain focused on returning to user growth through marketing and product initiatives in order to drive better payer and revenue growth. We believe strongly that we are on the right track in this regard. Note that pricing changes and weekly subscription packages creates short-term volatility in our payer numbers. Weekly packages lead to bumps when introduced as conversion increases, then declines when these shorter duration payers roll off. Over the coming quarters, we expect this to even out. We're confident that these shorter packages are long-term revenue accretive and bring other meaningful benefits such as increasing conversion, especially among younger users and females. We expect Hinge to deliver meaningfully accelerating year-over-year direct revenue growth again in Q3, driven by continued strong performance in English speaking markets, continued European expansion, and various monetization initiatives. We remain confident that Hinge's momentum will lead it to deliver approximately $400 million of direct revenue in 2023. We expect Match Group Asia direct revenue to be close to flat year-over-year in Q3. We expect modest improvement in year-over-year direct revenue growth rates for Hyperconnect and limited change for Pairs in Q3 compared to Q2. We expect our Evergreen & Emerging brands direct revenue to decline low-single digits year-over-year in Q3, with moderating declines at the Evergreen brands and continued strong growth at the Emerging brands. We expect Q3 indirect revenue to be up modestly year-over-year in Q3 as we begin to see some overall improvement in the ad sales market and we continue to broaden ad opportunities across our platform. We expect AOI of $320 million to $325 million in Q3, representing year-over-year growth of 13% to 14% and margin of 37% at the midpoint of the ranges. We expect overall marketing spend to increase year-over-year in Q3 by about 2 points as a percentage of total revenue compared to Q2. We'll be spending up at Tinder and Hinge as well as some of our newer growth apps, including Archer and The League. We expect IAP fees to continue to be a year-over-year headwind in Q3, though we have stopped placing funds into the Google escrow after July per the terms we agreed to. We expect to continue to be cautious on spending in all other categories within our control. We expect to incur approximately $2 million of severance and similar costs in Q3. For full year 2023, Match Group is on pace to achieve 6% to 7% top-line growth and deliver better AOI margins than we did in 2022, as Tinder's revenue continues to reaccelerate and we remain very cost disciplined overall. We're excited by the momentum we've seen in the business over the past few months. We're confident that the strategies we've implemented, changes we've made, and approach we've taken are setting us up for more consistent top-line growth at strong levels of profitability. While we are pleased with the progress, we recognize there is more to do, especially at Tinder, where delivering stronger user trends and sustained payer and revenue growth is squarely in our focus. We're confident the company is headed in the right direction and look forward to continuing to provide our stakeholders with updates on our performance in the coming quarters. With that, I'll ask the operator to open the line for questions.

Cory Carpenter:

Hey, thanks for the question. I think for Gary, could you expand on what you saw on testing that led you not to raise Tinder prices in international markets? And then, just any way to help quantify how big of an impact that specifically you expect it to have on Tinder payers and RPP in the second half of the year? Thank you.

Gary Swidler:

Yes. So, Cory, on the payers, there's a lot going on there and I'm going to try to unpack it for you a little bit, because you've got variability that's been introduced by price optimization, you've got variability that's been introduced by the weekly subscription packages, and they're rolling out at different times. First, we have the effects from the U.S. ones, and then from the international ones. So, there's a lot of movement in the numbers. Obviously, they are better as a result of deciding not to roll out the price changes in the international markets, and they're meaningfully better than they would have been had we done that. But what's also happened since the last time we chatted on an earnings call is that we've more slowly rolled out the pricing changes in the U.S. market. And so, right now, that's affecting the Q2 payers numbers. It's going to have some lingering effects in Q3 and likely into Q4 as we continue to slowly show those pricing changes to the U.S. payer base. So that's kind of one thing that's happening a little bit more slowly than we initially expected, but we obviously test and adjust and we think that's the right thing to do. And then of course, the change that you mentioned around the weekly -- around the payer -- the pricing changes not having been introduced internationally. So there's a lot of different pressures going on here. It will continue to roll through over the coming quarters. I do think that overall the third quarter sequential trends are going to be meaningfully better than what we saw in Q2, which was down 184,000. And overall, I think once we get through this year as we turn the corner into 2024, the noise that has resulted from all these changes, which are in our control, around introducing weekly subscription packages and price changes will have largely burned through and will be into a much more normal cadence of payer additions.

Gary Swidler:

Jason, are you there? It doesn't sound like we have Jason. Operator, maybe we should move to the next one.

Youssef Squali:

Great. Thank you very much. So, Gary, staying on the topic of pricing for Tinder, what percentage of the user base is now being impacted by the price increase? And how much more headroom do you see in RPP in Q3 and the rest of the year? Thanks.

Youssef Squali:

That's very helpful. Thanks, Gary.

Operator:

Our next question comes from Alexandra Steiger with Goldman Sachs. Please go ahead.

Bernard Kim:

Thanks, Alexandra, for the question. So, if you actually look at Tinder today, it's really similar to the product that was launched 10 years ago. I tried the app when I was in Los Angeles about 10 years ago, and I tried the app today and it felt pretty similar. So, what I've done is I've challenged the teams to make Tinder feel more vibrant and alive, going through like an overall and potential refresh of the product experience. What the teams were able to do creatively is to look at ways to bring more depth into member profiles and also keep that core experience intact. This is actually coming from extensive testing with our core users and direct feedback from Gen Z and our younger users. I think this experience will have a more modern look and feel and drive engagement, which will lead to more success on the platform and more conversations. But there is a balancing act here. The swipe is critical for Tinder's identity and experience, and people come in to swipe profiles. People love it. So, I want to make sure that members engage in more meaningful ways, so we have to make sure that we're balancing that swipe experience with a great UX that delivers a new experience that resonates with the new generation of users. And I really believe we've nailed it. I feel really positive about the work that our product and design teams have done together, and we'll be rolling that over the next couple of months.

Mario Lu:

Great. Thanks for taking the question. So, a similar follow-up in terms of the Tinder second half features. You mentioned in the shareholder letter, it will be focused on Gen Z as well as AI capabilities. So, just wondering if you could expand a bit more on why you're confident that these features will drive engagement and monetization. And then also, does this imply that Tinder Coin is no longer in the roadmap? Thanks.

Operator:

Our next question comes from Dan Salmon with New Street. Please go ahead.

Bernard Kim:

Thanks for the question, Dan. The general concept is that we are providing an experience for a small percentage of our Tinder members. And the value proposition is basically give these members a better way to get high-quality matches faster and sooner and make the experience overall even more fun. We've been actually testing multiple components of this experience with our members today, and we're seeing actually real benefits. So I'm personally really excited about these testing results. It's really early right now, so we don't know what the final pricing is yet. But at a high level, if you actually take a small fraction of our payers at higher price points, you actually get a number that's in the tens of millions of dollars on an annual basis. So I think that's actually pretty impactful. This is an area that I have a lot of experience in, where a small segment of users drive a high amount of monetization. So, this I see as a real opportunity for us.

Operator:

Our next question comes from Benjamin Black with Deutsche Bank. Please go ahead.

Gary Swidler:

So, I think the way to think about the rest of '23, first of all, Ben, is that the year is largely about increasing RPP. As I mentioned earlier, we saw a dramatic increase in Q2. We're expecting even greater increase in Q3, and then continued acceleration into Q4 because of the weekly packages and the price optimizations. On the payer side, as a result of all these things playing through the payer base, we're seeing year-over-year declines in the mid-single digits in terms of payers, and that's something that I expect to continue for the next couple of quarters. And there's a few different drivers of that. Obviously, the decisions we're making around weekly subscriptions and pricing is part of that. And the other part of it, of course, is what we're seeing on new user growth. And so, new user growth is getting stronger, but it's not to the point yet that we'd like to see it at, but we're driving that up further and further. And so, we continue doing that with marketing initiatives and with product initiatives. I think as that turns more positive, we'll be able to drive improved year-over-year payers growth as well. So, as we think about 2024, as I mentioned in an earlier answer, a lot of the volatility from the initiatives we're doing this year around revenue, around pricing and weekly subscription packages should have rolled off. And then, we expect to see a more balanced impact from payer increases next year as well as from revenue per payer increases. But I would caution that it really does depend on what we roll out from a product standpoint. So, for example, we're going to roll out -- we're intending to roll out the new premium tier late this year. That will be a driver of 2024 performance, and that is clearly a revenue per payer play, not specifically a payer play. So, we have to look at kind of what the product roadmap is to make some determinations. It's too early for us to kind of go through the whole product roadmap for 2024. We will provide more color on all of that in the upcoming quarters. But again, I would like to see, and we're targeting a more balanced contribution of payers and RPP to drive overall strong Tinder revenue growth next year. We're encouraged by the progress we've made on top-of-funnel, and that's clearly something we have our eyes squarely on. And we want to keep improving, which is what will help enable us to drive stronger year-over-year payer growth next year after this year being more of an RPP story. I hope that helps answer your questions.

Gary Swidler:

Okay. Great.

John Blackledge:

Great. Thanks. On Hinge, could you just provide some more color on the key drivers of the revenue acceleration in 2Q and kind of continuing into 3Q? And then, what have you seen -- I think it's early, but what have you seen with the new weekly sub-tier launch at Hinge? Thank you.

John Blackledge:

Thank you.

Shweta Khajuria:

Thank you for taking my question. Just a high-level question for you, BK, on AI. So, you touched on it in your prepared remarks as well as in the letter. Could you provide a little bit more context or concrete examples of where you're already leveraging AI-enabled technology at Tinder and Hinge? And how you think that could impact top- and bottom-line for those two businesses in particular? Thank you.

Shweta Khajuria:

Thanks, BK.

Justin Patterson:

Great. Thank you very much. Good morning. Gary, you've alluded the Q4 growth rates a couple of times within Tinder and Hinge. I'm curious, could you provide an update on your 2023 revenue outlook, where you think you'll land on that 5% to 10% range? And then thinking about just the AOI margin side, you did improve the language on that to increase versus 2022. How should we think about that magnitude of increase and the puts and takes to get there? Thank you.

Justin Patterson:

Thank you.

Nathan Feather:

Hey, you've got Nathan Feather on for Lauren. So, continuing on the AOI trends and given the impressive 2Q operating income result, what are kind of the one or two key drivers which could lead to further AOI upside in the back half? Thanks.

Operator:

Our next question comes from James Heaney with Jefferies. Please go ahead.

Bernard Kim:

Thanks, James. Great question. The Japanese market has remained challenging for us. What we can do is put the right team in place, and we're really excited about the new CEO that has joined us and is overseeing Pairs. I think he's going to do a really fantastic job. In tandem with that, it's really great that Malgosia is on the ground running the business. And she really has hit the ground running, meeting with all the different teams and then instituting product changes that I think will be impactful in the marketplace. So, we're exploring all the different options that we can do to jumpstart the business in Japan. But what we're really excited about in the short term is being able to advertise for the first time on TV in Japan. We actually believe that this channel unlock could be really meaningful. And you're right in saying that we are ready, the second that, that is available with the Pairs marketing campaign that we're really excited about to be on television for the first time. Thanks for the question.

Operator:

Our next question comes from Brian Fitzgerald with Wells Fargo. Please go ahead.

Bernard Kim:

Thanks, Brian, for the question. We're really proud of the Archer team and the experience that we're providing for gay daters. When it comes to an indication on how it's performing, it's still really early. It's only been live in the New York market for about 10 days, but daters are happily creating profiles right now. Our plan continues to be that we plan to roll out nationwide by the end of this year. When it comes to marketing, I'm really inspired by the approach that the team has taken. They're doing events with social influencers. They just recently had a big event on Fire Island in New York City, and we're really excited about the creative marketing efforts that the teams are executing against. Thanks for the question.

Operator:

Our last question comes from Jason Helfstein with Oppenheimer. Please go ahead.

Gary Swidler:

Sure. Let me take that one. First of all, it's important to point out that weekly subs are new to us, and we're still learning from the trends we're seeing there, especially around renewals. We don't have as much data as we'd like. Obviously, we have much more data around monthly subscriptions and longer-term packages. So, you're right, it's newer, it's harder to manage, it's harder to determine the outlook. We've gotten better at it just over the last few months, and we'll continue to get better at it as we get more data and time goes on. And it's also important to point out that we don't really manage our outlook or we don't provide an outlook based on payers and revenue per payer. We provide it based on revenue, where we have a lot better visibility because, frankly, the revenue impact from the weekly subs has been much, much more stable. It has been the impact on the payer count that has been more challenging to analyze. So, we're providing the best outlook we can on payers and RPP drivers within revenue because people keep asking us about it. But the reality is we don't look at it that way as much as we do on the revenue side. That's what we're targeting. So, it has introduced more variability. It has made things more complicated. I do think it will get better. And you're also right, there is more churn. These people come on for a short time, they go off. And so, we're seeing that dynamic. But the good news is the conversion rates are up, the renewal rates are strong, and it is helping especially with younger users who are really liking the weekly subscription packages. And so that's a real positive for the business. And also, I'd point out that all of this is a testing process. The business is a dynamic business. We're constantly readjusting. We've introduced this new type of subscription package now, and there has been real demand for it. And so, we need to keep testing. And so right now, we're giving our best outlook for Q3 in terms of payers being better than they were sequentially than in Q2. It's still early to say what the impact is going to be on Q4. There's a lot of variables around kind of all these things working themselves through the payer system. But what I can tell people with a lot of certainty is the revenue growth is accelerating, and that's the main thing that we care about and are focused on. The revenue per payer is accelerating. And some of this variability is going to be reduced as we get towards the end of this year. So that will make things a little bit more kind of clearer from a visibility standpoint. And we'll provide as much updates and information as we can. But I would discourage people from using payers as a proxy for top-of-funnel strength. What we're seeing and what indicates that there is top-of-funnel strength is improvement in the new registrations or new user sign-ups and reactivation. And we provided that chart in the letter, which clearly indicates that a 10% year-over-year improvement from a growth rate perspective in those top-of-funnel metrics. That's showing us that we're bringing in more people in, which is very critical, and we're going to continue to drive marketing and product initiatives to do that, which should continue to help us grow from a top-of-funnel perspective. Obviously, we can continue to convert those people and that will ultimately drive payers, and that's something we're going to -- we're expecting to see over the coming quarters, which will help drive payers and ultimately contribute to revenue. That is the metric that we're focused on to see the overall health of the business. The payers, we can impact that by pricing decisions we make and product decisions we make. If we rolled out $1 subscription, the payer numbers would go up, but it might not be revenue enhancing. So, we've got to consistently test and adjust to drive overall revenue for the business, not specifically a metric like payers or even RPP. And that's the way that we think about the business and think about how to drive long-term value for shareholders.

Gary Swidler:

Hopefully, that's helpful, Jason. We are glad you're safe and were able to join the call. And we thank everyone for joining this morning, and we look forward to talking to you all again on the next earnings call. Thank you so much.

Tanny Shelburne:

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.

Gary Swidler:

