Q3 2021 Match Group Inc Earnings Call
[music].
Good morning, and welcome to the match group's third quarter 2021 earnings conference call all participants will be in a listen only mode.
After today's presentation there'll be an opportunity to ask questions.
Please note. This event is being recorded I would now like to turn the conference over to Bill Archer head of Investor Relations and corporate development. Please go ahead.
Thank you operator, and good morning, everyone.
Today's call will be led by CEO Shar today, CFO and CFO Gary <unk>.
It will 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 have been set forth in our earnings release and our peer.
Reports filed with the SEC.
With that I'd like to turn the call over to Sean.
Thank you Bill.
Good morning, and thank you all for joining the call today.
Today, Gary and I are doing this call from our brand new offices in New York.
We had another strong quarter with over 25% year over year revenue growth.
So a record EBITDA for the quarter for us.
Didn't know in particular showed real strength, but not only 20 plus percent revenue growth, but also adding a record number of subscribers and payoffs this quarter.
It is a historical high for tinder, even higher than the poor girl than Tinder gold rolled out.
Multi excited to have our first woman CEO at Tinder.
Not a has seamlessly taking over the helm there and the team hasn't missed a beat in their journey to transform the tinder experience.
Okay.
Explore which is our new surface area within the Tinder app rolled out globally, a couple of weeks ago.
It is a dynamic interface, which allows users to connect with others to new experiences beyond the swipe.
That used to be tinder.
These experiences can be tailored by market. It keeps tinder at the center of culture gives users new reasons to keep coming back increases engagement and activity.
Our successful slide 19, visa's coming to Tinder on explore in a brand new series starting November seven.
Not only is it a very compelling Gen Z who done it storyline. This time it has a bunch of features like past Chad Bulletin that should amplify the conversations that follow on tinder.
Hinge had another great quarter across all metrics.
Doubling revenue again.
The one business that is seeing an unexpected softness as the main revenue driving avid hydro connect azhar.
It's hard a few months of headwinds in some key markets in Asia.
Some of it is COVID-19 some of it is marketing performance some product related delays.
However, South Korea has finally opened up to international travel and our teams were able to meet over the last couple of weeks in person.
We're working closely with them now on marketing to product road map in order to reverse the trends.
I am extremely optimistic about this team and technology asset as a long term value creator for our portfolio, especially as we enter with me described in the shareholder letter is the next phase of match group's evolution in the dating category.
In fact, my long term pieces with further validate it in the last couple of weeks when the team. They are walked me through a new concept a beta testing on some college campuses and sold it.
It's called single town. It is a platform where your digital cell in the form of real time audio powered all the tar skin serendipitously neat others in virtual spaces like a bar or you can sit down with someone in a park bench to have a one on one or a group conversation.
There is for instance, a piano bar with People's digital selves are gathering around but they're actually playing the piano at home and jamming with others.
You can over here a conversation join conversation you can tap into the digital avatars to see more of that profile and you have basically a richer set of signals to help connect with somewhat.
It is Matt adverse experience is coming to life in a way that is transformative to how people meet and get to know each other on a dating our social discovery platform and is much more akin to how people interact in the real world.
It is super early but we are seeing some encouraging early signals in terms of engagement among gen Z in Seoul.
Already the average daily time spend is about an hour and growing.
Subcultures up for me it is resonating with both genders.
And as we talked about an hour later this next phase of dating apps in particular is going to be all about richer more organic and more akin to real life ways of discovering meeting and getting to know people.
Technology is.
Finally, getting Dale and this underlying technology platform Hydro connect has built that power single town has been built in a way that it can be leveraged by other platforms easily.
So my long term view on what this talented team and technology brings to the portfolio as ever stronger.
Finally <unk>.
Based on everything we're hearing and seeing this coming season should be a strong lineup people are ready to shake off the COVID-19 malaise and get out there and D. A neat it's.
It is also shaping up to be one of the busiest wedding season.
I feel good about it re energized and much more social holiday season.
These social interactions are incredibly important for our collective mental health and wellbeing. So I for one I'm rooting for a hell of a holiday season, and a post holiday peak season for us as we enter the new year.
