MATCH GROUP, INC. 2021 Developments OnMarch 26, 2021 ,Match Group Holdings II, LLC ("MG Holdings II"), amended its credit agreement to provide for a$400 million incremental "delayed draw" term loan facility ("Delayed Draw Term Loan"), the proceeds of which could be used only to finance a portion of the consideration for the acquisition ofHyperconnect Inc. ("Hyperconnect"). The Delayed Draw Term Loan was terminated effectiveJune 18, 2021 according to its terms. OnJune 17, 2021 ,Match Group completed the acquisition ofHyperconnect . The purchase price was$1.75 billion , net of cash acquired. The acquisition was funded with cash on hand and the issuance of 5.9 million shares ofMatch Group common stock. Repurchase of 2022 Exchangeable Notes InSeptember 2021 , we entered into various transactions, which ultimately resulted in the repurchase of a portion of our 2022 Exchangeable Notes. In connection therewith, we: •Entered into agreements to repurchase approximately$414 million aggregate principal amount of our outstanding 2022 Exchangeable Notes; •Entered into agreements to unwind a proportionate amount of outstanding hedges and warrants corresponding to the 2022 Exchangeable Notes to be repurchased; •Commenced a registered direct offering of shares of our common stock to the holders of the 2022 Exchangeable Notes to be repurchased; and •Commenced a private offering of$500 million aggregate principal amount of senior notes due 2031. These transactions were completed onOctober 4, 2021 , resulting in our: •Issuance of 5,534,098 shares of our common stock at a price of$158.83 per share; •Issuance of$500 million aggregate principal amount of 3.625% senior notes due 2031; •Unwind of exchangeable note hedges and warrants for net cash proceeds of approximately$201 million ; and •Repurchase of approximately$414 million aggregate principal amount of 2022 Exchangeable Notes for approximately$1.5 billion , including accrued and unpaid interest on the repurchased notes, funded with (i) the net proceeds from the common stock offering, (ii) approximately$420 million of the net proceeds from the senior notes offering (with the balance of the net proceeds from the senior notes offering being used for general corporate purposes), and (iii) the net proceeds from the hedge and warrant unwind. In connection with these transactions, our third quarter 2021 income statement reflects a loss of$41.3 million , included in other expense, net, primarily related to the change in fair value fromSeptember 22 through the end of the period of an embedded derivative recognized upon the execution of the agreements described above. In the fourth quarter of 2021, we will recognize a gain of$24.0 million based on the changes in fair value of this embedded derivative until its settlement onOctober 4 . Our balance sheet as ofSeptember 30, 2021 , reflects (i) a$207.0 million obligation to pay cash in excess of the principal amount of the 2022 Exchangeable Notes we agreed to repurchase (allocated between current and long-term liabilities in relation to the amount expected to be funded by short and long-term assets, respectively), (ii) a$200.8 million net receivable relating to the agreements to unwind the corresponding hedges and warrants, and (iii) a$38.6 million liability for the fair value of the embedded derivative. 34 -------------------------------------------------------------------------------- Table of Contents Updated Operating and Financial Metrics In 2021, we have adjusted our key operating and financial data to provide better insight into the performance of our business. We are disclosing this data in three geographic areas-Americas ,Europe , and APAC and Other. Additionally, rather than presenting Average Subscribers and Average Revenue per Subscriber ("ARPU"), we now present Payers and Revenue Per Payer ("RPP") (as defined below). Unlike Average Subscribers, which included only users who purchase a subscription and were counted on a daily basis, Payers include all users from whom we earn revenue (including those who make only à la carte purchases) and are counted as unique users in a given month. Similarly, ARPU was a daily metric and included Direct Revenue sourced from subscribers only, whereas RPP is a monthly metric and includes all Direct Revenue. We believe that Payers and RPP, which account for non-subscriber users and the associated revenue, is more useful in evaluating the performance of our business. We believe presenting Direct Revenue, Payers, and RPP in three geographic regions enables investors to better understand our operating performance and is appropriate given our expanding global footprint. The new metrics also better account for the increasing à la carte revenue as a percentage of total revenue that the company earns and enhance comparability with our peers. Key Terms: Operating and financial metrics: •Americas includesNorth America ,Central America ,South America , and theCaribbean islands. •Europe includes continentalEurope , the British Isles,Iceland ,Greenland , andRussia , but excludesTurkey (which is included in APAC and Other). •APAC and Other includesAsia ,Australia , the Pacific islands, theMiddle East , andAfrica . •Direct Revenue is revenue that is received directly from end users of our services and includes both subscription and à la carte revenue. •Indirect Revenue is revenue that is not received directly from an end user of our services, substantially all of