Thanks, BK, and hello, everyone. Our Q1 2023 total revenue was still not to the standards we expect of ourselves coming in at $787 million, down 1% year-over-year. FX was a notable headwind once again as our total revenue would have been $822 million, up 3% year-over-year on an FX-neutral basis. The year-over-year FX headwind was $7 million more than we expected when we provided our Q1 outlook on our February earnings call. The unexpected additional headwind resulted in total revenue slightly below the range that we provided on that call. Direct revenue, which is revenue we earned directly from our users, was down 1% year-over-year, up 3% FX-neutral in Q1. This was driven by total payers down 3% year-over-year to $15.9 million and RPP up 2% year-over-year at $16.26. On an FX-neutral basis, Q1 RPP was up 6% year-over-year company-wide. Tinder slightly underperformed our expectations in the quarter. Tinder direct revenue was flat year-over-year at $441 million, up 4% FX-neutral. Tinder payers were relatively flat year-over-year in Q1 at $10.7 million and RPP was also relatively flat year-over-year at $13.80. Tinder saw year-over-year subscription revenue growth, while à la carte revenue declined year-over-year impacted by the macro environment. Tinder released weekly subscriptions and undertook pricing optimizations in several markets, including the U.S. towards the end of the quarter, limiting their revenue impact on Q1. User growth in the quarter was slightly below our expectations. However, in April, we've started to see much improved Tinder performance as the top of the funnel has strengthened somewhat, and the weekly subscription and pricing optimizations have begun to deliver tangible revenue contribution. Tinder plans to test weekly subscriptions and pricing optimizations in additional markets this quarter. Tinder introduced its marketing campaign in Q1 and it's achieving its objectives of improving brand sentiment, especially among younger users, particularly women. As a result of that campaign, Tinder's market position in terms of downloads has improved in several key markets, most notably the U.S. and the UK. Our Hinge brand continues to perform very strongly. Hinge grew direct revenue 27%, 30% FX-neutral year-over-year, slightly ahead of our expectations as performance in core English speaking markets continued to be outstanding. Hinge payers were up 15% and totaled over 1 million in the quarter, while RPP of over $25 was up over 10% year-over-year. The new subscription tiers at Hinge continue to contribute as well with the 20% take rate of the more premium tier HingeX consistent with our expectations. And as we detailed in the letter, Hinge's European expansion continues to have major traction. Our MG Asia business saw year-over-year direct revenue declined 13% in Q1, though down only 3% FX-neutral. At Hyperconnect, Azar grew direct revenue 4% year-over-year, though much stronger on an FX-neutral basis, but Hakuna and Pairs saw year-over-year declines. At Evergreen & Emerging, direct revenue declined 8% year-over-year, 6% FX-neutral as we continue to moderate marketing spend at the Evergreen Brands. The Emerging Brands, including Chispa, BLK, and The League collectively grew direct revenue in excess of 50% year-over-year. Both MG Asia and E&E performance was consistent with our expectations. Indirect revenue was $13 million in Q1, down 14% year-over-year as marketers globally continued to tighten advertising budgets and ad prices declined. Operating income was $198 million in Q1, a 5% year-over-year decrease for a margin of 25%. Q1 adjusted operating income or AOI was $263 million, down 4% year-over-year, representing a margin of 33%. Q1 AOI and margins were above our prior expectations, despite the total revenue shortfall versus our expectations as we continue to focus on costs, reducing marketing spend further and rationalizing some additional overhead costs as well. We incurred approximately $4 million of severance and similar costs in Q1. Overall expenses, including SBC expense were essentially flat year-over-year in Q1. Cost of revenue, including SBC expense, grew 2% year-over-year and represented 30% of total revenue flat year-over-year. Live streamer fees declined, but App Store fees increased year-over-year, primarily due to the $8 million escrow payment to Google, the last of which will be due in Q2. Selling and marketing spend, including SBC expense, decreased $15 million or 10% year-over-year. The fourth consecutive quarter, where we've seen a year-over-year reduction as we continue to reduce marketing spend at our Evergreen Brands and to exercise ROI discipline overall. We increased sales and marketing spend meaningfully year-over-year at Hinge and modestly at Tinder, but it was down year-over-year at virtually all other brands. Selling and marketing spend was down 2 points year-over-year as a percentage of total revenue to 17%. Product development costs, including SBC expense, grew 25% year-over-year and were 12% of total revenue, primarily reflecting the impact of engineering hiring at Tinder in late 2021, early 2022 and at Hinge. At this point, Hinge is the only major business within our portfolio where hiring remains particularly active. Interest expenses increased 13% year-over-year in Q1, primarily due to the floating rate structure of our term loan, but interest income also increased very meaningfully given higher rates we are earning on our cash. Our gross leverage was 3.5x trailing AOI and net leverage was 3x at the end of Q1. Our target remains for net leverage to be below 3x. We ended the quarter with $578 million of cash, cash equivalence, and short-term investments on hand. We repurchased 2.6 million of our common shares in the quarter for $113 million. At the end of Q1, we had only 2.7 million shares remaining under our existing buyback authorization. Our Board of Directors has authorized a new $1 billion buyback to replace the existing plan, which we expect to deploy over the next two to three years. As we discussed in the shareholder letter, we expect to generate approximately $800 million of free cash flow this year with further growth over the coming years. Going forward, we intend to return at least 50% of our free cash flow to shareholders. In consultation with our Board of Directors, we will determine the right timing and tools to use for return of capital. Our capital allocation priorities are one, to invest organically in our business; two, to strengthen our balance sheet; and three, to make compelling acquisitions. We may opt to return even more capital to shareholders if we do not identify sufficient compelling investment or acquisition opportunities. For Q2 2023, we expect total revenue for Match Group of $805 million to $815 million, up 1% to 3% year-over-year. We expect FX to be slightly more than a 1 point year-over-year headwind. At Tinder, we expect direct revenue to be up low-single digits year-over-year, also with a little more than a 1 point year-over-year FX headwind. On a sequential basis, we expect Tinder direct revenue to increase in the low-to-mid single-digit percentage range. This strong sequential growth demonstrates that momentum is building and gives us confidence in achieving the strong exit rates we anticipate in Q4. We expect Tinder Q2 payers to decline year-over-year and sequentially. There are a number of initiatives in flight globally, including the introduction of weekly packages and the implementation of price changes, which are having various positive and negative impacts on payers and are being rolled out at various times in various markets. It is important to understand that Tinder in the U.S. elected to implement one of the higher price levels it tested, which we believe will maximize direct revenue, but will correspondingly have a large negative impact on conversion and payers. We expect that Tinder sequential payer additions will be much stronger by the end of the year once these changes are implemented. We expect Hinge to deliver a meaningfully accelerating Q2 year-over-year direct revenue growth, driven by continued strong performance in Hinge's English speaking markets and the effects of the new pricing tiers and continued European expansion. We expect MG Asia to decline modestly year-over-year in Q2 and be essentially flat year-over-year on an FX-neutral basis. We expect our Evergreen & Emerging Brands direct revenue to decline year-over-year at similar rates as was the case in Q1 with similar growth rates at each of the Evergreen & Emerging groups of brands as was the case in Q1 as well. We expect Q2 indirect revenue to be closer to flat year-over-year as we broaden the opportunities we offer for advertising in our products. We expect AOI of $275 million to $280 million in Q2, representing margin of approximately 34% at the midpoints of the ranges. We expect overall marketing spend to increase year-over-year in Q2, specifically at Tinder and Hinge with reductions in almost every other brand in the portfolio. We do expect to allocate some marketing dollars to our newly incubated app to support its introduction this summer. We expect IAP fees to continue to be a year-over-year headwind in Q2, though we expect to stop placing funds into the Google escrow after July per the terms we have agreed to. We expect to continue to be very cautious on spending in all other spending categories within our control. We anticipate incurring approximately $4 million of severance and similar costs in Q2. Given the emerging success of the recent initiatives at Tinder and the momentum we expect the business to continue to build over the coming quarters, we have confidence that in Q4, Tinder year-over-year direct revenue growth will reach double digits, as will the company's overall year-over-year total revenue growth. We admittedly have had a modestly weaker Q1 and anticipate a slightly weaker Q2 than we expected when we provided our full-year outlook back in November of last year. As such, there is an increasing likelihood that we will be closer to the lower end of our total revenue growth outlook for the full-year. That said, marketing and product momentum is improving at Tinder and we've had strong performance in April, so we are eager to see how all the initiatives continue to progress. We also remain confident that Hinge's momentum will lead it to deliver approximately $400 million of direct revenue in 2023. In terms of full-year 2023 AOI margin, we continue to target flat or better than the 35% we achieved last year. We continue to expect improving year-over-year margins as the benefits of our cost savings initiatives take hold and Tinder topline growth reaccelerates. There continues to be a lot of developments in both legal systems and legislatures around the world regarding App Store policies, and we remain optimistic that further change is coming, especially as a result of the Digital Markets Act in the EU early next year. The most recent news was the Epic Games versus Apple Appeal in the 9th Circuit. As a result of that decision, we are increasingly hopeful that we will be able to promote less expensive payment methods with improved customer service to our users in the not too distant future. When we provided our full-year outlook last November, I said that we expected to take a little time in the first half of 2023 to build momentum, but are confident that improved product momentum and our financial discipline positioned us for much stronger growth and profitability in the back half of the year as well as long-term. That view has not changed. We would have preferred to see a little more momentum at the outset of 2023, but we strongly believe the changes we've made are working, momentum is gradually building, and we are positioned for much better financial performance by the end of this year, which should provide momentum into next year as well. Additionally, we believe that the combination of our updated capital allocation approach and our path to stronger growth can create a very compelling level of return for our shareholders. With that, I'll ask the operator to open the line for questions.

James Heaney:

Thanks for taking the question. Just for Gary, can you talk specifically about the encouraging signs that you're seeing at Tinder in April? Is that primarily around the success you're seeing on price increases? Or are there other specific optimizations that are driving the uplift? Thanks.

James Heaney:

Thank you.

Ygal Arounian:

Good morning, guys. Thanks for taking the questions. Just continue on Tinder on the product road map. And I want to focus on the product side, not the monetization here. And can you talk about what are the most important products on the road map? Maybe take some time to hit on the women's experience more specifically as well. How much lift is there on that to get on par with the competing dating apps? And thinking about some of the commentary in the letter pointing to users that are trying to drive other uses of the third-party apps and how that's been impacting the experience on Tinder. Thanks.

Ygal Arounian:

Thank you.

Jason Helfstein:

Hey. Thanks for taking the question. So can you talk about the Tinder price testing in a bit more detail on why you feel confident that this is the right move strategically? I completely understand about the weekly, but the idea of just like the price increase at the kind of the longer-term plans, more premium. And then you used the word additional color on what significantly meant. And then just secondly, more for housekeeping, but how are you thinking about specifically about second half Tinder net adds? Thanks.

Operator:

Our next question comes from Dan Salmon with New Street Research. Please go ahead.

Daniel Salmon:

There you go. Sorry about that. Can you hear me now?

Daniel Salmon:

Okay. Good stuff. So I just wanted to ask a little bit more about Tinder's brand campaign. It sounds like you're happy with the early returns on it. Maybe can you talk a little bit more about where it goes from here? You mentioned expanding it into new markets, but is regular marketing support of this nature something you see as an ongoing thing? The brand needs to be supported regularly. Happy with the creative. Is there – are there any iterations coming along those lines? And maybe if I can just slip in one more to BK or Gary. Obviously, the Board made a fairly significant change in making a commitment to return 50% of free cash flow every year. And obviously, buybacks are going to be a big part of that. Maybe just one quick one, are you considering a dividend?

Gary Swidler:

Sure. On capital allocation, as we talk about in the letter, the company generates a significant amount of cash flow, and we don't want to just build cash on the balance sheet for the sake of building cash on the balance sheet. We want to return it to shareholders. And so it's our responsibility to look with our Board of Directors at all of the tools that are available to return capital to shareholders, which really includes dividends and buybacks. And so we're not going to rule anything out. The Board authorized a new large share buyback, and that's – our plan is to implement that. But the world has evolved, valuations have evolved. We're not happy with where our stock price is. And to the extent that dividend makes sense at some point in the future, we're not afraid to consider that. So we'll look at all the tools. We constantly evaluate them. And we'll see kind of what we think makes the most sense as a way to return the capital to shareholders. So that's our thinking on capital allocation.

Operator:

Our next question comes from Shweta Khajuria with Evercore ISI. Please go ahead.

Gary Swidler:

Sure. Let me take that one. Thanks, Shweta. What I would say, first of all, on Hinge, obviously, we're very pleased with the traction that the brand has. And by that, I mean a couple of things. First of all, its resonance, its ability to resonate in markets outside of core English-speaking markets, that's something that was not assured. And when we go into a market like France, which is different than a market like Germany culturally, and the fact that the brand resonates and gets organic traction in both markets, that's really encouraging and tells you that the brand really has the ability to expand around the world. And the fact that the brand has significant organic traction in a market like India, which is obviously very different than France or Germany or any other European market, without any marketing or other efforts by Hinge in that market, that's a very encouraging sign for global expansion as well. So that's the first point. And we really do believe that the product experience at Hinge as well as their brand story around design to be [indiscernible] are both really resonating with users, and that's really a critical fact. The other thing, I would point out is that Hinge is very early in its monetization journey. It's got a lot of runway on monetization. It's got a lot of runway globally on user growth. So it still has a lot to do and a lot of runway, and we're focused on capturing that and it's just really a matter of time for all that to happen. So when you factor that all together in terms of kind of what do we think that means from a numbers perspective, we think that Hinge can maintain growth rates around what it's going to do this year on a percentage basis and drive to be a $1 billion-plus revenue business over the next few years, if you look at, let's say, a four, five year plan. And I think it can do that by making the right levels of investments over the next few years in international expansion, just as we're doing in Europe this year. And so I think that, that will put some pressure on margins at Hinge over the next couple of years as the growth continues to be very strong. And then gradually, the business will get to a level of margin that's more consistent with the overall company level of margins. And so we're looking forward to seeing that kind of financial performance out of Hinge. We took a lot of effort in the shareholder letter to talk about how we think there's ample opportunity for both Tinder and Hinge to grow at the same time. And that we think the cannibalistic effects of Tinder on Hinge – sorry, of Hinge on Tinder are not as much as people may think. So I'm not going to reiterate all that there. But I will just emphasize something that we said in the letter, which is important to understand, which is that the product experience at Tinder and Hinge are different and the brand ethos of Tinder and Hinge are different. And consumers understand that, and some consumers prefer one to the other, but many, especially young users, use both because they use them for different purposes. And they like certain aspects of one and certain aspects of the other. And so all of that tells us that we can grow Hinge and Tinder simultaneously, and that the overall impact of having both of those brands in a given market is accretive to Match Group's overall growth, much like we're seeing in the French market with some of the data that we've provided in the shareholder letter. So hopefully, that gives you some color to your questions.

Operator:

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

Gary Swidler:

Sure. Thanks, John. So it's important to understand that reactivating lapsed users at Tinder has always been one of its key components of growth and something that they've actually been very good at historically. And as you point out, and we said in the letter, there's a very large pool of lapsed users for Tinder to go ahead and reactivate. But what we've seen in the last few quarters is that the Tinder product experience has not met some users' expectations. Tinder's ability to reactivate those lapsed users has declined as well. So if you put it kind of simply, Tinder hasn't given lapsed users enough reason to come back to the product. And so as the team, led by BK, improves the product experience, we're optimistic that Tinder's success rate in reactivating these lapsed users will also increase. And we can really say the same thing for attracting new users as well, is that as the product experience and the brand narrative improve, Tinder should do a better job of attracting new users. Now obviously, it's much easier to re-attract a lapsed user who's used the product before than someone knew who's never tried it. But Tinder has to succeed on both fronts, attracting lapsed users and new users to achieve the level of growth in terms of overall user growth that we think Tinder needs to achieve. So it needs to push on both fronts and accomplish that. But as you said, and the letter again makes clear, there's a big pool of lapsed users in the developed markets, Europe, North America, for Tinder to go and reactivate. And there's a really big pool of never-tried users in other geographies in APAC and the rest of the world that have never tried Tinder. So there's ample runway for growth, both in terms of reactivating the lapsed users and also attracting first-time users that Tinder can go. And it's really just a question of product and brand execution to really achieve the level of user growth that we would like to see at Tinder.

Operator:

Our next question comes from Lauren Schenk with Morgan Stanley. Please go ahead.

Bernard Kim:

Thanks, Lauren, for the question. I'm really excited about Hinge's performance. Like Gary mentioned, we're on track to hit $400 million this year, and that's incredible from where we started with Hinge joining the family just five years ago. The progress that Hinge have made so far has been fantastic. But Hinge international expansion continues to be one of my top priorities for this year. When we go into these markets, we don't just localize the apps, but we actually culturalize these apps and make the experience what makes sense for daters in each of these individual markets. That also extends across our marketing message. So to use a European term, we do a bespoke approach of going to market, but also entrenching ourselves in these markets as well. So our plan this year is to establish Hinge across Europe as the intentioned dating app. It's really important for us that we continue on this steady path throughout the year. We are in most markets today but we have a lot more work to do, and that's going to unveil itself over the next year. We're actually going to consider new markets outside of Europe in 2024, but we're focused on Europe in 2023. Thanks for the question, Lauren.

Alexandra Steiger:

Thank you for taking my questions. So in the context of your Q2 revenue guide, which anticipates low single-digit growth, can you give us a bit more color on how we should think about the building blocks of your updated 2023 revenue guide? What are the different assumptions that went into the guide initially? And how did these evolve since the last update? And then lastly, what are some potential areas of upside or downside when thinking through 2023 revenue growth? Thank you.

Alexandra Steiger:

Thank you.

Benjamin Black:

Great. Thanks for the question. Just pivoting to costs, where you obviously reiterated the guide for AOI margins to be at least flat in 2023. So if we look beyond App store fee changes, what are the major swing factors that could drive upside or downside there? Is there room to tighten up the cost structure any further? And how should we be thinking about the trade-off between revenue growth and expense moderation at the legacy brands? What's sort of baked into your outlook there? Thank you.

Benjamin Black:

Great. Thank you very much.

Justin Patterson:

Great. Thank you very much. Perhaps a multipart big-picture question. BK, you're not alone in saying AI is a meaningful platform shift like mobile. Match does have a solid history of navigating platform shifts, albeit with new brands, often emerging and legacy brands slowing. Can you tease out how you think this can transform the dating experience and how it changes the opportunity set through the existing brands and some new ones you're incubating? Is this something you can build organically or acquire your way into? And then for Gary, how does AI change your expense profile over time? Thank you.

Gary Swidler:

Yes. And just picking up on that in terms of expenses, it is kind of early to say what is going to happen from AI in terms of expenses, just because we don't know exactly what kind of efforts are going to be needed. I would point out a couple of things. Obviously, one, we're mindful that some of these areas of AI and the folks needed to undertake those efforts can be very expensive. And so we want to do this in a smart way. Certainly, we'll try to leverage outside vendors, third parties wherever we can. And I'm sure more and more of those are going to crop up. So we're not planning to build a massive team focused on these efforts and really balloon expenses as a result of that. I will also tell you that we have significant capabilities in this area already at Tinder as well as at Hyperconnect, so that we can leverage some of those capabilities. And certainly a place like Hyperconnect, where in Korea, these types of engineers are much more readily available and much less costly, gives us a good platform to expand those efforts. And so we're very mindful of trying to keep the expenses under control as we build out the AI efforts, and we'll leverage either outside parties or the capabilities we already have like the Hyperconnect business. We probably have time for one or two more questions. Sorry, go ahead operator.

Brad Erickson:

Yes. Thanks. Just a couple of follow-ups here. I think historically, the company had looked at some of these features geared for women and had largely, I guess, not really decided to pursue them. So I guess just what's changed? Maybe speak to any testing data from these early efforts to kind of reinforce the thesis there. And how do you think about payer penetration on that, those products relative to Tinder overall? And then I might have missed it from earlier, but just quickly on the free cash flow guide. I think that was a little bigger step down versus the revenue or EBITDA. So maybe just anything to call out there that's driving that? Any comments on sort of general free cash conversion relative to EBITDA going forward? Thanks.

Brad Erickson:

Got it. Thanks.

Operator:

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

Gary Swidler:

It's an important question, Cory, and they left you like one minute for me to answer it, but I'll do the best that I can. So look, there's been a lot of positive developments in terms of App Store over the last six months in a lot of different jurisdictions. There's stuff going on in the Court systems in different places. There's stuff going on in the legislative process, and there's a lot of developments. We'll be the first to admit that the progress in these areas are a lot slower than any of us would like. The wheels of justice turn slowly as an expression for a reason. But ultimately, we think that we're going to get to a point where there's going to be meaningful changes to the App Store ecosystem to make them more fair and to benefit consumers. So you mentioned Epic Apple. There's also been things going on in the UK, CMA decision as well as other things in various markets that we think make it likely that developers will, at a minimum, be able to offer alternative payment systems to customers, which we think will result in improved conversion and also really enhance customer satisfaction. So we're looking forward to that. In the EU and in some other jurisdictions like India, we think there's going to be changes that are going to result in app store fee changes as well, particularly as a result of the DMA in Europe or in the EU in 2024. So that's a big one to monitor, which I think people generally are aware of. I don't know specifically if this Epic Apple case is going to result in App Store fee relief, but it's very possible. It remains to be seen if that's going to lead ultimately to App Store fee relief. And then when you sort of factor all this in with all these different changes and things going on in all these different jurisdictions, I think what it means is the App Stores have to ask themselves a question, which is are they going to respond to these changes in a piecemeal basis and have different policies and fee structures and approaches in different markets? Or are they going to have one global policy that addresses all of these really significant and valid concerns and change App Store policies to reflect a more fair App Store ecosystem for consumers? And so that's what remains to be seen. I think that probably plays out over the next 12 months, and so we need to keep watching it. But I know there's a lot of moving pieces on that. I know you're trying to follow it closely. And so I really do appreciate your efforts in that regard. And we'll continue to update on it. Take one more quick one.

Unidentified Analyst:

Yes. Thanks for taking my question. I just have one quickly. Is it possible to get a little bit more color on the new app that you guys are launching this summer?

Operator:

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

Tanny Shelburne:

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.

