Thursday, Aug 8th 2019

Q2 2019 Earnings Review: Tinder & Match Light Up IAC's Results


On Wednesday, IAC surged nearly +11% on strength at Tinder and other Match Group properties.

On Wednesday, digital media conglomerate IAC surged nearly +11% after its flagship asset Match Group reported very strong earnings.

Quick Refresher

As a reminder, IAC can be thought of as a Berkshire Hathaway of digital properties, owning a vast array of high quality assets ranging from video hosting site Vimeo to digital home services marketplace Angie's List.

Its most significant property by far is Match Group, the undisputed leader in the online dating category with brands including Tinder, Hinge, and OKCupid.

While the Match Group trades publicly under the ticker MTCH, IAC owns over 80% of its shares and generates over 40% of its revenue from the business.

This benefitted IAC tremendously in Q2, as MTCH closed Wednesday up nearly +24% after reporting its Q2 earnings.

The Explanation

Unsurprisingly, this success at MTCH was driven primarily by continued execution and performance at Tinder.

Even absent any meaningful recent product launches, Tinder continued to plough forward, growing its user base +39% YoY while increasing its average revenue per user +6% - amounting to total direct revenue growth of +46% YoY.

So what's driving that? We believe Tinder and Match Group more broadly is benefitting from the intersection of multiple powerful and self-reinforcing secular tailwinds in online dating - or increasingly so, just "dating."

Not only are younger generations dating for longer, but they're also increasingly turning to online channels to help them find their partners, while becoming more and more willing to pay for it.

Any one of these trends would have been powerful enough to drive a great growth story - but compound them on top of each other, and you have an incredibly powerful force.

The Fine Print

The one disappointment in IAC's Q2 was performance at Angie's List (which also trades publicly under ticker ANGI).

Angie's List experienced a disappointing quarter after some marketing missteps resulting from both underinvestment in that channel as well as a surprise uptick in customer acquisition cost from recent changes at Google.

As a result, the company reduced its annual growth target from 25% to 20-25%, while lowering its EBITDA forecast from $290mm to $215mm (at the midpoint).

The Big Announcement

In its shareholder letter, CEO Joey Levin finally reported that IAC would begin considering spinning off its stakes in MTCH and ANGI.

While this announcement only sets forth an exploratory process that won't necessarily result in either business being sold off, it is major news we think many shareholders were happy to hear.

A spinoff of IAC's public company stakes was a major leg of IAC's bull thesis due to the potential value it can unlock by removing the "holding company discount" - for more on that, please turn to our Q2 initiation report on IAC.

As of this writing, IAC was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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