And with that I will hand, it over to Gary to provide some more color on the quarter.
Thanks Shar.
We had a strong Q3 with total revenue of $802 million up 25% year over year.
Our businesses, excluding hyperkinetic produced total revenue of $748 million up 17% year over year.
Total payers reached $16 3 million in Q3, an increase of 16% from the prior year quarter.
Growth was strong in all geographies up 11% year over year in the Americas, 13% in Europe, and 36% in APAC and other whereas the count reflects a full quarter of contribution from Hyperconnected.
<unk> was up 8% year over year to $16.06 in Q3 up 5% in the Americas, 6% in Europe, and 17% in APAC and other again, reflecting a full quarter from Hyperconnected, where RVP exceeded $30.
Our direct revenue grew 17% in the Americas, 20% in Europe, and 59% in APAC and other again due to full quarter hyperkinetic results.
APAC and other now comprises approximately 22% of our direct revenue.
And there was a standout in the quarter delivering direct revenue of $434 million up.
Up 20% year over 20% year over year Tinder.
Tinder has phenomenal payers growth up 19% year over year, adding $1 7 million payers. The most in its history, reaching $10 4 million.
Some of this growth did come at the expense of RVP, which grew 1% year over year in the quarter.
Tinder had a number of conversion wins in the quarter, particularly in the lower priced subscription tier.
Tinder platinum adoption is ahead of schedule with total platinum subscribers, reaching nearly $1 million.
Tinder engagement also remains very strong with both swipe activity and daily average messages significantly above pre pandemic levels.
All other brands grew direct revenue, 32% year over year in Q3.
In this group changed was the standout growing direct revenue over 100% drill.
Driven by RVP growth of north of 70% and payers growth of 20%.
Okay. She spun upward.
Grew direct revenue over 80% year over year in Q3.
Hyperconnected contributed $53 million of total revenue in the quarter below our expected range.
Hyperconnected spacing pressure as largest revenue generate saar, especially in certain middle eastern markets.
It also faced delays in rolling out certain product initiatives and a challenging marketing environment.
We're working diligently with the hyper connecting to improve performance and deliver sustainable long term growth.
Indirect revenue reached $60 million, the highest ever in a quarter up 40% year over year.
It appears our strong brands relatively lower AD loads and contextual targeting have been especially appealing to advertisers in the current environment.
Operating income grew 10% year over year to $221 million and EBITDA grew 15% year over year to $285 million in Q3.
EBITDA margins were 36% what would have been 39% ex hyperconnected.
Overall expenses, including SBC expense grew 32% year over year in Q3 with more than half the total increase resulting from the acquisition of Hyperconnected <unk>.
Excluding the impact of paper connect cost of revenue grew 20% year over year due to higher fees and represented 27% of total revenue.
Sales and marketing spend excluding hyperconnected was up $5 million due to slightly higher marketing spend across our portfolio, but was down two points year over year as a percent of total revenue to 18%.
G&A expense ex Hyperconnected rose, 8% year over year, primarily due to an increase in legal fees and was 13% of revenue down a point year over year.
Product development costs ex hyperconnected, 37% year over year and were 7% of revenue as we increased headcount at several brands, mainly tinder and hinge.
Our gross leverage declined to three eight times trailing EBITDA and our net leverage was three three times at the end of Q3, we.
We believe our target of below three times net leverage by the end of 2021 is within reach.
In a complex series of related transactions, we repurchased $414 million aggregate principal amount of our 2022 exchangeable notes for approximately $1 $5 billion in cash using the proceeds from issuing five 5 million shares of common stock $500 million of Nu.
365% 10 year unsecured debt and the unwind the related bond hedges and warrants.
These transactions, which were executed in the third quarter, but sales in the fourth quarter created an embedded in the embedded derivative on which we recorded a $39 million loss in Q3, but also on which we expect to recognize a $24 million gain in Q4.
We had operating cash flow of $667 million in the quarter and free cash flow of $614 million, we ended the quarter with $523 million of cash and short term investments on hand.