Gary Swidler :

Thanks, BK. I feel great about my role and the other org changes we've made and think the hiring of Will Wu will be terrific. I'm very much looking forward to working with him and to continuing to see the company build its momentum. Now let me get into the numbers. As BK said, while not at the standards we hold ourselves to, our Q4 2022 total revenue was in line, and our adjusted operating income exceeded the expectations that we set forth in our last earnings call. Total revenue was $786 million, down 2% year-over-year. FX was a notable headwind once again. Our total revenue would have been $846 million, up 5% year-over-year on an FX-neutral basis. The FX headwind was less than we expected when we provided our outlook on our November earnings call, but that was offset by slightly more business weakness than we had forecasted primarily in Europe. Our direct revenue was down 2% year-over-year. It grew 2% year-over-year in the Americas with growth at Tinder, Hinge, BLK and Chispa but declines at the Evergreen Brands, which include Match, Plenty of Fish and OkCupid. Direct revenue declined 4% year-over-year in Europe but was up 8% on an FX-neutral basis driven by Tinder and Hinge with weakness at Meetic. Direct revenue declined 9% year-over-year in APAC and Other, but was up 9% on an FX-neutral basis driven by Tinder. Total payers were 16.1 million, a decrease of 1% year-over-year. Payers were down 2% year-over-year in the Americas, down 4% in Europe and up 6% in APAC and Other. Tinder payers globally were up 3% year-over-year, while All Other Brands were down 8% in aggregate. Q4 RPP was down 1% year-over-year at $16. RPP was up 4% in the Americas driven primarily by higher average prices paid for subscriptions at Tinder and Hinge. RPP was up 1% year-over-year in Europe, where contributions from Tinder and Hinge were offset by the strength of the U.S. dollar compared to the euro and the British pound. RPP was down 14% year-over-year in APAC and Other due to the strength of the dollar relative to the yen and the Turkish lira. On an FX-neutral basis, Q4 RPP was up 7% year-over-year company-wide, up 14% in Europe and up 3% in APAC and Other. Tinder overall performed in line with our expectations in the quarter, delivering direct revenue of $444 million, flat year-over-year, up 8% on an FX-neutral basis. Tinder added just under 300,000 payers to just over 10.8 million. Tinder saw a 3% RPP decline year-over-year in the quarter, which again highlights the impact of FX. Tinder RPP was up 5% year-over-year on an FX-neutral basis. All Other Brands' direct revenue was down 5% year-over-year in Q4 driven by an 8% payer decline, partially offset by 3% RPP growth. Hinge, BLK and Chispa continue to drive growth with Hinge up nearly 30% year-over-year. Our Evergreen & Emerging Brands declined 9% year-over-year in terms of direct revenue, and our Asian brands saw direct revenue declined 16% year-over-year, in large part due to FX. We saw stability in Pairs and Hyperconnect direct revenue on a local currency basis, but we have yet to see a rebound in the Japanese market despite improvement in the COVID situation there. Indirect revenue was $15 million in the quarter, down 18% year-over-year, but similar in dollar terms to the other quarters of 2022. Q4 2021 was particularly strong for indirect revenue. Operating income was $107 million in Q4, a 54% year-over-year decrease for a margin of 14%. Operating income was impacted by $102 million in impairment charges on intangibles primarily related to our Meetic and Hyperconnect businesses. The charges stem from declining financial performance at Meetic as well as the use of higher discount rates on Hyperconnect's long-range forecasts due to the higher interest rate environment and higher market volatility overall. Our Hyperconnect business outlook did not change meaningfully during the quarter. Adjusted operating income was $286 million, down 2% year-over-year, representing a margin of 36%. Q4 AOI and margin strength reflected our nimbleness on costs, as we reduced marketing spend and rationalized some bonus and overhead costs. Excluding the impact of the $102 million of impairment charges, overall expenses, including SBC expense, were essentially flat year-over-year in Q4. Cost of revenue grew 1% year-over-year and represented 30% of total revenue, up 1 point year-over-year driven by App Store fees and hosting costs. Selling and marketing spend decreased $12 million or 9% year-over-year, the third consecutive quarter where we've seen a year-over-year reduction as we continue to reduce marketing spend at our lower-growth brands and to exercise ROI discipline overall. Selling and marketing spend was down 1 point year-over-year as a percentage of total revenue to 16%. G&A expense was flat year-over-year and steady at 14% of revenue, reflecting lower legal fees but higher compensation expense. Product development costs grew 21% year-over-year and were 10% of revenue primarily reflecting increased engineering headcount at Tinder and Hinge. Our gross leverage was 3.4x trailing adjusted operating income, and net leverage was 2.9x at the end of Q4. We ended the quarter with $581 million of cash, cash equivalents and short-term investments on hand. We did not repurchase any shares in the quarter as we decide to allow our cash balance to build slightly. And we are concerned by the high volatility and weakness in the equity markets generally in Q4, which drove ours and many other stock prices down throughout the quarter. With our cash balance now strong, we will reconsider repurchases once the window reopens. We currently have 5.3 million shares remaining under our buyback authorization. When we look at our history as a public company, 2022 stands out as a year we did not hit our growth targets, delivering 7% top line and 6% AOI growth, respectively. Some of the miss was due to macro factors, including consumer weakness and particularly FX. On an FX-neutral basis, our top line growth was 14% in 2022. But our business overall and Tinder, in particular, decelerated as the year went on. And product execution was not where we expected to be, especially in the first half of the year. For the full year 2022, Tinder direct revenue was approximately $1.8 billion. Hinge delivered $284 million in direct revenue, slightly below our $300 million expectation due primarily to our decision to delay the rollout of HingeX. Evergreen & Emerging had $730 million in direct revenue, and our Asia brands delivered $322 million in direct revenue. Fortunately, we made critical corrective changes in the middle of the year, which have begun delivering results. It's still very early, and it will require some patience through 2023 to see the momentum build, but we're increasingly confident we're on course to deliver results consistent with our standards. For Q1 '23, we expect total revenue for Match Group of $790 million to $800 million, roughly flat year-over-year. For Tinder, we expect direct revenue to increase slightly year-over-year. We expect Hinge to deliver Q1 year-over-year direct revenue growth of over 25% driven by continued strong performance in its core English-speaking markets, the introduction of the two new pricing tiers and continued European expansion. The early testing of the new Hinge tiers is going well with take rate consistent with our expectations, higher conversion impact than we expected and no notable cannibalization of à la carte revenue. We expect the tiers to be globally rolled out by the end of February. We expect our Evergreen & Emerging Brands' direct revenue to be down under 10% year-over-year in aggregate, and our Asian brands to decline just under 15% driven in large part by FX. We expect Q1 indirect revenue to be down close to 10% year-over-year, given ad budgets broadly are being slashed due to macroeconomic concerns. We expect adjusted operating income of $250 million to $255 million in Q1, representing margin of about 32% at the midpoint of the ranges. IAP fees continue to be a headwind and will also now include an $8 million payment into the Google litigation escrow, which was a cost we didn't incur last Q1. We expect marketing spend to be up year-over-year at Tinder and Hinge with reductions elsewhere in the portfolio. We expect to incur $3 million to $5 million of severance and similar costs in Q1 related to our personnel reductions and cost savings initiatives. Macroeconomic factors are impacting our business, consistent with our expectations thus far in early 2023. That, coupled with improved product execution at our Tinder brand, gives us increasing confidence that Match Group can deliver 5% to 10% year-over-year revenue growth in 2023. We believe Tinder is positioned to deliver a similar range of growth. We also remain confident that Hinge's momentum will lead it to delivering nearly $400 million of direct revenue in 2023, approximately $100 million more than in 2022. We expect the company overall as well as Tinder to have accelerating year-over-year revenue growth as we move through 2023 driven by improved product execution leading to improved revenue momentum at Tinder. In terms of AOI, we expect improving year-over-year margins in the back half of the year as the benefits of our cost savings initiatives take hold and Tinder top line growth accelerates. Our cost savings initiatives are focused on rightsizing headcount and reducing overhead costs, including office expenses and professional fees. We expect to reduce our global workforce by approximately 8% in aggregate. We've already reduced roles in the U.S. In other countries, this process is ongoing. We expect to incur $6 million of severance and similar costs related to our cost savings initiatives in 2023. We're also reallocating marketing spend from lower-growth businesses to higher-growth ones in 2023 to keep overall spend close to flat. Our financial outlook reflects no change to current App Store policies, though we believe that the stores are moving to comply with aspects of the Digital Markets Act that is now in effect in Europe. The stores are also facing continued legal setbacks and restrictions in other markets globally such as India. We continue to expect changes in the App Store ecosystem, but the timing and shape of the changes is challenging to predict. We expect to be a U.S. Federal cash taxpayer in 2023. The precise amount we will pay depends in part on our stock price, which affects the compensation expense deductions we can take. We currently expect to convert low 70s percent of our AOI into free cash flow in 2023. We expect 2023 SBC expense of $230 million to $250 million, with the year-over-year increase driven by previous hiring as well as our desire to remain competitive on compensation. We've made a lot of critical changes since BK arrived mid last year, including revamping the Tinder team, streamlining our organizational structure, implementing cost savings initiatives and hiring critical new talent. These changes are just beginning to pay dividends. We expect it to take a little time in the first half of 2023 to build momentum but are confident that improved product momentum and our financial discipline position us for much stronger growth and profitability in the back half of the year as well as longer term. We look forward to delivering a combination of strong growth, profitability and cash flow generation for our shareholders. With that, I'll ask the operator to open the line for questions.

Ygal Arounian :

I want to ask about Tinder, and you spent a good amount of time in the investor letter talking about the Tinder product roadmap. And maybe you could just dig in a little bit deeper on that. And you mentioned you're starting to execute on that roadmap, maybe some kind of practical examples of that and highlight where we are and how much there is left to get through this year? And then second question on Tinder. And you talked about the three components of expanding the core experience of deeper engagement, broadening monetization and then optimization. You highlighted that optimization is going to drive 2/3 of Tinder's revenue growth in 2023. Just can you expand on that a little bit, why that's happening? And how we can expect the other two components to contribute to revenue growth over time?

Operator:

The next question comes from Lauren Schenk with Morgan Stanley.

Gary Swidler :

Thanks, Lauren. Why don't I try to take that one? So when we met on our last earnings call, we told you that we are seeing significant pressure on our ALC revenue, which was really driven by macro factors, particularly younger consumers that were feeling pressure from the economic environment. And that was especially acute at our Tinder brand where we have a lot of younger consumers. That impacted our Q4 performance, and it was also really a potential overhang on our 2023 performance as well. But since we met last time, a couple of things have happened. The first one, which BK mentioned, was that Tinder put out a lot of initiatives to reverse the trends in ALC. And you can see from the chart that's in the letter, they did succeed in reversing a lot of the decline we are seeing in ALC, not all of it, but a significant portion. And the other thing, and this is very important over the last few months is that we've really seen stability in our ALC trends. And so we have not seen further degradation, which was a risk when we spoke last time. I'd also want to add that we haven't seen any impact on our subscription revenue trends. That's Tinder and business-wide. I think our subscription trends remain extremely resilient to any economic pressure. But it's ALC where we've been impacted by some of the macro things going on. And I would also say that, as you know, dating has a bit of a peak season that starts at the end of December and runs through Valentine's Day. And so we watch the peak season, which tends to be a good harbinger of what's coming in Q1 and for the rest of the year. And what we've seen is really stability in those trends, kind of the typical pop that we see in trends in the peak season, we did see that this year as well, which tells us that the macro trends have not led to worsening consumer demand. They've not put incremental pressure on the consumer demand in the ALC. So that's been particularly encouraging and gives us more confidence in our 2023 outlook than we had last time. So just to summarize, while we see pressure on ALC and in fact, we see ALC revenue down year-over-year at Tinder, in particular, we don't think those trends are worsening. And so with stable ALC trends and with subscription revenue being resilient, that gives us that confidence in the outlook for 2023 and the fact that we think as the year progresses, we'll start to see improved momentum as well. And I would tell you that the peak season trends that we're seeing are not just a Tinder phenomenon, but we're seeing good stability of peak season trends across all of our businesses. I would also tell you that we think that the Americas business is pretty strong. It's a little bit weaker in Europe and certainly was in the fourth quarter, but in general, we think Europe is a little bit weaker than the Americas. In terms of the Tinder reacceleration as the year goes on, as we've talked about a few times now, we're very clear that the problem was largely a product execution one. And we're really pleased with the strides the team has made over the last six months in improving on product execution. And BK mentioned the Tinder team has a clear and strong product roadmap for 2023, and we see them executing on it. We see them shipping product and moving forward. The other thing, which BK also alluded to, is that we have more confidence in Tinder achieving its goals in 2023 from a financial perspective and accelerating its momentum to achieve that double-digit growth by Q4 because the roadmap is not dependent on one or two big swing initiative that we have to achieve. Rather, it's a series and a large number of smaller initiatives that really contribute to the growth. So that really does reduce the risk that we see in achieving the financial objectives for the year. And BK specifically pointed out that 2/3 of the revenue growth for the year for Tinder are coming from optimizations, which we have a high confidence in, strong line of sight to what we've done before. And we think they're highly achievable now that we've got the right team focused on those optimizations. So while there's a lot of work still left to be done and it's really early in the year, we don't want to get ahead of ourselves. I feel like we have a strong line of sight to getting back to that mid-teens growth by Q4.

Mario Lu :

Great. A couple on Tinder. In terms of the fourth quarter payer number decline of 300,000 quarter-on-quarter, just curious if you could talk a bit more about the drivers there. And then given the payer definition, just curious if those payers were the ones that only bought à la carte previously and stopped for a large reason for the decline?

Mario Lu :

Great. And then in terms of Tinder growth for this year, I know you're planning towards total revenue. But in terms of the 5% to 10% expected growth for this year and a slight growth in 1Q, is there any additional color you can provide just in terms of the drivers of growth between the payer users and then RPP?

Operator:

The next question comes from Alexandra Steiger with Goldman Sachs.

Bernard Kim :

Thanks, Alexandra, for the question. We spent the last few months refining the HingeX value proposition, and we've been testing it on a small percentage of the Hinge user base. We're really pleased with where it stands, and we're confident that it will deliver the expected contribution to our $400 million plan this year. The global rollout is planned for the end of February. And after it goes live, we'll continue to optimize it. It's important to understand that when you launch a new premium tier, you unlock a new kind of buyer. And the price points will pay dividends over multiple years. While we will benefit in 2023 from some incremental revenue from the higher price tier, the long-term value will be realized over time in terms of higher RPP and conversion. HingeX is a unique feature that directly leans into Hinge's designed to be deleted motto. And if it works, we believe it will lead to even more success for Hinge and create even more relationships around the world.

Justin Patterson :

Bernard, could you talk about just in broader detail why you found this to be the right organizational structure and how the different teams start to incentivize? And then perhaps related to that, could you talk about some of the top priorities for Will and where we can see his imprints and product lead as product lead over the next year?

Gary Swidler :

And I think in response to your question is that on the incentives, we tend to be pretty creative on our incentive structures. For example, the Hinge team is incentivized around its own performance. The performance of the business is a significant part of their incentives. And we've done that in other situation as well. And we are working on some other incentive programs around achieving specific goals in specific areas of the company. So we are trying to tailor incentives to drive more of the results that we're seeking, and that's something that we're actively working on.

Cory Carpenter :

So you left the '23 outlook unchanged. But given the weaker dollar, this does imply a bit of a downgrade on an FX-neutral basis. Just hoping you could talk about what's driving your more cautious view on an FX-neutral basis and your decision to keep the reported guide unchanged versus going through the FX? And maybe perhaps specifically any changes to your outlook at certain brands that were driving this?

Operator:

The next question comes from Deepak Mathivanan with Wolfe Research.

Bernard Kim :

Thanks, Deepak, for the question. We're continuing to look for a candidate, but we want to make sure that we're finding the right person that will work well with the Tinder team. In the meantime, the current leadership team is working really well together. The team has now been in place for six months, and they've gone through the kind of gelling well together stage to fully execution mode. We're making really good progress, and we feel actually really good with where we are. So there's no rush to add a CEO. We're only going to do it if the person really brings a lot to the table. Thanks so much for that question, Deepak.

Benjamin Black :

Gary, you mentioned that AOI margin should be at least flat in 2023. Beyond sort of App Store fee changes, what are the swing factors that could potentially drive upside or downside here? And also how should we be thinking about the quarterly margin cadence throughout the year? And then finally, when should we expect to see the impact from the 8% reduction in force?

Operator:

The next question comes from John Blackledge with Cowen.

Bernard Kim:

Thanks, John, for the question. When I started working with the Tinder team, I saw a real opportunity for marketing. Frankly, this is an area we need to make more investment to drive a brand story that better reflects all the positive outcomes that Tinder is responsible for. There has actually never been a Tinder global brand campaign before, and it's been years since we've actually had a defined marketing campaign in general. I think that the perception has taken a hold about Tinder is too limited. We want people to come into the platform feeling comfortable whatever their relationship intent is. The team had some really provocative and creative ideas. And this campaign will celebrate all of the relationship possibilities that Tinder creates every single day. We think that this will drive top-of-funnel growth over time. We intentionally moved Melissa into the Tinder CMO role because she has a track record of big, bold, attention-grabbing campaigns at OkCupid. And I know she and the team will do great things together at Tinder. We're really excited to roll out our first campaign and see the reaction. Stay tuned.

Shweta Khajuria:

Most of my questions have been addressed. But if you could please talk about Japan. You mentioned that you're not seeing much progress there, but that could drive upside. Any sense on when you think that could happen? Or what your -- or commentary on what you're seeing right now? And then the follow-up I have is, how do you -- it sounds like you're very confident now with the guidance, reiterating the reported guidance for the full year. Could you please talk about, Gary, the level of conservatism and/or the confidence you have in delivering to this for both top line and margins?

Gary Swidler :

All right. With that, I know we're out of time. So we're going to sign off, but thank you, everybody, for joining us. We appreciate the continued support, and we will talk to you in the next quarter.

Tanny Shelburne:

Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim; and CFO and COO, 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.

