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Match Group Reports Strong Q1 Revenue and Adjusted EBITDA Growth

DALLAS, May 3, 2016 /PRNewswire/ -- Match Group MTCH, -1.15% released first quarter 2016 financial results today and separately released an investor presentation which will be reviewed on the earnings conference call. The presentation is available on the Investor Relations section of its website at http://ir.mtch.com.

"Match Group posted very strong revenue and Adjusted EBITDA growth in the first quarter, driven by exceptional growth at Tinder, solid performance of Meetic and Match, and the PlentyOfFish acquisition," commented Greg Blatt, Chairman and CEO of Match Group. "We expect solid year over year performance throughout the balance of 2016."

Q1 2016 SUMMARY

  • Adjusted EBITDA nearly doubled over the prior year to $64.6 million
  • Revenue grew 21%, led by 24% revenue growth at Dating
  • Average PMC grew 36% to 5.1 million
  • Tinder surpassed 1 million PMC as of the end of the quarter and successfully launched its first à la carte paid feature
  • ARPPU declined 10% and Sales and Marketing as a percentage of revenue declined from 48% to 40%, driven primarily by the acquisition of PlentyOfFish and fast growth at Tinder
  • Free Cash Flow nearly doubled to $68.5 million, while operating cash flow increased 88% to $75.0 million

(in thousands, except EPS and ARPPU)

Q1 2016

Q1 2015

Growth





Total Revenue

$285,283

$235,069

21%

Total Dating Revenue

260,401

210,147

24%

Adjusted EBITDA

64,586

33,250

94%

Adjusted Net Income

28,226

21,677

30%

Adjusted EPS

$0.11

$0.13

-18%

Operating Income

29,188

27,040

8%

Net Income

7,152

26,206

-73%

GAAP Diluted EPS

$0.03

$0.16

-83%

Average PMC

5,083

3,732

36%

ARPPU

$0.54

$0.60

-10%

  • Operating income was up 8%, reflecting the strong Adjusted EBITDA growth, partially offset by:
    • a $3.2 million increase in the amount of contingent consideration expected to be paid in connection with the Eureka acquisition, the performance of which is exceeding expectations, compared to an $11.0 million reduction in the amount of contingent consideration expected to be paid in connection with the 2013 acquisition of Twoo, which was reflected in Q1 2015;
    • an additional $11.2 million of stock based compensation, about half of which reflects an ongoing increase in expense burden driven by new grants and the remainder of which reflects modification charges and certain awards we don't expect to be of a recurring nature; and
    • an additional $4.4 million intangible asset amortization in the current year driven by the acquisitions of Eureka and PlentyOfFish.
  • Adjusted Net Income increased 30% as a result of the increase in Adjusted EBITDA discussed above, offset by $18.3 million of additional interest expense in the current year resulting from our November 2015 financings.
  • Adjusted EPS declined 18% as a result of a 59% increase in the adjusted weighted average shares outstanding for the quarter driven primarily by our initial public offering in November 2015.

Revenue








(in thousands)


Q1 2016


Q1 2015


Growth

Direct Revenue:







North America


$164,382


$138,522


19%

International


84,646


63,364


34%

Total Direct Revenue


249,028


201,886


23%

Indirect Revenue


11,373


8,261


38%

Dating Revenue


260,401


210,147


24%

Non-dating Revenue


24,882


24,922


0%

Total Revenue


$285,283


$235,069


21%

Revenue growth of 24% at Dating was led by strong contributions from Tinder and PlentyOfFish. Non-dating revenue was flat at $24.9 million, beneath our expectations due primarily to lower than expected SAT test preparation course volume, which we believe continues to result from recent changes to the exam format.








(in thousands)

Reported Revenue


Constant Currency Adjustment


Adjusted Revenue

AdjustedGrowth

Direct Revenue:







North America

$164,382


$ -


$164,382

19%

International

84,646


3,880


88,526

40%

Total Direct Revenue

249,028


3,880


252,908

25%

Indirect Revenue

11,373


389


11,762

42%

Dating Revenue

260,401


4,269


264,670

26%

Non-dating Revenue

24,882


-


24,882

0%

Total Revenue

$285,283


$4,269


$289,552

23%

Excluding the impact of foreign exchange in the current period, Match Group revenue would have increased 23% to $289.6 million and Dating revenue would have increased by 26%. Acquisition-related deferred revenue write-offs were $3.8 million for the quarter and primarily relate to the acquisition of PlentyOfFish in Q4 2015.

Dating Average PMC







(in thousands)

Q1 2016

Q1 2015

Growth

Total Average PMC:






North America

3,221


2,553


26%

International

1,862


1,179


58%

Total

5,083


3,732


36%

Average PMC increased 36% to 5.1 million compared to 3.7 million for the year ago quarter, driven primarily by growth at Tinder and the acquisition of PlentyOfFish.

Dating ARPPU










Q1 2016


Q1 2015


Growth

Total ARPPU:







North America


$0.56


$0.60


-7%

International


$0.50


$0.60


-16%

Total


$0.54


$0.60


-10%

ARPPU was $0.54 for the first quarter of 2016, compared to $0.60 in the year ago quarter, driven primarily by growth at Tinder and the acquisition of PlentyOfFish. Excluding the effects of foreign exchange, ARPPU declined 9%.









Reported ARPPU


Constant Currency Adjustment


AdjustedARPPU

AdjustedGrowth








North America

$0.56


$0.00


$0.56

-7%

International

$0.50


$0.02


$0.52

-13%

Total

$0.54


$0.01


$0.55

-9%

Operating Costs and Expenses

(in thousands)

Q1 2016


% of Revenue


Q1 2015


% of Revenue


Growth











Cost of revenue

$53,677


19%


$38,953


17%


38%

Selling and marketing expense

113,495


40%


111,965


48%


1%

General and administrative expense

51,321


18%


29,738


13%


73%

Product development expense

22,863


8%


16,451


7%


39%

Depreciation

6,487


2%


7,045


3%


-8%

Amortization of intangibles

8,252


3%


3,877


2%


113%

Total operating costs and expenses

$256,095


90%


$208,029


88%


23%

Operating expenses increased 23% to $256.1 million compared to $208.0 million for the year ago quarter. This increase includes:

  • a $3.2 million increase in the amount of contingent consideration expected to be paid in connection with the Eureka acquisition, the performance of which is exceeding expectations, compared to an $11.0 million reduction in the amount of contingent consideration expected to be paid in connection with the 2013 acquisition of Twoo, which was reflected in Q1 2015; and
  • an additional $11.2 million of stock-based compensation, about half of which reflects an ongoing increase in expense burden driven by new grants and the remainder of which reflects modification charges and certain awards we don't expect to be of a recurring nature.

Operating expenses also includes $2.1 million of costs related to the consolidation and streamlining of our technology systems and European operations compared to $3.3 million in Q1 2015.

Adjusted EBITDA

(in thousands)

Q1 2016

Q1 2015

Growth





Dating Adjusted EBITDA

$67,274

$37,864

78%

Non-dating Adjusted EBITDA

(2,688)

(4,614)

42%

Total Match Group Adjusted EBITDA

$64,586

$33,250

94%

Dating Adjusted EBITDA Margin

26%

18%

7.8 pts

Total Match Group Adjusted EBITDA Margin

23%

14%

8.5 pts

Adjusted EBITDA increased 94% due primarily to the higher revenue and a decrease in sales and marketing expenses as a percentage of revenue as our sales mix continues to shift towards brands with lower marketing spend, as well as narrowing losses at our Non-dating business. Additionally, costs incurred related to the consolidation and streamlining of our technology systems and European operations were $2.1 million, a decline of $1.2 million compared to Q1 2015. As a result of these changes, Dating Adjusted EBITDA margin increased to 26% from 18% in the prior year, while total Match Group Adjusted EBITDA margin increased to 23% compared to 14% in the prior year.

OTHER ITEMS

Interest expense in the quarter was $20.4 million, consisting primarily of interest costs associated with the Company's term loan and senior notes, as well as commitment fees on its revolving credit facility.

The effective tax rates in Q1 2016 and Q1 2015 were 42% and 24%, respectively. In Q1 2016, the effective rate was higher than the statutory rate of 35% due primarily to the non-deductible losses on contingent consideration fair value adjustments, partially offset by foreign income taxed at lower rates. In Q1 2015, the effective rate was lower than the statutory rate of 35% due primarily to the non-taxable gain on contingent consideration fair value adjustments. The effective tax rates for Adjusted Net Income in Q1 2016 and Q1 2015 were 31% and 36%, respectively. The Q1 2016 effective tax rate for Adjusted Net Income is lower than the prior year primarily due to an increase in foreign income taxed at lower rates.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2016, Match Group had 248.9 million common and class B common shares outstanding.

As of March 31, 2016, the Company had $147.5 million in cash and cash equivalents and marketable securities. Additionally, the Company had $1.2 billion of long-term debt ($40 million matures in the next twelve months). Match Group has a $500 million revolving credit facility. The credit facility was undrawn as of March 31, 2016 and currently remains undrawn.

As of March 31, 2016, IAC's ownership interest and voting interest in Match Group were 84.6% and 98.2%, respectively.

DILUTIVE SECURITIES

Match Group has various tranches of dilutive securities. The table below details these securities as well as potential dilution at various stock prices (shares in millions; rounding differences may occur).

...




As of4/29/2016

Dilution at:










Share Price


$11.40

$ 12.00

$ 13.00

$ 14.00

$ 15.00










Absolute Shares as of 4/29/16

248.9

248.9

248.9

248.9

248.9











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