Good day, and welcome to Match Group Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tanny Shelburne, SVP of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim; and President and CFO, Gary Swidler. They'll make a few brief remarks, and then we'll open it up for questions. Before we start, I need 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 risks and uncertainties, 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. With that, I'd like to turn the call over to BK.

Thanks, Tanny. Good morning, everyone, and thank you for joining today's call. As we look back on 2022 and our Q4 results, it's clear that the year was challenging and our performance fell short of our expectations. But this is an organization that is not okay with missing our goals. And while the business continues to exhibit strong fundamentals and financial discipline, we have taken decisive steps, including restructuring for increased accountability and collaboration and recruiting key talent to set us up for long-term growth and maximize profitability. As I've previously shared during my first few months on the job, I went on an intense listening tour across Match Group. I've spoken to leaders and employees from all layers across the organization as well as users across our portfolio to identify opportunities and pain points. One thing that was very obvious is that this organization welcomes change and embraces the cultural shift that is required to drive shareholder value, while serving our mission to create real and meaningful connections every day. The changes we made at Tinder have allowed it to quickly regain footing and prioritize product momentum. The results are evident in Tinder's 2023 roadmap and improved execution. No other brand in the category has the virality, the reach and the scale that Tinder has. While it might take a few quarters, I'm confident by shoring up the talent there and judiciously investing in the team and the brand that we're going to accelerate Tinder's momentum and get us back to the financial performance that we all expect. I remain the Interim CEO of Tinder and key senior leaders continue to report directly to me. I'm encouraged by the progress that Tinder has made both culturally and in terms of execution. In fact, in the second half of the…

Thanks, BK. I feel great about my role and the other org changes we've made and think the hiring of Will Wu will be terrific. I'm very much looking forward to working with him and to continuing to see the company build its momentum. Now let me get into the numbers. As BK said, while not at the standards we hold ourselves to, our Q4 2022 total revenue was in line, and our adjusted operating income exceeded the expectations that we set forth in our last earnings call. Total revenue was $786 million, down 2% year-over-year. FX was a notable headwind once again. Our total revenue would have been $846 million, up 5% year-over-year on an FX-neutral basis. The FX headwind was less than we expected when we provided our outlook on our November earnings call, but that was offset by slightly more business weakness than we had forecasted primarily in Europe. Our direct revenue was down 2% year-over-year. It grew 2% year-over-year in the Americas with growth at Tinder, Hinge, BLK and Chispa but declines at the Evergreen Brands, which include Match, Plenty of Fish and OkCupid. Direct revenue declined 4% year-over-year in Europe but was up 8% on an FX-neutral basis driven by Tinder and Hinge with weakness at Meetic. Direct revenue declined 9% year-over-year in APAC and Other, but was up 9% on an FX-neutral basis driven by Tinder. Total payers were 16.1 million, a decrease of 1% year-over-year. Payers were down 2% year-over-year in the Americas, down 4% in Europe and up 6% in APAC and Other. Tinder payers globally were up 3% year-over-year, while All Other Brands were down 8% in aggregate. Q4 RPP was down 1% year-over-year at $16. RPP was up 4% in the Americas driven primarily by higher average prices paid for…

[Operator Instructions] The first question today comes from Ygal Arounian with Citi.

I want to ask about Tinder, and you spent a good amount of time in the investor letter talking about the Tinder product roadmap. And maybe you could just dig in a little bit deeper on that. And you mentioned you're starting to execute on that roadmap, maybe some kind of practical examples of that and highlight where we are and how much there is left to get through this year? And then second question on Tinder. And you talked about the three components of expanding the core experience of deeper engagement, broadening monetization and then optimization. You highlighted that optimization is going to drive 2/3 of Tinder's revenue growth in 2023. Just can you expand on that a little bit, why that's happening? And how we can expect the other two components to contribute to revenue growth over time?

