Good morning and welcome to the Match Group Third Quarter 2019 Earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Lance Barton, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Thanks Operator. Today’s call will be led by CEO Mandy Ginsburg and CFO Gary Swidler. They will review the third quarter investor presentation that’s available on our website and then answer questions. Before we start, I’d like 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 risk and uncertainty 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. Now over to you, Mandy.

Thanks Lance, and good morning everyone. Welcome to our 2019 third quarter earnings call. Our growth accelerated in Q3, which is our strongest quarter yet in what has already been an extremely successful year. Not only has the team driven phenomenal results, we have the scale, margin profile and diversity of brands to deliver record results while at the same time making new bets and investments that we believe will drive strong and consistent growth in the future. Before I take you through some of these growth initiatives, I want to briefly touch upon IAC’s proposal to fully separate Match Group from IAC. As you know, our board has formed a special committee of independent directors to evaluate IAC’s proposal. A summary of that proposal and the expected process going forward were outlined in a 13D filed last month on October 11. Unfortunately, there’s not really much we can say until the committee has agreed with IAC on a structure that they are ready to recommend to the interested shareholders of Match Group, so on this call we can’t really comment on the transaction; but of course, we can comment on our great results. With that, let’s jump right into the presentation, starting on Slide 3. You’ve heard me say the key objective for Tinder is to deliver an effective, engaging and fun core experience for all of our users on the app. That core experience is a fundamental driver of user retention and engagement which ultimately leads to better user outcomes, meaning more matches, more dates, and more relationships. In addition, we have focused on monetizing opportunities that will give users tools they find valuable and are willing to pay for because they provide a more efficient and effective experience on Tinder. Slide 3 illustrates how Tinder’s core experience…

Thanks Mandy. As you said, we had another terrific quarter in Q3 with accelerating growth on top and bottom lines, continued excellent performance at Tinder, and improvement in non-Tinder subscriber trends. We’re progressing on our strategic plan to position the company for consistent strong growth. This year, we’re making a significant amount of product and marketing investments that we believe will drive sustained, long-term global growth for the company through newer bets and by improving the performance of more mature brands. Even with these investments, we’re on track for extremely solid financial performance in 2019. Let’s get into the details for the quarter, then I’ll update on our financial outlook. On Slide 8, we review Tinder performance, which continues to shine. Q3 year-over-year growth in direct revenue of 49% accelerated from 2Q19 driven by 38% growth in average subscribers and 9% growth in ARPU. A big driver of Tinder’s growth in the quarter was the Gold homepage redesign, which was released on Android in July following its success in iOS. That helped drive a sequential increase of 437,000 average subscribers in Q3. Tinder remains on track to add approximately 1.6 million average subscribers this year, which will be our highest ever annual total. Much of this growth has been driven by a long list of new product features and optimizing existing paid features rather than one large new revenue feature. This success clearly demonstrates what we can do on a platform of Tinder’s scale. Underlying Tinder’s continued growth is an extremely active and engaged ecosystem of users, both free and paid, which Mandy highlighted earlier in the call. On Slide 9, you can see the year-over-year growth in average subscribers across the company’s brands accelerated in Q3 with overall average subscriber growth of 19%, a point better than in 2Q19.…

[Operator instructions] Today’s first question comes from Mark Kelley of Nomura. Please go ahead.

Good morning, thanks for taking my questions. The first one, can you just give us a little more color on the mix of discretionary and legal or regulatory expenses in 2020? I’m just curious what’s keeping margins flat next year. A little more color there would be helpful. Then second, and it’s related, I’m curious what Tinder margins would look like both this year and then what you would expect in 2020, just to give us a sense of the leverage that’s in the model excluding some of your long-term investments in newer bets. Thanks.

Sure. Let me give that a shot. There’s a lot of moving pieces on the margin, so I’m going to try to walk you through it relatively clearly, and hopefully this will be helpful. When you look at what’s happening for 2020, you’ve got a couple of big things that are helping give us improving margins. The most notable, of course, is that the Tinder business is becoming a bigger piece of the overall pie, and Tinder has higher margins than our other brands in aggregate and so we get a lift from having a bigger piece of the business be Tinder. I’ll talk about Tinder margins in a second, which was kind of the second part of your question. We’ve also talked previously about giving users a choice on Tinder on Android of credit cards or using their billing system, and given that, we’ve seen some improvement from a margin perspective as users have chosen to pay with credit cards on Tinder. Those two things are helpful to our margins in 2020. On the other side of the equation, we’ve got a number of things, some of which are discretionary and some of which aren’t, that are impacting margins. Most notably, and kind of the simplest one, is legal and the spinoff costs, and I’ll come back to legal. The spinoff costs, if the spinoff goes through, we’re saying we’re going to have $10 million of costs next year related to the spinoff - that would happen in 2020 or not, and then obviously that wouldn’t occur again beyond that. On the legal side, if you look at the trends in legal, our legal costs this year are jumping significantly from last year. In 2018, we had about $15 million of legal fees. This year, we’ve got about $40…

That was all very helpful. Thanks Gary.