For Q4, we expect total revenue for match group of $810 million to $820 million, which would represent 24% to 26% year over year growth.
Building off the conversion strength achieved in Q3, we expect tinder is year over year direct revenue growth to accelerate towards the mid 20% range in Q4.
Our expectation is that hyper connect will deliver revenue in Q4 at similar levels to Q3.
Between weaker Q3 performance and lowered expectations for Q4, we have reduced hyperconnected revenue contribution by approximately $20 million for full year 2021.
We expect full year Standalone high protect revenue to be about $210 million.
Despite softer performance at hyperkinetic strength at Tinder, and hinge position us to deliver around $3 billion of total revenue and full year 2021, representing 25% year over year growth.
Notably, we expect tinder direct revenue growth to be above 20% in full year 2021.
We expect EBITDA of $285 million to $290 million in Q4, representing 16% to 18% year over year growth and margins ex hyperkinetic roughly in line with the prior year quarter.
For the full year, we expect EBITDA to be above our previously communicated high end of the range of $1 6 billion.
Up nearly 20% year over year.
Typically we provide some initial thoughts on the upcoming year on our Q3 call for.
For the past several years, our initial outlook has been mid to high teens revenue growth.
For 2022, we expect our businesses ex hyperconnected to once again deliver that level of growth driven by another strong year for tinder and for hinge as it begin expansion into non English speaking markets.
With a full year of Hyperconnected revenue contribution included we expect the company to grow total revenue closer to 20% year over year and 2022.
We will provide a more precise revenue outlook on our February call. Once we see how the strategic changes that hyperkinetic and the new product initiatives across the portfolio begin to take hold.
Excluding impacts from policy changes that go into effect in 2022, we expect to see about a point of margin improvement at our businesses ex hyperkinetic.
And for hyperkinetic to achieve mid single digit EBITDA margins next year.
While we anticipate legal expenses to be meaningfully lower next year, we plan to reinvest a portion of that savings into important safety and corporate and social responsibility initiatives also given the highly competitive job market, we may reinvest to attract and retain crucial tests.
The level of investments we choose to make at these areas will impact the actual amount of margin expansion we achieved.
The biggest swing factor in our 2022 EBITDA outlook is what happens with App store fees, which are increasingly large percent of our revenue.
From 17% in 2020 to an estimated 19% in 2021 totaling over $550 million.
There are numerous actions across the globe scrutinizing, Apple and those requirement that we use their payment system and pay a 30% fee.
A reduction in these fees would have numerous positive consequences, including enabling us to pass along benefits to consumers.
Google has agreed to reduce fees for subscriptions, so not ala carte and from 30% to 15% starting January one 2022.
But they also still have a policy change to require use of their billing system scheduled to go into effect at the end of March 2022.
There are many unknowns regarding Apple's plans for IP, including whether and how they intend to comply with the law banning mandatory IP in South Korea, and the injunction the epic decision, which requires them to eliminate the anti steering provision by December nine 2021.
We're going to watch these developments around the app stores for at least another few months before we provide our EBITDA outlook for next year, we're optimistic more changes to the app ecosystem are likely.
There is a lot going on across our business, including a meaningful product evolution at tinder and many of our other brands.
We're excited to execute on our product roadmap to continue evolving the experience for our users we recognize that people around the world are increasingly turning to digital products to meet and socialize.
Our job is to continue to build new and exciting products and experiences that enable people to connect something we have been a leader that asked for more than 25 years. We're confident that if we remain focused on delivering outstanding products will continue to deliver strong growth and financial results for our stakeholders for many more years to come.
With that I'll ask the operator to open the line for questions.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
Youre using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And your first question today comes from Mario Lu with Barclays. Please go ahead.
Great. Good morning, a couple of questions on Tinder. The first one is on payers. So I was wondering if you could provide any additional color regarding the key drivers.
There are regions that attributed to tenders that 800000 sequential care growth in the quarter.
How should we think about a normalized cadence of tinder.
And their payer growth going forward.
Yeah, I can take that so generally Q3 is a good quarter for a pair of ads, but this one was indeed, a historically high for tinder and it was across all regions and.