Gary Swidler:

Thanks, BK, and hello again, everyone. In a tough environment, we had a solid Q3 with total revenue of $810 million, up 1% year-over-year. The FX headwinds were severe once again as our revenue would have been $883 million, up 10% year-over-year on an FX-neutral basis. The FX impact was $8 million worse than we expected when we provided our Q3 outlook on our August earnings call. Our direct revenue also grew 1% year-over-year. It grew 5% year-over-year in the Americas with growth at Tinder, Hinge, BLK and Chispa but declines at the Established Brands. Direct revenue declined 1% year-over-year in Europe but was up 15% on an FX-neutral basis driven by Tinder and Hinge. Direct revenue declined 5% in APAC and other but was up 16% on an FX-neutral basis driven by Tinder. Total payers were 16.5 million, an increase of 2% from the prior year quarter. Payers were down 1% year-over-year in each of the Americas and Europe and up 12% in APAC and other. Tinder payer additions grew stronger than we had expected, while our Established Brands, including Match, Meetic, OkCupid and Plenty of Fish saw year-over-year payer declines of over 15% in aggregate. RPP was flat year-over-year at $16.02 in Q3. RPP was up 6% in the Americas, a 1 point sequential improvement, reflecting higher average rates for subscriptions and increased average a la carte purchases per payer at Tinder and Hinge. RPP was flat year-over-year in Europe, where contributions from Tinder and Hyperconnect were offset by the strength of the U.S. dollar compared to the euro and the British pound. RPP was down 14% in APAC and other due to the strength of the dollar relative to the yen and the Turkish lira. On an FX-neutral basis, RPP was up 9% company-wide again in Q3, up 16% in Europe and 4% in APAC and other. Tinder performed slightly above our expectations in the quarter, delivering direct revenue of $460 million, up 6% year-over-year, 16% on an FX-neutral basis. Tinder had payers growth of 7% year-over-year, adding 700,000 payers to 11.1 million and a 1% RPP decline year-over-year in the quarter, which again shows the impact of FX. Tinder RPP was up 8% on an FX-neutral basis. Recall that Tinder made several beneficial paywall and other optimizations in Q3 '21, which drove record sequential payer additions and strong revenue in that quarter. We're now facing that challenging comp. All other brands direct revenue was down 5% year-over-year in Q3 driven by an 8% payer decline and 3% RPP growth. Hinge, BLK and Chispa continue to drive the growth. We continue to pull back on marketing spend for some of our Established Brands. And Plenty of Fish, in particular, continue to be impacted by macroeconomic conditions. In Asia, Hyperconnect's Azar app revenue was down 7% year-over-year. However, on an FX-neutral basis, it was up more than 10% due to the strength of the U.S. dollar against the Turkish lira and the Japanese yen. Hakuna continues to face challenges with revenue down low double digits year-over-year. Payers continue to be affected by market softness in Japan with only a slight year-over-year increase in revenue but down more than 15% as reported. Indirect revenue was $14 million in the quarter, flat to Q2 but down 11% year-over-year. Operating income was $211 million in Q3 with margins of 26%. Adjusted operating income was flat year-over-year at $284 million, representing a margin of 35%. Overall expenses, including SBC expense, grew 3% year-over-year in Q3. Cost of revenue grew 6% year-over-year primarily due to higher [indiscernible] fees, including the $8 million placed into the escrow for the Google litigation. Cost of revenue represented 31% of total revenue, up 2 points year-over-year. Selling and marketing spend decreased $24 million or 16% year-over-year, the second consecutive quarter where we've seen a year-over-year reduction as we continue to reduce marketing spend at our more Established Brands and to show ROI discipline overall. Selling and marketing spend was down 3 points year-over-year as a percentage of total revenue to 60%. G&A expense rose $11 million or 10% year-over-year. G&A comprised 14% of revenue, up 1 point from the prior year quarter. The increase in G&A expense reflects lower legal fees but higher compensation and headcount expense as well as an increase in travel expenses of $4 million as we continue to return to a more normal cadence of business travel. Product development costs grew 31% year-over-year and were 11% of revenue as we increased headcount, particularly at Tinder and Hinge. Our gross leverage was 3.5 times trailing adjusted operating income, and our net leverage was 3.1 times at the end of Q3. We ended the quarter with $398 million of cash, cash equivalents and short-term investments on hand. We deployed $267 million in the first month of Q3 to buy back 4.3 million of our shares at a VWAP of approximately $63 per share on a trade date basis. While the stock continued to decline significantly after we deployed our buyback, we believe our stock repurchase represents a sound long-term investment. We currently have 5.3 million shares remaining under our buyback authorization. For Q4, we expect total revenue for Match Group of $780 million to $790 million. We anticipate nearly $70 million of year-over-year FX headwinds in Q4, meaning that total revenue growth would be nearly 9 points higher on an FX-neutral basis. This headwind is $14 million more than we anticipated at the time of our last earnings call. We expect Tinder's Q4 direct revenue to be relatively flat year-over-year, up high single digits on an FX-neutral basis with mid-single-digit payers growth as ALC softness due to weak macroeconomic conditions impacts payers. We plan to adjust some of our merchandising tactics to help offset this. Historically, we've primarily offered large high-cost bundles of ALC features, for example, $30 bundles of Super Likes, which had been quite successful. In the current environment, we're adjusting our merchandising to emphasize smaller, lower-priced bundles to our users who see value in these ALC features but are now more price-sensitive. All other brands direct revenue is expected to be down mid-single digits but up low single digits on an FX-neutral basis. We expect Hinge, BLK and Chispa will continue to drive the growth, helping offset declines at the Established Brands as well as at Pairs and Hyperconnect due to FX. We expect indirect revenue to be down about 20% year-over-year, given pressures we're seeing building in the ad sales market. We expect adjusted operating income of $270 million to $275 million in Q4, representing margins of about 35% at the midpoint of the ranges. In Q4, we plan to increase marketing spend at Hinge, both in the U.S. where we see terrific momentum as well as in its international expansion markets as per its plan. We also expect to spend up slightly at Tinder and to launch a new brand marketing campaign at our Match brand. Given lower spend at our other brands, we expect meaningfully lower year-over-year aggregate selling and marketing spend again in Q4. While visibility into 2023 is challenging, we're focused on delivering 5% to 10% year-over-year revenue growth in 2023. We believe Tinder is positioned to deliver a similar range of growth. This equates to total revenue up high single digits to low double digits on an FX-neutral basis as we expect FX to be about a 3-point drag in 2023. We anticipate that the Emerging Brands such as Hinge, Chispa and BLK will deliver sufficient growth to offset the declines at the Established Brands. We expect Hinge to deliver at least $100 million of incremental revenue in 2023. We expect the company as a whole to have accelerating year-over-year revenue growth as we move through 2023 driven by improved product execution leading to improved revenue momentum at Tinder. The 5% to 10% top line range reflects 3 key variables. One, quality of product execution and the timing/success initiatives at Tinder. If Tinder executes well, growth will be on the higher end of the range. Two, the strength of the contribution from international expansion and the new premium tier at Hinge. And three, macroeconomic impacts, particularly on lowering consumers and especially on a la carte purchases primarily at Tinder. On the AOI side, we're still calibrating spend levels and the investments that we want to make in 2023. We expect incremental sales and marketing spend at Hinge to support its global user growth, including in its expansion across Europe. Despite the investment, we expect Hinge to maintain AOI margins of 30% plus. We expect to spend incremental marketing at Tinder to support its product enhancements and drive user growth. Even with that, we're confident Tinder can continue to achieve AOI margins in the 50% range. We also intend to invest in The League, which we acquired earlier this year and believe has solid growth potential. We plan to invest in incubating a couple of new apps, which we're confident can better serve certain demographic groups than the existing offerings. To enable us to make the investments in our growth businesses, we plan to reduce operating expenses in other areas of the company to ensure that we can deliver at least flat year-over-year margins in 2023. This assumes no change to current App Store policies. We believe our business continues to achieve profitability and cash flow generation that has few parallels in consumer tags. We've always been conscious of delivering profitability and cash flow. But in the current operating environment, our focus on these items is being sharpened significantly. Our job for the coming year is to invest wisely in select growth opportunities and to manage costs judiciously elsewhere. And our team is up to the task. With that, I'll ask the operator to open the line for questions.

Deepak Mathivanan:

So I just wanted to ask a little bit more about the weakness in a la carte. Is this impact more acute to certain markets, given the macro headwinds have been relatively somewhat different in various regions? Or is this more broad-based? Can you also provide a little bit of additional context on some of the brands that's experiencing to it?

Operator:

Our next question comes from James Heaney with Jefferies. Please go ahead.

Gary Swidler:

Sure. Why don't I go ahead and take that? I think when you look at our Q3, we provided a pretty conservative outlook for the quarter, in part because of all the disruption that was going on at Tinder. We weren't sure exactly how things were going to react to all the changes that we made. And so we wanted to be a little bit conservative in the Q3 outlook. And I think that led to the improvement versus expectations. In Q4, though, we're seeing a pretty significant deterioration in trends even over the last few weeks. We think the macro environment has gotten much more challenging, and we're nervous about it for Q4 and going forward. And so as a result of that, our outlook for Q4 is perhaps lower than you would have thought because we think the caution is warranted, given the change in trends and the weakness in the overall macro environment, which, as BK just said, is really affecting Tinder on the a la carte side as users, especially younger users, have less discretionary income are being a little bit more cautious in their purchasing. And we think that effect is going to linger for a period of time. We are taking actions to offset that, and I think some of those will help offset the effects of it, but it is going to take some time for that to work its way through as well. The other thing I would point out is that we have less product momentum going into Q4 than we typically have and certainly than we did last year when we had a very successful Q3 product adjustments that led to solid momentum in Q4. And remember, product work in the previous quarter or the previous two quarters gives us momentum into the next quarter. So we don't have the momentum we'd like to see or that we typically have leading into Q4. But it is building as the Tinder team makes more progress and influence new things. And so we think that, that momentum will build, and that gives us optimism that as the Tinder team continues to execute the way they need to execute, we'll start to see some improved momentum into 2023.

Mark Kelley:

I wanted to ask two. The first one is the letter mentions an expanded advertising component of Tinder. Is that an area of focus again? And I guess what's the right way for us to think about advertising as a percent of the business over time? And then second, the letter sounded like you're a bit more optimistic on virtual goods and currencies maybe relative to when you joined, BK. Am I reading a little bit too much into that? And if not, I guess, what has changed?

Operator:

Our next question comes from Shweta Khajuria with Evercore ISI. Please go ahead.

Bernard Kim:

We'll start testing Hinge's new subscription later this quarter, and we'll begin rolling it out globally after the new year. We believe that this can drive good conversion and strong RPP. Our outlook for 2023 has assumed a relatively modest take for the new tier. We think it's more comparable to Tinder Platinum than Tinder Gold, but we'll know a lot more after we begin testing later this month. Given the delay of the full rollout of this offering and FX headwinds, especially in the U.K., we do expect Hinge to fall about $15 million short of their revenue goal this year. But we like subscription monetization opportunities with Hinge -- with the Hinge user base. As with any big changes to tiers, we'll continue to optimize the offering throughout 2023. So really excited about that.

Cory Carpenter:

Just getting a lot of moving parts with Japan and Hyperconnect. Hoping you could talk about your expectations and your assumptions for the APAC region next year.

Operator:

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

Bernard Kim:

I'll try to answer this question on my own. We love the questions around marketing. So traditionally, Tinder has not spent much on marketing. They've always spent about less than 10% of revenue, and we don't see that changing. Thankfully, Tinder is not reliant on marketing to grow the business. However, this is a 10-year-old brand. And especially with younger users who are new to the category, we haven't taken the opportunity to establish our narrative. I believe that Tinder, which is a category leader, has been too quiet in the market for too long. In 2023, we're going to increase marketing spend to establish stronger brand narrative. But to answer your question, it's still going to be below 10% of revenue. With our new CMO, we see great opportunities to get brand message out there in a creative manner and market some of our newer product features that we have planned for next year. These two together should help accelerate user growth at Tinder. And even -- once again, and even with incremental marketing spend, we expect Tinder margin in 2023 to be in the 50% range as they always have been. Thanks for the question.

Youssef Squali:

Guys, thanks for sharing the initial outlook for 2023. We understand how challenging visibility is at this point, but still appreciate it. So maybe just a follow-up to the last question about marketing since BK, he liked the marketing questions. So if I understand it correctly, and this is a question about 2023. It seems like Tinder, Hinge and Match will see increase in marketing spend while all the other brands would be down. I guess the question is, is this a temporary strategy to weather the macro environment in 2023? Or do you see this more as a permanent pivot, permanent shift in your strategy going forward? And maybe just a quick one. You guys talked about how Hinge should contribute at least an additional $100 million in 2023. What do you expect that to contribute in 2022 just to have a base off to work off of?

Youssef Squali:

Yes, excellent. Very thorough.

John Blackledge:

Could you provide some more color on Hinge's international expansion efforts kind of what you're seeing? And then can you talk about kind of upcoming market launches in the fourth quarter and in 2023?

Operator:

Our next question comes from Lauren Schenk with Morgan Stanley. Please go ahead.

Bernard Kim:

So thanks for the questions. I'll handle the first part, and Gary, you can jump in on the back end on the second question. So the team is working really well together, and we're shipping products out faster. We gave them a goal to launch weekly subscriptions, boost optimization and relationship intent in Q3. And they accomplished all of that. Now we're in the process of crystallizing our product plans for 2023. I'm happy with how that's going, and we'll have more specifics to share in our next earnings call. But I do expect to name a CEO at Tinder. We have a really strong leadership team in place, and I want to make sure that the new CEO is going to work really well with each of them. We're looking for someone with deep consumer product expertise, who can hit the ground running and further galvanize the team around a long-term vision. It's important for us to find someone that will be at Tinder for a long time. So we want to spend the right amount of time doing the diligence and finding the right leader. In the meantime, I'm happy to stay as interim CEO. Gary, do you want to handle the second part?

Operator:

Our next question comes from Alexandra Steiger with Goldman Sachs. Please go ahead.

Gary Swidler:

So you're right, and I said it before, we're investing marketing dollars in the business where we see growth opportunities, Tinder, Hinge, The League, et cetera. And we're offsetting those with reductions in the more Established Brands. The net result of that is that we expect marketing spend next year to be roughly consistent as a percentage of revenue with what we've seen in 2022. And so overall, our goal for next year is to have flat margins for the year, hopefully, do better than that, but that's our target. But you may see small fluctuations quarter-to-quarter depending on the cadence of marketing spend. If we spend on a bigger campaign in Q1, that might have some effect on margins versus if we don't have that in Q2. So you might see margins be plus or minus a little bit year-over-year in each quarter depending on the marketing spend cadence and what's going on from a campaign perspective. Outside of marketing spend, we're going to offset any incremental margin headwinds that exist with improvements elsewhere to hit that goal of at least flat margins. And then you're right, Tinder is a very high-margin asset for us, and we talked about that already. And so improvement in margins and ultimately hitting our long-term margin goal really is dependent on or the factor that Tinder really accelerate its growth and really contribute meaningful growth to us. So that is the #1 job for the company is to really accelerate Tinder growth and get it back to where it's been historically or at least closer to that, which will help us get closer to our overall long-term margin target. The only other thing I'd point out around margins, and we mentioned this in the letter, is that our outlook for margins doesn't assume any relief from the App Stores at all, which we think is the prudent thing to assume at the moment. That being said, the Digital Markets Act went into effect yesterday in the U.K, and we are expecting changes to App Store policies as a result of that. And there's actions in other jurisdiction as well, markets like India, for example. And so we believe that it's likely that we're going to see relief from App Stores in 2023, if not in 2024 at the latest. And so I do think there is upside to our margins as that plays through. But right now, our outlook doesn't contemplate any of that.

Benjamin Black:

Great. Just a follow-up on expenses. So I think in the letter, you spoke about accelerating sort of broader cost controls next year. When should we expect to see those sort of initiatives impact the P&L? And could you sort of unpack exactly what those cost controls should look like?

Bernard Kim:

Thanks, everyone, for joining the call today. We feel like we've made a lot of great progress in a short amount of time. We look forward to sharing more with you during our next earnings call. Thanks so much.

Tanny Shelburne:

Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim; and CFO and COO, Gary Swidler. They will 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.

Gary Swidler:

Thanks, BK. And hello everyone. I'm excited for my and BK's first call together. There is a lot to cover this quarter, so I'm going to get right into it. We had a solid Q2 with total revenue of $795 million up 12% year-over-year. The Q2 FX headwinds were severe as our revenue would have been $842 million up 19% year-over-year on an FX neutral basis. The FX impact in Q2 was $13 million worse than what we expected when we provided our Q2 outlook on our May earnings call. Our direct revenue grew 12% year-over-year. It grew 9% year-over-year in the Americas with strength at Tinder, Hinge, BLK and CHISPA, coupled with declines at the established brands. It grew 6% year-over-year in Europe, but 19% on an FX neutral basis. Europe continues to be impacted by the war Ukraine as well. Direct revenue grew 32% in APAC and other 49% on an FX neutral basis, driven by Hyperconnect. Total payers were 16.4 million, an increase of 10% from the prior year quarter. Payers were up 4% year-over-year in the Americas, 5% in Europe and 32% in APAC and other, which was aided by the acquisition of Hyperconnect. Tinder payer editions came in stronger than we had expected, while our established brands including Match and Match Affinity brands, Meetic, OkCupid and PlentyOfFish, saw year-over-year payer declines of over 10% in aggregate. RPP was up 3% year-over-year to $15.86 cents in Q2. RPP was up 5% in the Americas, reflecting higher average rates for subscriptions increased average alacarte purchases at Tinder and Hinge. RPP was up 1% in Europe where contributions from Tinder and Hyperconnect were partially offset by the strength of the dollar compared to the Euro and the British pound. RPP was flat in APAC and other, where contributions from Hyperconnect were offset by the strength of the dollar relative to the Yen and Lira. On an FX neutral basis, RPP was up 9% company wide and 13% in both Europe, and APAC and other. Tinder performed well in the quarter, delivering direct revenue of $449 million, up 13% year-over-year, 20% on an FX neutral basis. Tinder had Payers growth of 14% year-over-year adding 1.3 million Payers to 10.9 million and a 1% RPP decline year-over-year in the quarter, which again shows the impact of FX. Tinder RPP was up 5% on an FX neutral basis. All other brands grew direct revenue 12% year-over-year in Q2 driven by 10% RPP growth and 2% payers growth. Hinge, BLK and CHISPA continued to drive the growth. Some of the pressure on our established brands, payers and direct revenue in the quarter was attributable to difficulties finding marketing opportunities that met our ROI thresholds. There were a couple of other specific trends as well. At PlentyOfFish, which tends to serve a lower income demographic, users had benefited from COVID-related government stimulus in Q2 2021, but we saw weaker payer in RPP trends in Q2 2022, as the benefits of the stimulus abated. The Match brand has some lingering impacts from its new business model. And Meetic saw some conversion softness. In Asia, Hyperconnect contributed as we expected in Q2, but its revenue was heavily impacted by FX, especially against the Turkish Lira and the Japanese yen, as well as by typical Ramadan related seasonality. Pairsin Japan saw a burst of new user strength after COVID restrictions were lifted, but only a modest sustained improvement in revenue and other trends in Q2. Indirect revenue was $14 million in the quarter up 7% year-over-year, as we continue to see strong demand for ads in our products and rates increased year-over-year. We had a $10 million operating loss in Q2 as the intangibles primarily related to the Azar and Hakuna trade names were impaired by $217 million or roughly half the intangibles there were attributed to them at the time of the acquisition. The impairment stems from a lower financial outlook for the two apps, including FX impacts in certain of Hyperconnect’s key markets, as well as the use of higher discount rates in the DCF calculations, given rising interest rates generally. Adjusted operating income group 9% year-over-year to 286 million representing a margin of 36%. Overall expenses, including SBC expense grew 62% year-over-year in Q2, but were only up 9% excluding Hyperconnect. Excluding the impact of Hyperconnect cost of revenue grew 14% year-over-year, primarily due to higher App Store fees, including the initial $5 million amount placed into escrow related to the Google litigation. Cost of revenue represented 29% of total revenue. Sales and marketing spend excluding Hyperconnect decreased $13 million or 10% year-over-year, the second straight quarter where we saw year-over-year reduction as we continue to reduce marketing spend at our more established brands and to show ROI discipline overall. Sales and marketing spend was down 3 points year-over-year as a percentage of total revenue to 15%. For the first half of the year, sales and marketing spend X Hyperconnect declined $21 million year-over-year. G&A expense, excluding Hyperconnect rose $3 million or 3% year-over-year. G&A comprised 14% of revenue unchanged from the prior year. The increase in G&A expense reflects lower legal fees and an increase in travel expenses as we continue to return to a more normal cadence of business travel. Product development cost excluding Hyperconnect grew 51% year-over-year and were 10% of revenue, as we increased headcount particularly at Tinder and Hinge in a highly competitive labor market. Our gross leverage declined to 3.5 times trailing adjusted operating income, and our net leverage was 3 times at the end of Q2. These leverage levels reflect the payment of $441 million related to the settlement of the former Tinder employee lawsuits and arbitrations. Those matters are now resolved. We ended the quarter with $473 million of cash, cash equivalent and short-term investments on hand. We deployed approximately $216 million in Q2 to buy-back approximately 3 million of our shares at [indiscernible] of just over $73 per share on a trade date basis. We currently have approximately 9.3 million shares remaining under our buyback authorization. As we stated in the letter, there are a number of key factors affecting our performance and outlook. The first is FX, which significantly affected the first half of the year and we expect will impact the second half of the year as well. We use the forward curve to provide our outlook and the curve has consistently underestimated the dollar strength this year, which is largely why we have been behind our outlooks for Q1 and Q2. Leaving aside FX impacts it's become clear that COVID created some unusual trends in our business. The established brands benefited from a less competitive marketing environment in the early days of COVID, which drove incremental growth. And their users also benefited from savings and government stimulus payments, which buttress monetization. As these factors have abated these businesses once again face growth challenges. Tinder experienced a very strong second half of 2021 as people began to socialize more after being vaccinated. Additionally Tinder made several beneficial paywall and other optimizations in Q3 2021, which drove record sequential payer editions and strong revenue in that quarter. We're now lapping these challenging comps. Moreover some of the Tinder product initiatives and optimizations that we've been counting on for revenue growth in the second half of 2022 are not delivering as we'd expected and we're delaying some launches. Our PlentyOfFish live streaming business is showing a slowdown in revenue growth after a period of strength in part driven by stimulus induced spending. And we haven't seen a sustained rebound in performance in Japan where data's remain reluctant and COVID cases continue to rise. Taken together these factors lead us to expect relatively muted revenue growth for the second half of 2022. On the cost side, we're feeling the financial impacts of the tight labor market, which caused us to raise compensation levels as well as a marketing environment, which has not yet fully adjusted to the economic realities. As such we've significantly slowed our hiring and are sticking to our ROI discipline in our marketing spend, even at the expense of some revenue growth. The App Store fees also continue to be a headwind. App Store fees including the escrow amount related to the Google Play Store were 19.5% of our revenues in Q2 2022, up over 2 points from Q1 2020. We remain optimistic that the App Stores will be required to adjust their policies as the DMA in Europe goes into effect in 2023, and we prevail in our lawsuit against Google in the U.S., which should create a much fair apt ecosystem for all. For Q3, we expect total revenue for Match Group of $790 million to $800 million essentially flat year-over-year. We anticipate over $60 million of year-over-year FX headwinds in Q3, meaning that total revenue growth would be over 8 points higher on an FX neutral basis. We expect Tinder's direct revenue to the up mid-single-digits, low-teens on an FX neutral basis in Q3 while all other brands direct revenue is expected to be down mid-single-digits, but low-single-digits on an FX neutral basis. We expect Hinge, BLK and Chispa will continue to drive the growth, helping offset declines at the established brands. We expect adjusted operating income of $255 million to $260 million in Q3 representing margins of about 32% at the midpoint of the ranges. We expect lower year-over-year sales and marketing spend, a much lower year-over-year growth rate in product and development than in Q2 2022 and a continued increase in App Store fees. The lower than expected revenue contribution from Tinder, which is our highest margin business has a meaningful negative effect on our overall company margins. For the full year, we're now estimating $195 million of year-over-year FX impacts, which is $72 million more than in our last earnings call and $163 million more than when we first gave our thoughts about 2022 back in November of 2021. We estimate FX is causing a 6-point reduction in year-over-year revenue growth for full year 2022, two points worse than at the time of our last earnings call. For Q4, we expect limited improvement in our year-over-year top-line growth rate and modest improvement in AOI margins compared to Q3. While we expect the second half of the year to be below our growth targets, we believe the company remains positioned to deliver accelerating revenue growth as we move through 2023, driven by improved product execution at Tinder. The biggest unknown we face relates to the macroeconomic environment and its impact on our business. The consumer is facing significant pressure from rising gas and food prices, constraining purchasing power. Our product is a small purchase and one that leads to happiness. So consumers are low to stop or reduce it. If the economy continues to worsen, we expect our business to remain resilient, but we may see modest effects at some of our brands, particularly those that cater to lower income consumers. We believe subscriptions, which constitute the vast majority of our revenue, will remain sticky, but it's possible consumers will pull back modestly on a la carte purchases, which tend to be more discretionary. We expect our Hinge business to remain largely immune from overall consumer spending pullbacks given its more affluent user base and have seen no impact to date. We'll continue to monitor these trends and provide an update on our next earnings call. Our category provides ample runway for growth, which we can achieve by growing users and by increasing payer penetration and RPP. It is up to us to execute on the opportunities. The recent changes we've made at Tinder should better position us to perform the way we have historically. While the business is facing some temporary challenges, we will remain disciplined on costs, especially in marketing and hiring. Our longer-term prospects remain bright and our goal remains to deliver strong, consistent growth and profitability for our shareholders. We believe our combination of growth and profitability as well as our free cash flow generation is one that few other companies can achieve. With that, I'll ask the operator to open the line for questions.

Shweta Khajuria:

Okay, thank you. BK, let me try a question on Tinder, please. So what are you looking for in the new Tinder CEO? And why has there been this much turnover in CEOs? Thanks.

Shweta Khajuria:

Okay, thanks BK.

Cory Carpenter:

Great. Thanks for the question. Sticking with Tinder, in the shareholder letter in the prepared remarks, you talked a lot about disappointing execution. So our question is, could you just talk about what went wrong at Tinder? And how quickly you think it can be turned around? Thank you.

Operator:

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

Gary Swidler:

Sure, John. I'm happy to take it. Thanks for the question. Here's the way that I kind of think about the back half for the year generally, Q3 and Q4, which is between what we expect to deliver now for the back half of the year and versus what would have resulted in our hitting our recent guidance, which was low end of the 15% to 20% range for 2022. There's a gap there, and it really results from three areas. The first, which is about a third of the gap, is from additional FX headwinds. We talked a lot in the prepared remarks about how much that has gotten more severe and so about a third of the gap comes from that. Of the rest, about half of the rest or one third of the total comes from what BK just talked about, which is Tinder missed execution and the lack of delivery of initiatives, not having hit product road map and delivered as we expected in the first half of the year. And the other piece comes from a variety of other factors across the business

Gary Swidler:

Yes, you're welcome.

Alexandra Steiger:

Great, thank you for taking my questions. Two on Hinge, if I can. So despite the accelerated launch time line, you reiterated $300 million in revenue contribution for this year. Could you maybe help us understand how you think about the monetization ramp into the second half of this year and also in terms of revenue growth next year given the faster rollout? And then second, could you maybe give us a sense of like where we sit in terms of Hinge margin trajectory and the cadence of investments going forward? Thank you so much.

Gary Swidler:

And let me jump in on the margin question. I want to point out a couple of things as it relates to Hinge and margins. The first thing is, while we are being very judicious and cautious about marketing spend across the company as well as on hiring now and going forward, we recognize that Hinge is the brightest spot in the portfolio. And it is our strongest growth business. It's a very important business to us. And we are going to continue to invest at the right levels in that business, both on the marketing side as well as in product and development and people. So we're being judicious, but we're being thoughtful. And we want to make sure Hinge has the resources it needs to continue on its growth trajectory. And I don't see issues there in terms of the way we are treating expenses as relates to marketing or headcount. I think Hinge has the resources to continue to grow exactly as we're planning for it to grow. So I want to make sure people understand the nuances there and the distinctions between business that are struggling more to grow, where we're going to be more judicious on marketing and hiring versus a business like Hinge, which is growing strongly. And we're investing in. As far as what kind of margins we can achieve, I think, that we are still very smart and efficient with our marketing spend. We are spending where we see traction in the business, like now in a market like Germany, we see the organic traction, we're investing into it with marketing spend. That has been our playbook and continues to be our playbook at Hinge. And we think that Hinge is already in position to achieve margins that are close to the company levels of margins. And we think that that's what Hinge can achieve over time. And so, we don't think Hinge will be a drag on our margins. We think that Hinge will contribute nicely to the overall company margins and still grow at the levels that we've been talking about as we've been providing our outlook, which, as we say, is 50% for this year and we think we'll be very strong into 2023 as well. So hopefully that answers your questions.

Bernard Kim:

And we go to the next one, please operator.

Benjamin Black:

Good morning. Thank you for the question. So in the past you've been a mid-teen to sort of high-teens revenue growth company. I understood that there is some volatility in 2022, given the leadership changes and the challenges around sort of the product rollout. But when we look to 2023, how should we be thinking about the growth algorithm? And what gives you the confidence in returning to more meaningful growth? Thank you.

Benjamin Black:

Great. Thank you.

Operator:

Our next question comes from Lauren Schenk with Morgan Stanley. Please go ahead.

Bernard Kim:

Thanks, I can take that one. Lauren thanks for the great questions. I feel confident that coins and virtual goods are a compelling offering in Tinder and can lead to significant monetization of power users, who I believe, are currently under monetized. Mark and I have spent most of our career in gaming, focusing on building such ecosystems, and we bring this expertise to the table. I love the idea of virtual goods and currency in Tinder. But I believe it hasn't been approached in a completely logical way. For instance, my experience in gaming demand for virtual goods and collectibles are rolled out first and then you launch the currency to get these items later. While it's frustrating to pause the efforts, I think, it's super important that Mark and I deliver the right value proposition so this can be a long term revenue stream. In terms of your question around shorter term subscription packages, historically Match Group has not offered these, but we are going to start testing a variety of short term subscriptions at different price points to see what works. We plan our initial rollout of these programs this upcoming fall.

Lauren Schenk:

Very helpful. Thank you.

Jason Helfstein:

Thanks. Maybe kind of a bigger picture question. So, far this earning season, we're seeing companies that have more affluent customer bases perform better in the quarter and with their third quarter outlooks. I think historically online dating has been perceived as recession resistant, kind of like alcohol and tobacco. I guess BK kind of what's your perspective on this? And I guess as you're thinking about are the headwinds that you are facing more self-inflicted or do you think that there is aspects of the vertical that are now mature enough, perhaps that younger users who have less discretionary income might cut back in spending during recession or some of the inflationary pressure we're seeing? Thanks.

Operator:

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

Bernard Kim:

Thanks, Youssef for the great question. Let me hit this like right on. I do not believe that the category is saturated. I wouldn't have taken this job if I thought it was. As we shared in the letter more than half of singles in developed markets, such as U.S. and Western Europe have not even tried dating apps. So – and there's even a greater opportunity in APAC and the rest of the world. We have just demonstrated that product innovation leads to product adoption, which drives overall category growth. It's important to continue to innovate on our products in order to introduce online dating to new users. A great example is at hinge, it has great user momentum and has strong top of funnel growth directly driven by exciting new features, such as voice prompts. Tinder has not seen that same level of product innovation recently, but we feel like we have the right marketing and product teams in place now to innovate and drive its next level of growth.

Operator:

Our next question comes from Mario Lu with Barclays. Please go ahead.

Gary Swidler:

Sure. I'm happy to take it. Let me just make sure that everyone understands kind of our outlook and there's clarity around that. So we're basically saying at the midpoint of the ranges in Q3, there'd be about 32% AOI margins, and then we're expecting some modest improvement from there, which I think you could read as 100 basis points to 150 basis points of sequential improvement in Q4. In terms of the overall year-over-year change in the margin drivers, let me see if I can kind of do this off the top of my head. And so I would say App Store fees are probably a point and a half of headwinds. So there's still a meaningful headwind on year-over-year margins in Q3 and probably headcount is maybe 2.5 points of headwind. So you have 4 points of headwind from the App Stores and the headcount moves that we've made. You probably get about a point of benefit from sales and marketing. On the other hand and I would say there's probably some small other effects from other items and that's probably a little bit of a headwind, so I probably am around 3.5 or so of year-over-year decline, so that probably rounds to your 4%. But I think it's primarily the head count and the App Store fees with some offset from the lower marketing spend. In terms of your second question, I don't expect there to be significant leverage on the product development line in the upcoming quarters, but I do think that as we turn the corner into 2023, we'll start to see the effects of the pullbacks and hiring that we're making. And also we'll start to see stronger revenue growth, stronger revenue generation from Tinder in particular as the new team really starts to accelerate and build momentum, and that will help drive momentum on the product development side as well as should help overall company margins because as I mentioned in my remarks, the fact that Tinder which is a very high margin business is not contributing as it has been, does have a significant effect on the overall company margin. So getting Tinder going is important not only from a revenue growth perspective, but also from a margin improvement, margin acceleration perspective. So it is the key, it's the reasons we've made the changes we are driving to, and I think we have optimism as we turn the corner into 2023 on all those aspects of the business.

Gary Swidler:

Sure.

Brent Thill:

Good morning, Gary. You bought back 3 million shares in the quarter. You said you're expecting the increase in share repurchases. Can you just say what that implies relative to, are you going to take a breather on M&A? And secondarily, can you just follow up on Japan; it feels like as your second largest market you're not seeing that open to the magnitude you'd like. What if you have the crystal ball, what do you think needs to happen and ultimately kind of when do you feel like that gets back to more normal?

Bernard Kim:

Thanks Gary. Before we close the call, I want to thank the employees, the board and our investors for trusting me with this opportunity. There's so much potential and runway ahead. I will work tirelessly to push the business forward. And as a vote of confidence, I plan on buying $1 million worth of Match Group's shares in the open market tomorrow. I'm committed to building long-term shareholder value, and I'm really looking forward to speaking with you again in November. Thank you all.

Bill Archer:

Thank you, operator, and good morning, everyone. This call will be led by CEO, Shar Dubey; and CFO and COO, Gary Swidler. They will 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 Shar.

Gary Swidler:

Thanks, Shar. I'm disappointed this will be our last earnings call together, but look forward to having BK join the company in time for our next call in early August. Turning to the business. We had a strong Q1 with total revenue of $799 million, up 20% year-over-year, following a 20%-plus year-over-year quarter in Q4 as well. In Q1, the U.S. dollar continued to strengthen against a number of global currencies, including the euro and the yen, which led to $26 million of year-over-year FX headwinds, excluding Hyperconnect. On an FX-neutral basis, Q1 total revenue would have been $825 million, up 24% year-over-year. Our direct revenue grew 20% year-over-year. It grew 16% in the Americas, 14% in Europe and 38% in APAC and other. We weathered the effects of the Omicron spike in the Americas and Europe fairly well. We did continue to feel the effects of rising COVID cases in Asia, especially Japan, although we've seen major improvement in that market recently following the lifting of restrictions. European performance was impacted by the Russian invasion of Ukraine, which reduced revenue in Russia, Ukraine and several other nearby countries. There was a modest impact on our performance from the war in Q1. We estimate a roughly $10 million negative impact per quarter on our revenue as a result of the invasion moving forward. Total payers were 16.3 million, an increase of 13% from the prior year quarter. Payers were up 7% year-over-year in the Americas, 11% in Europe and 34% in APAC and other, which was aided by the acquisition of Hyperconnect. Tinder payer additions were strong, while some of our more established brands in the Americas detracted from our overall payer growth. RPP was up 6% year-over-year to $16 in Q1. RPP was up a solid 8% in the Americas, 2% in Europe and 3% in APAC and other. The effects of FX are visible in the Europe and APAC RPP numbers. On an FX-neutral basis, RPP would have been up 9% and 10%, respectively, in Europe and APAC and Other. Tinder performed strongly in the quarter, delivering direct revenue of $441 million, up 18% year-over-year. Tinder had payers growth of 17% year-over-year, adding 1.5 million payers to 10.7 million, an RPP growth of 1% year-over-year in the quarter, which again shows the impact of FX. All other brands grew direct revenue 22% year-over-year in Q1 driven by 14% RPP growth and 7% payers growth. Hinge, BLK and Chispa contributed to drive the growth, and Hyperconnect contributed as well. Some of our established brands in the Americas saw pressure on payers in the quarter, a portion of which was attributable to a challenge to find marketing opportunities that met our ROI thresholds. There were a couple of other specific trends as well. At Plenty of Fish, which tends to serve a lower-income demographic, users had benefited from COVID-related government stimulus in Q1 2021, but we saw some relative payer softness in the early goings of 2022. The Match brand saw some payer impacts as it tested a softer paywall model in Q1. This is a short-term headwind that should be long-term beneficial as we refine the new model. Hyperconnect contributed just over $50 million of total revenue in the quarter generally as we expected. The business demonstrated continued improved performance, consistent with the trends we saw at the tail end of last year despite some impact of the Ukraine war on its Turkish business. Hyperconnect's revenue also continued to be significantly impacted by FX, especially against the Turkish lira and the yen. Indirect revenue reached $15 million in the quarter, up 19% year-over-year as the advertising market remains strong. Our brands have become more appealing to advertisers in the current advertising landscape. Q1 operating income grew 10% year-over-year to $208 million for margins of 26%, and adjusted operating income grew 19% year-over-year to $273 million for margins of 34%. Overall expenses, including SBC expense, grew 24% year-over-year in Q1, with about 60% of the total increase resulting from the acquisition of Hyperconnect. Excluding the impact of Hyperconnect, cost of revenue grew 17% year-over-year primarily due to higher App Store fees and represented 28% of total revenue. Sales and marketing spend, excluding Hyperconnect, decreased $8 million year-over-year as we continue to show spending discipline in a relatively frothy marketing environment. And we spent cautiously in markets that did not show sufficient post-COVID recovery momentum. Sales and marketing spend was down 3 points year-over-year as a percentage of total revenue to 18%. G&A expense, excluding Hyperconnect, rose 7% year-over-year. G&A comprised 13% of revenue, consistent with the prior year and was up $6 million year-over-year as we continue to spend on critical initiatives like user safety. Product development costs, excluding Hyperconnect, grew 28% year-over-year and were 10% of revenue, up 1 point as we increased headcount at Tinder and Hinge. Our gross leverage declined to 3.6x trailing adjusted operating income, and our net leverage was 2.7x at the end of Q1. We ended the quarter with $921 million of cash, cash equivalents and short-term investments on hand. We still expect to pay $441 million to settle the former Tinder employee litigation and all related claims and arbitrations from cash on hand. Our Board has also authorized a 12.5 million share buyback plan. For Q2, we expect total revenue for Match Group of $800 million to $810 million, which would represent 13% to 14% year-over-year growth. We expect this to be driven by double-digit year-over-year payers growth and year-over-year RPP growth in the single digits despite the continued FX headwinds. We anticipate approximately $35 million of year-over-year FX headwinds in Q2, meaning that total revenue growth would be more than 5 points higher on an FX-neutral basis. This is more than an additional point of year-over-year FX impact than we had expected at our last earnings call. Additionally, the negative impacts of the war in Ukraine are shaving another point of revenue growth. Excluding the effects of FX and of the war, our year-over-year growth outlook would be 19% to 20%. We eliminated age-based pricing discounts at Tinder late in Q1, which will impact Tinder payer growth in Q2, but revenue should be relatively unaffected. Additionally, Tinder payers will be negatively impacted by the loss of payers in Russia and Ukraine. We anticipate about 200,000 fewer payers in Q2 as a result of the age-based pricing change and the war. We expect Q2 RPP growth will be impacted by the continued FX pressures. We expect Hinge will remain on its growth trajectory and deliver strong revenue growth again in Q2. Hinge is on pace to expand into Germany, its first non-English-speaking geography in Q2. We believe that performance at Hyperconnect is improving, but expect that Q2 revenue will be impacted by the Ramadan holiday, which typically impacts Q2 results in many of Hyperconnect's markets in the Middle East. FX headwinds also continue to impact Hyperconnect, especially in Turkey and Japan. We expect adjusted operating income of $285 million to $290 million in Q2, representing margins of about 36% at the midpoint of the ranges. Recall that Hyperconnect reduces our margins by over 2 points. Our Q2 outlook assumes that we implement Google's change in policy to require use of their payment system as of June 1. We estimate a negative impact of $6 million in Q2 though we need to see actual results of implementation of the policy change to be sure of the precise impacts. We are currently evaluating our legal and other options to avoid the significant disruptive effect their policy change will have on our consumers. Taking into account the challenging operating environment, including the FX impact and the war in Ukraine, we now expect to be closer to the bottom end of our previously stated 15% to 20% year-over-year revenue growth range for the full year 2022. We expect a 4-point year-over-year FX impact and a 1 point impact of the war in Ukraine, meaning that growth would be 5 points higher absent those 2 factors. But things have been changing very quickly. At the moment, for the full year, we are estimating approximately $40 million more in year-over-year FX effects than we had at the time of our last earnings call 3 months ago, given the recent record-setting lows of the euro and yen against the U.S. dollar. It is clear there is a lot of uncertainty, the macro negatives but also potential positives, particularly around post-COVID reopening around the globe. This makes forward visibility challenging. Variability has clearly increased, and the trends could change meaningfully again over the next 3 months. We'll update again in August once we see what kind of summer of love we get. Our business serves a fundamental need for human connection. The demand for our products is unwavering and presents ample opportunity for future growth. While the macro environment poses some temporary challenges, our longer-term prospects remain bright. Our growth will continue to be driven by our innovative and broad portfolio of products, which is best in class at providing technologies to enable these important social connections. Moreover, we share knowledge across our portfolio, which enhances our successes and limits mistakes. We're disciplined on costs and very nimble, able to adjust marketing budgets on short notice. As such, we have margins and cash flow that many, if not all our peers, would envy. We've shown an ability to grow consistently and to show strong profitability and cash flow. We're ready for whatever comes next and expect to continue to deliver strong growth and profitability for our shareholders. With that, I'll ask the operator to open the line for questions.

Daniel Salmon:

Shar, you spoke, obviously, about some of your personal reasons for making the change and know that you aren't going anywhere either. But could you tell us a little bit more maybe about how long you've been considering this decision and why you think this was the right time to make it? And then second, you mentioned several highlights of Bernard's track record over the past 20 years. But there may be 1 or 2 things that really made him stand out from other candidates in the eyes of the Board that you'd highlight, and any insights into some of the specific things you think he'll be focused on when he takes the reign?

Operator:

The next question comes from Alexandra Steiger with Goldman Sachs.

Gary Swidler:

Okay. Thanks for the question. Why don't I try to take a stab at it and provide a little context of what's going on with Google as well as some of the financial impacts? So it's important to understand that we've had user choice on our -- on many of our platforms and brands for a long time. We maintain direct relationships with our customers that way. And in fact, our customers choose to use our payment systems, sometimes at a 3:1 ratio over the Google Play billing system. And Google forcing a change now really serves their interest of capturing the relationships with the customer. And I think they see a very short window now as they see the wave of regulatory change happening for them to grab that relationship with the customer before the regulatory changes disable them from doing so. Now we absolutely do not want to see this change in policy. But unfortunately, we're takers of the policies that Google puts on its store. We don't at all think the change is justified. We've been talking to Google for months to encourage them to allow us to continue to provide user choice. And yet, despite all the rulings and regulatory actions seeking to outlaw mandatory use of their payment system, they're still deciding to go ahead and require us to eliminate user choice, which we've had for many, many years. In fact, they've chosen to allow an exception to their policy to only one company, Spotify, because it served their purposes with European regulators and enabled them to take a share of Spotify subscription fees, which they had not previously been able to do. But in our case, they've been steadfast in removing our ability to provide user choice. Last week, Epic Games, facing a similar situation, decided to file a lawsuit against Google. We view that as a last resort and not something we take lightly in doing. But at the same time, the clock is ticking towards the June 1 deadline, and we need to do our best to protect our consumers' choice as well as our business. Under no circumstances do we want to see ourselves removed from the Play Store or unable to distribute through the Play Store. In terms of the impact, as we've disclosed, we expect their policy change to lead to an incremental approximately $6 million a month cost to us. So for the 7 months starting June 1, the total would be about $42 million in aggregate this year on top of the approximately $100 million we already expect to pay Google. That $42 million for the 7 months compares to the $50 million for 9 months we had estimated previously if the policy change had started in April. So it's pretty much as we expected. Now we do think that the winds of change are blowing very, very rapidly. And we think sometime late this year or next year, some of the regulations around the world are going to force Google's hand and require them to change their policy. Most notably, the DMA in Europe, which affects the entire European Union and is going to outlaw mandatory IP. So while Google is making this policy change now and requiring us to eliminate user choice, ultimately, we think this is going to be very short-lived. And as the regulations change across the globe to prohibit mandatory IAP, we'll be able to return back to an environment where we have alternatives to their payment system.

Mario Lu :

Congrats on your next chapter, Shar and, welcome, Bernard. So the question is on the full year revenue guidance. You guys lowered it to the bottom of the 15% to 20% range. So I was just wondering if you can help us unpack a little bit. So excluding the negative drag from FX and the war, are there other tough comps to consider in the second half that should offset the macro tailwinds that you guys mentioned such as Japan recovery?

Operator:

The next question comes from Justin Patterson with KeyBanc.

Shar Dubey:

Thank you, Justin. Yes, I can take this. So we've said this before that most of our Tinder revenue features are more appealing to men in terms of the value they provide. And we've been studying this. And as part of our -- and conversion of women on Tinder, in particular, even relative to many of our other platforms is much lower. So we've been testing and designing a set of potential paid features that will help women improve the quality of their experience and matches they get and give them more control over the experience. So these are things that we think they will find women, in particular, will find valuable. And we're hoping to be able to roll these features out as part of a package that's targeted to women later this year. So that's about as much I can go into it, but that's the thinking there of trying to get women conversion to more parity levels to -- relative to other platforms and relative to men on the platform. That's it, right?

Operator:

The next question comes from Doug Anmuth with JPMorgan.

Shar Dubey:

Yes, sure. We've looked back at our data back in 2008 and also sort of the early days of COVID as proxies for what happens. Generally, there is no change in -- no deterioration in engagement at all. In fact, we've seen increased engagement during times of anxiety and trouble a little bit, right? And if you look at propensity to pay, in 2008, we didn't really see much of anything. The business actually performed really well. And our general view is this is a very small expenditure for people and perhaps one of the latter things that people cut when things are off. Also looking back at the early days of COVID in 2020, while we did see a sudden decline when all the news was going around, the engagement first picked back up very quickly within a few weeks, and propensity to pay also started tracking back up within a few weeks, long before other broader economic indicators were recovering. And so we're watching for signs even now. We're not really -- haven't seen anything yet and not seeing anything. We'll keep a close eye. Our expectation, though, is our business is generally resilient during economic downturns because it does service this very fundamental human need.

Brent Thill:

Gary, just on the margin for the year. Can you describe the different approach, anything changing on the bottom line margin and how we should think about that for the full year?

Operator:

The next question comes from Lauren Schenk with Morgan Stanley.

Shar Dubey:

Okay. That was a long question. First, about MAU. As I said, the -- our total addressable market ex-China, as measured by connected singles, ages 18 to 65, is now over 700 million. And the vast -- in the Western markets, only half of this market has ever tried a dating product. And obviously, that number is much lower in the rest of the world. So that's sort of one opportunity. And usually, the cadence of nonusers breaking into the category is steady and slow driven by new products and features, new marketing campaigns, new channels and of course, word-of-mouth marketing from other successful users. So what became clear during COVID is the importance and efficacy of dating apps for single people as it became really one of the few choices left for -- to meet people. So now -- for now, it is a matter of us convincing the nonusers around the world to break and adopt a dating app. And we know that once they break into the category, they use multiple of them and they keep coming back as their life circumstances change. One of the examples of trying to tap into some of this category resistor, for example, is our recent new bet Stir, which taps into that unique value proposition for the single parent segment, who find it very hard to navigate mass market products and all of the things they have to go through versus self-selecting into a pool where everybody is sort of dealing with the same issues. While on the topic of MAU, I do want to explain something about the relevance of MAU or not in our business, because we are an episodic churn business and unlike in an ad-supported business, for us, all MAU does not have the same value in our ecosystem. Both for user outcomes as well as monetization, it is more correlated to the balance of liquidity by gender, age, intent, location, et cetera. And so the -- this is why -- and one of the big things is as people, they try it once, they have success or they take a break, and they come back when the circumstances change. So even a 25-year-old brand like Match continues to have a very healthy set of reactivations through the years, right? So that's a sort of phenomenon that's unique to our category, I think. And to your question about monetization, so on an average, the portfolio payer penetration is around mid-teens. But our hard paywall businesses are as high as 40%. And there's also a very large variance by geography. Even for soft paywall businesses in some markets, they are well north of 25%, close to 30%. And so there's a fair degree of runway for us to keep innovating on the payer penetration front. As for average revenue per payer, here's the thing that we have to keep in mind. The total lifetime value amount that a payer pays us is way cheaper than a cost of a single date. And for people who find success on it, this is a priceless, incredibly valuable service. And so I do think there is a tremendous amount of innovation opportunity for us to try different things here and increase that RPP. One of the things I'm excited about is we've referred to the virtual goods trading platform on Tinder and this idea of collectibles. So I think -- and Bernard has particular experience with some of those mechanics. I think that will be a pretty interesting vector for us to watch out for. So as I look back at the history, we've been able to improve all 3 of these metrics, TAM penetration, payer penetration, revenue per payer pretty much every year. And we still have a pretty long runway ahead and a large market opportunity of users to convince to use our products.

Youssef Squali :

Just a question on Hinge. It looks like Hinge continues to show pretty meaningful growth with some exceptional organic traction. You mentioned in the last call that you expected to do about $300 million in revenues. Is this still something that you expect? Or has the recent traction or does the recent traction maybe imply a higher number? Also, can you provide any color on what kind of revenue contribution you expect from the expansion in Germany slated this quarter?

Operator:

The next question comes from Benjamin Black with Deutsche Bank.

Gary Swidler:

Let me take that one. So just a little context again. At the time of our separation, we set some clear leverage targets, and we eliminated the buyback that we had back then to ensure that we hit those targets by the end of 2021. We set a net leverage target of 3x. And so now that we've hit that and actually are below that level of net leverage, it clearly makes sense for us to once again have a buyback authorization. At that time, we also stated our capital allocation priorities, which really haven't changed. They are to invest, number one, in our business organically. Number two, to do opportunistic M&A to fill any gaps in our portfolio or to add technologies that we think would enhance the overall portfolio. And we've done those kinds of acquisitions successfully on a number of occasions. If we can't find those kinds of strategically compelling M&A opportunities, then we want to return capital back to shareholders. And so the buyback provides us with the mechanism to have the ability to return capital back to shareholders if that makes sense. And so we think it's a good tool for us to have, an appropriate tool for us to have to use to offset dilution from employee equity awards and to take advantage of opportunities to buy our stock back cheaply in periods of market dislocation, as you point out, which is what we're experiencing right now. And so I think it's fair to assume that as we kind of see what's happening with the stock and with the buyback authorization in place, we'll find opportunities to go in and buy back some shares. And so we'll disclose what we do as we proceed along on that basis. But I think you are thinking about this the same way we are.

Ygal Arounian:

Gary, you hit on marketing a number of times, and you mentioned some challenging ROI or inability to kind of reach ROI targets. So you pulled back on some spending, and you've got the macro factors that are impacting how you spend. Can you just give us a little bit more of an overview on your philosophy on marketing right now? What sort of puts and takes can be -- I know, for example, you also highlighted in the letter stepping up in Japan as Japan reopens. Just how should we think about how all that might ebb and flow as we go through the year?

Shar Dubey:

That's our last question. With that, I want to thank everyone again. It has been a privilege and an honor. Thank you all.

Bill Archer:

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'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 Shar.

Gary Swidler:

Thanks, Shar. We had a strong Q4 with total revenue of $806 million, up 24% year-over-year. In the quarter, the U.S. dollar strengthened meaningfully against a number of global currencies, including the euro and the yen, which led to $12 million of year-over-year FX headwinds, excluding Hyperconnect. On an FX-neutral basis, total revenue would have been $818 million, up 26% year-over-year. We did not anticipate about $9 million of FX headwind when we provided our outlook in early November. Our direct revenue grew 24% year-over-year. It grew 21% in the Americas, an acceleration from last quarter; 16% in Europe; and 46% in APAC and Other. We did feel some COVID impacts on our business, particularly from the emergence of the Omicron variant, which severely reduced mobility in a number of markets starting in December. COVID continues to be a meaningful overhang on our Japanese business and in certain other markets. Total payers were 16.2 million, an increase of 15% from the prior year quarter. Growth was strong in all geographies, up 10% year-over-year in both the Americas and Europe, and 36% in APAC and Other, which was aided by the acquisition of Hyperconnect. RPP was up 8% year-over-year to $16.16 in Q4. RPP was up a solid 10% in the Americas, 6% in Europe and 7% in APAC and Other. Tinder performed strongly in the quarter, delivering direct revenue of $444 million, up 23% year-over-year, an acceleration over Q3's rate. Tinder had payers' growth of 18% year-over-year, adding 1.6 million payers to 10.6 million, an RPP growth of 4% year-over-year in the quarter. Tinder Platinum subscribers comprised approximately 13% of total Tinder subscribers, exceeding 1 million in aggregate. Tinder active user growth continues to be strong, with the brand achieving a record number of active users on its platform globally in 2021. Engagement on the platform also continues to be robust with several KPIs such as daily swipes and messages at or near all-time highs in Q4. All other brands grew direct revenue 26% year-over-year in Q4, driven by 16% RPP growth and 9% payers' growth. Hinge was the standout among this group, growing direct revenue approximately 90% year-over-year, driven by RPP growth of 60% to nearly $24 and reaching about 850,000 payers. BLK, Chispa and Upward in aggregate grew direct revenue over 70% year-over-year in Q4. Hyperconnect contributed about $50 million of total revenue in the quarter. The business saw improved performance in December compared to preceding months. It was also significantly impacted in the quarter by FX, especially against the Turkish lira as Turkey is a large market for Hyperconnect. Indirect revenue reached $18 million, the highest ever in the quarter, up 12% year-over-year. This was off a very strong Q4 2020. Q4 operating income grew 9% year-over-year to $232 million for margins of 29% and adjusted operating income, which we formally called adjusted EBITDA, grew 18% year-over-year to $290 million for margins of 36%. Adjusted operating income margins would have been 2.5 points higher, excluding Hyperconnect. Overall expenses, including SBC expense, grew 31% year-over-year in Q4, with slightly less than half of the total increase resulting from the acquisition of Hyperconnect. Excluding the impact of Hyperconnect, cost of revenue grew 21% year-over-year, primarily due to higher IAP fees and represented 28% of total revenue. Sales and marketing spend, excluding Hyperconnect, decreased $12 million as we pulled back marketing spend across our portfolio to maintain our ROI discipline in a crowded holiday marketing environment. That did have some impact on payers, especially in our marketing-heavy brands like Match. Sales and marketing spend was down 5 points year-over-year as a percentage of total revenue to 16%. G&A expense excluding Hyperconnect, rose 38% year-over-year, primarily due to an increase in legal fees. G&A comprised 14% of revenue, up 2 points or $28 million year-over-year. G&A was less than we had anticipated as the former Tinder employee litigation came to a conclusion on December 1. Product development costs, excluding Hyperconnect, grew 31% year-over-year and were 8% of revenue as we increased headcount at several brands, primarily Tinder. Our gross leverage declined to 3.7x trailing adjusted operating income, and our net leverage was 2.9x at the end of Q4, achieving the target of below 3x that we set at the time of our separation. We ended the quarter with $827 million of cash, cash equivalents and short-term investments on hand. We have agreed to pay $441 million to settle the former Tinder employee litigation and all related claims and arbitrations. We expect to pay this amount from cash on hand in Q1 2022. For full year 2022, we expect the company to deliver 15% to 20% year-over-year growth, driven by another strong year for both Tinder, where we expect high-teens year-over-year growth and Hinge. Our outlook includes approximately $85 million of negative year-over-year FX impacts on total revenue. That's approximately $60 million worse than what we expected at the time of our last earnings call in early November, which is about 2 points of growth. In addition to the FX impact, our revenue growth outlook is more conservative than what we shared in early November due to continued COVID impact, especially in Asia and particularly the rise of the Omicron variant, which is impacting us in the early goings of 2022. Keep in mind that we have a global business. And while we may be getting ready to move past Omicron in the U.S. and Europe, Asia still has to get through that period. So we expect our performance will continue to be somewhat impacted likely until sometime in Q2. In aggregate, our '22 revenue outlook has been reduced by about 3 points of growth since November due to the FX and COVID impacts. Our revenue outlook for 2022 also assumes momentum builds in the second half of the year. There remains much uncertainty about what happens next with the pandemic, but we have increased confidence that while the first part of 2022 may be tougher than we initially anticipated, the second half could be stronger. We're hopeful that once we get past the effects of Omicron, we could even have that summer of love that we had expected back in 2021 after the vaccines were introduced. We expect overall company margins to be roughly flat, inclusive of Hyperconnect, which we expect to be better than breakeven in 2022. For the full year, we expect 50 to 100 basis points of margin improvement, excluding Hyperconnect, as we incur lower year-over-year legal expenses and lower fees on Google subscriptions, which we plan to partially reinvest in safety and CSR initiatives as well as higher employee costs given the ongoing war for talent. Note that despite Google's recent fee cut, which covered only subscription revenue, we actually expect to pay a greater percentage of our revenue to the app stores in 2022 than in 2021 as more of our users come in via app. For instance, on our fast-growing Hinge app, most payers use iOS, and we pay a full 30% on that revenue. Our margin outlook reflects current App Store policies. Our outlook includes over $650 million of App Store fees in 2022, primarily to Apple. Our outlook does not include implementation of Google's previously announced requirement of mandatory use of its payment system starting in April 2022. Were that to happen, we incur approximately $50 million of additional costs for the remainder of the year. Even though we're unable to forecast further change in App Store policies at this time, we remain optimistic that more changes to the App Store ecosystem are likely, and we will continue to update you. For full year 2022, we expect SBC expense of $175 million to $185 million, reflecting additional hiring and the continued competitive market for talent. CapEx of approximately $70 million, about $10 million lower than in 2021 and adjusted operating income to free cash flow conversion of approximately 80%, excluding the $441 million legal settlement. We do not expect to be a material U.S. federal cash taxpayer in 2022. We have an initiative underway in countries where Tinder still offers age-based discounts to eliminate these discounts. These changes, which have begun in earnest in Q1, will impact Tinder payers beginning in Q1, but we expect these changes to be revenue neutral. For Q1, we expect total revenue for Match Group of $790 million to $800 million, which will represent 18% to 20% year-over-year growth. We expect this to be driven by year-over-year payers growth in the low to mid-teens and year-over-year RPP growth in the mid-single digits, as is typical for us. However, the effects from Omicron could shift these metrics somewhat. We anticipate about $25 million of year-over-year FX headwinds in Q1, meaning that growth would be more than 4 points higher on an FX-neutral basis. We expect Tinder's year-over-year direct revenue growth to be in the high teens in Q1 and that Hinge will remain on its growth trajectory and deliver direct revenue growth over 70% year-over-year in Q1. We anticipate that Hyperconnect will deliver revenue in Q1 at similar levels to Q4 '21. We expect adjusted operating income of $260 million to $265 million in Q1, representing margins in the low-30s percent range, typical for a first quarter for us despite about 2.5 points of pressure from adding Hyperconnect. Our company has all the ingredients to continue to deliver on our mission of helping people make meaningful connections through our technology. Tinder has an exciting product road map and a growing global user base to continue to convert. Hinge's product continues to gain traction and the business has meaningful opportunities ahead, including in many international markets. There is so much we can do with Hyperconnect, not only deploy their video and audio tech capabilities across our apps, but have them help us build exciting new Metaverse dating apps and immersive user experiences, which we can potentially make use of across our portfolio. Our financial performance is strong with room to grow already best-in-class margins and potential App Store reform benefits. We strongly believe that the next phase of our business is going to be very exciting. With that, I'll ask the operator to open the line for questions.

John Blackledge:

Gary, could you expand a bit on the margin expectations for 2022, maybe go through the puts and takes of the margin guide? And then secondly, kind of which markets outside of Japan are being kind of impacted by Omicron?

John Blackledge:

In Other markets --

Operator:

The next question comes from Justin Patterson of KeyBanc.

SharDubey:

Hi, Justin. So Tinder Explore, what it did, it allowed us to create a -- successfully a new service area and experience without hurting the very efficient Swipe machine. And the goal now is to have new and personalized experiences that are fun, interactive, useful in helping spark connections. And we've already got 70% of our users adopting the experience, and we're seeing high levels of engagement and likes, messages and conversations. So looking ahead, our plan is to continuously launch and feature a variety of novel and engaging experiences here. We talked about the music mode launch in the letter. Soon to come, for example, is going to be an experience that's a fun rip on the classic blind date experience. Explore also allows us to have geographically tailored programming. So in Brazil, we're about to launch Carnival mode on Valentine's Day. It's going to be an Explore experience that allows members to opt in to match with others that are celebrating carnival in their major cities like Rio, Sao Paulo, Salvador, et cetera. And people can share their favorite parties, where they're traveling to. Carnival is the most important cultural moment in Brazil, and it's a moment that connects people. And it's a great example of how Explore enables a fluid virtual to in real life experience. So additionally, as you can imagine, this new surface area with these Explore tiles also provides us opportunities for integrations with third parties to drive sort of new experiences in the app and offline. And it gives people a reason to keep coming back and check out these new experiences. And then as this -- the adoption and engagement on the service area increases, it does provide new opportunities to us to merchandise revenue features, both existing and new revenue features. So that's why we're so excited about this whole new surface area that we've created.

Deepak Mathivanan:

Just one maybe for Gary. Can you give us some color on monthly cadence on net payer adds in Americas and Europe during 4Q? Was most of the declines in the month of December due to Omicron? And also maybe perhaps what you're seeing in January so far. Kind of if you want to add some color by brand, that will be a great deal.

Operator:

The next question comes from Lauren Schenk of Morgan Stanley.

Shar Dubey:

I can take that, Gary. Lauren, Hinge is one of the best designed products for what I call [intentioned] dating. And that sort of reflects in how rich the profile is, the way you consume them, the way you communicate on the platform. And the team has kept innovating and pulling ahead of competition every year. The way they implemented audio, which -- basic audio, for instance, but they did it in the form of voice prompts and how that became such a resonant in socially viral feature is an example of how they approach product development. And this particular product, I think, has a pretty big resonance among a large segment of audience. It is differentiated in the market. And that's what gives us confidence about the international rollout. On monetization specifically, Hinge has made real progress on RPP, as you know, this past year. And we certainly don't think it's near its feeling. But our expectation this year in 2022 is for Hinge to do over $300 million in revenue. And it's going to be driven by both strong payer growth as well as continued growth in RPP.

Brent Thill:

Gary, on the second half recovery, I'm curious if you could just shell a little more of your plan on what the recovery looks like. And when you talk about Japan, can you also just frame up, for last year, what Japan dating growth and kind of what your expectations are? And I believe that's your second largest market. So what -- maybe drill in a little bit in terms of how you're expecting that region to bounce back.

Operator:

The next question comes from Ygal Arounian of Wedbush Securities.

Gary Swidler:

I am not sure we caught all of that question because there was a little bit of feedback on the line. But let me kind of take a shot at it. First of all, if we get the Google savings, we've talked about this generally on App Store, so I wouldn't say it's just specific to Google. But obviously, we're going to look at how to deploy any changes they make. We have the ability to return some of that to customers in the form of discounting to them. We also will have higher return on our marketing spend because we'll be paying less to the Stores. And so we'll be able to spend more into marketing, which should enhance our growth. So there's a number of things that we can do with any savings that we achieve from the App Stores over time. And like we said, we remain optimistic at some of that's coming, but this is a slow process on the regulatory front. And so right now, we have not made any further assumptions around that in our numbers for 2022.

Gary Swidler:

Yes. The only other thing I would add kind of on Google and its potential policy change, is that Shar said, you've got all these countries and jurisdictions saying, mandatory IAP is not acceptable. It's illegal in Korea, et cetera. It seems very surprising to me that in the face of all that, Google would make a global change and make IAP mandatory on March 31. That's just this kind of defies logic to me. But they'll have to make the decision they make, and then we'll have to see kind of what makes sense in reaction to that. So we'll see how that plays out over the next couple of months. But that's how I sort of handicap just given where the trends are blowing, which are very, very clear, as Shar said. The U.S. Senate subcommittee has taken up a bill around -- or is taking up a bill around this as well. It just seems very hard for me to believe that they would require people to use their payment system in that environment. But we'll see how it plays out.

Alexandra Steiger:

I have 2 on Hyperconnect. So first of all, it's great to see that several brands have begun leveraging Hyperconnect's technology. Can you maybe walk us through the impact you've seen both from an engagement perspective, but also from a cost savings perspective? And then to what degree can you also leverage Hyperconnect's monetization strategies and learnings across your portfolio of apps, for example, or especially at Tinder? And then maybe lastly, where do we sit in terms of like integrating Hyperconnect, the team, the company? And how should we think about any additional investments necessary from here?

Operator:

The next question comes from Shweta Khajuria of Evercore ISI.

Shar Dubey:

Maybe I'll start with the Tinder coins, and then Gary can jump in. Shweta, the Tinder coins is currently testing in 12 markets. And the use cases are both for incentivizing certain core actions and also increasing access to existing revenue products. And we are seeing some increased engagement and retention from these incentives. And there's a bunch of testing going on, on various sort of monetization experiences. The plan is to accelerate the rollout in Q2 and be globally out by Q3. However, the biggest value of coins to us is its ability to power new economies such as the virtual goods. And that is a whole new construct that we are hoping to be able to test in the back half of the year, and hence, we're not counting on any sort of meaningful contribution to 2022 revenue, it's more a 2023-and-beyond revenue contribution.

Operator:

The next question comes from Mario Lu of Barclays.

Shar Dubey:

Yes. I can take a shot at that. So you're right. Right now, we're focused on the metaverse as it relates to the experience on the smartphone and not any other hardware-enabled experiences. So that's to clarify. Now the technology that is relevant to our world is the one that allows us to create experiences online where people can meet each other, discover each other, more serendipitously and real time through shared experiences in a way that is more akin to how they would do in real life versus the profile-sorting experience that exists today. And so that’s sort of what Metaverse allows us to do and why we think that's relevant in our world. Imagine sort of a virtual club in the app where your digital self can walk around, check out live, different rooms. They meet others listening to the same music. You can strike up a conversation with someone. You can tap and check out their full profile. You can like them, message them later. And so that's sort of the -- how we envision the Metaverse experience leading to the dating context and the dating experience in our app. Now in terms of the types of underlying technology that's needed to enable these experiences, this is what the Hyperconnect team has been innovating on, right? Beyond just the real-time live, low-latency video, audio technology that they have, there are additional technology elements, everything from what's -- the pieces of the virtual human technology, the virtual fraud technology, also live audio and video connection based on location -- connections that are based on locations on a map, for instance, and so on. So that hopefully gives you some clarity on how we're thinking about the Metaverse world.

Cory Carpenter:

I just want to circle back to Hyperconnect. Could you talk a bit more about what drove the stability in December across the Azar and Hakuna Live apps? And just how you're thinking about the sustainability of that through 2022?

Gary Swidler:

I think that that's it, given that we're getting close to the bottom of the hour. So really appreciate everybody joining for this call. I hope everyone stays well and safe out there, and we look forward to talking to you in the warm spring months in May, where we'll be looking forward to a great summer. Thanks very much.

Bill Archer:

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.

Gary Swidler:

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 contributed $53 million of total revenue in the quarter, below our expected range. Hyperconnect is facing pressure at its largest revenue generating app, Azar, especially in certain Middle Eastern markets. It also faced delays in rolling out certain product initiatives and a challenging marketing environment. We are working diligently with the Hyperconnect team to improve performance and deliver sustainable long-term growth. Indirect revenue reached $16 million, the highest ever in a quarter, up 40% year-over-year. It appears our strong brands, relatively lower ad loads, and contextual targeting have been especially appealing to advertisers in the current environment. Operating income grew 10% year-over-year to $221 million and EBITDA grew 15% year-over-year to $285 million in Q3. EBITDA margins were 36%, what would have been 39% ex-Hyperconnect. Overall, expenses, including SBC expense, grew 32% year-over-year in Q3, with more than half the total increase resulting from the acquisition of Hyperconnect. Excluding the impact of Hyperconnect, cost of revenue grew 20% year-over-year due to higher IAP fees and represented 27% of total revenue. Sales and marketing spend, excluding Hyperconnect, was up $5 million due to slightly higher marketing spend across our portfolio, but was down 2 points year-over-year as a percent of total revenue to 18%. G&A expense, ex-Hyperconnect, rose 8% year-over-year primarily due to an increase in legal fees and was 13% of revenue, down 1 point year-over-year. Product development costs, ex-Hyperconnect, grew 37% year-over-year and were 7% of revenue as we increased headcount at several brands, mainly Tinder and Hinge. Our gross leverage declined to 3.8x trailing EBITDA and our net leverage was 3.3x at the end of Q3. We believe our target of below 3x net leverage by the end of 2021 is within reach. In a complex series of related transactions, we have repurchased $414 million aggregate principal amount of our 2022 exchangeable notes for approximately $1.5 billion in cash, using the proceeds from issuing 5.5 million shares of common stock, $500 million of new 3.625% 10-year unsecured debt, and the unwind of the related bond hedges and warrants. These transactions, which were executed in the third quarter, but sales in the fourth quarter created an embedded derivative on which we recorded a $39 million loss in Q3, but also on which we expect to recognize a $24 million gain in Q4. We had operating cash flow of $667 million in the quarter and free cash flow of $614 million. We ended the quarter with $523 million of cash and short-term investments on hand. For Q4, we expect total revenue for Match Group of $810 million to $820 million, which would represent 24% to 26% year-over-year growth. Building off the conversion strength achieved in Q3, we expect Tinder’s year-over-year direct revenue growth to accelerate towards the mid-20s percent range in Q4. Our expectation is that Hyperconnect will deliver revenue in Q4 at similar levels to Q3. Between weaker Q3 performance and lowered expectations for Q4, we have reduced Hyperconnect’s revenue contribution by approximately $20 million for full year 2021. We expect full year standalone Hyperconnect revenue to be about $210 million. Despite softer performance at Hyperconnect, strength at Tinder and Hinge position us to deliver around $3 billion of total revenue in full year 2021, representing 25% year-over-year growth. Notably, we expect Tinder direct revenue growth to be above 20% in full year 2021. We expect EBITDA of $285 million to $290 million in Q4, representing 16% to 18% year-over-year growth and margins, ex-Hyperconnect, roughly in line with the prior year quarter. For the full year, we expect EBITDA to be above our previously communicated high-end of the range of $1.060 billion, up nearly 20% year-over-year. Typically, we provide some initial thoughts on the upcoming year on our Q3 call. For the past several years, our initial outlook has been mid to high teens revenue growth. For 2022, we expect our businesses, ex-Hyperconnect, to once again deliver that level of growth driven by another strong year for Tinder and for Hinge as it begins expansion into non-English speaking markets. With the full year of Hyperconnect revenue contribution included, we expect the company to grow total revenue closer to 20% year-over-year in 2022. We will provide a more precise revenue outlook on our February call once we see how the strategic changes at Hyperconnect as the new product initiatives across the portfolio begin to take hold. Excluding impacts from IF policy changes that go into effect in 2022, we expect to see about 1 point of margin improvement at our businesses, ex-Hyperconnect and for Hyperconnect to achieve mid single-digit EBITDA margins next year. While we anticipate legal expenses to be meaningfully lower next year, we plan to reinvest a portion of that savings into important safety and corporate and social responsibility initiatives. Also, given the highly competitive job market, we may reinvest to attract and retain crucial talents. The level of investments we choose to make in these areas will impact the actual amount of margin expansion we achieve. The biggest swing factor in our 2022 EBITDA outlook is what happens with app store fees, which are an increasingly large percent of our revenue, up from 17% in 2020 to an estimated 19% in 2021, totaling over $550 million. There are numerous actions across the globe scrutinizing Apple and Google’s requirement that we use their payment system and pay a 30% fee. A reduction in these fees would have numerous positive consequences, including enabling us to pass along benefits to consumers. Google has agreed to reduce fees for subscriptions, though not a-la-carte from 30% to 15% starting January 1, 2022, but they also still have a policy change to require use of their billing system scheduled to go into effect at the end of March 2022. There are many unknowns regarding Apple’s plans for IAP, including whether and how they intend to comply with the law banning mandatory IAP in South Korea and the injunction in the Epic decision, which requires them to eliminate the anti-steering provision by December 9, 2021. We are going to watch these developments around the app stores for at least another few months before we provide our EBITDA outlook for next year. We are optimistic more changes in the app ecosystem are likely. There is a lot going on across our business, including a meaningful product evolution at Tinder and many of our other brands. We are excited to execute on our product roadmap and to continue evolving the experience for our users. We recognize that people around the world are increasingly turning to digital products to meet and socialize. Our job is to continue to build new and exciting products and experiences that enable people to connect, something we have been a leader at for more than 25 years. We are confident that if we remain focused on delivering outstanding products, we will continue to deliver strong growth and financial results for our stakeholders for many more years to come. With that, I will ask the operator to open the line for questions.

Mario Lu:

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?

Mario Lu:

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.

Mario Lu:

That’s helpful. Thanks, Shar.

Jason Helfstein:

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.

Jason Helfstein:

Thank you.

