MTCH - NASDAQ

Good day and welcome to the Match Group Third Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tanny Shelburne, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim; and President and CFO, Gary Swidler. They'll make a few brief remarks and then we'll open it up for questions. Before we start, I need to remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate or similar statements. These statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports with the SEC. With that, I'd like to turn the call over to BK.

Thank you, Tanny. Good morning and thank you all for joining today's call. As I reflect on this past quarter, I'm proud of the continued hard work and high level of commitment across the company, which has led us to deliver solid financial results in Q3. Across the portfolio, we remain focused on driving innovation efforts forward, delivering on our product roadmaps and building a durably growing and highly profitable business and I'm confident in the steps we're taking to strengthen our portfolio and financial performance over the long-term. As I mentioned during our last call, shareholders rightfully expect both short and long-term results. In the short-term, Tinder's direct revenue was slightly below our expectations driven by the under delivery of certain optimizations. However, Tinder added 311,000 payers sequentially and declined by only 4% year-over-year. This was well above our outlook provided in late July. While we're pleased with the results on payers, we saw less progress on Tinder MAU than we expected. Tinder remains focused on the long-term testing several important new features aimed at cleaning up its ecosystem and improving user outcomes. This includes testing mandated face photos in several markets. With this feature, users with faceless profiles are required to upload a face photo before they can send likes. Initial results have been promising and we'll continue to monitor these metrics before full rollout. We're optimistic about the positive impact that this could have on the overall Tinder ecosystem and user experience. Similarly, Tinder released several features designed to improve outcomes, particularly for women into testing in Q3. This includes Spotlight Drops, a revamped Explore tab with newly added tiles and recommendation improvements. Additionally, Tinder has seen stabilization in women's engagement metrics, including weekly women's active messengers and four way conversations. We're pleased with the progress we've seen recently at Tinder on product execution, but are far from done. The team is working tirelessly pushing forward with initiatives to drive Tinder's transformation forward. At the same time, we're clear eyed that Tinder's progress will not always be linear because we know that transformation, such as these, take time. Our commitment to driving better user trends and sustained top line progress remains strong and we believe that we'll see tangible markers of progress over the coming quarters as Tinder's new initiatives continue to roll out. Hinge delivered another exceptionally strong quarter with continued user momentum and impressive revenue growth. Hinge's download rankings continue to climb across its core English speaking and European markets, demonstrating just how much the experience resonates with intentioned users. Hinge also gained momentum against its next largest competitor becoming the second most downloaded dating app in the US in October, a testament to its strength and high appeal of Hinge's experience. Hinge also made improvements to its product in the quarter announcing the global launch of Your Turn Limits. The feature is supporting daters by helping them focus on their current conversations, making good on their brand promise to help get users out on great dates faster. This feature has been powerful in increasing response rates, which were up 20% in tests and nearly half of users said it helped them increase their focus on current matches. This exciting feature is just one piece of Hinge's strategy to deliver a richer experience for daters. We're embedding even more product innovations like AI-enabled features into every step of the user journey. Hinge also continues to advance its innovations as it seeks to transform the future of intentional dating by creating the feeling of working with a trusted guide. As part of this, Hinge began testing AI-enabled prompt suggestions to help users have more meaningful conversations that lead to great dates faster. This is just one example of how Hinge is embedding AI throughout the dating journey and I look forward to sharing additional product updates in the future. At MG Asia, our live video app, Azar, expanded into the US applying learnings from its success in Europe. Aazar's more casual and engaging experience is striking a chord with Gen

