Excellent. Let's get started. I'm Jamesm ichael Sherman- Lewis. I'm on the internet team here at Citi. Joining us is Steven Bailey, Chief Financial Officer of Match Group. Steven, thank you so much for being here. Before we get started, I'll read the Safe Harbor. During this presentation, Match may discuss their 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 actual results could differ materially from the views expressed today. Some of these risks have been set forth in periodic reports filed with the SEC. Also today, we may discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the published materials on their IR website. These non-GAAP measures are not intended to be a substitute for GAAP results.
With that out of the way, Steve, let's start with Tinder. DAUs declined 4% in 2Q, improved to roughly down 2.5% in July, and approaching positive growth in early August. As we sit here today, has Tinder crossed into that positive territory inflection yet? How would you rank order the largest drivers of improvement as we're moving through the quarter?
In August, we're getting close, closer by the minute. In August, it was down - 1%. Better than July and better than Q2, so we're headed in the right direction. September's looked a little bit better so far too. We're getting there, and we should get there soon. Really, the biggest factors are the algos, which we've talked a lot about. It's a culmination, and we've done a lot. It's all the product changes, but if you had to boil it down to the one, it would be the algos. In particular, we released a new unification algorithm, the version two of that algorithm, mid-July. That's had a pronounced effect on sparks and sparks coverage, all of which have been better in August. That's leading to the improvement in DAU too.
On the algo and the connection with improving the retention and the frequent usage, how do you think about leading indicators of sparks versus DAUs versus MAUs and the connection underlying those? As we scale Tinder back towards growth in 2027, do you think there's a possibility that some of these metrics could maybe converge together?
I do think the DAU and MAU metrics will ultimately converge. I think what you're seeing now is there's really two drivers of MAU. There's users, new users, and then there's retention, right? The product of those two things is effectively MAU. Why you're seeing DAU outpace MAU today is we've made more progress on the product side, on the engagement side. Users are staying longer, and they're using the app more frequently throughout the month because they're getting more value out of the experience. That's what's improving DAU at a little faster clip than MAU.
The big push over the next couple of quarters is around reconsideration and perception change and getting that other part of the formula, the user growth part of the formula, headed in the right direction so that that's how we get MAU from the - 7 we were at in Q2 up to flat. I think over time, throughout 2027, those two metrics will converge.
Makes sense. Marketing should obviously help, but the biggest driver as we see it is the algo improvements. Just circling back to that for just a minute. The architecture changes, the more unified recommendation stack, as we put it. What does the new architecture enable Tinder to do that it couldn't previously? How do you think about potential next-gen recommendation systems from here?
There's really two parts of it. One is technical, which is just the approach to the algorithms. Spencer talks about it this way, I think it's a good way to lay it out, is before, the old architecture was, think of it as stacks of cards. There's about 15 stacks of cards, independent stacks of cards being profiles. Each stack was optimized towards one objective. So it might be the revenue in a stack optimized towards generating revenue or generating matches or generating a boost for the new user experience. Then we basically decide which of the 15 stacks we would show you first. You'd get through that one stack, and then we decide what next stack to have you go through. Now it's one unified stack.
There's one stack of cards, not 15, and that technically has just worked better and been more efficient and effective. The second part is really not technical, it's more strategy-driven, right. That is all around optimizing this new unified algo towards sparks and towards meaningful connections. Whereas before it was, again, a number of different constraints, revenue or matches or what have you, and that's been a huge unlock. I think that's probably been the most powerful thing. You know, one of the things, I'm sure we'll get a question on it, is around the user give back budgets. One of the reasons we created that budget, we were a little concerned that we might end up spending $60 million in revenue on user give backs. It ended up being less, is because we removed the revenue stack altogether.
We thought that would have a pretty detrimental impact on the business. It turned out not so much just because this unified stack as a whole just outperformed those individual stacks, even when we deprioritized the revenue.
Makes a lot of sense. This unified stack, though, is still fully on Tinder. Are we close to a point where we're leveraging, call it more cross-portfolio signals across your brands, to really maybe unify and upgrade that recommendation stack more broadly?
Yeah. We do have a team. We have a central AI team that's working on more longer-term horizon efforts that are centered around some of the things you just mentioned. Really leveraging the size and the scale of our business in more a unified data stack way that we can apply AI and machine learning to. That's a little bit more longer term. I think the next big unlock for Tinder specifically when it comes to algorithms is more real-time algorithm updates. So, later this year, probably towards the end of the year, later in Q4, we're going to roll out real-time matching or real-time algo updates. Today, it takes about four hours for the algorithm to adjust to your changing behavior on the app. That's far behind, I would say, the benchmark today for a social media app.
We've all used TikTok or Instagram, where it feels like it's being updated in real time.
Within a session.
Within a session. We're going to get from about four hours to a few minutes by the end of the year. I think that will be the next big unlock for Tinder on the algo side.
That's exciting. As we think about these next unlocks and the cadence of improvements, the initial algo changes, I think, were targeted towards women.
Yeah.
We saw not just the women sparks increase by 6%, but also men sparks increase by 5%. Could you talk a little bit about the next iteration of extending these recommendation capabilities towards straight men and LGBTQ+ users? How should we think about this network effect really compounding?
Yeah, I think it's hard to extrapolate it out with precision because, like you said, improving the experience for women also improved the experience for men, so it's a double-sided network ecosystem. A little bit hard to predict the actual impacts. What I can say is we expect very much so that it'll be a positive, right? It was a big win for women. It should be a meaningful win for men, and it should be a meaningful win for LGBTQ+. How many points of sparks improvement will that create? It's a little tough to say, but it's in test now, and we plan to roll out globally by Q4, so we'll see pretty soon.
Good to hear. Could we move on to maybe Tinder monetization?
Yeah.
Tinder payers down 5% in Q2, but payer penetration was up globally, and I think in your top markets. What underpins your confidence in improving Tinder payer trends in the back half? H ow much of this strength could really be driven by these improving audience trends that we talked about versus payer conversion?
Yeah, what gives me confidence is it can really come from two places. One is improving user trends, improving MAU trends. Two is monetization optimizations that we've been doing this year. We don't talk about it as much, but we've had a lot of success optimizing on the monetization side. We've got a lot of irons in the fire, both on the monetization roadmap and on the product roadmap, events, missed connections. We're going to start testing groups, these algo changes. I think it's a collection of all those things that give me confidence that we can keep moving the payer metric in the right direction. I don't think it's going to be a step function change next quarter or the quarter after. Remember, we're saying we want to get back to payer growth by the end of next year, by Q4 of next year.
I do think it will improve to some degree.
Great. On improving these payer trends and balancing the free experience with the paid experience, how do you think about, or let me reframe it this way. How are your product and algo teams now working maybe more closely with your revenue optimization teams to balance the growth of the users versus the payers?
I think one interesting thing that happened is the fact that we created this user give-back budget, the $60 million user give-back budget. It was a big number. Part of that was by design, and part of it was, it wasn't just external, but it was also internal because we needed to shift the culture away from one that was just very myopically focused on revenue. We'd get in these situations where the product teams were culturally sensitized to revenue, and if there was any drop in revenue at all at any of these tests, they would shut the test off. We decided to put this budget out there to give them the freedom to innovate. It's okay if there's a small hit to revenue. We can manage it if it's long-term beneficial to the users.
It's okay to have a test budget and to stir things up a little bit in a smaller geography or in an A/B test because that's how you unlock real innovation. That's worked. The culture has shifted. I think the revenue shackles are off a bit. Obviously what we've found is it hasn't had as big an impact to revenue as we expected, but it's created a more innovative work environment. That itself has created a place where instead of the monetization team and the product innovation teams being in opposition of one another often, arguing whether this feature should get rolled out or not. It's helping users, but it's hurting revenue. Where should we land? Everybody's aligned now on, we've got the room to innovate and iterate.
The other thing that was beneficial is we're all working towards one key KPI, which is sparks, which is user outcomes, and that's always the tiebreaker, if you will. The culture around setting this budget and the setting of a key metric around sparks, which really galvanized the teams, okay, this is what we're shooting for, has made it much easier for the teams to work together. I think they're working better than they have together in a long time.
Good to hear. On improving this experience for existing users, I think as we've talked about the next phase being maybe driving reconsideration amongst lapsed users and to your point, the marketing efforts that are potentially to come. If we could talk a little bit about those marketing dollars that are coming. Lower-funnel channels I think are now 50% of your-
Yes
marketing spend. How do you think about whether it's the intensity or maybe the ROI on those marketing dollars going forward? Are there any maybe historical markers in Tinder's history as to maybe the intensity, the magnitude of those dollars?
Yeah. Well, I think a few things. One, a bit of what we saw in 2026 is a catch-up for maybe a little bit of under-investment in years past. Part of that was managing margins. Part of it was that the product just wasn't evolving very much. There wasn't a whole lot to talk about. A lot of the marketing went towards a brand narrative, a broader brushstrokes brand narrative, spark something new or meet somebody new, and that didn't really perform well. We weren't spending at the same clip. Now what you've seen is the product's evolved. There's a lot of new features to talk about. We've shifted to more down-funnel marketing, like you mentioned, and the ROI has improved, which has unlocked more spend for us. The metrics we're really looking at are driving registrations and reactivations.
Marketing is doing a better job driving registrations and reactivations than it has in the past, and those new users are retaining at healthy rates, similar rates to the organic users we see. So, we know that this is sustainable financially. We want to get the message out because we've got a lot of new features, and a key part of the strategy from here is changing reconsideration and perception. Particularly around events and a big push into social, we think marketing plays a key role in amplifying that message, and it's what's needed to get us from down 7% or so in MAU to flat. That's the next leg in the turnaround.
How do you think about Events? Events is really interesting to me, kind of bridging that digital to in-person dating experience. A lot of great early KPIs that I think you've talked about the 70% of eligible 18-year-olds to 24-year-olds engaging with the Events tab already. As we think about events expanding towards the 75 cities by the end of the year, how do you think about the broader opportunity set here, how much you might spend, but also maybe economics for Events?
Look, we've done this in a pretty smart way, I think a pretty scalable way. We've partnered with existing events providers. We're not curating these Events on our own. We're not putting a lot of money into creating the Events. The Events are there. We're partnering with Events aggregators or events companies that already have the Events and are looking to fill seats, and we've got the users to do that. Most of the dollars, we've got a couple development teams working on it, so there's a sort of a trade-off there. They could be working on other things, but we think events is the right place to have them. We've got a small Events sourcing team, and it's less than 10 people, so it's relatively manageable and will scale up quite well.
Most of the spend is on the marketing side, the co-promotion and marketing the events themselves. As we just mentioned, this is not about getting as many of our users to go to an event as possible, per se. Obviously, we want users to go to events, but it is a bigger strategy than that. It is changing perception and reconsideration for all users. What will likely happen is a small percentage of users will actually go to events, but a lot of them will think about Tinder through a different light because it has events. We have seen that with, like you said, 70% of Gen Z are interacting with the events page. They are coming back week after week. That shows there is interest. A smaller percent are actually going to the events. I think that will go up over time, but they like the idea.
This is what they want. I think it is a powerful message for changing reconsideration. The economics, the unit economics are pretty good and scalable. I think the economics for the user are very good, right? Because one issue that I think the company and the industry faces is that while the $20 a month you pay to be on the app is not really all that much money if you are meeting new people. The $200 you got to spend on a dinner in New York is a lot of money, and I think that is a constraint for Gen Z. Events offers a better value prop to users. 30% of the events are free. Those that cost money cost about $30 a month versus the dinner in New York, that is far more expensive. You are meeting not just one person and hoping it turns out well.
You are meeting lots of people and having a good time no matter how it turns out. You are often bringing a friend with you, which lowers the pressure. I think it is exactly what users are looking for and helps bridge the sort of economic gap for the user themselves. Those are all reasons why we are really excited about the events being the broader social push overall.
Love it. Can we turn to Hinge?
Sure.
Hinge MAU is up 13%, payers up 17% this past quarter. As we approach this kind of $1 billion revenue target and both of your core markets mature, but your newer international markets continue to emerge, how do we think about the growth algorithm? Whether that's audience growth, payer penetration, some pricing potentially. How do you think about that mix changing maybe this year and into next year?
Yeah.
Sorry for the loaded questions.
Well, there's a few good ones in there. Let's take the sort of payer-RPP mix first. What we've seen over the last few years is heavier growth on the payer side than the RPP side. I think that will continue for the foreseeable future, including in 2027. There's a couple reasons for that. One is, the international markets or the expansion markets are growing faster than the core markets, and they're usually a lower price market on the outset, so that puts a little pressure on RPP and drives more conversion and payer growth. I expect that dynamic to continue. Then, the second reason is, this lower-priced tier that we can talk about, which we're testing, that will affect all markets, but core in particular. That will drive more payer conversion than RPP.
I think that that mix will be kind of similar in 2027 than it was in 2026, which is sort of the mix we want. In terms of growth and the mix between international and core markets, one way to think about it is this year, obviously, the growth rates are much higher in expansion markets than in core markets, where they're a little bit more flat. But the quantum of revenue being generated by core markets versus international expansion markets is similar, like in a dollar term. I think that will probably continue in 2027 as well. I don't think the algorithm's going to change all that much. In the core markets, if we want to just stay there for one second and talk about growth within core, revenue growth is still quite strong. User growth has flattened out a little bit.
We've spent a lot of time looking at this. We think there's a lot of opportunity to continue to grow in core markets. One is on the monetization side. Hinge monetizes at lower rates than Tinder in core markets. The RPP is higher than Tinder, but the payer penetration is much lower, so there's room to grow that payer penetration rate in core markets for sure. Then two, Hinge is more scaled and maturing in certain markets to some extent. I f you look at it, let's just take the U.S., it's mature in liberal coastal cities. It's mature in New York, it's mature in San Francisco, it's mature in L.A. If you dig in, there's a lot of room for growth still in those middle America markets, southern markets, maybe more conservative parts of the country.
They under-index versus Tinder greatly, and so I think there's a big opportunity to just have Hinge appeal to a broader swath of the U.S. than just the markets that they really got started in. So that gives us confidence. Then if you break it down by age, for example, there's still a lot of opportunity in a little bit older segments. They've done very well with Gen Z. A s you get into the mid-30s, into the 40s, there's still a big opportunity there, where an app like Hinge that's higher intent can appeal to that population, too. So I think between going after those under-penetrated demographics and geographies, plus opportunities on the monetization side, we'll see pretty strong core growth in 2027 as well.
Yeah, makes a lot of sense. Touching on the monetization just a little bit more, I know you referenced the lower-priced subscriptions. Can you walk us through just a little bit more of the rationale behind that decision and what early learnings from that could you potentially apply to Tinder as well?
Yeah, there's a few things we've looked at and thought about. One, most large-scale dating apps have a three-price tier system, right? That's the case for Tinder, that's the case for Bumble. Hinge right now only has two. Makes sense to add a third. There's a precedent there. Hinge is also higher priced than those other apps. S o the fact that they're a higher price point, which makes sense for a more higher-intention dating app, leaves more room for a lower-priced tier than maybe you would see at like a Tinder, which that third tier they added was actually a higher-priced tier, not a lower-priced tier. So that's part of it. Then two, what I think is really interesting is the tier there is going to be focused on women in particular. That's a huge untapped opportunity for the category as a whole.
The category has done very well finding ways to add value for men. See who likes you, unlimited likes, those are men value prop features, not so much what women are looking for. It will be really interesting as you asked, what can we learn from this test? I think that will be where a lot of the learnings come from. Can we create features that women value, and is that an unlock to increase payer penetration across the business of the category as a whole?
Perfect. I would like to take a minute to open it up to the audience for any questions. Otherwise, I can keep going. All right, no problem. Let's move on to the App Store economics. Alternative payment savings expected to now reach $130 million. That is up $20 million. Could you break down what has driven the additional upside in expected IEP savings this year, and given the changes in the landscape, any update on where things stand with the Apple versus the Google App stores?
This is moving quickly. I spent a lot of time tracking this very closely, so let me give you an update, because there have been a few changes since even the earnings call about a month ago. Let's just go platform by platform. Google, no change since the last earnings call. They basically rolled out their own global fee structure. It is not subject to court approval in the U.S. anymore. Unfortunately, for us and other developers, it does not offer much incentive or ability to offer alternative payments. The economics, it is not very economical for us to do it. When we run the numbers and look at it, we will offer that to customers, but it is maybe about a $5 million benefit, we think, to the bottom line relative to the world we have been working in within for Google over the past couple of years.
A little bit disappointing, quite frankly. A t least we have got some certainty about where that is headed. Could it change? Could the DMA come out in Europe and say, "This is not good enough, Google. You have to do better"? Of course. F or now, they have rolled out a global policy that goes into effect between the end of this year and into next year across the globe. I t is basically one consistent policy. Apple has taken a different approach. They have a jurisdiction by jurisdiction fee structure that is quite hard for developers to follow. But there has been a little bit of new news there since earnings. Two things.
One, as it relates to the Apple versus Epic Games court case that's ongoing in the U.S., they proposed to the courts a 15% fee on alternative payments, which is less than the 30% fee you pay for in-app purchases, but more than the 0% we're paying today, aside from the credit card fees. It's now in the court's hands. The court needs to decide what they think an appropriate fee is. They can agree with Apple. They can say, "No, we think it's a different fee." We just have to see how that plays out. We expect the court to say something later this year or early next year, and until that, it's 0%, and we'll continue to take advantage of it. We'll still have to see how it plays out. Then in Europe, that happened in mid-August, they made that announcement.
In August, about a few days later, they made an announcement on European fee structure where, I don't know, somewhat ironically, they increased the fees for in-app purchases in Europe by three points or four points. So that's a bad guy for us relative to the fee structure we had before. But they did offer more optionality around alternative payments. The economics aren't great, but they are better, that it's a similar 15% fee for link-out web purchases. So now it's on us to try to optimize around alternative payments in Europe, which we haven't done in the past, to try to reduce the impact of that higher fees on in-app purchases, and we'll sort of have to see how that plays out. But if we stood there and did nothing, it'd be a negative to us for 2027. Those are some of the things going on.
The big one, which is Apple App Store fees in the U.S., still 0% on alternative payments. That won't change until the court rules, we think sometime later this year or early next year.
Must be challenging to navigate that environment.
It is.
I'm sure you'd love to spend less time on.
It is challenging.
Alternative payments.
Ultimately what we want is user choice, right?
Right.
We want our users to be able to choose between different forms of payment, we want economics that make sense for developers like us, we hope that the courts and the regulators get there.
Perfect. Let's move to E&E, maybe briefly. E&E direct revenue down 17%, continued pressure obviously from Azar. As you continue to evolve the portfolio mix with OurTime, BLK, Upward, but also bringing on incremental investments. Do you think about E&E more broadly over time as maybe a growth opportunity or really a free cash flow and profit driver?
I think the reality is it's hard to talk about E&E as one monolith. It's true that most apps are now on one platform, which I think is a big unlock going forward. But different brands within that sort of portfolio within a portfolio are in different stages of their life cycle and deserve different levels of investment. So really what we've been doing is looking at brand by brand, what makes sense. Spencer really leaned in here. We've defined what our priority brands are, those that deserve investment in marketing and in development and in headcount, and those that should gain from the shared platform capabilities.
If we get a win on the shared platform, all brands benefit from that, but maybe do not get as much brand-specific investment as some of the other ones with a bigger competitive moat or with a better opportunity to get back to growth. We have done that. I think that has been a helpful exercise. The other thing we have done is for those priority brands like the Match.com's, like the BLKs, like the Upwards, we are crystallizing their brand positioning. What customer does Match.com, who is their target customer? How are they positioned? What should that message be, and how should the product serve them? We are also bringing in some of the same philosophy we had at Tinder around driving meaningful connections and sparks and a real focus on the user to the E&E portfolio. I think the strategy will benefit those brands over time.
I think certain brands within the portfolio will get back to growth, going back to your question. I think that the collection of brands as a whole at E&E will probably still decline in 2027 as a whole. A gain, I think, there are certain apps, Azar could certainly get back to growth, Pairs could be growing, and certain apps within that traditional E&E bucket could get back to growth too.
Could you elaborate quickly on the brands you are prioritizing, specific kinds of demographics or geographies, user cohorts?
It is brands that we feel have a competitive moat have staying power, have brand equity. I mentioned most of them, Match.com, Upward, BLK, The League, Azar, Pairs. Then, we'll spend a little bit less time and effort on brands like OkCupid, for example. Not that we won't invest in them. They'll, like I said, gain in any rollout of improvements we make across the shared platform, but we're just going to invest a little bit less in marketing and in brand-specific resources. The same holds true for a brand like Plenty of Fish. I think, trying to spread our time management capacity and investment across all these brands of the portfolio equally was the wrong strategy. We've kind of crystallized where we want to focus, which I think is the right call.
Makes sense. Anybody else in the audience have a question? Sorry, could we bring the mic over? Nice long walk.
Hi there. You've got a new CEO, Jackie Jantos at Hinge. I suppose, what are her key strategic priorities? What are the areas and parts of the markets that she's targeting and focusing on at the moment?
A few things. One, she is new to CEO, although it's been a little while now. S he's not new to the company and she's been there for a long time and worked very closely with Justin, who was the founder. It was a well-orchestrated and planned sort of succession. I think it's went very well. She's got a marketing background. She's worked for some of the biggest brands in the world. I think brings a real strategic eye to the consumer, which I've appreciated. The strategy has not changed from what it was before her taking the reins at the highest level. It's a real focus on staying true to the ethos of Hinge, which is the app designed to be deleted. Staying true to a brand that's for high-intent users. Prioritizing product innovation and investment.
I think, of late, we've been talking a lot more about how do we get the category back to growth. Hinge is one of the brands to do it. It's a brand that resonates really well with Gen Z, and it gives a lot of users what they're looking for in terms of a product experience. We're talking more about how do we not only win back lapsed users, but how do we really get new users to enter the category, and what role can Hinge play? One area, for example, that we're focusing a lot on is trust and safety. It's always been important, but it's one of the biggest barriers to entry. What role can Hinge play in really leveling up trust and safety to break down some of those category barriers and get singles to try dating apps for the first time.
That's some of the areas of focus. We're spending a lot of time, she's spending a lot of time focused on the core markets. We understand that the Hinge equation for long-term growth is both continued growth in the core markets and geographic expansion. I mentioned a lot of the things we're thinking about on the core market side, but she's very involved in all that. Then I think the second, or the last thing that we've been focused on and she's been focused on as the CEO is, where does Hinge go next? What does the next geographic market look like? Is there an opportunity to expand into Asia? What countries would we go into? What timeline would there be? How do we make sure we do it right?
How do we make sure the product is customized or localized to meet the sort of expectations of users in India or Japan, and really that methodical approach to geographic expansion that worked in Europe? How do we use that same playbook to win over Latin America and Asia over the next couple of years? That's how we get Hinge not only to the $1 billion, but beyond that.
Last 20 seconds maybe. Capital allocation.
Good. I'm glad you-
We're getting in the back half, but as you return Tinder to growth, does that change your capital allocation strategy?
No, it doesn't. I think what we've been really good at is cutting costs in non-strategic areas. We did the reduction in force and the reorg that I think has not only reduced costs but sped up innovation. We've saved a lot of money on alternative payments. We'll continue to juggle the changing landscape there and do the best we can to save as much money as possible, and then reinvest that organically to make sure Tinder and Hinge are getting the investments they need. That, while giving 100% of free cash flow back to investors through buybacks and the dividend. We'll do more than $1 billion this year, and we plan to give 100% back, maybe not in any one quarter, but certainly over time. I think it's a powerful combination. The buybacks, reducing shares outstanding while turning around Tinder.
I've called it the coiled spring before. I think as we get out the other end of this, it'll be really a powerful value creation formula for investors over time.
Perfect. Let's end on that coiled spring. Thank you very much for being here today.
Thank you. Appreciate it.