A month has gone by since the last earnings report for Match Group (NASDAQ:MTCH). Shares have added about 1.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Match Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Match Group Beats on Q3 Earnings & Revenues
Match Group reported third-quarter 2019 adjusted earnings of 51 cents per share, which surpassed the Zacks Consensus Estimate of 47 cents. The bottom line also improved from 39 cents reported in the year-ago quarter.
Revenues of $541 million climbed 22% year over year and beat the Zacks Consensus Estimate of $533 million. Excluding the effect of foreign exchange, the top line was up 24% year over year. The increase was primarily driven by an improvement of 19% and 4% in average subscriber base and Average Revenue per User (ARPU), respectively.
Further, robust Tinder average subscriber growth (up 38% year over year) positively impacted the quarterly results.
Quarter Details
Average subscriber base and ARPU were 9.6 million and 59 cents, respectively, at the end of the reported quarter. North America subscriber base increased 10%, while International advanced 29%. Growth in ARPU was driven primarily by strength in both North America (up 5% year over year) and International (up 3%).
In the third quarter, Tinder average subscribers increased 1.6 million year over year and came in at 5.7 million. Sequentially, the same increased 437,000 ARPU. This primarily came on the back of higher number of Gold subscribers.
Direct revenues from Tinder grew 49% year over year, primarily backed by a 38% increase in average subscriber growth and 9% rise in ARPU.
Adjusted EBITDA was $206.1 million, up 25% year over year. Adjusted EBITDA margins came in at 38%, down 100 bps year over year.
Total cost and expenses as a percentage of revenues decreased 100 bps year over year and came in at 67% in the reported quarter.
Operating income advanced 26% from the year-ago quarter to $176.6 million. Moreover, operating margin expanded 100 bps to 33%.
Balance Sheet
Match Group exited the third quarter with cash and cash equivalent balance of $366.4 million, up from $266.4 million reported in the previous quarter. The company had long-term debt of $1.6 billion flat from the previous quarter.
Cash flow from operations was $472.9 million during nine months ended Sep 30, 2019. Free cash flow came in at $442.8 million for the year-ago comparable period.
During the reported quarter, the company repurchased 1.4 million shares at an average price of $75.91 per share. The company had 9.9 million shares remaining under the previously announced share repurchase program.
Guidance
Match Group anticipates fourth-quarter 2019 revenues between $545 million and $555 million. Tinder remains the key catalyst.
Adjusted EBITDA is anticipated to be in the range of $205 million to $210 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Match Group has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Match Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Match Group, Inc. (MTCH): Free Stock Analysis Report
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