Thanks, BK, and good morning everyone. Great to be with you today. We met our expectations for total revenue in the quarter and exceeded our expectations for AOI with margin solid at 38%. That said, the levels of total revenue and AOI growth we achieved 2% and 3% respectively remain below the levels we are targeting to consistently deliver. OI in the quarter was down 14% year-over-year. OI was impacted by $37 million of impairments and other charges related to our exit of Hakuna and other of our live streaming services which was within the expectations we provided on the last earnings call. Severance and similar costs in Q3 were $3 million which was less than what we had been expecting. Overall, payers declined 3% in the quarter to $15.2 million while RPP increased 5% year-over-year to $19.26. Tinder direct revenue of $503 million was down 1% year-over-year, but up 1% FX neutral in Q3. Additionally, Tinder began testing several initiatives to improve ALC revenue trends. These initiatives were generally more cannibalistic to subscription revenue than we had anticipated and we opted to delay their rollout to allow time for additional iteration. This modestly impacted Q3 direct revenue, but we expect the delays in these ALC initiatives to have a more significant impact on Q4 revenue versus what we previously expected. We were expecting these features to contribute to Q4 revenue. Tinder payers declined 4% year-over-year in Q3 an improvement from down 8% in Q2, delivering 311,000 sequential payer additions which was above our expectation of 250,000. We did some price testing of the weekly subscription package in the quarter which drove higher payers than we had anticipated but reduced RPP, which was up 4% year-over-year in the quarter to $16.87. Tinder MAU were down 9% in the quarter consistent with Q2 trends. We had expected to see improvement in year-over-year MAU trends in the quarter. However, in mid-September, we began to see weaker new user trends, which includes new registrations and reactivations of lapsed users than is typical at this time of year, a trend that has stabilized in October. The pressure on new users was largely confined to iOS. We are working collaboratively with Apple to investigate whether it's related to the introduction of iOS 18 in mid-September, certain trust and safety enhancements we made or another cause. This in turn has caused pressure on Tinder MAU. We are working on a number of initiatives to improve this trend. Tinder remained a very high margin business with 52% AOI margins in Q3. Our Hinge brand continues to perform exceptionally well. Hinge delivered $145 million of direct revenue, up 36% year-over-year, driven by 21% year-over-year payer growth and 12% year-over-year RPP growth in Q3. Hinge continues to experience strong user growth in both core English speaking markets and its European expansion markets leading to 20% year-over-year MAU growth in Q3. The brand continues to climb the rankings in various countries and regions and to gain share versus key competitors. Hinge also continues to iterate on a variety of product advances including those that implement AI technologies to improve the user experience and outcomes. Hinge's profitability picture was strong in Q3 with 35% AOI margins and year-over-year AOI growth of 65%. Margins were slightly elevated as Hinge pulled back on some marketing spend in this quarter in preparation for a Q4 marketing campaign. Our MG Asia business delivered direct revenue of $72 million, a decline of 6% year-over-year, but down only 1% FX neutral. Payers increased 14%, while RPP fell 18% year-over-year, partially due to FX impacts. Excluding the now exited Hakuna app from the prior year quarter, MG Asia direct revenue was down 2% year-over-year in Q3. MG Asia AOI margins were 25% in the quarter leading AOI to be up 9% year-over-year. Azar's direct revenue declined 2%, but was up 5% FX neutral in Q3. Azar grew MAU 14% year-over-year in the quarter. European expansion continued to be solid with MAU in that market up 27% in the quarter. Azar has just entered the US market, which will be a critical market for success for the app to become a truly global brand. Pairs direct revenue declined 1% in Q3, but was up 2% FX neutral as a number of marketing and product initiatives are contributing to stronger performance. User trends in the Japanese dating market appear to finally be stabilizing. At our Evergreen and Emerging brands, direct revenue was $158 million, a decline of 9% year-over-year. However, direct revenue was down only 4% when excluding revenue from live streaming services in the prior year quarter. Excluding live streaming revenue, gains in Emerging brands over the past few quarters have largely been offsetting declines from the Evergreen brands as we illustrated in the shareholder letter. E&E achieved the 26% AOI margin in Q3. We expect E&E's margins to continue to improve as we realize the benefits of the consolidation efforts. Indirect revenue was $16 million in Q3, up 10% year-over-year, driven by a higher price per impression received and higher add impressions. Turning to the cost side including SBC expense. Cost of revenue declined 1% year-over-year and represented 28% of total revenue down one point year-over-year as live streaming costs declined $8 million year-over-year. Credit card and app store fees declined $3 million year-over-year while web hosting fees increased $4 million. Selling and marketing costs increased $3 million or 2% year-over-year primarily due to increased spend at Tinder, Hinge and certain emerging brands. Selling and marketing spend was flat as a percentage of total revenue at 17%. G&A cost declined 3% year-over-year and remained at 12% of total revenue as legal and professional fees declined by $6 million year-over-year. Product development costs grew 10% year-over-year primarily as a result of higher headcount and lower capitalized labor costs at Tinder along with higher software and hardware costs and were up 1% as a percent of total revenue at 12%. Depreciation was up $8 million year-over-year to $25 million. $5 million of which was related to the write-off of capitalized software due to the Hakuna and live streaming services shutdowns. Impairments and amortization of intangibles increased primarily due to impairments of intangible assets of $31 million at E&E and MG Asia as a result of the termination of our live streaming services and our Hakuna brand. Beginning this quarter, we are disclosing our business units as four operating segments Tinder, Hinge, MG Asia and E&E. In addition, we disclose a corporate