Thanks, Ygal. I can take that one. It's been pretty clear when I joined last May that I wasn't happy with the state of the Tinder roadmap. So we moved quickly, and we made changes to the team. And we pushed really hard over the next six months thinking about our product roadmap and where we want to take the business. It was important to lock a roadmap that everyone was aligned on. We focused on two key areas: experience for our daters on our platform and future areas for monetization. As we are laying out the product roadmap, we actually found some problems in the foundation that we had to prioritize and fix. So the team rallied quickly on focusing on that. Our emphasis has always been on the health of our ecosystem, given that these foundational improvements will lead to better user experience, enable further monetization. Unfortunately, we head into 2023 with less momentum than what we would like. But as we build momentum in the first half of the year, it sets us up for a second half of the year for accelerated growth. The chart that we included in the letter actually shows a challenging environment that Tinder was facing. À la carte revenue was under significant pressure, given the macro environment. But I'm really proud of the way that the team moved really quickly and coming together with solutions to offset this weakness. In fact, they did it in three ways. Number one, they changed the merchandising approach around ALC, which was no longer working in this macro environment. Number two, they rolled out Primetime Boost. And number three, they rolled out a new optimization called Compound Boost, which collectively helped offset a good amount of the ALC weakness. I've been impressed with how quickly…

The next question comes from Lauren Schenk with Morgan Stanley.

Great. You mentioned in the letter that the year is off to a solid start performance-wise. Just wondering if you could expand on those comments and what you're seeing specifically? And is the improvement broad-based or specific to some brands or regions? And then just maybe following up on the last question, what are some of the KPIs or trends that you're seeing internally that give you confidence in Tinder reaccelerating to mid-teens revenue growth by the end of the year?

Thanks, Lauren. Why don't I try to take that one? So when we met on our last earnings call, we told you that we are seeing significant pressure on our ALC revenue, which was really driven by macro factors, particularly younger consumers that were feeling pressure from the economic environment. And that was especially acute at our Tinder brand where we have a lot of younger consumers. That impacted our Q4 performance, and it was also really a potential overhang on our 2023 performance as well. But since we met last time, a couple of things have happened. The first one, which BK mentioned, was that Tinder put out a lot of initiatives to reverse the trends in ALC. And you can see from the chart that's in the letter, they did succeed in reversing a lot of the decline we are seeing in ALC, not all of it, but a significant portion. And the other thing, and this is very important over the last few months is that we've really seen stability in our ALC trends. And so we have not seen further degradation, which was a risk when we spoke last time. I'd also want to add that we haven't seen any impact on our subscription revenue trends. That's Tinder and business-wide. I think our subscription trends remain extremely resilient to any economic pressure. But it's ALC where we've been impacted by some of the macro things going on. And I would also say that, as you know, dating has a bit of a peak season that starts at the end of December and runs through Valentine's Day. And so we watch the peak season, which tends to be a good harbinger of what's coming in Q1 and for the rest of the year. And what we've seen…

The next question comes from Mario Lu with Barclays.

Great. A couple on Tinder. In terms of the fourth quarter payer number decline of 300,000 quarter-on-quarter, just curious if you could talk a bit more about the drivers there. And then given the payer definition, just curious if those payers were the ones that only bought à la carte previously and stopped for a large reason for the decline?

Sure. Let me take that one as well. So the fourth quarter Tinder's payer number was really affected by a couple of things, which I kind of just alluded to. The first is the overall macro weakness and the pressure on the consumer, the younger consumer, consumers with less discretionary income, which is definitely impacting Tinder and the Tinder payer numbers generally as well as the product weakness and lack of product momentum that Tinder did not achieve in Q -- in 2022. And so that manifests itself throughout the year and led to a weaker Q3 and Q4 from a Tinder payer perspective as well as a Tinder revenue growth perspective. And so those are really the two key factors that are affecting what you see in the Tinder payer number in Q4. The thing that maybe we didn't talk about as much on the last call, which we did end up doing starting in Q4 and we're going to continue to do in Q1 and probably through most, if not all, of 2023 is we are doing a bigger focus on product -- sorry, on pricing optimizations. And that's a big initiative for us. We're basically at Tinder eliminating more of the intro pricing and discount pricing than we had been planning to previously. That's having an adverse effect on the Tinder payer numbers, and that's what happened in Q4. But it's relatively neutral to revenue. And so our goal is to get Tinder to much more optimal price points, which, again, will impact the payer numbers there. But longer term, it's a revenue positive. We'll essentially have fewer payers but at higher price points. So that's an ongoing project through the year, which is going to have some effect on Tinder payer numbers. As you know, we…

Great. And then in terms of Tinder growth for this year, I know you're planning towards total revenue. But in terms of the 5% to 10% expected growth for this year and a slight growth in 1Q, is there any additional color you can provide just in terms of the drivers of growth between the payer users and then RPP?

Yes. I mean, because there's a lot of swing factors in that, I don't really want to get locked in specifically to kind of an outlook for RPP specifically or payers growth specifically. I would tell you that sitting here today, our forecast kind of calls for relatively balanced growth between payers and RPP for the year, but it could shift depending on what initiatives succeed more than others, what we prioritize as the year goes on, what succeeds in testing. So that's our best guess sitting here right now, but we don't have religion around that, and it really could shift. But I would tell you it's relatively balanced. The other thing that I would just point out to you is that I do expect softer Tinder payers growth in the first half of the year and stronger Tinder payer growth in the back half of the year because the momentum is building, the initiatives will be rolled out as the year goes on. And so opposite of what we saw in 2022 where you had strong payers growth in the beginning of the year and then not enough initiatives that led to weaker payers growth in the back half of last year. You're going to have a bit of the opposite effect this year where you've got this product momentum building, payers momentum building, momentum in the business generally. And that should carry through to stronger revenue growth, obviously, which is in our outlook as well as stronger payers growth year-over-year in the back half of the year. So those are the trends that we're expecting for the year. Hopefully, that's helpful.

The next question comes from Alexandra Steiger with Goldman Sachs.

Shifting gears to Hinge. First, could you please maybe share some feedback and early learnings from the recently launched HingeX in plus tiers? And then second, how should we think about the revenue growth opportunity beyond '23 and the $400 million revenue guide you provided through the lens of payer net adds and then also ARPU growth?

Thanks, Alexandra, for the question. We spent the last few months refining the HingeX value proposition, and we've been testing it on a small percentage of the Hinge user base. We're really pleased with where it stands, and we're confident that it will deliver the expected contribution to our $400 million plan this year. The global rollout is planned for the end of February. And after it goes live, we'll continue to optimize it. It's important to understand that when you launch a new premium tier, you unlock a new kind of buyer. And the price points will pay dividends over multiple years. While we will benefit in 2023 from some incremental revenue from the higher price tier, the long-term value will be realized over time in terms of higher RPP and conversion. HingeX is a unique feature that directly leans into Hinge's designed to be deleted motto. And if it works, we believe it will lead to even more success for Hinge and create even more relationships around the world.

Next question comes from Justin Patterson with KeyBanc.

Bernard, could you talk about just in broader detail why you found this to be the right organizational structure and how the different teams start to incentivize? And then perhaps related to that, could you talk about some of the top priorities for Will and where we can see his imprints and product lead as product lead over the next year?

Thanks, Justin, for the question. I've spent the last eight months digging in and learning about the organization and have been really impressed with what I've seen. Following the positive impacts from the changes at Tinder, it became clear to me that we could do more by being more efficient and making some structural changes to the organization that could help us grow and continue to innovate. We believe by reorganizing the company into four pillars, Tinder, Hinge, Asia and Evergreen & Emerging, we're better aligned to focus on key areas of growth and double down on our strategy. At Tinder and Hinge, there's significant upside. So we want to continue to invest in the teams there. And now I have a direct line of sight into each of those businesses. In Asia, I thought it was important to have a product-focused leader on the ground working with those businesses to recapture growth and drive profitability. With Evergreen & Emerging, we have similar businesses that we've now combined into one global organization. With this, there should be many opportunities to share learnings and be more nimble and more efficient. And then with the Emerging Brands and our new bets, this team has built and launched new businesses before. And there's been a lot of experience bringing these products to market, serving unique demographics. We think there will be really exciting opportunities coming out of this group as well. As I've said in the letter, ultimately, I believe that this new org structure will improve transparency and accountability across the entire company. We're also really excited that we're adding Will Wu to the team as CTO. I've personally known Will for a long time, and I know how passionate he is about product and innovation. He has an incredible track record on innovation and has changed the way that Gen Z has interacted on social media platforms. He's a really low ego guy, and he just wants to win. He'll be based with me and the Tinder team in Los Angeles. And I think he'll work really well with our teams all across Match Group.

And I think in response to your question is that on the incentives, we tend to be pretty creative on our incentive structures. For example, the Hinge team is incentivized around its own performance. The performance of the business is a significant part of their incentives. And we've done that in other situation as well. And we are working on some other incentive programs around achieving specific goals in specific areas of the company. So we are trying to tailor incentives to drive more of the results that we're seeking, and that's something that we're actively working on.

The next question comes from Cory Carpenter with JPMorgan.

So you left the '23 outlook unchanged. But given the weaker dollar, this does imply a bit of a downgrade on an FX-neutral basis. Just hoping you could talk about what's driving your more cautious view on an FX-neutral basis and your decision to keep the reported guide unchanged versus going through the FX? And maybe perhaps specifically any changes to your outlook at certain brands that were driving this?

Yes. I mean, I wouldn't quite characterize it that way. I don't think just -- we have a 5% to 10% range. It's a pretty broad range for the year, and just because we're not adjusting it right now, it doesn't mean it's implicitly a decreased outlook. Cory, as you know, FX has been really volatile for the last 12 or 13 months and it's been particularly volatile in just the last few weeks as well as since our last earnings call. I think at our last earnings call, it was like a 3-point headwind for the full year '23. Now it's basically neutral. And I think it's down to about a 3-point headwind in Q1. So based on that level of volatility plus there's still a lot of uncertainty out there around macro, so we feel like our trends are stable. And we've been really happy with peak season, but it's hard to deny there's a lot of uncertainty on the macro front for full year '23. And certainly, for the first half of the year, I think pretty much every company is calling that out in their earnings call. So given all that, we just didn't think it was prudent to start adjusting our guidance ranges at this very early stage in the year. It's February 1 after all. So we left that unchanged. But obviously, as you rightly point out, to the extent there are FX tailwinds, that would be a swing factor either to a higher level within our range or potentially above the top end of our range depending on what kind of tailwind we get from FX as the year goes on. So I would rather kind of wait and see how some of that plays out, whether we see some level of stability around FX. And then, of course, we'll revisit it. I'm sure we'll revisit it next quarter as well. But -- and overall, in terms of your question, I don't think there's really significant changes to our business outlook really at any of our businesses. As I said in the answer to the question that Lauren asked, we've actually seen a good start to the year across most of the businesses. And so we feel like things have firmed up, but we're also cognizant of the fact there's a lot of risk and uncertainty and things to battle through. And so we feel good about kind of where we are from an outlook perspective at this point in time. But there's still a lot of innings to play in the game. So we're going to see how it plays out.

The next question comes from Deepak Mathivanan with Wolfe Research.

Just want to ask about the Tinder CEO search process. Can you provide an update there? What has been the challenge? And how important is it for a new leader to buy in with the product roadmap that you currently have for 2023 since you're putting a lot of efforts into these?

Thanks, Deepak, for the question. We're continuing to look for a candidate, but we want to make sure that we're finding the right person that will work well with the Tinder team. In the meantime, the current leadership team is working really well together. The team has now been in place for six months, and they've gone through the kind of gelling well together stage to fully execution mode. We're making really good progress, and we feel actually really good with where we are. So there's no rush to add a CEO. We're only going to do it if the person really brings a lot to the table. Thanks so much for that question, Deepak.

The next question comes from Benjamin Black with Deutsche Bank.

Gary, you mentioned that AOI margin should be at least flat in 2023. Beyond sort of App Store fee changes, what are the swing factors that could potentially drive upside or downside here? And also how should we be thinking about the quarterly margin cadence throughout the year? And then finally, when should we expect to see the impact from the 8% reduction in force?

So on your question, Ben, first of all, I want to say we're very focused on making sure we deliver at least flat, if not improved margins year-over-year this year. That is a goal for us. It's one of the drivers behind implementing the cost savings plan. So we're very committed to making sure that, that happens. In terms of the swing factors aside from App Store relief -- and by the way, I think App Store relief is likely to be a 2024 event but we're waiting to see how the regulatory processes continue to play out, but that could be a significant event for us as soon as 2024. I think there's a few swing factors. The first really would be around Tinder executing on its product roadmap better than what we're expecting. So getting some improved revenue growth on the Tinder side would be very margin beneficial. Same thing would be true on the new Hinge tiers. That would be upside to the extent they perform better. And right now, they're performing as we expect, but it's still a very small test. And so we'll see how that continues to play out. And then a recovery in Japan would be very helpful for us as well, which you'd like to think is going to happen at some point this year but is not currently baked into our forecast. Just generally, any macro improvement, macro tailwinds, which is not what we're expecting as the year goes on, but any of that would be very helpful. But because we can't rely on those things, in this environment, we implemented this cost savings plan. And it's going to generate meaningful savings for us in terms of marketing spend, headcount, overhead, et cetera. When I look at kind of the trends…

The next question comes from John Blackledge with Cowen.

Just coming back to Tinder, could you discuss further the rationale for the upcoming global Tinder marketing campaign?

Thanks, John, for the question. When I started working with the Tinder team, I saw a real opportunity for marketing. Frankly, this is an area we need to make more investment to drive a brand story that better reflects all the positive outcomes that Tinder is responsible for. There has actually never been a Tinder global brand campaign before, and it's been years since we've actually had a defined marketing campaign in general. I think that the perception has taken a hold about Tinder is too limited. We want people to come into the platform feeling comfortable whatever their relationship intent is. The team had some really provocative and creative ideas. And this campaign will celebrate all of the relationship possibilities that Tinder creates every single day. We think that this will drive top-of-funnel growth over time. We intentionally moved Melissa into the Tinder CMO role because she has a track record of big, bold, attention-grabbing campaigns at OkCupid. And I know she and the team will do great things together at Tinder. We're really excited to roll out our first campaign and see the reaction. Stay tuned.

The next question comes from Shweta Khajuria with Evercore ISI.

Most of my questions have been addressed. But if you could please talk about Japan. You mentioned that you're not seeing much progress there, but that could drive upside. Any sense on when you think that could happen? Or what your -- or commentary on what you're seeing right now? And then the follow-up I have is, how do you -- it sounds like you're very confident now with the guidance, reiterating the reported guidance for the full year. Could you please talk about, Gary, the level of conservatism and/or the confidence you have in delivering to this for both top line and margins?

Well, I think on the margin outlook, obviously, that's much more in our control, and we've taken steps that we know are going to lead to more cost discipline. Obviously, we can go further if the conditions dictate. So I feel very confident in the flat or better margins. That is something that we are extremely committed to. I think you rightfully pointed out that based on what we've seen so far this year, we feel incremental confidence in our outlook for the year. But as I said in response to Cory's question, I think it's really just a little too early, really one month into the year to start further adjusting our outlook. And we tend to try to be conservative and thoughtful when we provide the guidance. So especially in an environment where there's a lot of uncertainty and a lot of things that remain unknown, I think that's the right course and the prudent course to take. So we're sticking by it. But I think it's fair to say that what we've tried to get across this morning is that the start to the year has been very solid for us. And that is giving us confidence that what we're seeing is going to come to fruition as the year goes on. Japan is a wildcard. I think that the government there is really trying to take steps to fully get COVID behind it, trying to discourage real from wearing masks and things like that. But as we've talked about previously, there's been a reasonable amount of less socialization in that market because of all the restrictions that came from COVID. And so when kind of society there is going to really rebound back to much more normal levels of socialization is really hard to say. All I can tell you is we haven't seen it so far. It's been a number of quarters now. And as a result of that, we're not assuming that it happens in 2023. At some point, it's likely we're going to come to you and say we've seen a rebound in that market. I cannot tell you precisely when that's going to be. So again, from a conservatism standpoint, we're not assuming that rebound in the Japanese market this year. But we're hoping we're wrong, and it will come sooner. And we're looking for catalyst to try to spur activity in that market, which would be meaningful upside to us because Japan is such an important market for both our Pairs brand and our Tinder brand. So we'll have to wait and see. But again, right now, based on what we're seeing in conservatism, it dictates not assuming anything kind of from a rebound standpoint in the Japanese market.

All right. With that, I know we're out of time. So we're going to sign off, but thank you, everybody, for joining us. We appreciate the continued support, and we will talk to you in the next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.