Mostly because a lot of the growth and payers in Q3.
Came as a result, it would be normally referred to as under the Hood and.
Revenue optimization, so a combination of merchandising and paywall optimization drove conversion and pay up growth.
Some of this increase conversion was in.
Lower price tiers, which were dilutive to our P. P M.
And again, we mentioned.
The you.
You know the one thing I want to emphasize we generally always focus on revenue growth, sometimes it comes to payroll growth and sometimes through our P. B, sometimes boat and so we don't worry too much about the cadence necessarily but we're definitely always focused on revenue from New Jersey.
To.
It increased revenue overall.
Got it and just a quick follow up on the Tinder RPT growth you mentioned, the lower priced tiers being successful as being one contributor.
What about any color about the platinum is still being a contributor to RPT growth.
And then any color you can provide regarding the expectations from these new features such as to explore.
Whether they will accelerate tinder RPT in the next few quarters. Thanks.
Yeah.
Sure.
So yes, the RPT dilution came because some of the conversion features.
Helped pay a growth in the lower tier.
Our price tiers.
Platinum has been exceeding our expectations going said close to 1 million at the end of September we've actually now past that.
And it will continue to be a driver of <unk> growth.
In terms of explore and it is new its only been out for.
Couple of weeks, but we have early evidence of this.
And we expect them to explore experiences should increase engagement and reactivation and this in turn ought to provide more revenue optimization opportunities over time, both in terms of conversion as well as our PPE growth meaning boat.
Conversion for new payers, but also a la carte revenue opportunities on through that interface.
That's helpful. Thanks, Sean.
The next question comes from Jason <unk> with Oppenheimer. Please go ahead.
Hey, maybe just dig a little more deeper.
So as far as the fourth quarter acceleration in Tinder direct revenues.
Just maybe talk about like what's driving the confidence for that plus 25%. Thank you.
Sure, Jason It's Gerry I'll take that.
I would say generally tinder has really been performing very strongly and increasingly strongly as the year has gone on.
And they engage with the product is really.
Even stronger than it was pre pandemic. So we really feel good about the dynamics overall at tinder.
And what we're expecting is that in Q4, we're going to see both payer and RVP grow.
The momentum that we had on the peer growth should continue into Q4, so I'm expecting a similar level of year over year peer growth in Q4 as we saw in Q3.
And I think we will also be able to achieve some RTP growth as well, which we didn't see as much in Q3, but I think we'll see that in Q4. So when you combine the additional RPT growth with similar level peer growth youre going to get overall direct revenue growth in kind of approaching the mid twenty's at Tinder as I said earlier, so we feel.
Very good about that the one thing that I just would remind people is that seasonally Q4 tends to be weaker for tinder around payer growth, especially when we've seen a very strong Q3, it does make kind of the sequential.
Payer increase more challenging so thats, what we are expecting to see from a sequential perspective in Q4, but year over year I'm expecting similar levels of growth on payers as what we saw in.
In Q3.
And just last reminder, would be we don't really manage the business typically around RVP growth, where payers growth. We're looking for direct revenue. Our overall revenue growth. So we don't get as focus on one metric versus the other theres, obviously, a trade off that we saw in Q3, but we continue to manage to drive a strong level of revenue growth and we're positioned to do that.
Q4.
Thanks.
The next question comes from Cory Carpenter with Jpmorgan. Please go ahead.
Yeah. Thank you on the App store.
Certainly a lot of moving parts, but based on what we know today.
Do you need any further guidance you can provide on the way to frame potential lobster released just as we head into <unk> in 2022.
Thank you.
Sure do you want to take that one yeah, you know what I'm going to take the opportunity to talk about the app store a little bit more broadly in.
All of the puts and takes that we're seeing and what we think is likely to happen.
So you know that there's been a flurry of activity on the App store fronts, particularly in the last few months.
South Korea became the first country to outlaw mandatory.
Additionally, at this point there are either active investigations litigation or proposed legislation.
Across the globe, including.
Countries in Europe, U K, Japan, India, Australia, and the U S.