which is advertising revenue. •Payers are unique users at a brand level in a given month from whom we earned Direct Revenue. When presented as a quarter-to-date or year-to-date value, Payers represents the average of the monthly values for the respective period presented. At a consolidated level, duplicate Payers may exist when we earn revenue from the same individual at multiple brands in a given month, as we are unable to identify unique individuals across brands inthe Match Group portfolio. •Revenue Per Payer ("RPP") is the average monthly revenue earned from a Payer and is Direct Revenue for a period divided by the Payers in the period, further divided by the number of months in the period. Operating costs and expenses: •Cost of revenue - consists primarily of the amortization of in-app purchase fees, compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, live video costs, and data center rent, energy and bandwidth costs. In-app purchase fees are fees paid to Apple andSeptember 30, 2021 , there was$0.4 million in outstanding letters of credit and$749.6 million of availability under the Credit Facility. As ofDecember 31, 2020 , there was$0.2 million in outstanding letters of credit and$749.8 million of availability under the Credit Facility. •Term Loan - The term loan facility under the credit agreement ofMG Holdings II. AtDecember 31, 2020 , the Term Loan bore interest at LIBOR plus 1.75% and the then applicable rate was 1.96%. As ofSeptember 30, 2021 , the applicable rate was 1.87% and$425 million was outstanding. •5.00% Senior Notes -MG Holdings II's 5.00% Senior Notes dueDecember 15, 2027 , with interest payable eachJune 15 andDecember 15 , which were issued onDecember 4, 2017 . As ofSeptember 30, 2021 ,$450 million aggregate principal amount was outstanding. •4.625% Senior Notes -MG Holdings II's 4.625% Senior Notes dueJune 1, 2028 , with interest payable eachJune 1 andDecember 1 , which were issued onMay 19, 2020 . As ofSeptember 30, 2021 ,$500 million aggregate principal amount was outstanding. •5.625% Senior Notes -MG Holdings II's 5.625% Senior Notes dueFebruary 15, 2029 , with interest payable eachFebruary 15 andAugust 15 , which were issued onFebruary 15, 2019 . As ofSeptember 30, 2021 ,$350 million aggregate principal amount was outstanding. •4.125% Senior Notes -MG Holdings II's 4.125% Senior Notes dueAugust 1, 2030 , with interest payable eachFebruary 1 andAugust 1 , which were issued onFebruary 11, 2020 . As ofSeptember 30, 2021 ,$500 million aggregate principal amount was outstanding. •3.625% Senior Notes -MG Holdings II's $500 million aggregate principal amount of 3.625% Senior Notes dueOctober 1, 2031 , with interest payable eachApril 1 andOctober 1 , commencing onApril 1, 2022 , which were issued onOctober 4, 2021 . •2022 Exchangeable Notes - The 0.875% Exchangeable Senior Notes dueOctober 1, 2022 issued byMatch Group FinanceCo, Inc. , a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable eachApril 1 andOctober 1 . As ofSeptember 30, 2021 ,$517.5 million aggregate principal amount was outstanding. OnOctober 4, 2021 ,$414.0 million aggregate principal amount was repurchased. •2026 Exchangeable Notes - The 0.875% Exchangeable Senior Notes dueJune 15, 2026 issued by Match Group FinanceCo 2, Inc., a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable eachJune 15 andDecember 15 . As ofSeptember 30, 2021 ,$575 million aggregate principal amount was outstanding. •2030 Exchangeable Notes - The 2.00% Exchangeable Senior Notes dueJanuary 15, 2030 issued by Match Group FinanceCo 3, Inc., a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable eachJanuary 15 andJuly 15 . As ofSeptember 30, 2021 ,$575 million aggregate principal amount was outstanding. 36 -------------------------------------------------------------------------------- Table of Contents Non-GAAP financial measure: •Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") - See "Non-GAAP Financial Measures" below for the definition of Adjusted EBITDA and a reconciliation of net earnings attributable toMatch Group, Inc. shareholders to operating income and Adjusted EBITDA. Management OverviewMatch Group, Inc. , through its portfolio companies, is a leading provider of digital technologies designed to help people make meaningful connections. Our global portfolio of brands includes Tinder®, Match®, Meetic®, OkCupid®, Hinge®, Pairs™, PlentyOfFish®, OurTime®, Azar®, Hakuna Live™, and more, each built to increase our users' likelihood of connecting with others. Through our trusted brands, we provide tailored services to meet the varying preferences of our users. Our services are available in over 40 languages to our users all over the world. As used herein, "Match Group ," the "Company," "we," "our," "us," and similar terms refer toMatch Group, Inc. and its subsidiaries, unless the context indicates otherwise. For a more detailed description of the Company's operating businesses, see "Item 1. Business" of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 . Additional Information Investors and others should note that we announce material financial and operational information to our investors using our investor relations website at https://ir.mtch.com, our newsroom website at https://newsroom.mtch.com,Securities and Exchange Commission ("SEC") filings, press releases, and public conference calls. We use these channels as well as social media to communicate with our users and the public about our company, our services and other issues. It is possible that the information we post on social media could be deemed to be material information. Accordingly, investors, the media, and others interested in our company should monitor the social media channels listed on our investor relations website in addition to following our newsroom website,SEC filings, press releases and public conference calls. Neither the information on our websites, nor the information on the website of anyMatch Group business, is incorporated by reference into this report, or into any other filings with, or into any other information furnished or submitted to, theSEC . 