Match Group Inc. Earnings Fueled by Tinder's Explosive Growth

By Markets Fool.com

Image source: Match Group.

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Match Group (NASDAQ: MTCH) reported second-quarter results on July 26. The world's leading provider of online dating products enjoyed solid increases in sales and profits as its dating apps continue to surge in popularity.

Match Group results: The raw numbers

Metric

Q2 2016

Q2 2015

Growth (YOY)

Revenue

$301.119 million

$248.817 million

21%

Adjusted EBITDA

$100.120 million

$63.448 million

58%

Adjusted Net Income

$46.625 million

$33.166 million

41%

YOY = year over year. Data source: Match Group Q2 2016 earnings.

What happened with Match Group this quarter?

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Total revenue rose 21% year over year to $301 million, fueled by a 40% increase in international revenue.

Dating revenue jumped 23% to $275 million, driven by the strong growth of Tinder and Match's recent acquisition of PlentyOfFish. Non-dating revenue, however, was flat at$26 million, mostly due to tepid sales of SAT test preparation courses at The Princeton Review.

Average paid member count (PMC) jumped 30% to 5.3 million. Yet average revenue per paying user (ARPPU) declined 5% to $0.55, mostly due to the growth of Tinder and PlentyOfFish, both of which have lower price points than most of Match Group's other brands. Still, ARPPU was up sequentially compared to the first quarter of 2016, as a new premium version of Tinder boosted Match's ability to better monetize the highly popular app. Tinder is still on track to double its paid member count to roughly 1.6 million by the end of the year, according to the company, which noted Tinder ranked No. 5 by revenue among non-game apps in the iOS and Google Play stores in June.

EBITDA (earnings before interest, taxes, depreciation, and amortization) -- adjusted to exclude stock-based compensation expense, acquisition-related costs, and other special items -- surged 58% to$100 million. Adjusted EBITDA margin also improved to 33% compared to 25% in the prior-year period, aided by a decrease in sales and marketing expenses as a percentage of revenue as Match Group's sales continue to shift toward brands with lower advertising requirements.

All told, adjusted net income leapt 41% to $47 million. Adjusted earnings per share, however, fell 11% to $0.17 as a result of a 57% rise in share count from the year-ago quarter.

Looking forward

Match Group expects third-quarter dating revenue to grow 2% to 3% over Q2, with EBITDA margin of 35% to 37%, while fourth-quarter dating revenue is projected to increase by 4% to 6% sequentially, with EBITDA margin "in the mid-40s% range."

Match Group also reiterated its full-year guidance for dating revenue of $1.1 billion to $1.14billion. However, the company lowered its outlook for overalladjustedEBITDAto$400 million to $415million, down from previous expectations of $410 million to $425million, due to higher anticipated operating expenses related to increased growth investments in Tinder.

"Q2 showed solid performance, with 23% Dating revenue growth, operating income of$74 millionand total Adjusted EBITDA of over$100 million," said Chairman and CEOGreg Blatt in a press release."We continue to execute against our plan, with exceptional growth at Tinder and solid performance by Meetic, Match and PlentyOfFish."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Match Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.