So he would be C at a practical level.
Google appears to be compliant with the South Korean law.
That does not seem to be the case with Apple yet.
Google has reduced its fees on subscriptions, but not on a la carte from 13% to 15%, which is going to be effective January 1st 2000 22022.
Now recall, Google had a while ago announced that they will be enforcing mandatory I app.
And are they delayed that a decision to March 31st.
2022, and we are as of now onshore where they stand on that policy change.
Interestingly for.
It's been a while since the Apple and Google App store economics are not in sync and so you have to see how Apple responds to the Google change in.
Right plus subscription.
Aldi.
And some of the developments in the last few months.
I do think this will continue to break and it will be a beneficial change to consumers and to developers and.
And depending on when and what and how this breaks the outcome for us is pretty Bailey.
So we're watching for some of these milestones that are coming up in the next few months hopefully it'll give us some more priority and we will be able to communicate a little better in our next call B you know the my final thought on this is I've never seen it.
Quint in this I App appstore issue, where there's been so much activity around the world and you know at some point Apple has to take a step back and.
Ask themselves whether this is still the right thing to do and so another reason why I think this will change in some way.
Thank you.
The next question comes from her sweater catch area from Evercore ISI. Please go ahead.
Okay. Thank you let me try to please possible to please comment on recent development related to the lawsuit and your position on the case and then the second question is could you. Please talk about the trends you're seeing an eight back, particularly in Japan, and you touched on Korea, but generally in a back in the recovery in.
In that region and what is baked in your 2022 Ah top line growth guidance. Thank you.
Sure, let me take care of crack at the on the litigation. Unfortunately, there's really not much said, we can say about that right now it's an active litigation jury is a jury trial and the jury selection started at the beginning of this week.
An opening statements are going to be next Monday this coming Monday. So this is occurring right now here in New York.
And you know look there is always uncertainty in a jury trial, but we feel extremely good about our position and that the plaintiffs cheese is meritless and we're gonna go in and defend ourselves vigorously. So we'll you're watching that as it plays out over the coming weeks.
As far as D V Tech trends go I can say a lot more about that and what I would say is really Japan is the biggest area of focus for us.
In Asia, because that is our number two market, we derive significant revenue in the Japanese market.
And really the only recently lifted their fourth state of emergency.
Had the Olympics and after the Olympics, they had pretty significant spike in COVID-19 from their perspective, and they've taken some pretty significant action and really some restrictions on dining in other socializing brilliantly lifted last week. So that geography continues to be impacted by by Colgate in a pretty significant way.
And we have not yet seen a return to normal levels of socializing in that in that market.
That is impacting our business in a significant way we have the number one and number two in Japan, and chairs and Tinder and so we have meaningful presence there, notably the trends are not just affecting us they're affecting all of the data gaps in that market, but because we are so large in that market. It is affecting us significantly.
So we're optimistic that the drivers that make Japan, a great getting market with lots of potential growth continue to be there and we think this will resolve itself over time as people in Japan, starting to go back out and get Covid further behind them, but it's going to take a little bit of time watching it and we're off.
Domestic but I think it needs a little bit of time to play to play out.
And while Japan is the market in Asia, that's the most significant impacter for US there's other markets in Asia. There also still affected mostly in east Asia, but you've got Singapore, Taiwan that are still affected as well bye trend as a result of COVID-19. So given the the geographic footprint of our business.
<unk>, which does have a significant presence in Asia.
We are still dealing with impact there and I would say if you look at kind of what's happened around the globe given our overall global exposure. The Americans is recovered well, especially the U S and Europe is a little bit behind but make fries as well and then Asia further behind so if you look at the trends.
That we've seen in the U S. I think that over time, that's gonna play through and these other market. It's really is a question of timing.
More than anything else and so we'll see how that plays out another market that just went to India, India was really impacted by Covid depth and we saw a significant impact on our business. We have seen a meaningful recovery in India. As a result of improvement in the Covid situation. There. So it is.
Very much market by market, depending on what actually the government's taken them with a level of COVID-19 issues is what we are seeing gradual kind of step by step recovery as we look at markets around around the world.