37 -------------------------------------------------------------------------------- Table of Contents Results of Operations for the three and nine months endedSeptember 30, 2021 compared to the three and nine months endedSeptember 30, 2020 Revenue Three Months Ended September 30, Nine Months Ended September 30, 2021 $ Change % Change 2020 2021 $ Change % Change 2020 (In thousands, except RPP) Direct Revenue: Americas$ 393,613 $ 56,821 17%$ 336,792 $ 1,112,263 $ 195,533 21%$ 916,730 Europe 217,680 36,053 20% 181,627 603,281 111,114 23% 492,167 APAC and Other 174,432 64,585 59% 109,847 419,684 118,750 39% 300,934 Total Direct Revenue 785,725 157,459 25% 628,266 2,135,228 425,397 25% 1,709,831 Indirect Revenue 16,110 4,606 40% 11,504 41,979 11,948 40% 30,031 Total Revenue$ 801,835 $ 162,065 25%$ 639,770 $ 2,177,207 $ 437,345 25%$ 1,739,862 Percentage of Total Revenue: Direct Revenue: Americas 49% 53% 51% 53% Europe 27% 28% 28% 28% APAC and Other 22% 17% 19% 17% Total Direct Revenue 98% 98% 98% 98% Indirect Revenue 2% 2% 2% 2% Total Revenue 100% 100% 100% 100% Payers: Americas 8,309 854 11% 7,455 7,935 941 13% 6,994 Europe 4,710 556 13% 4,154 4,433 472 12% 3,961 APAC and Other 3,284 867 36% 2,417 2,862 471 20% 2,391 Total 16,303 2,277 16% 14,026 15,230 1,884 14% 13,346 RPP: Americas$ 15.79 $ 0.73 5%$ 15.06 $ 15.57 $ 1.01 7%$ 14.56 Europe$ 15.41 $ 0.84 6%$ 14.57 $ 15.12 $ 1.31 10%$ 13.81 APAC and Other$ 17.71 $ 2.56 17%$ 15.15 $ 16.29 $ 2.30 16%$ 13.99 Total$ 16.06 $ 1.13 8%$ 14.93 $ 15.58 $ 1.34 9%$ 14.24 For the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 Americas Direct Revenue grew$56.8 million , or 17%, in 2021 versus 2020, driven by 11% growth in Payers and 5% growth in RPP. Growth in Payers was primarily driven by Tinder with contributions from Hinge and the Swipe Apps (BLK, Chispa, and Upward). RPP growth was driven by both subscriptions and à la carte purchases at Hinge and Tinder. Europe Direct Revenue grew$36.1 million , or 20%, in 2021 versus 2020, driven by 13% growth in Payers and 6% growth in RPP. Growth in Payers and RPP was primarily due to Tinder and the acquisition ofHyperconnect . RPP growth was favorably impacted by the increased strength of the British pound and the Euro compared to theU.S. dollar between the two periods.Asia and Other Direct Revenue grew$64.6 million , or 59%, in 2021 versus 2020, driven by 36% growth in Payers and 17% growth in RPP. Payer growth was primarily driven by the acquisition ofHyperconnect with 38 -------------------------------------------------------------------------------- Table of Contents additional contributions from Tinder and Pairs. RPP growth was primarily due to the acquisition ofHyperconnect . Indirect Revenue increased primarily due to our receiving a higher rate per impression. For the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 All revenue categories increased primarily due to the factors described above in the three-month discussion. Cost of revenue (exclusive of depreciation) For the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 Three Months Ended September 30, 2021 $ Change % Change 2020 (Dollars in thousands) Cost of revenue$ 232,211 $ 62,388 37%$ 169,823 Percentage of revenue 29% 27% Cost of revenue increased primarily due to the acquisition ofHyperconnect in the second quarter of 2021, an increase of in-app purchase fees paid to mobile app stores of$25.7 million , excludingHyperconnect ; increases in compensation expense; and increased web hosting fees. For the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 Nine Months Ended September 30, 2021 $ Change % Change 2020 (Dollars in thousands) Cost of revenue$ 604,765 $ 142,195 31%$ 462,570 Percentage of revenue 28% 27% Cost of revenue increased primarily due to the factors described above in the three-month discussion with an additional increase for the nine month period from partner-related cost associated with live streaming at PlentyOfFish. Selling and marketing expense For the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 Three Months Ended September 30, 2021 $ Change % Change 2020 (Dollars in thousands) Selling and marketing expense$ 153,388 $ 23,529 18%$ 129,859 Percentage of revenue 19% 20% Selling and marketing expense increased primarily due to the acquisition ofHyperconnect in the second quarter of 2021, increases in marketing spend primarily at Tinder, and an increase in compensation expense of$2.0 million . For the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 Nine Months Ended September 30, 2021 $ Change % Change 2020 (Dollars in thousands) Selling and marketing expense$ 427,294 $ 82,144 24%$ 345,150 Percentage of revenue 20% 20%
Selling and marketing expense increased primarily due to the factors described above in the three-month discussion.