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

Thanks. Only a few questions. One, obviously investors are trying to understand the fourth quarter Tinder guide. You did comment about this change that Apple made which was impacting re-sign ups, so maybe if you can elaborate a bit more there, and then just what other information do you have that it’s not due to Facebook Dating? We know you put out information about Canada, but any other information you want to put out there around your thoughts around Facebook Dating. Then secondarily, marketing is kind of at a record low as a percent of revenue. I think this was the second lowest quarter as a percent of revenue in the last three years. Do you need to invest more in marketing, and just maybe elaborate there. Thanks.

Okay, let me take the Facebook one first, and Gary can chime in on the other questions. When Facebook launched Dating, we told you all on this call that we did not think it would impact our business, and that is turning out to be true. Facebook rolled out in the U.S. and we’ve seen zero impact in our business, especially at Tinder. Facebook at this point is rolled out in about 20 markets starting last year, and we’ve obviously been studying and watching these markets really closely and we haven’t seen any impact in any of our KPIs across the globe. Then when Facebook launched in Canada about a year ago, we thought this was a great way to get a proxy for the U.S., so we’ve seen that now, those trends for the last year, and we’ve seen no impact in the Canadian market, so we’re feeling good from a competitive aspect at this point but we’ll continue to watch. Keep in mind, during this past year when Facebook launched in all these markets, this is also when Tinder’s growth has been accelerating globally. The only other thing that I wanted to mention is the Q4 Tinder net add expectation is not affected by Facebook at all. We see, as Gary had mentioned, that this is an increased level of terminations by iOS related to the changes at Apple, but we’re not seeing this effect on Android nor on new subscribers, so to date we still see very--no impact, and we’ll continue to keep you all updated, but we do feel good from a competitive standpoint.

Yes, I think that’s all right. It’s important to understand that what we’re seeing in terms of Tinder subs for Q4 is basically what we’ve been expecting the entire year. We had a product plan at Tinder which we’ve been executing on. We talked about 1.6 million net adds for the full year or thereabouts, and we’re on track to deliver something very close to that. There is a little bit of a pull forward of terminations, as Mandy said, on iOS at Tinder and some of our other brands from the changes that Apple made, so that is affecting the sub number a little bit in Q4, but that is really, I think, the only thing that’s going on that was not expected by us all along in this year as we planned Tinder sub additions. That’s the one item, but again I think it’s mostly a pull forward probably into a little bit in Q4, probably lingers into Q1, and then I think you’ll see that effect on the Tinder sub numbers and the overall sub numbers dissipate a little bit. As it relates to the Tinder sub outlook, that’s kind of the pieces of it. It’s certainly not related to Facebook or competition in any way. I think if you look at the overall fourth quarter outlook that we provided, there’s really two things that are, I think, affecting where we thought we’d be back in August versus where we are now. I think the first is FX, which I called out in my remarks. That’s probably on the order of $6 million incremental negative versus where it was three months ago related to Brexit and the euro and the pound against the dollar. That’s one piece of it, and there’s probably some small impact from the…

Thank you.

Our next question comes from Ross Sandler of Barclays. Please go ahead.

Hey Gary, just one on the 2020 revenue outlook. Tinder obviously continues to perform very strongly right now, and from your comments, into the future. What level of Tinder PMC net adds are baked into the 2020 guidance? How do we bridge the 49% growth you’re seeing right now with this mid to high teens revenue guidance as that becomes a bigger part of the business, and are you expecting the decel to come from Tinder or some of the other brands? Any color there would be helpful, thank you.

Okay, sure. If you look at what we’re expecting for next year, I think that Tinder will probably add, in terms of order of magnitude, a similar amount of revenue in 2020 over 2019 that it’s adding dollars-wise, 2019 over 2018. We think that will be very similar, but obviously since it’s off a bigger base, the growth rate will be lower in 2020 for Tinder than it is in 2019. That’s just math. That’s a piece of it, and then on the other side of the equation, we are increasingly confident that the rest of the brands in aggregate are going to start to deliver some growth for us on revenue in 2020, so I think it will be modest at first but we believe we are approaching the point where the other brands are going to contribute, and so if they add a little bit of growth, that is what gets us into that mid to high teens growth rate overall for the company. That’s kind of the mix - still very strong growth at Tinder, but a lower overall growth rate off the bigger base, and a little bit of contribution from the other brands. I think that that is really the dynamics around our growth outlook on the top line for next year. In terms of the Tinder subs for next year, we haven’t really provided yet an outlook on that, and there’s a few reasons for that. I think as we’ve said many times, and I guess I’ll say it one more time here, we don’t focus solely on Tinder subscriber net adds. We focus on driving Tinder revenue, which I just told you what we think we can do next year in that regard, and we get it through a mix of ARPU improvement…

No, that’s it.