Okay. Thank you Gary.
You're welcome.
Next question comes from Dan Salmon with B M O Capo markets. Please go ahead.
Great. Good morning, everyone I'd, just like to follow up a little bit on the change to your revenue outlook for Hyperconnected, perhaps just expand a little bit on the near term trends you're seeing they're across both of the app. So I know there was a little bit of color in the letter, but anything else that you could add would be great.
And then just more broadly any any material change to your mid to long term I would look for the opportunity for Doctor says thanks.
Alright, let me take a crack at that one too and sharp it certainly jump in but as I went through it and make sure I mentioned as well yeah, they're really kind of three things that have led to the lower than expected revenue for for Hyperconnected and it's really focused on the main revenue generating app bizarre, which is a one to one.
Video experience. The first is COVID-19 hyperconnected czar have significant presence in Asia, and the middle East and as I, just talked about COVID-19 to choose to be an issue in many of those markets and.
You've got a lot of people are living at home with their families spend a lot of time at home and it has changed the interaction of the consumer with the one to one video chat App Amazon and so we're looking to have all of the app in ways that Ah Chi the experienced and make it more conducive in the current bill.
<unk> I think that's kind of a first piece of it the second piece of it is on the marketing front Azhar does a lot of performance marketing and we've talked about in other contexts. The marketing environment has become more competitive and also more challenging as a result of changes that Apple has made around around idea.
Okay. So that's a second piece of what's going on and then the third piece is they've had some product initiatives that have been late and it would take up it not been as quick as we had hoped and so there's some product things that are happening there as well. So all three of those things have impacted visa.
DSR performance the hyper connect performance I would tell you that we're not happy at all that we missed our expectations for Q3, and then we had the lower them for Q4 at.
Sure mentioned, we send a team over there finally has been a couple of weeks with hyperkinetic working through product Roadmaps marketing roadmaps and adjusting things to reverse the trends.
We're confident that we're working closely with them, we're gonna be able to return the business to grow but it's gonna take some time I think the current trends are going to persist into the first part of 2022, and we're expecting that there'll be some return to growth in the latter part of next year.
<unk> also said in her remarks, even with that short term softness we're still very optimistic about the long term prospects for hyperconnected.
It keeps interviewed extremely significantly to the long term growth of the overall Matthew there's many ways that we can do that we think that we can leverage video audio AI capability that they've got things in moderation and C. E. There's a number of things that we're working very hard of leveraging and so we're really trying.
Do both things at once both adjust the product and marketing roadmaps around their existing App and also leverage their capabilities across our portfolio and then you've got a single town and so the new <unk> elements and the experience of that we're seeing in that beta test and that.
Something that potentially we can build into either either a standalone app and or potentially leverage that user experience into some of our after the portfolio. So there are a lot of things going on Hyperconnected, we need to make progress in all three of those areas. We're working extremely diligently on it the team there is working extremely diligent.
Lee on it until even though there's some short term pressure on the business are long term thesis and excitement around it remains completely intact if not even.
Stronger than it was months ago, when we first maybe a physician. So we've just got work to do and we're working away at it.
Great if I could just follow up on one thing Gary you mentioned the impact on performance marketing and a T T on that asset, but I don't think you mentioned it as being material. So the rest of your business around the world is that a function of are you relying that business relying a little bit more on on performance advertising happens.
So I'll add that type of thing to drive new users, whereas maybe tinder hinge and the others are tend to be a bit more viral in nature.
Yeah, I mean, it varies by our business depending on what the marketing approach is so as you rightly said hypercatalexis feeling it because they're marketing approach is impacted by by by the elimination of IBSA, we're feeling it in other parts of our business too or feeling it a match and music, which are significant marketers as well the lines on mark.
Getting we found good creative ways to work around it to some extent and offset some of the impact, but there is still impact and businesses that rely heavily on marketing. So all of the stake into our numbers and our performance that you're seeing for this year and our outlook for Q4 and into next year. We've included all that it's not very.