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General and administrative expense
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020 Three Months Ended
2021 $ Change % Change 2020
(Dollars in thousands)
General and administrative expense $ 103,502 $ 14,541 16% $ 88,961
Percentage of revenue 13% 14%
General and administrative expense increased primarily due to the acquisition of
Hyperconnect in the second quarter of 2021, an increase in legal and other
professional fees of $6.5 million , and increases in other miscellaneous costs,
partially offset by a decrease in employee compensation as the 2020 period
included an expense for the modification of a stock-based compensation award.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
General and administrative expense $ 304,560 $ 68,076 29% $ 236,484
Percentage of revenue 14% 14%
General and administrative expense increased primarily due to the acquisition of
Hyperconnect in the second quarter of 2021, an increase in compensation expense
of $14.3 million primarily related to an increase in stock-based compensation
expense associated with new awards granted in the current year, partially offset
by the non-recurrence of expense for the modifications of certain awards in
2020, an increase in legal and other professional fees, $7.5 million of
professional fees associated with the acquisition of Hyperconnect , and other
miscellaneous costs.
Product development expense
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Three Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Product development expense $ 66,974 $ 27,694 71% $ 39,280
Percentage of revenue 8% 6%
Product development expense increased primarily due to the acquisition of
Hyperconnect and an increase in compensation expense of $12.6 million , primarily
due to increases in headcount at both Tinder and Hinge, and an increase in
stock-based compensation.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Product development expense $ 174,683 $ 49,704 40% $ 124,979
Percentage of revenue 8% 7%
Product development expense increased primarily due to the factors described above in the three-month discussion.
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Depreciation
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Three Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Depreciation $ 10,104 $ (1,117) (10)% $ 11,221
Percentage of revenue 1% 2%
Depreciation decreased primarily due to a decrease in computer hardware and
capitalized software placed into service.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Depreciation $ 30,622 $ 338 1% $ 30,284
Percentage of revenue 1% 2%
Depreciation was flat compared to prior year period.
Amortization of intangibles
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Three Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Amortization of intangibles $ 15,066 $ 14,607 NM $ 459
Percentage of revenue 2% -%
________________________
NM = not meaningful
Amortization of intangibles increased primarily due to an increase in
definite-lived intangibles related to the acquisition of Hyperconnect in the
second quarter of 2021.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Amortization of intangibles $ 15,521 $ 8,259 114% $ 7,262
Percentage of revenue 1% -%
Amortization increased as a result of the factor described above in the three-month discussion.
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Operating income and Adjusted EBITDA
Three Months Ended September 30, Nine Months Ended September 30,
2021 $ Change % Change 2020 2021 $ Change % Change 2020
(Dollars in thousands)
Operating income $ 220,590 $ 20,423 10% $ 200,167 $ 619,762 $ 86,629 16% $ 533,133
Percentage of revenue 28% 31% 28% 31%
Adjusted EBITDA $ 285,329 $ 36,147 15% $ 249,182 $ 777,986 $ 126,660 19% $ 651,326
Percentage of revenue 36% 39% 36% 37%
For a reconciliation of net earnings attributable to Match Group, Inc.
shareholders to Adjusted EBITDA, see "Non-GAAP Financial Measures."
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Operating income and Adjusted EBITDA increased 10% and 15%, respectively,
primarily driven by Payer and RPP growth at a number of brands. Operating income
and Adjusted EBITDA were further impacted by the acquisition of Hyperconnect ,
higher product development expenses from increased headcount at Tinder and
Hinge, higher general and administrative expense primarily related to higher
legal and other professional fees, and higher cost of revenue primarily due to
in-app purchase fees; partially offset by lower selling and marketing expense as
a percentage of revenue. Operating income was further impacted by higher
amortization of intangibles due to the acquisition of Hyperconnect and higher
stock-based compensation expense, primarily due to new grants made during the
year and new grants associated with the Hyperconnect acquisition, partially
offset by expense for an award modification in 2020.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Operating income and Adjusted EBITDA increased 16% and 19%, respectively,
primarily driven by the factors described above in the three-month discussion.
Operating income was further impacted by higher non-cash compensation and
amortization of intangibles.
At September 30, 2021 , there was $310.8 million of unrecognized compensation
cost, net of estimated forfeitures, related to all equity-based awards, which is
expected to be recognized over a weighted average period of approximately 2.5
years.
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Interest expense
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Three Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Interest expense $ 31,850 $ (159) -% $ 32,009
Interest expense was flat compared to prior year period.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Interest expense $ 95,907 $ (2,747) (3)% $ 98,654
Interest expense decreased primarily due to the lower interest rate on the
4.625% Senior Notes compared to the 6.375% Senior Notes, which were issued and
redeemed, respectively, in the prior period, and a lower LIBOR rate on the Term
Loan in the current period.
Other (expense) income, net
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Three Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Other expense, net $ (39,212) $ (37,289) NM $ (1,923)
Other expense, net in 2021 includes a $38.6 million loss related to the changes
in fair value of an embedded derivative arising from our definitive agreements
to repurchase a portion of the 2022 Exchangeable Notes (the "Repurchase
Agreements"). Additionally, other expense, net includes a $5.2 million
inducement expense arising from the Repurchase Agreements, offset by $2.4
million of gains on the net settlement of the bond hedge and warrants between
the date of the Repurchase Agreements and the measurement date on September 30,
2021 . Other expense, net also includes, foreign currency gains of $1.4 million ,
and gains of $0.6 million related to mark-to-market adjustments pertaining to
certain equity instruments.
