Match Slumps as Forecast Disappoints on Covid Drag in Asia

(Bloomberg) -- Match Group Inc. forecast growth through the end of the year that missed analysts’ estimates, citing lingering Covid effects in Asia, particularly in its second-biggest market of Japan. 

The Dallas-based company said it expects fourth-quarter revenue of $810 million to $820 million. That compares with the average analyst forecast of $838 million, according to data compiled by Bloomberg. Adjusted earnings before interest, taxes, depreciation and amortization will be $285 million to $290 million, according to a statement Tuesday. Analysts had projected $285.5 million.

Match said it expects to see improvement “as mobility restrictions lift, vaccine levels continue to rise, and case counts fall.” The shares tumbled 5.4% in extended trading.

The dating-app giant, which owns brands including Tinder, OkCupid and Hinge, was forced to pivot during the pandemic as lockdowns early in the Covid-19 outbreak all but eliminated in-person socializing. That led Match to enhance its digital experience and simulate offline encounters with features like video and audio. 

Expanding its offerings beyond just swiping through pictures of potential mates has helped Match to remain nimble even as in-person activities have resumed. Match has been incorporating new features to spur users to spend money in the apps, such as a new digital currency in Tinder for people to buy perks meant to increase their chances of meeting someone. 

The Dallas-based company has also been branching out beyond romantic relationships to platonic ones, purchasing South Korean video technology company Hyperconnect, which specializes in video and audio and is seen as more of a social media app. In the third quarter, Hyperconnect added $53 million of revenue, Match said, but didn’t perform as well as expected. Hyperconnect’s main revenue generating app Azar faced “some unexpected headwinds in 2021, including a worsening of the pandemic” in key Asia Pacific markets, which led to changes in user habits and some delayed product initiatives, Match said.

“Based on the current trends and our strategic direction at Hyperconnect, we have reduced our full year expectations for Hyperconnect’s revenue contribution by about $20 million,” according to the statement.

Match is also grappling with recent changes to Google and Apple Inc.’s app stores. The company didn’t give a forecast for fiscal year 2022, saying it wanted to see how the app store policies evolve, “in light of the significant ongoing legislative, regulatory and legal activity on this topic in jurisdictions across the globe.”

Google announced last month it was lowering the fees on the app store for mobile developers to 15% from 30% on subscription-based products. Apple also charges 15% for subscriptions after the first year, but hasn’t lowered the cut from 30% in year one. Since Match monetizes many of its apps through subscription services, this change could have a significant effect on its bottom line. Chief Financial Officer Gary Swidler has said fees to Apple and Google for the app stores are the company’s biggest expense. 

The company paid more than $550 million in fees to the app stores in 2021, according to a letter to shareholders. “We’re starting to see improvement in the fairness of the app ecosystem, but there is still a long way to go in this effort,” Chief Executive Officer Shar Dubey and Swidler wrote in the letter. 

In the third quarter, Match said revenue rose 25% from the same period a year earlier, in line with analysts’ estimates for $802 million. The company reported earnings of 43 cents a share, missing analysts’ forecasts for 49 cents. Match attributed the miss to a one-time loss linked to refinancing debt. 

Tinder, Match’s star property, reported direct revenue grew 20% from the same period last year to $434 million. Match said the numbers of payers across the company increased 16% to 16.3 million. 

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