and unallocated cost category for expenses which includes the corporate costs like Board of Directors and Investor Relations costs, certain corporate costs that have not been allocated to individual business units such as legal and accounting costs and certain shared services and central technology that we don't allocate to individual business units such as central trust and safety services and certain central software. Providing these additional disclosures offers better insight into the company's performance and reflects our in-depth focus on revenue growth and profitability. We may consider adjusting our methodology for allocating shared costs in the future to best reflect the profitability of each of our business units. Turning to our balance sheet, our gross leverage was three times trailing AOI and net leverage was 2.3 times AOI at the end of Q3, below our target of less than three times. We ended the quarter with $861 million of cash, cash equivalents and short-term investments on hand. In Q3, we repurchased 7.1 million of our shares at an average price of approximately $34 per share on a trade date basis for a total of $241 million. Year-to-date, we have deployed approximately a 100% of our free cash flow well above our latest commitment to deploy more than 75% of our free cash flow for share repurchases. We intend to continue returning at least 75% of our free cash flow to shareholders. Turning to our outlook. For Q4 '24, we expect total revenue for Match Group of $865 million to $875 million essentially flat year-over-year. Excluding revenue from Hakuna and other live streaming services that we have exited from the prior year quarter, total revenue growth would be 2% to 3% year-over-year. At Tinder, we expect direct revenue to be $480 million to $485 million down 2% to 3% year-over-year in Q4. This range for Tinder incorporates the current MAU trends as well as the delayed ALC initiatives I noted earlier, each accounting for approximately half of the reduction to our Q4 expectations for Tinder. We expect Tinder payers to decline mid-single-digits year-over-year in Q4 with modest year-over-year RPP improvement offsetting a portion of that decline. Within our other brands, we expect direct revenue to be $370 million to $375 million up 3% to 5% year-over-year lower than our previous expectations due weaker trends in our E&E businesses. We expect Hinge to deliver direct revenue of approximately $145 million roughly 25% year-over-year growth in Q4 driven by continued strong user trends and monetization efforts. The reduction in our outlook for company total revenue compared to the one we provided last quarter reflects approximately $25 million related to Tinder, half of which is attributable to weaker than expected MAU trends and half to delayed ALC initiatives. The additional roughly $10 million reduction versus our prior expectations primarily reflects underperformance in direct revenue at our Evergreen brands and less than previously expected indirect revenue as we anticipated a few of our larger advertisers to pull back on spend during the holiday period. We expect AOI of $335 million to $340 million in Q4 including approximately $7 million of severance and similar charges as well as the Canada Digital Services Tax. This would translate it to year-over-year AOI declines 6% to 7% on an as-reported basis, but year-over-year growth of 4% to 6% when excluding the $40 million we received from Google as part of the settlement of our lawsuit in the prior year quarter. We expect marketing spend in the Q4 to be lower than the prior year quarter primarily due to lower planned spend at Tinder but higher expected spend at Hinge as we spend into the strength at that brand. At the midpoints of our total revenue and AOI ranges, margins in Q4 would be 39%. We now expect Match Group total revenue growth for the full year of 2024 of approximately 4% roughly 5% FX neutral. Total revenue growth would be up 5% when excluding revenue from Hakuna and live streaming from the prior year quarter. We expect Tinder to achieve direct revenue growth of 1% to 2%, up roughly 3% FX neutral for full year 2024. For full year 2024, Match Group is on pace to deliver AOI margins of at least 36% despite approximately $20 million of severance and other charges and the retroactive Canada DST, most of which we did not foresee at the beginning of the year and a shortfall in total revenue versus our expectations. We expect free cash flow for 2024 to be approximately $1 billion. While Hinge continues to perform exceptionally well and is solidly on the path to a $1 billion of direct revenue that we have been speaking about and our MG Asia and E&E business units are performing relatively in line with our expectations and are roughly stable in aggregate in terms of direct revenue. We expect Tinder's recent user trends and delays in ALC initiatives that are affecting our Q4 revenue outlook to create weaker momentum for Tinder heading into 2025. That said, Tinder has significant new product features in various stages of testing that we expect to roll out in the coming quarters. The impact of these initiatives as well as the trends over the balance of 2024 and into 2025 will dictate what we can deliver in terms of Tinder direct revenue growth and therefore whole company total revenue growth in 2025. We plan to review Tinder and our other businesses product plans in detail at our upcoming Investor Day. We'll translate all of this into a medium term financial outlook for the company and provide our initial 2025 expectations. We recognize that the company's growth trajectory requires us to be extremely financially disciplined to drive shareholder value and are contemplating several initiatives in that regard. We plan to discuss these programs and our expected margin trajectory at our Investor Day. While growth in the dating category and for some of our brands remains challenging, our profitability and free cash flow generation remains strong. When combined with a program to return significant amounts of capital to shareholders, we believe the company remains well positioned to drive meaningful free cash flow per share growth for the next several years and beyond. We are also confident that our product innovation especially with AI could drive additional growth over the medium term. We plan to lay out our capital allocation approach and overall view on shareholder value creation when we meet in December. With that, I'll ask the operator to open the line for questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Ross Sandler with Barclays. Please go ahead.