Very significant to us, but there is some impact and we're not able to outrun it completely but through creativity and some good solved and adjusting channels and so forth, we're able to offset some of the impact so.
All of our numbers include the impact, but it is a new fact of life that we are dealing with a cross our business and our marketing teams are doing a great job finding ways to offset it wherever they wherever they can.
That's great very helpful. Thanks care.
So.
The next question comes from print with Jeffrey Please go ahead.
Good morning on hinge great great growth I'm curious kind of if you could describe the next chapter of of the the rule out for engine I think I want to join the deleted commercials, you've got going.
Thanks, Brad.
Yeah, we've been Super excited about hinge and it's been a great growth driver for us, but it's still S. As I said before only exists in select English speaking market and much of that growth has been user growth in those markets and some really good work they've done this year.
On monetization they still have a ways to go in these market as well as on monetization, but one of our key strategies for next year is far hinge to enter non English speaking market, we're planning to build translation localization capabilities, we're going to start.
The international expansion for hinge next year, it will likely begin in some markets in Europe, and then more broader build a rollout over time you know.
As you mentioned their marketing campaigns, and particularly the design to be deleted timeline has really resonated with consumers.
And the hinge team continues to differentiate themselves on the product and he do think that product experience hinges boating is very well suited for international markets. So next year is going to be exciting for a hinge.
Thanks.
The next question comes from John Blackledge, Chris Cowan. Please go ahead.
Great. Thanks, I'm just one question what is it puts and takes for top line growth to be above kind of the initial guide of around 20% year over your account your for your gross thanks.
So uhm join I would say, there's probably two key thing to think about that could drive 2022 top wide higher than what we've discussed so far uhm. The first thing is we have some really bold and big initiatives plan for Tinder next year, especially around virtual.
Good in some other areas as well and the outlook that we've given you know doesn't assume a meaningful step function impact a home run or really meaningful impact from any of those initiatives. So we're waiting to see as we were all these initiatives out how they involve how they perform and then we can injure.
Just accordingly, depending on that but the way we approach our outlook is to you know not.
Not factor in something that's kind of off the charts unexpected that we haven't seen previously your house or don't have reason to expect so we'll see how it goes and we obviously always update as we see improving trends in the business and the second thing is around Covid and I'm sure. We're all tired of talking about it and hearing about it and everything else, but the real.
He is the date and category as a whole remains impacted by the fact that people socializing behaviors, how much they're going out how much they're meeting other people how much risk there was taken in going out with people has not returned to pre covered levels I'm sure you and everyone else on the phone notice from their own.
Experience is you know you're going out more than you were but not as much as Houston.
You are traveling more but not as much as you used to.
And so we're waiting to see how the behaviors evolve and where we get you versus the pre covered level of it vary by country I talked with Japan.
In the U S in certain parts of the US certainly it is stronger than at other parks. Some people would take more risks are more comfortable and other people. So we want to see where the world kind of normalizes back too. If you can use that term and that will affect our outlook for 2022 in our performance for 2022 right now.
Way, we have forecasted really assume that current behaviors don't change that much but the level of of socializing that are going on now kind of stay this way through the course of next year, maybe the improves slightly depending on market.
But but in general we're not assuming a massive change versus current behaviors that could prove to be too conservative, but right now we don't see a full balance back occurring at the moment and so we're not assuming a change in that for 2022. So we'll see how this evolves it's something that we're watching very closely.
Mostly but that's another place where we could be.
See some improvement versus our current outlook, depending on how people's behaviors start to adjust.
Thank you thanks, so much.
The next question comes from Eastern Sally Truist. Please go ahead.
Great. Thank you for taking the questions too. Please actually just the double click on that last question. Gary I was wondering if you can maybe expand on what's bakes into your mid to high teens growth, particularly around pears in our P. P for tinder non tinder brands and then.
Have your labor costs increases had any minute or has labour cock not yours, but just labor cost increase had any material impact on on your operation. So far I think you've called out in the letter that you may choose to invest further in attracting and retaining talent next year any more color there would be super helpful. Thank you.
