We'll get started. Pleased to have Match CEO, Bernard Kim, and President and CFO, Gary Swidler, with us today. I'll read the safe harbor, and then we'll get going. During this presentation and during the question and answer session, 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 uncertainty, and the actual results could differ materially from the views expressed today. Some of these risks have been set forth in our periodic reports filed with the SEC. Maybe we'll start off higher level, BK, with you. You've been at Match for about one year now. What are some of the key changes you've made, and how do you think about the state of the business today?
Great. It's great to be here today. Yes, I'm almost at my one-year anniversary, so we're gonna be celebrating that soon. Some days it feels long, and other days it feels really, really fast. But, you know, we've made a lot of change over the last year. We reorganized the teams, around Tinder, Hinge, E&E, Evergreen and Emerging, and in Asia business. Around Hinge, we have a strong business that's growing really nicely. We have expansion internationally and new pricing subscriptions that have hit the marketplace, and we have really strong brand momentum. Around E&E, very clear focus around cost efficiency, as well as emerging brands that are going after niche markets. Then in Asia, we have, for the first time in the company's history, we have a CEO on the ground in Malgosia Green.
She's based in Singapore, and she's running all of our Asian businesses, and we're really excited around our performance there. Pairs has a brand new leader, and then Hyperconnect, is a business that we're kind of, you know, bringing into Match Group, and we are excited about, you know, that talent joining the group. Around Tinder, I mean, that has been really inspiring, the work that we've done there. The last year, I mean, I'll be honest, coming into the business, it was a business in turnaround. I felt like quick changes needed to be made with regards to stabilizing the leadership team. In our case, bringing in a brand new C-suite in.
Stabilizing the organization, having us focus on the product roadmap, and then delivering against that product roadmap, and then a focus on marketing and innovation. We've done all of those things. I've actually been in the turnaround room, multiple times in my career. I kinda know how that goes, and I saw a lot of the, like, same tendencies. I thought we could have moved faster in the last couple turnarounds I've worked on. But in the case of Tinder, I was learning the business, wanted to make sure that we were making the right moves, testing properly, and we're seeing that momentum on product execution, marketing, and innovation in this year. It's really been an exciting 300+ days.
We'll definitely come back to Tinder, but maybe before jumping in, there's a lot of debate around industry saturation. BK, you know, how do you think about the growth opportunity in online dating from here, and why haven't we seen perhaps as strong of a recovery post-COVID as expected?
Look, I mean, I wouldn't have joined the organization and the company if I didn't think that there was a growth opportunity for us. You know, you look at a company and, you know, hundreds of millions of first dates are created by this organization and our teams. There's literally nothing more inspiring than that, especially as in a post-pandemic world, people wanna get out in IRL, meet one another, look at these really kind of, you know, interesting opportunities to get people together, and there's no company like Match Group when it comes to being on the forefront of that. We have a lot of work ahead of us, though. When it comes to product innovation, when it comes to product execution, I think we can improve on where we've been.
It's inherent on our organization as a group of 2,000 people focused on product and innovation to figure out that next thing that's gonna drive that word of mouth and get people to say, "Hey, have you tried Tinder? Have you tried Hinge?" You know, you should try this experience, and, you know, I think it's really important for us to do that. You know, for me as a team and for me as a leader of this organization, I've set clear objectives for people to go after innovation around profitability as well as growth as a business. You know, I actually think the last couple months have been considerably more exciting than maybe the first six months have been with, like, the advent of AI and how we can use AI within our multiple platforms.
We have an incredible data trough when it comes to, you know, understanding what daters are looking for, understanding what people are looking for when it comes to that first date, when they're looking for love in the marketplace. We wanna utilize AI when it comes to, like, you know, improving jumping into our platforms. You know, maybe listening to what our daters have said, like, "Here are some pain points that I've had in our experience," and then utilizing AI to help in those areas. It's a really exciting time for us.
A bunch of questions on Tinder. We'll kinda start with just as you just alluded to in the first question, Tinder was a turnaround. Where are you in the turnaround? Maybe what have you accomplished so far, and what's been more difficult?
Yeah, I mean, like, you know, I came from a history in gaming, we've always focused on acquisition, engagement, and then monetization. You know, when it comes to Tinder, there was actually a lot of the same language, I had to learn the business and understand how delicate that ecosystem is. You know, I thought we could move a lot faster in certain areas, every change that you make, impacts other parts of engagement or, you know, the way that people interact or spend in our platform. I wanted to make sure that we're doing the right things around testing. That flywheel took a little bit of time, we're really kind of seeing that over the last
You know, couple of weeks. You know, our product execution, our product velocity has actually increased pretty dramatically from where we were at the first half of last year. We see a positive impact in the back half of this year as we roll out pricing optimizations, we roll out weekly subs, we roll out Just for You for women's experience. There's like, you know, there's been a tremendous amount of traction. You know, the thing that I look at is like culture, momentum, how the teams are gelling together. We've had some wins recently, and we think that's gonna continue to have that positive effect in the, in the future of our business.
On the price increases, you rolled out a pretty sizable price increase in the U.S. late in 1Q. Understanding, you know, Gary, you talk a lot about optimizing for revenue, just what gives you the confidence raising prices is the right longer-term strategy for the brand?
Yeah, just to make sure kind of people understand the dynamics of this. First of all, you know, we test this extensively. We tested the effect of raising prices in the U.S., and we do see a negative effect on the number of payers, but we do see an increase in revenue. We rolled some of those changes out in the U.S. at the end of the first quarter, like you said, and that's gonna have a negative effect on payers, but it's gonna generate incremental revenue for us. Now we're rolling out those price changes into an additional five international markets. I don't know what variants of price are gonna prevail there and generate the most revenue. Could be higher, could be lower. We're gonna test and see.
We've assumed that it's going to be the same as what's happened in the U.S., that's what we've assumed in our outlook in terms of kind of payer outlook as well, don't know for sure yet. That will play through in Q2, we'll see. If the similar variant of price prevails as the highest revenue generator in these international markets, I'd expect to see, you know, negative sequential payer growth in Q2, then in Q3 as a result of those payer, as a result of those price changes and the impact on payers. By Q4, a lot of that should have washed through the system, we'll see better sequential payer additions in Q4. We'll be back in the positive territory. That has to wash through. It's important to understand that Tinder is really catching up.
We should have been making these price optimizations over time on a gradual but consistent basis. They didn't do that for a while. Now there's a bigger catch-up. The prices have changed pretty dramatically. Once that goes through, I think you'll see the benefits of all the great work the team there has done on the ecosystem, on the marketing side, and on product changes more generally. You'll start to see that momentum in the business really build. Keep in mind, this is a momentum business. You saw it, you know, slowly slow down on the momentum side. Growth really wasn't there. Now you're starting to see it go in the other direction. The momentum's building. There'll be modest revenue growth as we get through this year. It'll accelerate by the time we get to the fourth quarter.
That's kind of where I see the trajectory.
The other big optimization you've talked about is weekly subscriptions. What have the learnings been early on, and how impactful could that be to revenue or payers?
Yeah, I think that overall, you know, the optimizations are the bigger piece of it, the price optimizations, the price changes. You know, the weekly subscriptions are a nice additional source of incremental revenue, but not a massive one. It's one of the reasons why we never did weekly subscriptions to begin with because they impact the number of people who take monthly subscriptions, so they're only modestly additive. I think what we're seeing in this market is two things. One, in a more cautious economic environment, people are a little bit more interested in weekly subscriptions as a smaller commitment, more bite-sized. We're seeing a better take-up of weekly than we probably would have seen two years ago when the economy was stronger. That's 1 aspect.
The other thing, which has been a pleasant surprise, but it shows you know, the power of the size of the ecosystem, and you never know exactly what's gonna happen. Weekly subscribers have been a healthy boost to à la carte revenue as well. They've been big takers of à la carte. We're seeing some real benefits there on the à la carte side from having introduced weekly subscriptions. That knock-on effect is meaningful for us.
One more on the financials, and BK, I wanna get back to kind of more top-of-the-funnel stuff. Gary, the shareholder letter had a chart showing Tinder subscription revenue in the U.S. accelerating through April. you know, has this trend continued through May? you know, I guess bigger picture, like how much of the expected acceleration in the second half is simply flowing through what you've kind of done around the price optimizations in the weekly subscriptions?
I mean, a lot of it is from that. You know, there's more work to do, and I don't wanna minimize everything we need to do as the year progresses. There's a lot of initiatives underway at Tinder, as BK started to go through. The benefits of having rolled out the pricing changes in the U.S. and then having rolled them out in the international markets does help give us confidence that by the time we get to Q4, we have a sense that we can do 10+% year-over-year revenue growth. Yes, to answer your other part of your question, the April trends have continued into May, so that's increasing our confidence. Now instead of, you know, four weeks, we've had seven weeks of similar trends.
That's obviously very encouraging and, you know, meaningful extra data points for us, and increased confidence that what we said about the back half of the year is coming to fruition. You know, we're feeling good about that. I want Tinder to keep executing on its many initiatives, and it needs to keep doing that. From a financial perspective, we're making the progress that we need to make. Subscription revenue continues to be up nicely year-over-year. As I mentioned, we're seeing some increases in à la carte as well because of weekly subscriptions and some changes we've made on the Boost à la carte feature as well. Things are starting to flow there as well, which again, gives us more confidence that we can achieve our financial objectives.
BK, moving back to you, optimizations were a big part of, let's call it act one of the Tinder turnaround. You also called out early signs of momentum in top of the funnel in April. Could you talk about what's driving the top-of-the-funnel improvements and then, you know, if you're seeing this momentum is continue as well?
Great. you know, I wouldn't underestimate act one, which is, getting these optimizations to work, getting weekly subscriptions out in the marketplace. You know, I would say that when I joined Tinder a year ago, there actually was a lot of really great ideas that were flowing through the company, and we were testing a lot of different things. We just weren't putting product out in the marketplace. Our product execution and delivery wasn't there. I think there was a general pause, and part of that was, you know, just continued leadership turnover. Today, we're in a much different place. Product execution is working. Our product velocity is up.
The kind of fruits of that labor is act one, which is, you know, that focus on revenue, seeing the results over the last couple weeks and that performance coming through. That drives this like, you know, this momentum and this energy of like the things that I'm working on every single day are showing up, and it's a multi-billion dollar platform that we're working against. It's really exciting to kind of see that happen. These like little wins that lead to like this, you know, positive flow and this, you know, improved kind of culture that we can do it out in the marketplace. You know, when it comes to our top of funnel, you know, we have a brand-new marketing campaign that's hit, and it's working. That's really exciting to see.
You know, we've gone a long time where we've underinvested in marketing across Tinder. We've let the market tell the narrative on Tinder. Probably, like, when it comes to the pendulum, there's a lot of fun and great things that are happening in Tinder. It's probably swayed towards the negative. We need to swing that pendulum over to like, wow, it starts with a swipe, and there's a tremendous amount of possibilities that come from this platform. It's been galvanizing for our teams. We're seeing it in the top of funnel. User intent is higher. People that are considering our brand as Tinder with especially Gen Z young women, that's improving every single day that this campaign is live and out in the marketplace. The key for us is like improving that ecosystem.
I talked about this in our letter, but it's around realness, respect, and relevance. That is the three words that our product teams talk about every single day. It's having that great experience in Tinder that then creates that word of mouth like, "Wow, I just had one of the best dates of my life, and it's due to Tinder." Having that positive kind of story that then tells other people like, "Hey, let's jump in. Let's try Tinder. I may have lapsed out because I'm in a relationship. I'm jumping back into Tinder." There's a lot of runway for us.
You know, one other thing I just wanted to jump back on the, on the optimizations. We're getting a lot of questions about, you know, is now the right time? I just want people to understand that, you know, as many people in the room probably know, a lot of subscription prices have increased over the last couple of years because there's been inflation. People have raised subscription prices. Tinder didn't do that over that period of time. Now the gap between where some of the competitors are priced and where Tinder's price has become very wide. Tinder's really playing catch up. We're seeing a sort of sustained effect for a couple of quarters, we'll have caught up to where it makes more sense to be. There aren't negative effects on the ecosystem from those pricing changes.
You know, they don't pay the higher price as long as they keep renewing the subscription. It's for people who are coming back into the system or are new to the system who see the higher prices. The effects on the ecosystem are really modest. You can always become a free user because the vast majority of people use the product for free anyway. There's no real negative knock-on effects on the ecosystem. We think that as we continue to improve ecosystem health, that will have real benefits overall to the ecosystem. The price optimizations aren't gonna negatively impact that.
Sticking on the Tinder brand campaign, I think some investors worry that maybe it's too late to shift the Tinder brand narrative. It sounds like it's working. How would you reply to that and kind of what are you seeing more specifically that's giving you confidence in the strategy?
It's absolutely not too late. you know, if I would say that if we were launching this campaign and we had tried five or six other campaigns that hadn't worked, we would be in a different place. you know, Tinder and its position, you know, we're in a position where we probably didn't have to spend as much money in marketing or focus on the brand. We're in a different place today. The things that we're doing are working. We're seeing traction. We have a great team working against it. This is the first stage of a multi-stage kind of process for us. What I'm really excited about is when we get that product innovation flywheel rolling on top of an improved brand perception, we can start marketing like the really great product innovations that we have coming through the pipeline.
It's an exciting future that we have.
A lot of optimization focus now, but looking forward, you've talked about making it priority to increase product velocity, shots on goal, if you will. What are the kind of the one or two or three products on the roadmap you'd highlight as potentially the most impactful in the next six to 12 months?
You know, it's hard to pick, because there's all these different product optimizations, improvements in the ecosystem that we're making every single day. You talk about shots on goal. Not everything's gonna work, but we need to have those shots on goal, and that product velocity needs to be, you know, up and to the right. Our teams are working really hard today. We have a lot of work ahead of us. We have some, like, recent momentum, but we don't wanna, like, take our foot off the pedal. It's like all these different things, and I talked about, you know, the women's experience. Having that first and foremost every single day when we walk into the office and grinding up against that.
I guess if I were to pick one other right now, it would be, kind of the Like the higher ecosystem initiative that we have working, that we're working and we're testing as a team right now. Previously we kinda launched a smoke test called Tinder VŌLT. We haven't decided on what the name is going to be, but it's a, you know, an ecosystem that's created to kind of, you know, cut through some of the, get to like those dates faster, and I see a real great opportunity for us. Probably more next year than this year.
What about AI, in terms of just impact and, you know, I think you've talked about some of the transformative impact you have on the, on the space, but from a product perspective, you know, how does that fit in?
We have a couple different sprints that we're working on as a team. You know, Will Wu just started at our organization just over a month ago, and he's been so exciting with regards to the perspective that he brings within AI. Like Gary and I sat down with our leadership team, and, you know, we talked about the kind of transformative impact that we think that AI is going to have across dating and all the different platforms that we manage as a team. It's now for a time for us to put like pen to paper and have teams start working on, you know, multiple different things across the company.
What Gary and I sat down was like, "Okay, how do we solve against some of the fatigue points that daters might have?" Some people might say, "Okay, it's really tough to set up a profile." Others might say, "I need help or, like, a coach to kind of get me through messaging." Sometimes people might not know this, but, you know, it's best to put closure to a conversation, so you're not ghosting another dater on the back end. You know, that's like, really great ways we could utilize AI to help us in, you know, in tackling a lot of these kind of pain points across our ecosystem. You know, I'm really excited about what we're working on as a team.
Moving to Hinge. Continues to be a bright spot for the portfolio. Still about one-fifth the size of Tinder. How sustainable is Hinge's growth and, you know, how much do you think is coming at the expense of Tinder?
I mean, I think Hinge has been one of the great all-time acquisitions as a company, really nice job on that, Gary, and the team. You know, I would say that, like, right now it's, you know, about a fifth of where Tinder is in revenue. We see a tremendous runway ahead. When it comes to intention daters, Hinge has really struck a nerve in the marketplace. You know, we're at the start of our monetization journey there. It's really kind of been focused on brand, product innovation. This year we've introduced a new subscription tier. We're working on monetization optimizations based on the learnings from all of Match Group that we're rolling out on the back half of the year, we're focused on international expansion.
We've kind of hit multiple markets in the EU, and those have been tremendously successful organically. The brand is really resonating globally. You know, I like, I view this when we bought the company, they were doing about $1 million in revenue. We see in, like, the next four to five years as being a billion-dollar business for us.
Could you maybe zoom in a little on the international expansion? You've clearly had a lot of early success in Europe. You know, kinda where are you in your international expansion efforts, and where are you most focused, like, the next six-12 months?
You know, right now we're really focused on the EU. There's a lot of work to do in the EU. We've kind of culturalized our experience. We're, you know, putting together culturalized marketing for each one of the markets. You know, this year I've, like, tried to have us focus on, you know, the short-term opportunity, and it's vast and it's huge for us. You know, I think we're focused on other countries next year.
Okay. Gary, a few for you, maybe on margins. You guided to at least flat margins this year. The question we get a lot is: Do you still see a path to getting back to the 40% plus margins over time, or is this perhaps changed given the mix shift to Hinge and the lower profile margin of Hyperconnect?
I think there's still upside on the margin side from where we expect to be this year. You know, the company's becoming more scaled. The biggest, you know, sort of factor in all of that is Tinder and Tinder's revenue growth, because Tinder is a 50%+ margin business on the AOI side. The more that Tinder contributes to the pool, you know, the more margins that the overall company will improve. Getting back to you know, meaningful growth at Tinder is the thing that really drives value for the company and drives margins. You know, obviously the other, you know, factor is App Store fees.
You know, I'm assuming that they stay the same, but I think that's not, you know, particularly likely, and so there's real upside potentially from there too, depending on where we shake out on App Store fees. Just running the business day-to-day, ignoring the App Stores, I think there's leverage and scale. I think there's opportunity with Tinder, and I think there's more we can do on the cost side. We've made some changes. We're still, you know, trying to be very conscious on the cost side. I think there's opportunity on the emerging brands to reduce duplication and take out some of the duplication there. There's a lot of different levers for the company to continue to pull.
Buybacks. You announced a $1 billion buyback last quarter with plans to return at least half of free cash flow the next few years. The question is why now and why was this the right amount?
Well, look, the company has a history. If you go back to the five years we operated as a, you know, 80% owned IAC company of returning significant capital to shareholders. But when we departed from IAC, we took on a significant amount of debt, and we basically committed to get the leverage down from about 4.5 times to three times net leverage. That was our focus, so we suspended buying back stock. We did that. We suspended buying back stock, and we brought the leverage back down to three times. We're basically at the target that we wanna operate at, and so the question is, what do you do now? What we're saying is, we're gonna go do what we did before, which is we generate a lot of cash.
We're gonna return a significant portion of it to shareholders. People say, "How much?" We say, "Well, when we look at, you know, it's 800 plus this, you know, the $800 million plus this year, and it will continue to grow." When we look at it and say, "Here's our M&A opportunities. Here's what we need for organic investment in the business," that still leaves at least 50% that we can return to shareholders in the form of buybacks or some other way. It may be more depending on what we do from an organic growth perspective and from an inorganic growth perspective. We still have a lot of financial flexibility. If we don't find uses for the other 50%, we'll still return some of that to shareholders as well.
We think we're in a great position from a balance sheet perspective, from an ability to invest in the business perspective. Acquisitions have gotten cheaper, so we're continuing to look, and we think we've been a good acquirer. As BK said, the Hinge acquisition is a great one. We'd love to see us replicate that. We, I think, have to stay in, you know, close to our knitting in terms of Hyperconnect not having gone as well as we would have liked. Keep working that one as well. I think there's opportunity for us, especially as prices have come down. You know, fundraising for smaller companies is more complicated. So there's more opportunity for us, and we need to stay nimble on the acquisition front too.
One more for each of you. I think this is for you, BK. Just on Hyperconnect. It feels like you're feeling better about stability, but how do you see Hyperconnect fitting into the Match portfolio longer term, and how does it add the most value to you?
Gary mentioned it, we overpaid for Hyperconnect. There was a pull forward of revenue kind of in the heat of COVID. I think a lot of companies were going through this. You know, we stretched a little bit outside of dating for Hyperconnect and, you know, we paid a lot of money for it. I mean, I think we will be judged on Hyperconnect maybe in the next 5 to 10 years, with, like, where the market has gone, even in the last 6 months with AI. I mean, we have a tremendous amount of talent in machine learning and AI and expertise in the Hyperconnect organization.
When I joined the company, a couple of my Korean friends had called me and said, like, "Hey, you know, Hyperconnect is the hotbed of innovation in Seoul. Don't screw it up." I mean, that's, like, some of the feedback that I've gotten from my, you know, fellow Korean friends. You know, I think we have to take that very seriously. Like, my position within the company is, like, seeing the talent, seeing where the market can go, and then having teams work together. I see, like, a really optimal, like, solution in having AI teams with Hyperconnect work really closely with Tinder and, like, breaking down some of those barriers.
We could have, you know, a couple features centered around AI that, you know, could justify, you know, the billion-plus that we spent against Hyperconnect, as long as the Tinder team works with the Hyperconnect team. It's exciting.
Gary, Tammy wanted to make sure we had 5 minutes to talk about the App Store at the end. I think you and I have talked about this for years. What's your latest thoughts on just where we are? I know you're not assuming any improvements in the model, but where are we kinda with it, and what changes do you hope or, you know, think are on the horizon?
Well, look, you know, the App Store situation involves a lot of action by politicians and a lot of actions by the court systems in a variety of different countries. You know, you've got Europe, you've got Korea, you've got India, you've got a lot of jurisdictions involved. U.S. as well. You know, unfortunately, you know, They say the wheels of justice turn slowly, and that's an expression for a reason. You know, this stuff just doesn't move very quickly. We'd like to see it move more quickly, it is certainly something that has become much more in the focus of regulators over the last 5 years. It's not something we talked about five years ago. We've been talking about it for a few years now.
I think that there's a lot of legislatures that are focused on improving the fairness of the App Store ecosystem because they feel like, you know, consumers essentially paying 30% is just too high a price, and you basically got two monopolies, the Google system and the Apple system. I think 2023 is gonna be an important year in this regard. Most notably because, you know, the EU has passed a law that is effective called the DMA, the Digital Markets Act, and they're figuring out how to enforce that over the course of 2023. To the extent that the Europeans stay true to their law, which says that the App Store fees need to be fair and non-discriminatory, and if they've said they're not currently, then Apple and Google have to make changes to comply with that.
Let's see how that plays out, but I think that will play out later this year, which will be an important development. The other thing is, you know, we've got this lawsuit pending against Google here in the U.S., which includes not only us as a developer, but includes 37 states' attorneys general. It includes a consumer class as well. You know, Google went into court and basically said, "We wanna delay this for 18 months." The judge said, "I wanna see you in our courtroom on November 6th. No delays, so come up with a schedule that gets you here." You know, it's gonna be interesting to see how that all plays out, but that's a significant event that's on the, on the books for 2023 as well.
There are gonna be developments later this year on Apple and Google and, you know, we remain optimistic. We think that change should come, that it's long overdue. Let's see how the year plays out.
Awesome. We'll leave it there. Thank you.
Thank you, Corey.