Great. So I guess, Gary, starting with the Tinder top of funnel trends, could you just elaborate a little bit more on what's going on? You mentioned iOS and a few other things around top of funnel and the weaker MAU at the end of 3Q and then what's happening right now in 4Q? And as we turn ahead to '25, other than cranking on marketing, what other trends might help drive top of funnel at Tinder? And I guess it's related to this, did you feel like Tinder's operating margin at 52% is at the right level or how do we think about that long-term? Thank you.

Thanks, Ross. This is BK. I'm going to handle the first part of that question and Gary can jump in on the margin side. So we did see a step back in Tinder's MAU growth starting in mid-September. And as Gary mentioned in his comments, we're investigating several possible causes. This includes the introduction of iOS 18 and some recent trust and safety enhancements that may have added to friction for daters. While I believe this step back isn't what we wanted, we don't see this as a long-term structural shift. Our team's top priority remains driving product innovation and that's where Tinder's focus is. We know we need to clean up the ecosystem and create better experiences, especially for younger users and women and we're working on it, but meaningful changes do take time. Now you mentioned marketing and it's definitely key to reinforce Tinder's brand and promoting new products. But marketing alone will not drive top of funnel growth. That's why our focus is on product-led strategies to build sustainable engagement. We're excited for Investor Day, so we can lay out our product roadmap and discuss our plans to get Tinder back on track. We're confident in these plans.

And then Ross, I think on the AOI margin question at Tinder, look, I mean Tinder has AOI margins that you really don't see anywhere else. And over the last couple of years, we have been investing more dollars. The margins have actually come down a little bit from where they were as we put a couple more points into marketing, more points into product development as well to try to build out the team. We know we have to do a real transformation on the product side and we've obviously been investing in the brand story as well as we've talked about many times. So the margins have come down a little bit. We haven't gotten the revenue improvement we are really seeking from all that. And I think we have to proceed carefully from here. I feel really good about the team and where the team is. I think we have the resources we need on the product side. We just need to keep plugging away our product. And as BK said, the marketing will follow, as we see improvements in the product. If we saw some real material step forward on product wouldn't hesitate to put more dollars into marketing. But unless and until we see that, we're going to proceed carefully on margins on both the product development side as well as on the marketing side and put the pedal to the metal, if you will, once we see those real product transformations occur.

The next question comes from Benjamin Black with Deutsche Bank. Please go ahead.

Good morning. Thank you for taking the question. So could you help us understand what's contributing to the a la carte delays here? Is it product market fit? Is it pricing? Just any additional color would be really helpful. And when should we think about these products or features going live? And then I guess relatedly you've spoken about unbundling some of your, the features that are included in your subscriptions at Tinder, things like Passport, the Likes You feature. Can you just give us an update as to where we stand there? Thank you very much.

Thanks, Ben. This is BK. I'm happy to talk through our product progress. Our team has made solid progress in Q3, getting four a la carte features into testing. Testing carefully before a full rollout is essential, so we can understand their impact on both revenue and the ecosystem. And sometimes, this actually means more rounds of testing and iteration than we'd like. But getting it right is key. Here's a look at what we've been testing and let me break it down for you. First, our unbundled features. We offered Passport as a one-off a la carte option outside of a plus subscription, and we've seen some cannibalization here, but we're testing carefully with targeted groups to find the best approach. Likes You is a feature that allows users to act as selected likes without having a gold subscription, and it's shown some cannibalistic effect to gold subscription. So we're refining it by testing specific customer segments with new merchandising approaches. Then our new ALC features First impressions allows users to send a personalized message on specific profile elements. Think of this as a swipe note that adds a touch of meaning to new connections and we've extended testing to continue tracking its ecosystem impact. And the fourth feature that we've tested encourages quicker engagement by setting a time limit on matches. And we've seen a boost in post-match messaging, but it also impacted daily active users, especially with women, while these engagement gains are promising and address ghosting concerns, we're revisiting the mechanic to minimize any negative effects on the ecosystem. Now we're optimistic about rolling out the first three features more broadly in the coming months, but we believe that these ALC options had really affordable values for certain users and we're refining our targeting to make sure we're going after the right segments at the right time.