Other expense, net in 2020 includes foreign currency losses of $1.3 million .
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Other (expense) income, net $ (40,886) $ (60,227) NM $ 19,341
Other expense, net in 2021 includes a $38.6 million loss on derivative discussed
above, a $5.2 million inducement expense as we entered into definitive
agreements in the third quarter of 2021 to repurchase a portion of the 2022
Exchangeable Notes, partially offset by gains of $2.4 million on the net
settlement of the bond hedges and warrants between the definitive agreement date
and the measurement date on September 30, 2021 .
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Other income, net in 2020 includes a favorable legal settlement of $35.0
million , foreign currency gains of $1.4 million , and interest income of $2.5
million , partially offset by a loss on redemption of bonds of $16.5 million .
Income tax provision
For the three months ended September 30, 2021 compared to the three months ended
September 30, 2020
Three Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Income tax provision $ 18,627 $ (7,495) (29)% $ 26,122
Effective income tax rate 12% 16%
The income tax provision in each of 2021 and 2020 benefited from excess tax
benefits generated by the exercise or vesting of stock-based awards.
For the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020
Nine Months Ended September 30,
2021 $ Change % Change 2020
(Dollars in thousands)
Income tax provision $ 38,200 $ 23,424 159% $ 14,776
Effective income tax rate 8% 3%
The income tax provision in each of 2021 and 2020 benefited from excess tax
benefits generated by the exercise or vesting of stock-based awards, partially
offset in the 2020 period by a non-recurring increase in the valuation allowance
for foreign tax credits.
For further details of income tax matters see "Note 2-Income Taxes" to the
consolidated financial statements included in "Item 1-Consolidated Financial
Statements."
Related party transactions
For a discussion of related party transactions see "Note 11-Related Party
Transactions" to the consolidated financial statements included in "Item
1-Consolidated Financial Statements."
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NON-GAAP FINANCIAL MEASURES
Match Group reports Adjusted EBITDA and Revenue excluding foreign exchange
effects, both of which are supplemental measures to U.S. generally accepted
accounting principles ("GAAP"). Adjusted EBITDA is among the primary metrics by
which we evaluate the performance of our business, on which our internal budget
is based and by which management is compensated. Revenue excluding foreign
exchange effects provides a comparable framework for assessing the performance
of our business without the effect of exchange rate differences when compared to
prior periods. We believe that investors should have access to the same set of
tools that we use in analyzing our results. These non-GAAP measures should be
considered in addition to results prepared in accordance with GAAP, but should
not be considered a substitute for or superior to GAAP results. Match Group
endeavors to compensate for the limitations of the non-GAAP measures presented
by providing the comparable GAAP measures with equal or greater prominence and
descriptions of the reconciling items, including quantifying such items, to
derive the non-GAAP measures. We encourage investors to examine the reconciling
adjustments between the GAAP and non-GAAP measures, which we discuss below.
Adjusted EBITDA
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("Adjusted EBITDA") is defined as operating income excluding: (1) stock-based
compensation expense; (2) depreciation; and (3) acquisition-related items
consisting of (i) amortization of intangible assets and impairments of goodwill
and intangible assets, if applicable, and (ii) gains and losses recognized on
changes in the fair value of contingent consideration arrangements, as
applicable. We believe Adjusted EBITDA is useful to analysts and investors as
this measure allows a more meaningful comparison between our performance and
that of our competitors. The above items are excluded from our Adjusted EBITDA
measure because they are non-cash in nature. Adjusted EBITDA has certain
limitations because it excludes the impact of certain expenses.
Non-Cash Expenses That Are Excluded From Adjusted EBITDA
Stock-based compensation expense consists principally of expense associated with
the grants of stock options, restricted stock units ("RSUs"), performance-based
RSUs and market-based awards. These expenses are not paid in cash, and we
include the related shares in our fully diluted shares outstanding using the
treasury stock method; however, performance-based RSUs and market-based awards
are included only to the extent the applicable performance or market
condition(s) have been met (assuming the end of the reporting period is the end
of the contingency period). To the extent stock-based awards are settled on a
net basis, the Company remits the required tax-withholding amounts from its
current funds.
Depreciation is a non-cash expense relating to our property and equipment and is
computed using the straight-line method to allocate the cost of depreciable
assets to operations over their estimated useful lives or, in the case of
leasehold improvements, the lease term, if shorter.
Amortization of intangible assets and impairments of goodwill and intangible
assets are non-cash expenses related primarily to acquisitions. At the time of
an acquisition, the identifiable definite-lived intangible assets of the
acquired company, such as customer lists, trade names, and technology, are
valued and amortized over their estimated lives. Value is also assigned to (i)
acquired indefinite-lived intangible assets, which consist of trade names and
trademarks, and (ii) goodwill, which are not subject to amortization. An
impairment is recorded when the carrying value of an intangible asset or
goodwill exceeds its fair value. We believe that intangible assets represent
costs incurred by the acquired company to build value prior to acquisition and
the related amortization and impairment charges of intangible assets or
goodwill, if applicable, are not ongoing costs of doing business.
