Will Tinder Gold Drive Match Group's Q1 Earnings?

Match Group, Inc. MTCH is set to report first-quarter 2018 results on May 8.

The company has had a dismal earnings surprise history in the trailing four quarters, missing estimates all through, with an average negative surprise of 5.3%. In the last reported quarter, it missed estimates by 6.5%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Match Group is the world's foremost provider of dating products and operates a portfolio of more than 45 brands. Three of its biggest and best known brands are Match.com, OkCupid and Tinder. The company's reputation, established user base and size are likely to prove conducive to the upcoming earnings.

About 60% of the company's revenues come directly from users of its dating services in North America, mostly in the form of membership subscriptions. Online dating has been expanding, as users from more demographics join the fray. Most of Match Group's users connect from mobile devices, where conversion to paid members is also higher. In the last reported quarter, its average subscriber base rose 24% year over year, driven primarily by solid contribution from Tinder. Match and OkCupid also registered modest growth. This momentum bodes well for the company's top-line growth in the quarter under review.

Match Group has been reaping profits for the past three years and recording top-line expansion as well. The company is currently enjoying strong growth, driven by robust momentum at Tinder and solid performances from Meetic, Match as well as PlentyOfFish.

Match Group recently rolled out a Tinder Gold subscription package, which has driven incremental ARPU as well as subscriber growth. Tinder's ARPU actually grew 32% in the last reported quarter. Recently, the company also launched the "Likes You" feature, along with a bunch of other optimizations. These factors will drive the results of the quarter under review.

In the last quarterly report, Match Group provided its revenue projections for first-quarter 2018 in the range of $380-$390 million (reflecting 29% year-over-year growth at the mid-point), with an EBITDA of $115-$120 million for the quarter (reflecting 36% year-over-year growth at the mid-point). The company also typically suffers adverse seasonality in its first quarter, which is usually its lowest-margin quarter. Also, the company's marketing spend is usually the highest in the first quarter, which will also impact margins in the upcoming results.

However, weaker-than-expected advertising revenue growth trends might dent the company's top line in the to-be-reported quarter. Further, profits might be affected due to higher investments in Tinder along with higher-than-expected data costs and professional fees.

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