Thank you for that.

The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.

Thanks for taking the question. So I just wanted to dig in a bit more on the payers as far as like 3Q to 4Q at Tinder. I mean, obviously, when you're kind of modeling this out, you're looking over time. Was there any kind of pull forward that you think could have happened in the quarter due to certain initiatives, whether like intended or unintended that ultimately resulting in that lower AOI number in the fourth quarter? Or is it really just the point you were making about the lower starting MAU and then the ALC headwinds combined with potentially the iOS issues? Thank you.

Sure. Why don't I take that, Jason. I mean the MAU momentum we had in most of the third quarter and leading into the third quarter, was stronger, and that led us to perform better from a payer perspective. There is some sequential seasonal effect as well. If you look back at history, Q3 tends to be sequentially stronger as well. So there's some of that, but there clearly was better MAU momentum, which led to better year-over-year payer growth. And as a result of that, we got strong sequential payer growth as well. So the reversing of that with weaker momentum which really started very late in the third quarter and carried over into the beginning of the fourth quarter kind of that mid-September to October time frame makes it more difficult on the payer front as well in Q4 and we've taken a step back in that regard, as BK said. And so I haven't done the precise math, but targeting that mid-single-digit year-over-year payer decline. I think that if we end up with something like negative three, probably have close to $300,000 sequential decline. If it's worse than that negative five, would be something closer to $500,000 of sequential decline. And so that's the range I think we're looking at for the fourth quarter. Obviously, we're working as feverishly as we can to arrest the MAU situation and drive payer growth. I do think it's important to point out that just given the overall broad product transformation that's going on at Tinder, some of this kind of change in direction quarter-over-quarter may be expected. Obviously, we'd like to see strong and steady improvement, but really, it's about the product transformation that Tinder is undertaking to really drive better MAUs, better KPIs generally through '25 and beyond, and therefore, drive payer improvement and ultimately revenue improvement. That's really what we need to see. I also will point out that we talked about the MAU issue, that we've been seeing as an iOS issue primarily. And just keep in mind, those are some of the higher value users and payers on iOS. And so it being more of an iOS issue does put more pressure on the payer number. So that's another factor in all of this. So hopefully that gives you at least some of the color to explain kind of what's been going on.

Thank you.

The next question comes from John Blackledge with TD Cowen. Please go ahead.

Great. Thank you. So on the Hinge 4Q revenue guide, the 4Q revenue growth looks really strong, but decelerating a bit more than we expected. If you could provide any color on drivers of Hinge revenue growth, that would be great. Thank you.

Sure, John. I'm happy to do that. If you remember back to last 4Q, Hinge rolled out weekly subscription packages in that quarter because we had seen such good success with Tinder and other brands in the portfolio and we decided it made sense to roll them out at Hinge as well. And so what you're really seeing in Q4, when you look on a growth rate perspective is really the fact that it's comping against last Q4 where we saw significant jump in revenue at Hinge as a result of weekly rolling out in that period of time. So that's really what's going on. I would say if you take a step back away from the quarter-to-quarter trends. We're really happy with what's going on at Hinge, the user growth remain strong. The market share gains remain strong. The product continues to resonate. The brand story continues to resonate. And as a result of that, I'm expecting hands to continue to grow at a very nice clip to add quantum of revenue in '25, similar to what's been added in 2024, and the story there remains a great one. So really, from my perspective, I feel really good about what's going on at Hinge.

Thank you.

The next question comes from Nathan Feather with Morgan Stanley. Please go ahead.

Hey, everyone. Yes, really encouraging momentum there at Hinge. I want to dig in a bit more on the Your Turn Limits feature. It's rare you can launch a feature that increases friction and engagement. First, anything given user receptivity, has there been any user growth or churn impact as you pull that out? And then second, do you see opportunities to nudge people to deeper engage with matches they've already made either at Hinge or other brands in the portfolio? Thanks.