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The following table reconciles net earnings attributable to Match Group, Inc.
shareholders to Adjusted EBITDA:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Inthousands)
Net earnings attributable to Match Group, Inc. shareholders$ 131,210 $ 141,207 $ 446,355 $ 13,294 Add back: Net (loss) earnings attributable to noncontrolling interests (309) (586) (1,077) 59,680 (Earnings) loss from discontinued operations, net of tax - (508) (509) 366,070 Income tax provision 18,627 26,122 38,200 14,776 Other expense (income), net 39,212 1,923 40,886 (19,341) Interest expense 31,850 32,009 95,907 98,654 Operating Income 220,590 200,167 619,762 533,133 Stock-based compensation expense 39,569 37,335 112,081 80,647 Depreciation 10,104 11,221 30,622 30,284 Amortization of intangibles 15,066 459 15,521 7,262 Adjusted EBITDA$ 285,329 $ 249,182 $ 777,986 $ 651,326 Effects of Changes in Foreign Exchange Rates on Revenue The impact of foreign exchange rates on the Company, due to its global reach, may be an important factor in understanding period over period comparisons if movement in exchange rates is significant. Since our results are reported inU.S. dollars, international revenue is favorably impacted as theU.S. dollar weakens relative to other currencies, and unfavorably impacted as theU.S. dollar strengthens relative to other currencies. We believe the presentation of revenue excluding the effects from foreign exchange in addition to reported revenue helps improve investors' ability to understand the Company's performance because it excludes the impact of foreign currency volatility that is not indicative ofMatch Group's core operating results. Revenue excluding foreign exchange effects compares results between periods as if exchange rates had remained constant period over period. Revenue excluding foreign exchange effects is calculated by translating current period revenue using prior period exchange rates. The percentage change in revenue excluding foreign exchange effects is calculated by determining the change in current period revenue over prior period revenue where current period revenue is translated using prior period exchange rates. 46 -------------------------------------------------------------------------------- Table of Contents The following tables present the impact of foreign exchange effects on total revenue and Direct Revenue by geographic region, and RPP on a total basis and by geographic region, for the three and nine months endedSeptember 30, 2021 , compared to the three and nine months endedSeptember 30, 2020 : Three Months Ended September 30, Nine Months Ended September 30, 2021 $ Change % Change 2020 2021 $ Change % Change 2020 (Dollars in thousands) Revenue, as reported$ 801,835 $ 162,065 25%$ 639,770 $ 2,177,207 $ 437,345 25%$ 1,739,862 Foreign exchange effects (3,781) (46,235) Revenue excluding foreign exchange effects$ 798,054 $ 158,284 25%$ 639,770 $ 2,130,972 $ 391,110 22%$ 1,739,862 Americas Direct Revenue, as reported$ 393,613 $ 56,821 17%$ 336,792 $ 1,112,263 $ 195,533 21%$ 916,730 Foreign exchange effects (1,162) (1,809) Americas Direct Revenue, excluding foreign exchange effects$ 392,451 $ 55,659 17%$ 336,792 $ 1,110,454 $ 193,724 21%$ 916,730 Europe Direct Revenue, as reported$ 217,680 $ 36,053 20%$ 181,627 $ 603,281 $ 111,114 23%$ 492,167 Foreign exchange effects (5,054) (38,138) Europe Direct Revenue, excluding foreign exchange effects$ 212,626 $ 30,999 17%$ 181,627 $ 565,143 $ 72,976 15%$ 492,167 APAC and Other Direct Revenue, as reported$ 174,432 $ 64,585 59%$ 109,847 $ 419,684 $ 118,750 39%$ 300,934 Foreign exchange effects 2,575 (5,376) APAC and Other Direct Revenue, excluding foreign exchange effects$ 177,007 $ 67,160 61%$ 109,847 $ 414,308 $ 113,374 38%$ 300,934 Three Months Ended September 30, Nine Months Ended September 30, 2021 $ Change % Change 2020 2021 $ Change % Change 2020 RPP, as reported$ 16.06 $ 1.13 8%$ 14.93 $ 15.58 $ 1.34 9%$ 14.24 Foreign exchange effects (0.08) (0.33) RPP, excluding foreign exchange effects$ 15.98 $ 1.05 7%$ 14.93 $ 15.25 $ 1.01 7%$ 14.24 Americas RPP, as reported$ 15.79 $ 0.73 5%$ 15.06 $ 15.57 $ 1.01 7%$ 14.56 Foreign exchange effects (0.05) (0.03) Americas RPP, excluding foreign exchange effects$ 15.74 $ 0.68 5%$ 15.06 $ 15.54 $ 0.98 7%$ 14.56 Europe RPP, as reported$ 15.41 0.84 6%$ 14.57 $ 15.12 1.31 10%$ 13.81 Foreign exchange effects (0.36) (0.53) Europe RPP, excluding foreign exchange effects$ 15.05 $ 0.48 3%$ 14.57 $ 14.59 $ 0.78 6%$ 13.81 APAC and Other RPP, as reported$ 17.71 $ 2.56 17%$ 15.15 $ 16.29 $ 2.30 16%$ 13.99 Foreign exchange effects 0.27 (0.22) APAC and Other RPP, excluding foreign exchange effects$ 17.98 $ 2.83 19%$ 15.15 $ 16.07 $ 2.08 15%$ 13.99 47
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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCESFinancial Position
September 30, 2021 December 31, 2020
(In thousands)
Cash and cash equivalents:
United States $ 331,537 $ 581,038
All other countries 179,774 158,126
Total cash and cash equivalents $ 511,311 $ 739,164
Short-term investments 11,874 -
Total cash and cash equivalents and short-term
investments $ 523,185 $ 739,164
Long-term debt: Credit Facility due February 13, 2025 $ - $ - Term Loan due February 13, 2027 425,000 425,000 5.00% Senior Notes due December 15, 2027 450,000 450,000 4.625% Senior Notes due June 1, 2028 500,000 500,000 5.625% Senior Notes due February 15, 2029 350,000 350,000 4.125% Senior Notes due August 1, 2030 500,000 500,000 2022 Exchangeable Notes 517,499 517,500 2026 Exchangeable Notes 575,000 575,000 2030 Exchangeable Notes 575,000 575,000 Total long-term debt 3,892,499 3,892,500 Less: Unamortized original issue discount 5,422 6,029 Less: Unamortized debt issuance costs 39,181 45,541 Total long-term debt, net $
3,847,896
Long-term Debt
For a detailed description of long-term debt, see "Note 6-Long-term Debt, net"
to the consolidated financial statements included in "Item 1-Consolidated
Financial Statements."
Cash Flow Information
In summary, the Company's cash flows are as follows:
Nine Months Ended September 30,
2021 2020
(In thousands) Net cash provided by operating activities attributable to continuing operations
$
666,925
(916,043) (3,912,134)
Net cash provided by financing activities attributable to
continuing operations 27,687 1,711,971
2021
Net cash provided by operating activities attributable to continuing operations
in 2021 includes adjustments to earnings of $112.1 million of stock-based
compensation expense, $30.6 million of depreciation, $15.5 million of
amortization, and $49.8 million of other adjustments; partially offset by
deferred income taxes of $21.7 million primarily related to the net operating
loss carryforward created by settlement of stock-based awards. The increase in
cash from changes in working capital primarily consists of an increase from
deferred revenue of $30.4 million , due mainly to growth in subscription sales,
an increase in income taxes payable of
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$18.4 million primarily related to the timing of payments related to
international taxes, and an increase from other assets of $17.7 million
primarily due to the amortization of prepaid hosting services. These changes
were partially offset by an increase in accounts receivable of $26.6 million
primarily related to the increase in sales and the timing of cash receipts, and
a decrease in accounts payable and other liabilities of $4.1 million due mainly
to the timing of payments, including interest payments.
Net cash used in investing activities attributable to continuing operations in
2021 consists primarily of cash used to acquire Hyperconnect , net of cash
acquired, of $863.3 million , and capital expenditures of $52.8 million that are
primarily related to internal development of software and purchases of computer
hardware to support our services.
Net cash provided by financing activities attributable to continuing operations
in 2021 is primarily due to $45.6 million of proceeds from the issuance of
common stock pursuant to stock-based awards, partially offset by payments of
$15.7 million of withholding taxes paid on behalf of employees for net settled
equity awards.
2020
Net cash provided by operating activities attributable to continuing operations
in 2020 includes adjustments to earnings of $366.1 million of loss related to
discontinued operations, $80.6 million of stock-based compensation expense,
$30.3 million of depreciation and $7.3 million for amortization of intangibles.
The decrease in cash from changes in working capital primarily consists of an
increase in accounts receivable of $87.9 million primarily related to the timing
of cash receipts, including cash received in the fourth quarter of 2019 rather
than in the first quarter of 2020, and an increase in revenue; a decrease from
other assets of $26.1 million primarily due to a legal settlement. These changes
were partially offset by an increase in deferred revenue of $26.9 million , due
mainly to growth in subscription sales; an increase in accounts payable and
other liabilities of $18.3 million , due mainly to the timing of payments,
including interest payments; and an increase from income taxes payable and
receivable of $5.3 million primarily due to the receipt of an income tax refund,
partially offset by payments of taxes during the year.
Net cash used in investing activities attributable to continuing operations in
2020 consists primarily of the net cash distributed to IAC at the Separation of
$3.9 billion , which includes $1.4 billion of net proceeds from the stock
issuance in connection with the Separation, and capital expenditures of $32.4
million that are primarily related to internal development of software and
computer hardware to support our products and services.
Net cash provided by financing activities attributable to continuing operations
in 2020 is primarily due to proceeds of $1.0 billion from the issuance of the
4.125% and 4.625% Senior Notes and borrowings under the Credit Facility of $20.0
million , partially offset by the redemption of $400.0 million of the 6.375%
Senior Notes, payments of $212.0 million for withholding taxes paid on behalf of
employees for net settled equity awards of both Former Match Group and Match
Group , and purchases of treasury stock of Former Match Group of $132.9 million .
Liquidity and Capital Resources
The Company's principal sources of liquidity are its cash and cash equivalents
as well as cash flows generated from operations. As of September 30, 2021 ,
$749.6 million was available under the Credit Facility that expires on February
13, 2025 .
In September 2021 , we entered into various transactions, which ultimately
resulted in the repurchase of a portion of our 2022 Exchangeable Notes. In
connection therewith, we:
•Entered into agreements to repurchase approximately $414 million aggregate
principal amount of our outstanding 2022 Exchangeable Notes.
•Entered into agreements to unwind a proportionate amount of outstanding hedges
and warrants corresponding to the 2022 Exchangeable Notes to be repurchased.
•Commenced a registered direct offering of shares of our common stock to the
holders of the 2022 Exchangeable Notes to be repurchased.
•Commenced a private offering of $500 million aggregate principal amount of
senior notes due 2031.
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These transactions were completed on October 4, 2021 , resulting in our:
•Issuance of 5,534,098 shares of our common stock at a price of $158.83 per
share.
•Issuance of $500 million aggregate principal amount of 3.625% senior notes due
2031.
•Unwind of exchangeable note hedges and warrants for net cash proceeds of
approximately $201 million .
•Repurchase of approximately $414 million aggregate principal amount of 2022
Exchangeable Notes for approximately $1.5 billion , including accrued and unpaid
interest on the repurchased notes, funded with (i) the net proceeds from the
common stock offering, (ii) approximately $420 million of the net proceeds from
the senior notes offering (with the balance of the net proceeds from the senior
notes offering being used for general corporate purposes), and (iii) the net
proceeds from the hedges and warrants unwind.
In connection with these transactions, our third quarter 2021 income statement
reflects a loss of $41.3 million , included in other expense, net, primarily
related to the change in fair value from September 22 through the end of the
period of an embedded derivative recognized upon the execution of the agreements
described above. In the fourth quarter of 2021, we will recognize a gain of
$24.0 million based on the changes in fair value of this embedded derivative
until its settlement on October 4 . Our balance sheet as of September 30, 2021 ,
reflects (i) a $207.0 million obligation to pay cash in excess of the principal
amount of the 2022 Exchangeable Notes we agreed to repurchase (allocated between
current and long-term liabilities in relation to the amount expected to be
funded by short and long-term assets, respectively), (ii) a $200.8 million net
receivable relating to the agreements to unwind the corresponding hedges and
warrants, and (iii) a $38.6 million liability for the fair value of the embedded
derivative.
The Company anticipates that it will need to make capital and other expenditures
in connection with the development and expansion of its operations. The Company
expects that 2021 capital expenditures will be between approximately $80 million
and $85 million , an increase from 2020 cash capital expenditures primarily due
to leasehold improvements in our new leased New York office space, and building
improvements at our company-owned buildings in Los Angeles .
As of September 30, 2021 , all of the Company's international cash can be
repatriated without significant tax consequences.
Our indebtedness could limit our ability to: (i) obtain additional financing to
fund working capital needs, acquisitions, capital expenditures, debt service, or
other requirements; and (ii) use operating cash flow to pursue acquisitions or
invest in other areas, such as developing properties and exploiting business
opportunities. The Company may need to raise additional capital through future
debt or equity financing to make additional acquisitions and investments or to
provide for greater financial flexibility. Additional financing may not be
available on terms favorable to the Company or at all.
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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
During the nine months ended September 30, 2021 , there were no material changes
to the Company's contractual obligations since the disclosure in our Annual
Report on Form 10-K for the year ended December 31, 2020 , except for the
agreements associated with the partial repurchase of the 2022 Exchangeable Notes
discussed above in "Financial Position, Liquidity and Capital Resources."
Item 3. Quantitative and Qualitative Disclosures about Market Risk
During the nine months ended September 30, 2021 , there were no material changes
to the Company's instruments or positions that are sensitive to market risk
since the disclosure in our Annual Report on Form 10-K for the year ended
December 31, 2020 .
Item 4. Controls and Procedures
The Company monitors and evaluates on an ongoing basis its disclosure controls
and procedures and internal control over financial reporting in order to improve
their overall effectiveness. In the course of these evaluations, the Company
modifies and refines its internal processes as conditions warrant.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), Match Group management, including our principal
executive and principal financial officers, evaluated the effectiveness of the
Company's disclosure controls and procedures, as defined by Rule 13a-15(e) under
the Exchange Act. Based on this evaluation, management has concluded that the
Company's disclosure controls and procedures were effective as of the end of the
period covered by this report in providing reasonable assurance that information
we are required to disclose in our filings with the Securities and Exchange
Commission under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Commission's rules and forms,
and includes controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
There were no changes to the Company's internal control over financial reporting
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
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