Okay, thank you very much. Next question, please?

Yes, sir. Our next question comes from Brent Thill of Jefferies. Please go ahead.

Good morning. Ninety-five thousand non-Tinder sub adds in 3Q, that’s the best we’ve seen in a while. Can you just talk through the specific brands that drove that strength, and given there was strength there, why didn’t it have a bigger impact on the top line?

Sure, okay. Well, thanks for pointing out certainly one of the brighter spots in our earnings report, I think, from this quarter. We believe that the non-Tinder brands really did turn the corner in Q3, and that’s why we have confidence that those brands are going to grow in aggregate in Q4 and into 2020. You pointed out the 95,000 sequential additions, which is notable, as you say, and I think the important thing to understand is we’re getting contributions to that number from a broad number of brands. Hinge is clearly a big contributor, OK Cupid is a big contributor, the new bets in BLK and Chispa are contributing, our Meetic business is contributing, so it’s a number of brands within the non-Tinder group that are really contributing. Our goal is to keep widening that out, and I think we’re on track to do that. The reason that you don’t see as much revenue flow through as you might expect, given those subscriber trends, is a lot of those brands are still very early in their monetization trajectory. We’ve talked about this before a little bit related to Hinge, which we think there’s a lot to go in terms of monetization. It’s not something we’ve turned our attention to, but we are now starting to turn our attention to it, so that is on the plans for 2020. I think that as Hinge continues to grow users, it will grow subscribers as it’s been doing. As we adjust monetization, it will start to contribute much more to the overall revenue pie at the company, and the same is true for some of the other brands as well. Those brands are just in different phases of their development, and as I said earlier, when we’re investing--when I explained why we’re investing in these brands, we see the clear user growth, the product momentum, and now we need to turn our attention to monetization, to subscriber and revenue growth. That’s what naturally comes next. You’ve got to take this all one step at a time, and we have a playbook that we’re following for these brands. We’re going to bring that playbook next to Hinge in a very significant way, and we have a lot of confidence that we’ll be able to do what we need to do to drive monetization at those brands.

Thank you.

Our next question today comes from Eric Sheridan at UBS. Please go ahead.

Thanks so much for taking the question. Maybe going back to the commentary from Mandy on the video side and the rollout of the product that drove engagement in the quarter, can you put a finer point on some of the learnings there in terms of return you think you got on the spend around that product, how global could become in terms of being rolled out, and are there other products like that or additional investments you want to make not only within Tinder but maybe across a broader portfolio of brands and GOs as you think about what it might do for engagement maybe in the long term? Thanks so much.

Okay great, thanks Eric. The Swipe Night content that we developed was really focused on that Gen Z audience and we saw it really resonated with that particular audience. In addition, it’s kind of an interesting way to capture a user’s personality and get people to engage an strike up conversations right on the app, and so we think that, one, as I’ve mentioned, we saw increased engagement, we saw increased communication, we saw increased conversations, we saw an increase in women engagement, so all of these things are really healthy and good for the ecosystem. Then outside of what’s happening on the app, we just saw a tremendous amount of buzz, which we think will continue to keep Tinder in the dialogue and make it fresh and young and relevant, and really addresses this audience that--you know, it needs to make sure that Tinder stays relevant in this community. We also think that the short interactive miniseries, it could work in international markets, so we’re excited to see what happens when we launch the series outside the U.S., which we’re planning on doing next year, so more to come on that. But given what we saw in the U.S., we think that this is definitely going to be relevant outside of the U.S. Then taking a step back and looking at video and video content across our other products, we are exploring video content as engagement drivers in a variety of different ways on our other platforms. I talked a little bit about live streaming today. What I like about the live streaming test is that users will have the ability not just to engage with the broadcasters but also to talk to other daters as well, so you can imagine where a broadcaster might be talking about music or recipes, people can actually comment not just to the broadcaster but to each other, so we think that that content could create engagement and more of a community. So, look - it’s a little bit early on some of these video initiatives, but at the end of the day we want to make sure that people have a reason to keep coming back and have a reason to strike up conversations, because ultimately that will drive success. As we roll these out, we’ll be letting you know how that’s going. Okay, next question?

