Match Shares Plunge After Disappointing Revenue Forecast

(Bloomberg) -- Match Group Inc. missed revenue estimates in the fourth quarter and gave a disappointing forecast for the current period after Apple Inc. made it easier for daters to cancel their subscriptions. The shares tumbled as much as 7.5%.

The Dallas-based owner of some of the world’s most popular dating apps reported revenue of $547.2 million for the three months ended Dec. 31, missing the average analyst estimate of $552.9 million, according to data compiled by Bloomberg. The company said first-quarter revenue will be $545 million to $555 million, below Wall Street’s projections of $562.2 million.

It was the second consecutive quarter Match delivered a disappointing revenue forecast. Chief Financial Officer Gary Swidler told analysts on a conference call Wednesday morning that the company’s revenue was negatively impacted by software upgrades in Apple iOS devices that streamlined the cancellation process for apps.

While users of subscription businesses such as Netflix rarely delete their apps, people tend to ditch dating apps once they start seeing someone seriously. As a result, Apple’s software updates hit Match harder than others in the app economy.

“Canceling is basically a switch of a button now,” said Evercore ISI analyst Benjamin Black. Streamlining the cancellation process led to earlier account terminations which would have otherwise been spread across the course of the year, Black said.

Swidler expects the changes to impact revenue in the current period, but said it would dissipate beyond that.

The disappointing revenue forecast comes as Match faces multiple legal battles, government investigations on two continents, a surprise leadership change and a looming spinoff from its parent company IAC/InterActiveCorp.

In November, Swidler said mounting legal costs were denting profit. Last year the company spent about $40 million on legal costs, up from $15 million in 2018 as it sparred against rivals, ex-employees and government agencies. The company expects its legal costs will increase primarily in the first half of this year and said it also plans on ramping up marketing spending in Asia.

One ongoing bright spot for Match is its star-performer Tinder, which introduced “swipe left” and “swipe right” into pop culture vernacular. Tinder pulled in $1.15 billion in revenue for 2019, which is more than half of Match’s total $2.05 billion in revenue for the year. Tinder’s direct revenue grew 39% in the fourth quarter, boosting its total global subscriptions to a record 5.9 million, the company said.

As the world’s biggest online dating provider, Match runs about 45 different dating brands, including Hinge, Plenty of Fish and OkCupid. To fend off global competition, Match has been expanding in Asia, acquired a local app in Egypt and launched expensive marketing campaigns in South Korea and India. Match has tried to tailor its products to each culture, hiring local general managers and tweaking its North American-based apps for new audiences with different traditions and tastes.

The company reported overall average subscribers grew to 9.8 million in the fourth quarter, a 19% increase from the previous year. One of its apps, OkCupid, has fielded strong growth in India, reporting eight consecutive quarters of year over year revenue growth, the company said. OkCupid will begin new marketing investments in the U.K., Australia, Indonesia and Malaysia.

In a surprise announcement last week, Match Chief Executive Officer Mandy Ginsberg said she would step down due to personal challenges, with the company’s president Shar Dubey taking over on March 1. On the conference call, Dubey told analysts: “My taking over does not change the core strategy.”

One of Dubey’s first tests will be to oversee Match’s planned spinoff from the media and internet conglomerate IAC/InterActiveCorp. The move will result in the full separation of the two companies and is expected to be completed in the second quarter of 2020.

She’ll also have to oversee three lawsuits Match is involved in in the U.S. It’s being sued by the Federal Trade Commission for deceiving consumers with fake accounts; by Tinder’s founders for allegedly misleading them on the app’s valuation; and it’s suing rival dating app Bumble, claiming it stole intellectual property. Match is also under investigation by Ireland’s data protection commission for sharing user data across its various dating brands.

So far Match has seemed to navigate the challenges it’s facing. The stock has gained about 50% over the last 12 months. Earnings per share were 45 cents in the fourth quarter, up from 39 cents a year earlier.

Match has said it will build new photo verification tools and harassment detection services to try to strengthen the safety features on its apps throughout the year.

©2020 Bloomberg L.P.

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