Cory Carpenter:

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 Dubey:

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 it will be materially higher in 2022. About 70% of our revenue comes from subscription and since Google does not yet require mandatory IF, approximately 80% of our IF fees actually goes to Apple. So a lot of moving parts, and we have not yet attempted for any impact from changes to IFPs in our outlook. Generally, in Q4, we expect very, very minimal impact. But depending on – given all the scrutiny that’s going around the world and some of the developments in the last few months, I do think this will continue to break. And it will be a beneficial change to consumers and to developers. And depending on when and what and how this breaks the outcome for us is pretty varied. So we’re watching some of these milestones that are coming up in the next few months. Hopefully, it will give us some more clarity, and we will be able to communicate a little better in our next call. The – my final thought on this is I’ve never seen a point in this IF app store ratio where there is been so much activity around the world. And at some point, Apple has to take a step back and ask themselves, whether this is still the right thing to do. And so another reason why I think this will change in some way.

Operator:

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

Gary Swidler:

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 so large in that market, it is affecting us significantly. So we are optimistic that the drivers that make Japan a great dating market with lots of potential growth continue to be there. And we think this will resolve itself over time as people in Japan start to go back out and get COVID further behind them. But it’s going to take a little bit of time. We’re watching it, and we’re optimistic, but I think it needs a little bit of time to play out. And while Japan is the market in Asia that’s the most significant impact for us, there is other markets in Asia that are also still affected mostly in East Asia, but you’ve got Singapore, Taiwan that are still affected as well by trends as a result of COVID. So given the geographic footprint of our business, which does have a significant presence in Asia, we are still dealing with impact there. And I would say if you look at kind of what’s happened around the globe given our overall global exposure, the Americas has recovered well, especially the U.S. And Europe is a little bit behind, but main products as well. And then Asia is further behind. So if you look at the trends that we’ve seen in the U.S., I think that over time, that’s going to play through in these other markets. It really is a question of timing more than anything else. And so we will see how that plays out. Another market to just point to is India. India was really impacted by COVID at steps, and we saw a significant impact in our business. We have seen a meaningful recovery in India as a result of improvement in the COVID situation there. So it is very much market by market depending on what actions the government has taken and what the level of COVID issues is. But we are seeing gradual kind of step-by-step recovery as we look at markets around the world.

Gary Swidler:

You are welcome.

Dan Salmon:

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.

Dan Salmon:

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?

Dan Salmon:

That’s great. Very helpful. Thank you.

Brent Thill:

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.

Brent Thill:

Thanks.

John Blackledge:

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.

John Blackledge:

Thank you. Thanks so much.

Youssef Squali:

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.

Youssef Squali:

That’s good color. Thanks Gary.

Justin Patterson:

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.

Justin Patterson:

Thank you.

Operator:

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

Bill Archer:

Thank you, operator, and good morning, everyone. Today’s call will be led by CEO, Shar Dubey; and COO, Gary Swidler. They will 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 Shar.

Gary Swidler:

Thanks, Shar. It's great to be here again in person with you and the team in Dallas today. Seeing colleagues working together makes me very much look forward to days when the office will be filled with activity once again. We had a terrific Q2 with 27% year-over-year total revenue growth, the strongest growth the company has achieved since 2018. Non-Tinder brands grew direct revenue 28% year-over-year in the quarter, the sixth consecutive quarter, where these brands grew in aggregate. Hinge, POF LIVE, and our BLK and Chispa apps continued to perform very well. Hinge grew revenue, nearly 150% in the quarter, driven by strength in both subscription and a la carte, led by Roses and Standouts. At Tinder propensity to pay has improved significantly, which you can see in the a la carte revenue strength, as well as overall payer numbers. Tinder saw a notable acceleration in year-over-year direct revenue growth to 26% in Q2, up from 18% year-over-year growth last quarter and 13% year-over-year growth in Q4 2020. Our direct revenue grew 25% in the Americas; 28% in Europe and 31% in APAC and other. Our U.S. performance is exceptionally strong. And our performance in Europe is trailing slightly behind the U.S., consistent with the pace of the recovery there. APAC and other growth also was solid in Q2. But a number of markets there, including important ones for us like Japan, are now facing increased COVID restrictions. Note that we are now disclosing the performance of the business in three geographic regions to give investors better insight into our results. Indirect revenue grew 54% year-over-year, marking a third consecutive strong quarter as the advertising market generally and our direct sales specifically were very strong. Also note that we closed the acquisition of Hyperconnect in mid June. So our metrics reflect about two weeks of contribution. Net of certain one-time purchase accounting adjustments, Hyperconnect contributed $4.3 million of revenue in Q2. We have broken this information out in the shareholder letter, so you can see what Match Group X Hyperconnect and what Hyperconnect itself delivered in Q2. We have also moved to disclosing payers and monthly revenue per payer. In the quarter, total payers reached 15 million, which was an increase of 15% from Q2 2020. Growth was strong in all geographies, up 16% year-over-year in the Americas, 13% in Europe, and 17% in APAC and other. Tinder payers were up 17% year-over-year in Q2. For comparison purposes, in Q2 average subscribers increased 1.3 million over the prior year to 11.4 million, representing 13% year-over-year growth. Tinder's average subscribers were up just under 1.1 million or 17% year-over-year and came in at 7.2 million in total. This was the best Tinder year-over-year subscriber growth since the pandemic began and was very strong sequentially as well. All other brand average subscribers were up 240,000 or 6% year-over-year. Revenue per payer increased 10% year-over-year to $15.46. [ph] It was up 8% in the Americas, 13% in Europe, and 12% in APAC and other. RPP was up 8% year-over-year at Tinder. RPP derived three percentage points of growth, $0.53 from foreign exchange impacts in the quarter. At Tinder, Platinum sales and strengthen a la carte contributed to RPP growth. Continued strong performance of PlentyOfFish live streaming business and Hinge’s a la carte features contributed to the strength in RPP at the established and emerging brands respectively. Total company ARPU was up 10% year-over-year to $0.65. Non-Tinder brands ARPU growth was extremely strong again this quarter, up 16% year-over-year and Tinder ARPU was up 7% year-over-year. Operating income grew 7% and EBITDA grew 15% year-over-year in Q2. EBITDA margins were 37%. Net of purchase accounting adjustments, Hyperconnect reduced Match Group EBITDA by $3 million in Q2 from $266 million to $263 million. Overall expenses including SBC expense increased to 70% of revenue compared to 65% in Q2 2020 when we pulled back on spending as the pandemic took hold. Cost of revenue grew 30% year-over-year impacted by higher IAP fees, web hosting costs and fees related to live-streaming video at PlentyOfFish. Sales and marketing spend was up $38 million or 42% year-over-year, close to what we had anticipated and represented 18% of total revenue in Q2, as many of our brands spent into reopenings. Product development costs grew 24% year-over-year as we increased headcount at several brands, mainly Tinder and Hinge. G&A expense rose 66% year-over-year and comprised 16% of revenue. G&A in Q2 included $4 million of professional fees and $9 million of stock-based comp expense, both related to the acquisition of Hyperconnect. Our gross leverage declined to 3.9 times at the end of Q2, while our net leverage was 3.7 times as we use cash on hand for a portion of the consideration in the Hyperconnect purchase. We're pleased to see both gross and net leverage below four times and we're on track for net leverage below three times by the end of 2021. For Q3, we expect total revenue for Match Group of $790 million to $805 million, which would represent 23% to 26% year-over-year growth. That's solid growth of what was a very strong Q3, 2020 as daters emerged from the initial wave of lockdowns in North America and Europe and Asia had COVID under control. We expect EBITDA of $275 million to $280 million in Q3. This reflects an additional $15 million of costs in the second half of the year versus our prior expectations for government relations and other advocacy related to app store practices and for legal matters, including the former Tinder employee litigation, as we prepare for a fall trial. We think plaintiff's claims in that case are totally without merit and are fully prepared to defend ourselves vigorously to the end. We currently expect that the trial will conclude by the end of the year and the meaningful costs we've incurred related to this lawsuit should not recur beyond 2021. For the second half of the year, we expect Hyperconnect to contribute $125 million to $135 million of revenue. This outlook reflects some pullback, primarily due to COVID as well as our decision to focus the Hyperconnect team on delivering video and other technology that we can implement across the rest of our portfolio. We expect at least two of our brands to make use of Hyperconnect technology before the end of 2021 and a number of others to implement Hyperconnect capabilities by year end 2022. As a result of this focus on building tech that our other brands can use. We expect Hyperconnect to remain roughly breakeven from an EBITDA standpoint in Q3 and Q4 2021. For the company as a whole, we expect full your revenue of just above $3 billion including Hyperconnect, exceeding the high end of our previously stated range. This reflects better than expected performance at our dating brands in the first half of 2021 and anticipate second half year-over-year growth north of 25%. Approximately 20% of Tinder, single digits at the established brands and north of a 100% at the emerging brands including the contribution from Hyperconnect. From an EBITDA perspective, we now expect a range for the full year of $1.045 billion to $1.06 billion. This outlook incorporates Google's recent change in policy to enable our brands to opt out of mandatory in-app billing until at least March, 2022. It also includes the previously mentioned additional legal costs and higher spend for government relations and advocacy to encourage the app stores to reduce their fees. We're increasingly confident that the lawsuits and investigations around the globe related to app store practices will result in changes to those policies in the not-too-distant future. We've had an outstanding first half of the year where we've accomplished a great deal. Tinder's growth has accelerated, and the product is evolving in exciting ways that we expect will present real revenue opportunities for us over time. Hinge and our other newer apps continue to exceed our expectations. And our more established brands are performing well. Importantly, our services are now more in demand than ever as people around the world seek social connection online, whether in the form of companionship, romance or love. With Hyperconnect, our portfolio is increasingly well positioned to deliver on our mission of connecting people, which we expect will enable us to continue to deliver strong results for our stakeholders. With that, I'll ask the operator to open the line for questions.

Cory Carpenter:

Thanks for the questions. I had one for Shar and one for Gary. For Shar, on the reopening, hoping you could expand a bit on what impact you're seeing to user behavior in markets like the U.S. where COVID in Delta are flaring up a bit recently. And then Gary hoping you could talk about some of the puts and takes driving your expectation for Tinder revenue growth of close to 20% in the second half? Thank you.

Gary Swidler:

And then Corey, as far as our outlook for Tinder revenue in the back half of the year, our outlook sitting here today is for just north of 20% top-line growth for Tinder in the second half of 2021, which is meaningfully higher than what it was last year. If you break it down further into the quarters, I think Q3 growth will probably be just under the 20% mark because last year, if you remember, Q3 was very strong. North America and Europe were coming out of the lockdowns and people got back outside, started being active again. The weather was nice and Asia had the virus under control. So you had really good conditions globally, which led to a strong Q3 last year. For Q4 this year, I'm expecting the growth to be comfortably above 20% year-over-year. But given Q4 is still a quarter away and Tinder has broad geographic exposure. The COVID risks that are still out there necessitate us being a little bit conservative. And so that's what you're seeing as we give our outlook for the back half of the year on Tinder growth.

Operator:

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

Gary Swidler:

Sure. Look, we've had extremely strong start to the year and that's enabled us to raise our outlook twice so far this year. So we feel great about how we performed in 2021. In fact, our Q2 was really stellar, 27% revenue growth, well-balanced between Tinder and non-Tinder. So we feel really good about Q2 in particular. And I think we're very well set up for the rest of the year. So right now, sitting here, I think we have good visibility into Q3 and that is reflected in our specific guidance for the quarter. And then we're anticipating really solid, sequential revenue growth going into Q4, which would mean that we should see accelerating year-over-year Q4 growth. But as I just said to Corey, there's still some uncertainty in the environment with COVID and Delta and potentially other variants and everything else that people know much about. And so we think that a little bit of conservatism is appropriate, especially the further out that we look. And so that's all factored into the guidance we've provided.

Gary Swidler:

So, thanks. That's a good question, actually. So when you look at that chart, that's in the letter related to the Swipe apps and PlentyOfFish live and Hinge, it really is impressive what we've been able to achieve, getting those businesses from virtually nothing to $300 million or so this year in aggregate. But the letter is a little bit unclear. And so I wanted to clarify that each of the group of Swipe apps, as well as the PlentyOfFish live streaming business are contributing at least $50 million of revenue to that $300 million this year. So Hinge is the balance of the $300 million after the two contributions of 50 plus. And as we've said before, Hinge is on track to more than double revenue in 2021 after tripled. And we gave the performance for Hinge also in the second quarter of 150% revenue growth. So the $250 million I think is high. But I've given you the components. So it should enable you, I think, to determine kind of where we think Hinge is going to be roughly for the year.

Operator:

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

Shar Dubey:

I can take that. Thanks, Jason. So we're definitely not looking at advertising as an incremental revenue source. But we do see a la carte is becoming an increasing area of focus in addition to subscriptions. And with regards to virtual currency, it is something we're testing in a couple of small markets and we test it, we started testing it in a couple of small markets in Q2. It is currently very limited in a feature set that it covers. We are encouraged by what we've seen so far and we'll be expanding to additional markets and more feature coverage over the next few quarters. More broadly though, the Tinder experience, as I said, is evolving to include these new multi-dimensional surface areas in the app where people have new ways to discover and connect and share interests and form communities. And if you think about most of the ALC features today, things like Boost and Super Like for instance, they are designed to allow users to stand out in a one-to-one experience. And we think there are some real interesting revenue opportunities to help people stand out in these many to many experiences on the app that we're building.

Operator:

The next question comes from Mario Lu with Barclays. Please go ahead.

Gary Swidler:

So this is a little bit complicated. I want to try to run through it to make sure people understand. There are two reasons why payers are higher than average subscribers. The first is that payers captures non-subscriber ALC payers. But there's another reason which is the definitions of average subscribers and payers. Average subscribers represent a daily average over the quarter, while payers is the number of unique payers in a given month, and then it's average for the quarter. And so if you look at Match Group overall at our payer numbers, what you'll see is that the non-subscriber ALC payers are actually a relatively small part of the difference between average subscribers and payers. It's more a function of the way payers are counted that accounts for payers being higher than average subscribers. So again, ALC payers that our non-subscribers are a relatively small piece of that disparity. Now, that being said, we do think that as we expand our ALC monetization efforts and we add virtual currency, especially in Asia Pacific, and now we bring on Hyperconnect, which has a lot of non-subscriber ALC payers. The percentage of non-subscriber ALC payers is going to increase. So you'll start to see that as we move forward into the year. I'd encourage you to look at the specific definitions which we provided of average subscribers as well as payers. And if you have further questions on this, we're happy to try to take this offline and go through some examples, because I know intuitively it's not that obvious. But again, the definitions are what's accounting for a large part of the gap.

Gary Swidler:

Yes. So it's a good question. We have relatively consistent RPP in APAC compared to the Americas and Europe which is really a reflection of a couple of things. One is that Pairs in Japan is our highest RPP dating business. So that's definitely helping on the RPP and APAC. And then we actually have relative price parody between Tinder and APAC and our other geographies. So you don't see much of a disparity. And so those two things taken together as a result, APAC, RPP is pretty similar to the rest of the world. As far as kind of what the mix is, Pairs tends to be a subscription business as does Tinder in APAC today. However, as we've talked about, we're experimenting with ways to increase the a la carte consumption at Tinder through virtual currency and other product innovations. We're early days for all of that, but we think we can improve payer penetration by adjusting our monetization strategies. And so that's something that you may very well see over time.

Gary Swidler:

Sure. Next question, please.

Dan Salmon:

Hey, good morning, everyone. I jumped on a little bit late. So hopefully this one wasn't covered. But I just wanted to follow up on one of the comments in the letter where you spoke about the HyperX Group at Hyperconnect. Sounds like a little bit of a lab and I'd love to learn just a little bit more about some of the products that are working on currently about the group itself. Maybe broad strategic goals, number of employees. And is that the type of thing that you see as new and incremental to Match that Hyperconnect brings as well?

Dan Salmon:

That's great. Thank you, Shar.

Shweta Khajuria:

Okay. Thank you. Could you please help us understand the guidance for Hyperconnect piece? So, at the time of acquisition we were expecting about 40% to 50% growth, the revised guidance is slightly less than that. You called that pull back from COVID. Any additional color, is that just COVID? Is there a level of conservatism there? And then the follow-up to that is how are you expecting to manage costs at breakeven for the back half, but any additional color on the potential of EBITDA margins for that business would be great? Thank you.

Shweta Khajuria:

Okay. Thanks Gary.

Operator:

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

Shar Dubey:

Sure. Thanks Justin. I can take this. So, with these established brands, there are a few different stories here. Keep in mind the established brands used to be desktop first brands and they have all reimagined the product as mobile first experiences. And some of them like Match and Meetic, for instance, have shifted their business model from the hard paywall to more premium experiences, which has meaningfully increased engagement and conversion. And apps like POF have added new experiences like POF Live, which has created a new revenue stream. OkCupid continues to expand to new international markets. And generally, they've also sharpened their marketing to become more resonant and relevant to their core audience. So now as they continue to execute, they should be able to expand the category and their core user base and deliver modest growth we think.

Operator:

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

Gary Swidler:

Sure. So, on the Google fees in the fourth quarter, I think, what we said previously is that where we ended up on the, our EBITDA ranges would be impacted on whether the Google change actually occurred or not. And at this point, they've now, about a few weeks ago, they basically said they are pushing back the deadline for compliance until March 31, next year. So that cost is obviously not going to hit us in Q4. And so now what we've done is we've given a more up to date EBITDA outlook the rest of the year, which reflects a lot of puts and takes. You've got the legal and GR costs that you mentioned, and there's more things moving around in there and then Google is not in there anymore. And so, this is our kind of our latest and greatest with everything we know sitting here today, factored in. Frankly, I don't know for sure if that $15 million of extra-legal and GR is going to get spent. But we've embedded it. So, I think the costs are relatively fully loaded at this point for the rest of the year. Then in terms of potential workarounds, we continue to talk to Google, we have a good relationship with them, it's very collaborative. And so, we'll see how that all evolves. That being said, as you probably know, there are many, many investigations, and lawsuits and regulatory actions around the world in many jurisdictions, in many countries related App Store practices generally. And so, as a result of that we're increasingly optimistic that there's going to be a change in App Store policies one way or another at some point in the not-too-distant future. And so, we'll see where we are, as time progresses and we'll keep everybody updated on our latest thinking on this. As far as the Tinder former employee litigation goes, ultimately, it's an ongoing litigation, so there's not too much that we can really provide in terms of details on that. What I can say is that we ran a process that involved two globally recognized, highly regarded investment banks that listened to everything that was now plaintiffs in this case had to say about the business, went through an exhaustive analysis and those banks ultimately came up with a valuation of Tinder at the time that was in line with where Wall Street analysts, like those who are on the phone thought Tinder was valued. So, it wasn't particularly surprising from that standpoint. And so, we're confident in our case and that we think their case is completely meritless. And so, we're looking forward to getting to the trial later in the fall and fighting this to the end. And so that's our plan and we remain optimistic.

Operator:

And the last questionnaire today will be John Blackledge with Cowen. Please go ahead.