Thanks, Nathan, for the insights and positive comments on Hinge. First and foremost, Your Turn Limits is a great example of product innovation in the dating category. The Hinge team has historically excelled really well here with launching innovation features like voice prompts in the marketplace and Your Turn Limits build on that strength. And you're right, the thinking behind Your Turn Limits is a bit counterintuitive since it introduces some additional friction, but the key insight the team had here is while daters tend to match freely they usually only focus on a couple of conversations at a time, focusing on quality over quantity. By helping users focus on their open chat, we can actually boost responsiveness and ultimately get more people out on dates. As a first of its kind feature in the category, the response has been very positive globally with headlines actually crediting us for addressing the ghosting problem in dating apps. This is a great validation for our teams, and it shows that product innovation in this space will be well received by users. Now it's tough to link product launches directly to user growth, given that rollouts take time. However, the timing of Hinge is very strong Q3 and early Q4 performance does align well with this feature launch. So we're really pleased with what we're seeing so far. And as with any new feature, we share these learnings across the entire portfolio and the entire company is learning from this product launch. Thanks for the question.

The next question comes from Ygal Arounian with Citigroup. Please go ahead.

Hey, good morning guys. Going back to Tinder. And just think about the comments on how product kind of leads the way over marketing at first. And I know we'll hear a lot more about products from, at the Investor Day in a few weeks, but you called out a few products like Spotlight Drops, you talked about the broadening of the Explore tab. What impact are you seeing there? Anything else you could help us think through around the cadence of products at Tinder and kind of where we're going from here? Thanks.

Thanks, Ygal, for the question. These new features Spotlight Drops and the broad and expanded Explore tabs are already helping users find more people that they're genuinely interested in. Early results are promising, but we believe that there's even more potential to refine these features to drive even stronger engagement. The team is continuing to iterate on both Spotlight Drops and Explore, aiming to make it easier for users to get better matches with less effort. By broadening the Explore tab, we believe that these new titles will focus on shared interest and intention and creating a more dynamic tailored experience that resonates, especially with younger users and women. And we believe that these features are truly learning tools for our organization. For instance, they're helping us gather valuable insights on how recommendation changes impact the user experience and we're learning from the importance of match factors like relationship intent. All of these insights and rollouts are shaping the way that we approach Tinder's future. They're feeding directly into the larger scale innovations that we have planned for 2025. Now ultimately our product roadmaps and our teams are focused on improving ecosystem health and user outcomes across the board. And the cadence of these rollouts are intentional. We're building these features step by step to ensure that they're impactful and aligned with what users want today and in the future. Thanks for the question.

The next question comes from Cory Carpenter with JPMorgan. Please go ahead.

Thank you and good morning. Gary, you talked a bit about the impact from the 4Q guidance on 2025. Any more color or foot stake you can give us as you think about that initial '25 outlook? Thank you.

Hey, Cory, good morning. As I said in my remarks, I feel like we have a pretty good handle on Hinge's trajectory we've seen similar situations before and so we have a pretty good ability to predict where that business is going. And similarly the E&E business and Match Group Asia are fairly stable. And so I think we can keep them there. And that helps fill out the picture for 2025 as well. So just given the size, obviously, the contribution that it makes the overall picture, it really comes down to Tinder. And there's so many things in flight at Tinder we're not really ready yet to kind of put a pin in it. I think in December, we'll definitely give more color on the cadence of the product rollouts. What we think things are going to provide at Tinder and how we see that playing out through '25. So we'll be in a better position to do it then. Obviously, also just with the step back in MAU over the last 1.5 months, want to see how the rest of November plays out, which will be informative as well for '25. So as I called out, it does give us a little bit weaker momentum that we would have preferred going into '25, just what the recent developments have been at Tinder, and it really is more of a product transformation story. We need to improve the health of the ecosystem. We need to improve are standing with younger users with women. And if we can roll out products that accomplish that, that's really going to drive growth in 2025 and beyond. And if Tinder is able to do that, that obviously contributes and affects what we can deliver from a company-wide perspective as well. So more details on that at Investor Day and subsequently when we do our earnings call in February as well, we'll put an even sort of more fine point on it. The only other thing that I would add is that just given what the top line trends are, we need to be very mindful of margins. So we're trying to carefully balance the investments with growth in margin. BK and I spent a lot of time focused on that. It's a real, it's something I think we have historically done and done well. But there is obviously more pressure on expanding margins given the top line trends. And so we're trying to be as financially disciplined as we can and I do believe there's a path for continued margin improvement at the company and we are focused on that. So as we look at 2025 outlook, we'll talk about that in more detail at Investor Day and beyond and give you some color around that as well. But from an overall expectation perspective, I do think expecting continued margin improvement is something that we will be talking about.

Okay. Thank you.

The next question comes from Justin Patterson with KeyBanc. Please go ahead.

Great. Thank you. Good morning. Gary, I wanted to touch on that Evergreen and Emerging stability a little bit more. This quarter was less extreme in terms of sequential revenue declines. How much closer are we towards seeing the Emerging side of the business start to offset the Evergreen declines? And then from the margin perspective, you did indicate that there's potential for that to go higher as we see some of the cost efficiencies come through. How much higher do you think we can go? Are you seeing you still have some investment in there to support that Emerging growth? Thank you.

Yes. Thanks for the question, Justin. Look, we put a chart into the letter to kind of go through this because there's a live streaming piece that isn't continuing. But when you take out the live streaming piece. I think what you can see is the gains in revenue at the emerging brands are coming very close to offsetting the declines in the Evergreen. So we need to keep the evergreen declines under control and we need to keep driving growth at the Emerging brands. And I do think that we're in position sometime in 2025 to find that crossover point where the growth in Emerging is exceeding the declines at the Evergreen. I don't know if it will be every single quarter and perfectly linear. But at the end of the day, we're very close, and I think we're going to cross that threshold at some point in 2025. I do think that the E&E business is also a story of margin expansion. If you look back in 2023 when we first launched the consolidation project, the margins in that business were in the low 20s percent range, which was well below where the company was and where we wanted to be. And so we launched this project and ultimately I think when you look at 2026 and beyond once all the benefits of that project are fully phased in, the margin of that business should be nicely north of 30%. And again we'll go through some of these specifics at the Investor Day, but it's a significant improvement in margin and that incorporates investing in marketing and other things that we need to drive the growth that I talked about at the Emerging brands. So that's sort of all-in cost savings from the consolidation investments in marketing at some of the Emerging brands as well as the revenue picture with the Evergreen and the Emerging brands that I described. So I do think it's an important point to call out and I appreciate the question.

The next question comes from James Heaney with Jefferies. Please go ahead.

Great. Good morning. Thank you for the question. You've been able to hold your margin target at 36% despite all the moving pieces this year. How do you get comfortable that you're making just the right levels of investment across the business, Tinder and Hinge? Thank you.

Why don't I jump in and take that. Thanks, James. Look, I appreciate you pointing out that we've been able to keep the margin to 36% or better despite the fact there are a lot of moving pieces this year. Some unexpected things like the Canada DST, which really doesn't do anything for us on the revenue side, but it hurts us on the cost side. And obviously the revenue has not been what we anticipated at the beginning of the year as well. So we've been really managing it. And as I said, in response to Cory's question, BK and I and others Steve Bailey spent a lot of time focusing on making sure we're making the right trade-offs because we are managing a portfolio of brands. They're each in different stages of growth and investment and we need to properly make those trade-offs. That's really the name of the game for us. And so we spend a lot of focus on that. I think if you look at some of the things we've done even over the last couple of years, we've been able to fund additional investment at Tinder, which we thought was necessary on the product side, on the marketing side to improve the picture at the business and while we haven't seen the impact we were hoping for yet, it's very, it's been very important to try to position us to deliver what we need to deliver at Tinder. So we've been able to find ways to make those trade-offs. I think if you look at Hinge, we've been expanding that business internationally, particularly across Europe. We've made significant investments there on the marketing side and some on the product side as well. So that's another one. And then we also have these new bets continually happening, which is critical to our portfolio strategy, laying the seeds for the future. And we do that with brands like Archer where we made substantial investment to try to build that business and gain share from the large competitor that exists in that space. So we're doing all that. And then we're taking actions on the other side which are helping to offset some of those investments. So we've talked a lot about kind of what's going on in the E&E consolidation. I talked about some of the margin enhancement there. That's helping fund some of the things that we're doing on the investing side. The same is true of our decision to exit live streaming and the Hakuna app, those were not helping us from a margin perspective, and we're redeploying the dollars from those businesses into Tinder, into Hinge, where we think we get more benefit. So it's a constant balancing. And as we said in the remarks, we have to manage the different brands in the portfolio for the stage of life they're at. Some require a lot of initial investment because they're just starting to take off. Some are more mature and we need to pull back on the investment as much as we can and manage them more from a profitability and cash flow perspective and that is core to the Match Group strategy.

Thank you.

The next question comes from Dan Salmon with New Street Research. Please go ahead.

Great. Thanks. Good morning, everybody. Thanks for taking the question. So BK or Gary I guess, in past letters, you noted that M&A is not on the table right now. My question is whether you and the Board are considering divestitures at all. You've talked about, obviously, you've exited live streaming and then we've got the new disclosures on business unit profitability. That's the type of thing that makes it easier for us to analyze the company if you are considering divestitures or other actions. So it would be great just to hear how you're thinking about the portfolio these days? Thanks.

Why don't I jump in and try to address that and certainly, BK, feel free to as well. I think our board, I don't want to speak for them, but we're open to whatever makes sense to drive shareholder value. We constantly evaluate our portfolio, our investments the brands that we have and competitors that are out there from an M&A perspective to see if we think anything makes sense. And we haven't been shy about pulling the trigger on things where we thought it would drive long-term value. And so we continue to look at everything that's out there. The environment continues to change politically and otherwise as well. And so we need to keep constantly refreshing our look at strategically what could make sense for us. And if we think something would enhance shareholder value, we absolutely wouldn't be shy about doing it. I do want to point out that the enhanced disclosure that we did in this quarter you shouldn't tie it to anything around sales, divestitures, things like that, that really is not the driving force behind the enhanced disclosure. Really, what it is, is a desire to give investors a deeper look into each of the four business units the way that BK and I are looking at them. And so that people understand the growth dynamics, the profitability dynamics in a detailed way. And so that was really a desire to provide those building blocks to shareholders so they understand how the overall company kind of ladders up based on those four building blocks. And that was really the logic behind it. We did it now because we are going to spend time at Investor Day reviewing each of the four business lines performance and outlook. And so we thought it would be useful for investors to have this in their hands leading up to the Investor Day, so we could address the business units in detail kind of one by one and that's our plan. So hopefully, investors find the enhanced disclosure beneficial.

The only point I'd like to add is that we are solely focused on our core execution and our portfolio strategy. And that's focused on really fantastic innovation and product followed on by excellent marketing. So we still remain very heads down focused on execution and delivery. Thanks for the question.

The next question comes from Shweta Khajuria with Wolfe Research. Please go ahead.

Hello. Thank you for taking my questions. Let me try two, please. On brand perception, could you please talk about how that has trended over the past quarter and quarter-to-date. And any thoughts on how you plan to continue to improve Tinder's brand perception as we think about next year. Are you still targeting key demographic segments like Gen

Thanks so much, Shweta, for that question. And on Tinder, our focus remains squarely on Gen

The next question comes from Curtis Nagle with Bank of America. Please go ahead.

Great. Two ones, I guess, based on advertising. One, just Gary, could you dig a little bit more into the advertiser pull back in the holidays? Just I guess why is it short in holiday or maybe allocation in other buckets for some of your partners. And then in terms of the shift in marketing spend into 4Q, seasonally kind of a weaker quarter. I guess just what's driving that your competitor is doing the same thing. So just curious what's going on there.

Sure. I'll try to take those quickly because I know we're running out of time. On the marketing, sorry, on the ad spend, I agree it's a little bit counterintuitive, but we have some contracts with some large advertisers that spend with us kind of quarter-to-quarter. And a couple of them have so far indicated that just given kind of the crowded market in the holiday season, they're going to spend less with us in Q4 than they've been kind of pacing to throughout the rest of the year and then they'll resume spend in Q1 of next year. So it's sort of a timing thing more than anything else. We're working to replace some of that spend with some other advertisers. I think it could be possible. The view of the fourth quarter might have shifted slightly for people based on some of the events over the last few days. So we'll see kind of what kind of fourth quarter we're in for on the advertising side. But sitting here preparing for this, we had seen some expectation of a pullback from a couple of advertisers. And so that caused a slight guide down on the ad revenue on our side. The shift in marketing, I think there's a couple of things really going on there. One is just being a little bit more cautious with Tinder, as BK said, it's not really marketing that's driving user growth at Tinder. It needs to be product and we'd rather hold some firepower on the marketing side until we see more traction on the product. And so that's just a timing decision. Conversely, we see a lot of strength at Hinge across the board, their brand marketing, their marketing generally is really resonating, and we want to keep fueling that business with marketing. And so that's really what's driving a decision to spend more at Hinge in Q4. They spent actually down in Q3, but we're going to press again in Q4 and that's kind of the plan. So we're constantly kind of pulsing the marketing inside a specific brand Hinge was less than three more in four, Tinder is going to be the opposite. And I think you should continue to expect some variability around the spending patterns of the different businesses.

I'm going to leave it there just because we're out of time. But I appreciate everyone joining this morning. Hopefully, we were able to answer some of the critical questions on the quarter and we look forward to speaking with you again on December 11 at our Investor Day. Thanks a lot and have a good day.