Yes ma’am. Our next question comes from Nick Jones at Citi. Please go ahead.

Hi, thank you for taking my questions. As you invest in some of the newer brands and in maybe more conservative regions, like APAC and EMEA, are there any differences in the funnel, in the perception trends? I guess the separate perception of using online dating and then the perception of using it and then into paying, ultimately does the funnel look the same in these newer markets or newer regions that are more conservative than it does in the U.S., and can your marketing machine operate the same way there as it does in the U.S.?

Okay, let me take that one. If you think about more developed markets like the U.S. and Western Europe, we see about half the addressable market, half the singles have tried a dating app, and then in the regions that you mentioned, we see that percentage much less. There is higher stigma, so that’s part of the reason, and there is lower category usage, but that is changing and we see that changing pretty rapidly. If you think about that addressable market, it’s huge. These are young populations that high mobile internet--they have high mobile usage and high internet usage, and they are starting to date and their parents are less involved, or becoming less involved in their dating behaviors and their choices for partners. We think that this social change that’s happening across this region is a big tailwind for us in the category and the next three to five years, we’re going to see that shift accelerating. One of the reasons that we invested in Harmonica was for that reason. Harmonica is just one example where we see that there’s this need for a young Muslim demo; in fact, the entrepreneurs that started Harmonica started it because their friends and family members felt a lot of pressure to have an arranged marriage and they didn’t feel comfortable with arranged marriage, so they thought this was a great option for serious minded Muslims, which is a huge addressable market across EMEA and APAC. You asked about different penetration rates. There are definitely markets where monetization is higher than North America and Western Europe. Japan is one of these examples, so high ARPU but low penetration because there’s still a lot of stigma, and that’s changing. Then there are also markets where there is lower levels of monetization but huge TAM, and so we think in both these cases there is growth opportunity for us and we want to capitalize on both of these, so we’re pretty bullish. Obviously in these markets, we said recently that in five years, 25% of our revenue would come from these regions, from APAC, and when we announced that, we were about 12% and now couple quarters later we’re about 15%, so we’re definitely marching along that path and we continue to see opportunity there.

Great, thank you.

Today’s final question comes from Benjamin Black of Evercore. Please go ahead.

Thanks for the question, guys. I was wondering if you could perhaps comment on the trajectory of cost of revenue as we look to fiscal 2020 when you consider the mix shift to Tinder and Hinge perhaps offset by the Android app fee bypass. Separately, I’m wondering if you could perhaps comment on the Android subscriber trends post the Gold redesign. Thank you.

So just taking the last part of your question first, on the Android sub trends, we delivered 437,000 sequential adds at Tinder in Q3. We had been expecting just above 400,000, so we actually are very pleased with the way the quarter went in general for Tinder as well as specifically the impact of the redesign on Android, because I think the number speaks for itself - we exceeded the expectations that we had set out. We feel very good that that went better than planned and are very pleased overall with the Q3 performance of subscribers at Tinder. In terms of the cost of revenue, there are two or three items that I want to call out. On the positive side, we’re getting benefit from more and more users at Tinder on Android paying by credit cards. As we’ve said before, we think providing users a choice makes sense. Obviously the users see benefit in that because the take rates on the credit card payment method are strong at Tinder, so that is giving us benefit in terms of cost of revenue. In terms of other things that are going on, though, that may make that benefit less visible as you read our reports, there’s two things really going on, one which I alluded to in the answer to the first question on the call. Tinder is spending more on tech infrastructure as it expands more globally, to serve that more global customer base, so that is appearing also in cost of revenue and is somewhat of an offset to the benefit we’re getting from the Android credit card, so that’s one piece of it. The other thing, which I alluded to as well in that question earlier in the call, related to other brands besides Tinder moving more of their user base to apps, so we’re seeing a higher percentage of revenue being paid to app stores as a result of more of our other users coming on and subscribing through the App Store. Those are the kinds of puts and takes inside the cost of revenue line, and that’s why it had been increasing pretty significantly over the last eight quarters, or maybe even longer. It has kind of stabilized at that point because there are pluses and minuses, or benefits and offsets going on within that line, and I think that’s an important trend overall to understand in the business.

Great, thanks.

I think we have to leave it there. I think we’re basically out of time. We appreciate everybody joining. Obviously lots of moving pieces and we tried to take you through it all as clearly as we could, but we feel great about the quarter, we feel great about the momentum that the business is showing. We are in great shape as we turn the corner from ’19 into ’20, and we look forward to talking to you all on our February call. Thanks very much.

Thank you, sir. Today’s conference has now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines.