Match Group Inc - New (MTCH) — Q3 2019 Earnings Call Transcript

Thanks Operator. Today’s call will be led by CEO Mandy Ginsburg and CFO Gary Swidler. They will review the third quarter investor presentation that’s available on our website and then answer questions. Before we start, I’d like to remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or similar statements. These statements are subject to risk and uncertainty and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. Now over to you, Mandy.

Thanks Lance, and good morning everyone. Welcome to our 2019 third quarter earnings call. Our growth accelerated in Q3, which is our strongest quarter yet in what has already been an extremely successful year. Not only has the team driven phenomenal results, but we have the scale, margin profile, and diversity of brands to deliver record results while at the same time making new bets and investments that we believe will drive strong and consistent growth in the future. Before I take you through some of these growth initiatives, I want to briefly touch upon IAC’s proposal to fully separate Match Group from IAC. As you know, our board has formed a special committee of independent directors to evaluate IAC’s proposal. A summary of that proposal and the expected process going forward were outlined in a 13D filed last month on October 11. Unfortunately, there’s not really much we can say until the committee has agreed with IAC on a structure that they are ready to recommend to the interested shareholders of Match Group, so on this call, we can’t really comment on the transaction; but of course, we can comment on our great results. With that, let’s jump right into the presentation, starting on Slide 3. You’ve heard me say the key objective for Tinder is to deliver an effective, engaging, and fun core experience for all of our users on the app. That core experience is a fundamental driver of user retention and engagement which ultimately leads to better user outcomes, meaning more matches, more dates, and more relationships. In addition, we have focused on monetizing opportunities that will give users tools they find valuable and are willing to pay for because they provide a more efficient and effective experience on Tinder. Slide 3 illustrates how Tinder’s core experience has led to remarkably high and stable user retention over the long run. The last chart shows that we’ve maintained strong engagement over the last several years at the same time we’ve driven user growth in revenue. Eighty-five percent of our users who are active on any given day will return the following month, and you can see that hasn’t changed since we started monetizing Tinder several years ago. Our users find real value in the product and they demonstrate that by coming back to the app again and again. Over 60% of Tinder users are active on it six days per week. The average Tinder user is active more than five days a week, and that number keeps growing. The number of users active every single day of the week has increased by 30% this year. In addition to these healthy retention and daily usage metrics, we’ve seen a meaningful lift in matches and messages since the launch of Tinder Gold two years ago. These metrics have shown continued strength even as we ramp growth throughout Asia and Latin America. Revenue growth for all these regions has been accelerating. Tinder is the highest grossing lifestyle app in roughly 100 countries around the world, yet it remains very underpenetrated in virtually all of them. In particular, large markets such as Japan, India, and South Korea present major opportunities for Tinder, and we’ve been making meaningful strides in each of those markets. There is a long list of other countries that individually generate less revenue but present us with a large opportunity for growth in aggregate. These countries have strong societal tailwinds as more and more young people are dating and choosing their own partners. Localizing and marketing the product internationally is a key part of Tinder’s growth strategy. We believe this will help grow brand awareness, shape perception, and tap into local consumer behavior. The right-hand chart shows that these core efforts are driving growth in the business. If you turn to Slide 4, you will see one of our recent initiatives, Swipe Night. This demonstrates how we are continuing to innovate to make sure Tinder remains the iconic lifestyle brand for young singles. Swipe Night was a big creative swing in product innovation that is a real first in the category. Swipe Night is an in-app, first-person five-minute interactive video series where at key turning points, people use the swipe feature to decide what happens to them next. Your choices dictate how the adventure unfolds and who you mess with, and we tag profiles with the choices people made to create natural ice breakers. The episodes aired every Sunday night in October in the U.S. Millions of users interacted with Swipe Night, leading to a 20% to 25% increase in likes and a 30% increase in matches. We also saw elevated conversation levels for days after the episodes ran, and female engagement, which is an incredibly important metric in any dating app, increased as a result as well. There was also a tremendous amount of positive buzz in the press and social media around Swipe Night, highlighting this first-of-its-kind experience. This really extended our appeal and resonated with Gen Z users. We’re planning to make Season 1 available on demand soon and will roll this out in key international markets early next year. This effort demonstrates the kind of creativity and team we have at Tinder and the kind of bets we’re willing to make. Swipe Night is just one example of the many innovative initiatives you can expect to see from Tinder in the coming quarters to continue to grow our influence around the world. Let’s now turn to Slide 5. This slide highlights some of the other bets we’re making across the portfolio. They include fueling the rapid growth at Hinge, growing OK Cupid in India and beyond, and continuing to address specific demographics through Chispa and BLK. Hinge’s product continues to gain traction with relationship-minded millennials. Its recent new marketing campaigns have given the brand a sustained lift and new users, and we expect to continue to invest in their momentum. We see plenty of room for Hinge to grow in English-speaking countries, which remains a focus for today. Until now, the Hinge team has been focused on user growth and product experience, but in 2020 we plan to shift the focus to improving monetization. We expect that these monetization efforts will gradually help offset the people, product, and marketing investments we’ve been making in that business. Moving to the center of the page, OK Cupid has achieved tremendous growth in India since we started investing there late 2018. They generated significant traction, especially compared to both domestic and international competitors operating in India. As a result of OK Cupid’s success in India, we’ve begun a similar push in Israel and Turkey this quarter, and we have plans in 2020 to push in even more countries where OK Cupid already has measurable organic traction. Last, Chispa and BLK have both been able to achieve strong growth in the U.S. within their respective demographics of Latinos and African Americans. We’re in the early innings of monetization at both apps, but progress is strong, and we’re optimistic we’ll be able to drive solid subscriber and revenue growth at both brands in 2020. On Slide 6, I want to cover some exciting new initiatives in live video that we’ve recently launched or will be launching soon, that we think could further expand our addressable market. Our company mission is to drive meaningful connections for every single person globally, and we recognize that video can be an important enabler of those connections. Chatting with friends and family using live video is ubiquitous today. It’s evident that video has become a primary form of communication and expression, especially for Gen Z and younger, but beyond using video with people you know, innovative live video experiences offer ways to get to know someone new. It could by chatting with someone new on a one-to-one basis or by watching someone’s personality shine through as they’re live streaming to a group. We know that many singles remain reluctant to use overt dating apps, and meeting people through live video experiences can provide a powerful alibi for fostering new connections. We’re excited by these consumer trends and are in the process of launching a few small tests of live streaming broadcasts on both Plenty of Fish and Twoo, where we have very large global user bases. In addition to the core matching and messaging experience on these brands, our users will be able to join live streaming communities. They can chat directly with live broadcasters or with other users who are viewing the same broadcast. We think live streaming could be a great feature that helps build community and ultimately more engagement between our users. In addition to potentially driving higher engagement, live streaming offers new potential monetization avenues that don’t currently exist in our portfolio. We did evaluate building this capability in-house, but in an effort to get these tests up and running quickly and with minimal start-up cost, we ultimately decided to leverage the SDKs of two different third-party platforms. This is our first foray into live streaming, so we’ll be closely watching these tests to understand the adoption rates and how it impacts the overall ecosystem of our two brands in this test. Moving to the right side of this slide, research shows that despite being more connected than ever before, people are lonelier. Just under half of all Americans report feeling lonely, and this is unfortunately worse in younger demographics. Our products aim to enable users to make real-life connections and get on dates in the real world. We also think enabling conversations to take place virtually can play a role in creating positive connections and combating loneliness. With these trends in mind, we’ve internally incubated a one-on-one live video app called ablo. ablo enables one-on-one video connections between people from all over the world. This is very different from our other products which are geared to delivering in-person or IRL dates. This app allows two people to connect in real time regardless of location and language. The app will translate language simultaneously so two people who don’t have a common language can, quote-unquote, talk to each other. ablo has grown to over 2.5 million registered users since it launched earlier this year, with the vast majority of users under the age of 35. ablo users have embraced the concept of connecting with people from all over the globe. They view it as enabling traveling without having to go anywhere. They cite making new friends from other cultures and other backgrounds as one of the biggest reasons for using the app. We see people having great conversations about their cultures, where they work, best places to travel, and they even share their favorite recipes. We believe ablo gives us a different use case beyond dating and allows us a broadly addressable market, and we hope it can help our users feel more connected and perhaps even less alone. It’s still early, but ablo has seen solid retention trends and strong App Store ratings. The app is off to a nice start, and we plan to continue investing in the product and its growth. This is another example where we’re investing in exciting and innovative products to further fuel long-term growth for the business. Before I wrap up, I want to emphasize that across the company we are launching new and exciting features as well as expanding brands into new markets where we see opportunity. I am extremely optimistic about the future and strongly believe we are making smart investments to capture an even larger piece of a growing market and deliver sustained growth at strong levels of profitability. Gary is going to take you through our fantastic results for Q3 along with an early look at our outlook for 2020, so with that, Gary?

Thank you, Mandy. As you mentioned, we achieved another fantastic quarter in Q3, with growth accelerating on both the top and bottom lines, strong performance at Tinder, and improvements in non-Tinder subscriber trends. We're making progress on our strategic plan to set the company up for consistent and robust growth. This year, we're investing significantly in product and marketing, which we believe will drive long-term global growth through new initiatives and enhance the performance of our established brands. Even with these investments, we're on track for solid financial results in 2019. Let's delve into the quarter's details, and then I'll provide an update on our financial outlook. On Slide 8, you can see that Tinder's performance continues to excel. Our direct revenue in Q3 grew by 49% year-over-year, an acceleration from Q2, driven by a 38% increase in average subscribers and a 9% rise in ARPU. A key factor in Tinder's growth this quarter was the redesign of the Gold homepage, released on Android in July after its success on iOS. This led to a sequential increase of 437,000 average subscribers in Q3. We're on track to add about 1.6 million average subscribers this year, marking our highest annual total to date. This growth stems from numerous new product features and the optimization of existing paid features, rather than a single major revenue feature. This success highlights our capabilities on a platform as large as Tinder. Underpinning Tinder's continuing growth is an active and engaged ecosystem of both free and paid users, as Mandy mentioned earlier. On Slide 9, you can see that the year-over-year growth in average subscribers across the company's brands picked up in Q3, with overall average subscriber growth at 19%, an increase from 2Q19. Subscriber growth in North America and internationally also accelerated from Q2. Internationally, subscriber growth was particularly strong, mostly due to Tinder and Pairs, though other brands also contributed. Non-Tinder subscribers have shown improved performance recently. Several of our more established businesses, alongside our new ventures like Hinge, Chispa, and BLK, contributed to this subscriber growth. This gives us confidence in modest non-Tinder year-over-year subscriber growth in Q4, a trend we anticipate will continue into 2020. The average subscribers for the quarter exceeded 9.6 million, with just over half coming from outside North America. We expect the increase in international subscribers to continue as our international growth efforts at Tinder and other brands advance. Slide 10 details ARPU trends. Tinder's ARPU has risen over 70% in the last three years, driven by a growing share of subscribers opting for the higher-priced Gold package, along with strong a-la-carte sales. Tinder's ARPU is now comparable to that of our other brands, which have been stable overall. In Q3, Tinder’s ARPU increased 9% year-over-year, more on an FX neutral basis. We believe there is still room for Tinder's ARPU to grow. Overall, company ARPU rose by $0.02 year-over-year to $0.59. On an FX neutral basis, total company ARPU increased by 6% to $0.60, while international ARPU grew by 7%. Transitioning to Slide 11, the company's Q3 total revenue reached $541 million, reflecting a year-over-year growth of 22%, an acceleration of four points from 2Q19. Without the impact of foreign exchange, total revenue growth would have been 24%, equating to $550 million on a constant currency basis. Total direct revenue increased by 23%. Our smaller indirect revenue saw a decrease of 15%, which was an improvement compared to Q2. We expect to see indirect revenue trends gradually stabilize over time. The margin improved by a point from the previous year’s quarter. Selling and marketing expenses declined as a percentage of revenue again this quarter, down three points to 21%, largely offset by increased legal expenses. On Slide 12, we note that at the time of our IPO, we had a gross leverage of 4.5 times. We've consistently reduced that by over 50%. By the end of Q3, we reported a gross leverage of 2.2 times and a net leverage of 1.7 times, both below our targets. It's worth noting that we've achieved this de-leveraging even after paying a $556 million special dividend in late 2018 and utilizing $582 million for share buybacks over the past two years. Additionally, we've spent $629 million to net settle employee equity awards and cover employee withholding taxes since 2017, totaling nearly $1.8 billion in cash outlays, which underscores the significant cash-generating capacity of our business. On Slide 13, we present our latest financial outlook. For Q4, we expect total revenue to be between $545 million and $555 million, with EBITDA ranging from $205 million to $210 million. This revenue outlook includes about $6 million of incremental negative FX impacts, primarily from the euro and the pound against the dollar, since our previous financial outlook in August. We anticipate that our Q4 margin will align with that of 4Q18, despite expecting around $25 million in additional legal costs and long-term oriented product and marketing investments compared to the same quarter last year. For the full year of 2019, we expect both revenue and EBITDA growth in the high teens, surpassing our initial expectations for the year. Our EBITDA for 2019 accounts for about $20 million invested in Hinge, which was planned from the start of the year. Our full-year margin is being impacted by roughly $60 million of expenses we didn’t anticipate at the beginning of the year, categorized into two main areas. First, we've reinvested part of our successes this year back into our businesses, mainly at Tinder globally, OK Cupid in select international markets, Harmonica targeting the Muslim demographic worldwide, and Pairs Engage focusing on the Japanese matrimonial market. We believe these investments will enhance the company's long-term growth and help us capture significant global market opportunities, particularly in Asia. Secondly, we are facing increased legal and regulatory costs in 2019. This includes expenses from the France digital services tax and higher costs associated with ongoing litigations. I also want to highlight that Apple recently made changes to its customer subscription management process, negatively affecting renewal dynamics across many of our brands. These changes are causing a temporary spike in terminations, which we think are mostly a pull forward of future cancellations. We expect this will impact Q4 and Q1 2020’s subscriber net addition levels before the effect diminishes. As the changes are new, we're monitoring their impacts closely, but have incorporated them into our latest outlook. We're currently undergoing our planning process, but I want to share some high-level expectations for 2020. We anticipate achieving mid to high teens revenue growth once again, driven by continued strong performance at Tinder, along with growth from several other businesses. We expect overall subscriber growth in 2020 from our non-Tinder brands, alongside sustained strong growth for Tinder. Tinder has an ambitious product roadmap for 2020. They are still determining the right balance between user growth, engagement, subscriptions, and a-la-carte features. We plan to keep investing in our new ventures showing strong traction in their markets. Key among these is Hinge, which has shown great product momentum and increasing brand recognition within the U.S. and other English-speaking territories. Hinge's user growth is robust, and we are shifting our focus to subscriber and revenue growth. Beyond Hinge, we plan to continue investing in OK Cupid across multiple global markets. We intend to sustain our investments in BLK, Chispa, Ship, ablo, and Harmonica. While we expect to face increased legal costs next year, we anticipate that many significant pending issues will be resolved by the end of 2020. I also want to mention that if we proceed with the spinoff, we expect to incur up to $10 million in advisory and related costs for the transaction. Despite our investments and higher legal expenses, we aim to achieve mid to high teens EBITDA growth for 2020, maintaining EBITDA margins comparable to 2019. We remain confident in our long-term margin target of over 40%. In fact, if we exclude the $60 million in discretionary and non-discretionary expenses from this year, our margins would hover around 40%. I wanted to share our current thoughts for 2020 with you, but we will refine our plans throughout the year and provide further updates and details on our next earnings call in early February. Now, I'll ask the Operator to open the line for questions.

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

Sure. Let me give that a shot. There’s a lot of moving pieces on the margin, so I’m going to try to walk you through it relatively clearly, and hopefully this will be helpful. When you look at what’s happening for 2020, you’ve got a couple of big things that are helping give us improving margins. The most notable, of course, is that the Tinder business is becoming a bigger piece of the overall pie, and Tinder has higher margins than our other brands in aggregate and so we get a lift from having a bigger piece of the business be Tinder. I’ll talk about Tinder margins in a second, which was kind of the second part of your question. We’ve also talked previously about giving users a choice on Tinder on Android of credit cards or using their billing system, and given that, we’ve seen some improvement from a margin perspective as users have chosen to pay with credit cards on Tinder. Those two things are helpful to our margins in 2020. On the other side of the equation, we’ve got a number of things, some of which are discretionary and some of which aren’t, that are impacting margins. Most notably, and kind of the simplest one, is legal and the spinoff costs, and I’ll come back to legal. The spinoff costs, if the spinoff goes through, we’re saying we’re going to have $10 million of costs next year related to the spinoff - that would happen in 2020 or not, and then obviously that wouldn’t occur again beyond that. On the legal side, if you look at the trends in legal, our legal costs this year are jumping significantly from last year. In 2018, we had about $15 million of legal fees. This year, we’ve got about $40 million more expected for the year, so close to $55 million, so it’s a significant jump in ’19, and then our numbers for 2020 include additional legal fees probably in the neighborhood of about $15 million or so. The jump is pretty significant from ’18 to ’19, and then incrementally from ’19 to ’20. Now, we don’t view those as discretionary. We are involved in three significant lawsuits and we are pursuing those with top flight lawyers because in one of the cases, Bumble, we think they’ve infringed on our patents and we’re expecting to be compensated for that, so we’ve been pursuing that litigation. On the other two, one related to the FTC and DOJ investigation, we think the claims that have been made in that case are meritless and we are going to defend ourselves against that vigorously, so that is increasing our legal costs in 2020. It started now in late ’19, and it’s going to take place over the course of 2020. The third relates to all the matters on the Tinder employee lawsuits, which again we think is purely a case of sour grapes on the Tinder employees’ behalf, and we are defending ourselves on that lawsuit vigorously with top flight counsel again because we don’t expect to make up the difference when people decide to sell their stock earlier and the stock price was lower, versus now we’re not going to compensate people for having made that decision, and so we’re fighting that lawsuit. I think a lot of those matters are going to resolve themselves in 2020, and so the legal costs that have jumped and are pressuring our margins by probably about two points if you add up the jump in legal costs between, say, ’18 and ’20, that will no longer be the case after we get beyond 2020. So we view those as a temporary lift, a necessary lift, an unfortunate lift, but it’s something that we’ve chosen to pursue to defend ourselves and to pursue the Bumble infringement. Then if you look at other trends in the business, in our non-Tinder brands what we’re seeing is more of a shift to apps, and so we’re paying more App Store fees on the non-Tinder brands. That is a positive trend. We think it gives people a better user experience, but it’s an extra cost that we’re incurring and is a negative on the margin side. Then you get into the two categories of investments that we’re choosing to make that are discretionary but we think are good for the long-term health of the business to help us grow the business long term. The first is, and I mentioned this in my remarks, we’re investing in a number of new bets and we’re watching these new bets very carefully. We believe they have solid traction. We’re looking for indicators of solid traction to continue to make investments in them, but we think to help continue to grow globally at the company, we want to make these bets. If you look at the investments we’re making in OK Cupid international, in our Pairs business in Japan which is growing extremely nicely, in BLK and Chispa here in the U.S. focused on certain demographics, all of those businesses are showing strong traction. We’re very disciplined about our investments into these businesses, but right now, the markers that we’re looking for in those businesses are being hit, and so we’re choosing to invest. We’re doing that knowing that we’ve got this headwind from the legal expense, and so the result is flatter margins than we would like in 2019 and 2020, but we’re taking that on and basically saying, despite the fact that we’ve got this non-discretionary legal expense that’s impacting our margin, we’re going to keep investing in the business for the future even if it means short-term we don’t have the margin expansion we were hoping for. Once we get through the legal issues, we’ll see that margin expansion actually occur, so we’re making that conscious choice. I think as we go through our planning process for the rest of this year, for 2020, we’re going to scrub all those investments and all those expenses and see what else we can deliver, but right now the guidance that I’ve provided reflects what we think is a reasonable level and a logical level of investments in those new brands. Then we’ve got investments at Tinder, which has obviously been our growth engine. You asked about this directly, but the margins at Tinder are strong, they’ve been expanding. The last time we talked about margins at Tinder, we said they were north of 40%. I think that was close to two years ago, so you can expect that Tinder margins are much stronger now than they were two years ago. Tinder brings those strong margins, but at this point, we also think it’s important to continue to make investments in Tinder because we want to get it to grow globally and get to that next level. So as we look at markets like Japan, like India, international markets where we think there is a big opportunity for Tinder, we want to make sure we’re making the right level of investment. So again, it’s a conscious decision. We’re going to scrub those investments in Tinder and make sure the investments we’re making in engineering resources, overall product development, tech infrastructure, product localization, trust and safety, moderation, all the things that are important, that need to be made for this continued expansion globally, especially in these Asian markets, that we’re making the appropriate levels of investment. We’ve incorporated into our outlook for next year a strong level of investment in Tinder in all of those areas. Even with that, we’ll see some margin expansion at Tinder next year, and as we come back in early February having scrubbed those numbers, we’ll be able to give you a little more precision around both the investments at Tinder and the investments in some of the new brands. That’s everything we’ve incorporated for next year, and I think it explains the margin trends at Tinder as well as the margin trends at the overall company.

That was all very helpful. Thanks Gary.

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

Let me address the question about Facebook first, and then Gary can respond to the other inquiries. When Facebook introduced its Dating feature, we mentioned in this call that we didn’t anticipate it would impact our business, and that has proven to be correct. Facebook has launched in the U.S., and we have observed no impact on our business, particularly at Tinder. Currently, Facebook has been rolled out in approximately 20 markets since last year, and we have been closely monitoring these regions without noticing any effect on our key performance indicators globally. When Facebook launched in Canada about a year ago, we believed it would serve as a good indicator for the U.S. market, and after observing trends over the past year, we have found no impact in Canada either. Therefore, we feel confident in our competitive position at this time but will keep an eye on it. It’s important to note that during the past year, as Facebook expanded into these markets, Tinder's growth has actually been accelerating worldwide. Additionally, I want to emphasize that our expectations for Q4 Tinder net additions remain unaffected by Facebook. As Gary mentioned, there’s been an increase in terminations related to iOS changes from Apple, but we aren’t seeing this effect on Android or new subscribers, so we continue to observe little to no impact, and we will keep you updated. Overall, we feel positive from a competitive perspective.

Yes, I think that’s all right. It’s important to understand that what we’re seeing in terms of Tinder subs for Q4 is basically what we’ve been expecting the entire year. We had a product plan at Tinder which we’ve been executing on. We talked about 1.6 million net adds for the full year or thereabouts, and we’re on track to deliver something very close to that. There is a little bit of a pull forward of terminations, as Mandy said, on iOS at Tinder and some of our other brands from the changes that Apple made, so that is affecting the sub number a little bit in Q4, but that is really, I think, the only thing that’s going on that was not expected by us all along in this year as we planned Tinder sub additions. That’s the one item, but again I think it’s mostly a pull forward probably into a little bit in Q4, probably lingers into Q1, and then I think you’ll see that effect on the Tinder sub numbers and the overall sub numbers dissipate a little bit.

Thank you.

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

Okay, sure. If you look at what we’re expecting for next year, I think that Tinder will probably add, in terms of order of magnitude, a similar amount of revenue in 2020 over 2019 that it’s adding dollars-wise, 2019 over 2018. We think that will be very similar, but obviously since it’s off a bigger base, the growth rate will be lower in 2020 for Tinder than it is in 2019. That’s just math. That’s a piece of it, and then on the other side of the equation, we are increasingly confident that the rest of the brands in aggregate are going to start to deliver some growth for us on revenue in 2020, so I think it will be modest at first but we believe we are approaching the point where the other brands are going to contribute, and so if they add a little bit of growth, that is what gets us into that mid to high teens growth rate overall for the company. That’s kind of the mix - still very strong growth at Tinder, but a lower overall growth rate off the bigger base, and a little bit of contribution from the other brands. I think that that is really the dynamics around our growth outlook on the top line for next year. In terms of the Tinder subs for next year, we haven’t really provided yet an outlook on that, and there’s a few reasons for that. I think as we’ve said many times, and I guess I’ll say it one more time here, we don’t focus solely on Tinder subscriber net adds. We focus on driving Tinder revenue, which I just told you what we think we can do next year in that regard, and we get it through a mix of ARPU improvement and subscriber growth. As we start to move more internationally at Tinder, the typical western model subscription which is something that we’re very good at and has driven our business to this point may not be right in every market and we may shift the way we approach Tinder monetization more towards a-la-carte or consumables than towards a subscription model. That’s something we’re evaluating as Tinder grows globally, and so that is something that we’re focused on. Obviously we understand we need to deliver a healthy number of Tinder net adds. We think we’ve incorporated a healthy level into our underlying assumption for next year, but as we continue to refine our product roadmap for next year, we’re maintaining the flexibility to make adjustments between subscription and a-la-carte as we think through the global dynamics in the Tinder business. That is kind of where we are at this moment. As I said, we will have more detail around exactly how we’re going to approach it, product cadence and everything else, as we get a little further I think we’ve done this a few times now, so the product cadence has become, I think, a little bit more clear. If you look at 2019, we had a big revenue feature in Q2, another in Q3 related to the Gold homepage redesign on iOS and Android, so I think as we preliminarily think about it, we’re thinking about some cadence that’s kind of similar to that next year, but again that’s something we’re still sorting through and we’ll have more guidance on exactly when the features will be rolled out. But suffice to say, as we had in 2019 a very robust product roadmap for Tinder focused on revenue and engagement features, Tinder has rolled out a lot of different things very consistently in 2019, we’re going to do the same thing in 2020 and our base case assumptions for next year assume that we’ll roll out a lot of different things. Some will be more successful, some will be less successful. Our outlook doesn’t assume any massive home runs, but our goal always is to outperform those expectations and deliver features that really move the needle. I’m sure some will and some won’t, and some will move the needle more than we hope, but how that all breaks out and when and which ones, I think remains to be determined. The Tinder team is hard at work trying to make sure that we deliver all of those features next year, and I’m sure they will. Anything else, Ross?

No, that’s it.

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

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

Thank you for highlighting a positive aspect of our earnings report from this quarter. We believe that the non-Tinder brands made significant progress in Q3, which gives us confidence in their overall growth for Q4 and into 2020. You mentioned the 95,000 sequential subscriber additions, which is impressive. It's important to note that this growth is coming from a variety of brands. Hinge and OK Cupid are major contributors, along with our newer initiatives BLK and Chispa, and our Meetic business. Our aim is to continue expanding this group, and we feel we are on the right path. The reason the revenue growth isn't as substantial as expected, considering the increasing subscriber numbers, is that many of these brands are still at the beginning stages of their monetization journey. We've discussed Hinge previously, noting that there's significant potential for monetization that we have not fully focused on yet, but we are now beginning to develop strategies for it, which will be part of our plans for 2020. As Hinge continues to attract more users, we believe it will also increase its subscriber base, leading to greater contributions to our total revenue as we refine monetization strategies. Other brands are at different points in their growth, and, as mentioned earlier, our investments in these brands stem from clear user growth and product momentum. Our focus now needs to shift to monetization and revenue growth, which is a natural progression. We will approach this systematically, and we have developed a strategy for these brands, which we will apply to Hinge in a significant manner, with strong confidence in our ability to enhance monetization for these brands.

Thank you.

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

Thanks, Eric. The Swipe Night content we created was specifically aimed at the Gen Z audience and we found that it really connected with them. Additionally, it serves as an innovative way to showcase a user’s personality while encouraging engagement and conversations within the app. We observed increased user engagement, communication, and conversations, particularly among women, which is all positive for the ecosystem. Beyond the app, we noticed significant buzz around the content, which we believe will help maintain Tinder’s visibility and relevance among younger users. We're also optimistic that the short interactive miniseries will succeed in international markets, and we plan to launch it outside the U.S. next year. Based on what we've seen in the U.S., we believe it will be appealing abroad as well. Looking at video content across our other products, we are exploring various ways to use video as a means to drive engagement. I mentioned our live streaming tests today, which allow users to engage not only with broadcasters but also with each other. For instance, while a broadcaster discusses music or cooking, viewers can interact with one another. We believe this could foster engagement and build a sense of community. While it's still early for some of these video initiatives, our goal is to create reasons for users to return and initiate conversations, which is key to our success. We'll keep you updated as we progress with these efforts.

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

If you consider more developed markets such as the U.S. and Western Europe, about half of the addressable market and singles have used a dating app, whereas in the regions you mentioned, this percentage is significantly lower. There's a higher stigma in these areas, contributing to reduced category usage, but this is changing quickly. The addressable market is large, consisting of young populations with high mobile internet and usage rates who are beginning to date, while parental involvement in their dating decisions is decreasing. We anticipate that this social transformation will significantly benefit our category over the next three to five years, with an accelerating shift. Our investment in Harmonica reflects this trend; the founders created it in response to the pressures their friends and family faced regarding arranged marriages and the need for an option for young Muslims who are serious about dating. This represents a substantial addressable market in EMEA and APAC. Regarding penetration rates, some markets have higher monetization than North America and Western Europe, such as Japan, which has high ARPU but low penetration due to stigma, although that is evolving. Additionally, there are markets with lower monetization but significant total addressable market potential, and we believe there are growth opportunities to seize in both scenarios. We remain optimistic, noting that we recently stated that in five years, 25% of our revenue would come from these regions, climbing from about 12% at the announcement to approximately 15% now, indicating we are progressing on that path with continued opportunities ahead.

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

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

Great, thanks.

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