Yeah, I mean on the second question around Labor cost you know, we like many companies are seeing a very competitive job market, especially protect talent, especially for engineers. It varies by market, but there certainly are markets, where we're seeing a significant amount of pressure and we're having to.
React to that and want to protect our franchise wanted to retain our key talent and in hiring new talent either to grow the business or as a replacement for people who may leave has become much more competitive and costs are going so we've seen that occurred throughout 2021 and right now we don't see any significant shifts.
And that trend as we head into 2022, so you never know what the future holds but sitting here today as we put together our initial outlook for 2022, we're assuming that those trends are going to persist and we're going to need to continue to invest in.
In our account to continue to build a business we want a bill and we're prepared to do that because that is long term critical to our business and a success. So that is something that we are dealing with as many companies are and will continue to be thoughtful around it.
As far as your first question the mid to high teens grow I described a little bit about something that could drive to the outside.
And you know hook, our expectation is for tinder to continue to perform very very well for hinge as it both expand into international market non English speaking market, but also there are significant opportunities for it in its current market. So we think both businesses should drive significant levels of growth next year.
Here, we've talked about the more established brands.
Growing up a modest amount that is still our goal for next year as well. We've also talked about some some pressures we're facing for example in the Japanese market and how that's going to evolve that's important to our Harris business in the performance of Paris for next year and a little bit remains to be seen how the Japanese consumer evolved.
And how they emerge out of Covid. So that's another factor in our in our business.
We also have talked a little bit about ruling out livestreaming at a number of our businesses and how that takes place in okay, Cupid and be okay, and other business very planned wildlife streaming. So there's a number of things that we've made some assumptions around we tried to make the most realistic assumptions we can but.
General trends like Covid or recovering markets like and are certainly open for interpretation as are the success of our initiatives, whether there at tinder or whether there are some of our new initiatives like life screaming at a couple of brands. So we're going to see how that all plays out which is why we always give this initial outlook here on our Q3 calls or tell you what.
I think we're going to see next year, but we will give you a much more precise view of things when we get to February after we've seen some of these initiatives start to roll out and once we have three more months of a performance and Kobe recovery and everything else. So it's the best we can do now is our best set of assumptions sitting here today, but subject.
A refinement is there are many many moving parts and that's before you even get to the EBITDA size of App stores and everything else. That's happening that we've we've talked about extensively. So you know we tried to give our best outlook and that's what we've done today, but we will refine it as we get closer to the beginning of next year.
Oh, that's a good car that's scary.
The next question comes from Justin Patterson with Keybanc. Please go ahead.
[noise] great. Thank you and good morning, I wanted to go back to virtual currency and the virtual goods ecosystem, how should we envision the pieces just that rolling out over time and then when you look at the trading mechanics, and just more patrol. Good. So it's a whole what are the fundamental elements you need to get the right to schedule that <unk>.
And just create an efficient economy I'm on the final point about that how should we think about sizing that opportunity Incrementality does a business over time. Thank you.
Uhm I can take that Gary okay. So the virtual currency or the claim is it's something we think of as a infrastructure.
I think that's going to be nice and necessary eventually for virtual goods in that particular.
Component is currently testing and we should have it sorted out in the next few months.
Now more to have good the team is working on a daily Tinder specific version.
It was good that will help users with both sounds expression as well as the ability to stand out, particularly any one too many it sounds nice area that explore experience as well enable.
And to the way, we envision virtual goods and it is something that users will be able to correct.
As well as kids and gift to others and so there's a lot of in addition to this virtual currency, which is going to be a big component of I want a name of virtual good we do have to get the the categorization off the good and the design of it right yeah.
To create a value structure and a currency for these good and what are the most important needed to build the right experiences that allows users to showcase them on the app in the right way and so that is the plan for 2022.
And the plan as you need does all of this out at test it out learn and refine it would work out the teams in a couple of market.
And then if we get this right I do think it could be a multi your avenue Victor.
Tinder, which doesn't exist today and so a lot of work done, but where I'm very optimistic that this is going to be a really fun thing on tinder.
Okay cool.
Think that was the last call. Thank you all very much have a wonderful holiday season, and thanks again for joining us today.
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