Q4 2021 Match Group Inc Earnings Call

February 2, 2022

[music].

Good morning, and welcome to the match group fourth quarter 2021 earnings conference call.

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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 COO, Gary Switzerland. They.

We 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 risks have been set forth in our earnings release, and our periodic 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.

You know this past year has been remarkable for match group in many ways.

Even though the broader world has been a bit disorienting times and.

And as much as we had hoped to be done with Covid and 2021.

Recent only cross storage as a reminder, that we aren't quite at the end yet although I sure hope we're close.

So our business grew 25% in revenue despite the waves of Delta and more recently omicron.

And this latest Omi cross charge has impacted peak season behaviors and dating sentiment in parts of the world and because these soldiers have had varying effects on our business I thought I would start by sort of level setting where our business is in the context of the pandemic.

So if you recall back in 2020 in the early days of the pandemic our business took a hit during the global Lockdowns and then stabilized by late spring.

But at that time, both user activity and propensity to pay slowly recovered.

And as we've dealt with different waves of Covid since.

Usually the mobility restrictions are generally impacted.

Dating activity.

And now fast forward two years, while much of the western markets, including the U S are seeing less and less impact to activity and propensity to pay with these ongoing soldiers.

Several markets, particularly in Asia are still disproportionately impacted <unk>.

Japan for instance has now dealt with three periods of state of emergency last year, all of which had has has had a meaningful impact on mobility and general dating sentiment.

And there seemed to be a glimmer of hope after that last one was lifted but again omicron has them back in a quasi state of emergency at least until February 20th.

And all of this has led to a level of anxiety and fatigue, particularly in these winter months and we're seeing the effects of this in Japan and parts of Asia.

Now beyond these geographic differences as we've said before a few times.

While active online daters and propensity to metrics have largely recovered in western market there.

There is still a hesitancy among new users who have never tried dating apps before to break into the category.

Now these are usually largely driven by word of mouth and that of course depends on normal levels of socializing, which hasn't yet happened.

And you know if you've resisted online dating until now the pandemic hardly seems the right time to start. So this past year, we have seen periodic upticks of new entrants when COVID-19 is not dominating the news cycle, but by and large that has not fully recovered in a sustained way.

So unlike categories like say online groceries for instance, where pandemic pulled forward new users for us.

Non users breaking into the category even at a normal cadence is still to come.

And we feel optimistic that if omicron truly is what causes the shift from a pandemic to endemic and if things do indeed return to more normal in spring and summer.

We are well positioned to be able to capitalize on it.

We've made significant progress in building out our portfolio of products that appeal to different demographics and intent.

We've innovated on many pain points everything from trust and safety to more authentic discovery and getting to know each other experiences.

We've been disciplined and measured in our marketing efforts given the macro climate, but were ready with several creative and optimistic campaigns to re annual Jive, stating sentiment as soon as we are in a new post pandemic normal.

Romance and love May be just the thing that takes us out of this collective malaise.

Now tinder beyond a 22% revenue growth in 2021 Tinder released its biggest updates since the invention of the swipe feature.

This was the launch of Tinder explore.

Explore provide stendal with additional flexibility to expand use cases to more dimensions of discovery and social live experiences.

Explore enhances responsiveness offers surface and opportunity for regionally tailored experiences.

Has exciting media video dating hybrids, such a swipe night wedding dates concert festival mode.

And it's clearly had a productive start with almost 70% of users adopting this experience.

The 2022 roadmap has many more enhancements planned along with new monetization opportunities later in the year.

Hinge.

Just had an impressive year or were they more than doubled revenue. There are also seeing a strong start to 2022 in markets they've been around at like the UK and Australia.

And the voice prompts feature they launched late last year has really resonated with users not to mention the social virality. This has seen.

Turns out People's life goals gating styles, and Theyre best Dad jokes are both entertaining and insightful.

Our 2022 plan for hinge to expand internationally beyond English speaking markets remains intact.

We're also making progress at hyper connect and stabilizing the core business and we plan to return them to growth later this year.

They have recently launched a Saar lounge their live streaming feature and have goodness city. They are interactive and immersive new discovery experience and they continue to experiment with meta versus elements, both in dating and social discovery contacts.

We've also successfully integrated Hyperconnected live video and audio attack on a couple of our platforms.

And the teams are making progress, enabling our other brands to leverage their technology more broadly to build new immersive discovery and live experiences.

While.

Much remains to be done at hydro connect work actually very confident it is on the right track and it is pushing us forward in a number of areas that are critical to our long term growth.

As I reflect on last year, what jumps out to me has been our ability to find opportunities in the face of uncertainty and despite this latest omicron surge and all the uncertainty it may create over the next couple of months I am hopeful about 2022.

How we're going to use technology and innovative product experiences.

Our story with ever more creative marketing.

And most importantly, profoundly change many more lives around the world and with that I will hand, it over to Gary to provide some color on the quarter and the full year.

Thanks, Shar, we had a strong Q4 with total revenue of $806 million up 24% year over year.

In the quarter the U S dollar strengthened meaningfully against a number of global currencies, including the euro and the yen, which led to $12 million of year over year FX headwinds excluding hyperconnected.

On an FX neutral basis total revenue would have been $818 million up 26% year over year, we did not anticipate about $9 million of FX headwind when we provided our outlook in early November .

Yes.

Our direct revenue grew 24% year over year. It grew 21% in the Americas and acceleration from last quarter, 16% in Europe , and 46% in APAC and other.

We did feel some COVID-19 impacts on our business, particularly from the emergence of the omicron variant, which severely reduced mobility and a number of markets starting in December .

Covid continues to be a meaningful overhang on our Japanese business and in certain other markets.

Total payers were $16 2 million, an increase of 15% from the prior year quarter.

Growth was strong in all geographies up 10% year over year in both the Americas, and Europe , and 36% in APAC and other which was aided by the acquisition of Hyperconnected.

RPT was up 8% year over year to $16 16 in Q4, RPT was up a solid 10% in the Americas, 6% in Europe , and 7% in APAC and other.

Tinder performed strongly in the quarter delivering direct revenue of $444 million up 23% year over year, an acceleration over Q3 s right.

Tinder had payers growth of 18% year over year, adding $1 6 million payors to $10 6 million and RVP growth of 4% year over year in the quarter.

Tinder platinum subscribers comprised approximately 13% of total tinder subscribers exceeding $1 billion in aggregate.

Tinder active user growth continues to be strong with the brand achieving a record number of active users on its platform globally in 2021.

Engagement on the platform also continues to be robust with several kpis, such as daily swipes and messages at or near all time highs in Q4.

All other brands grew direct revenue, 26% year over year in Q4, driven by 16% RVP growth and 9% payers growth.

Hinge was the standout among this group growing direct revenue approximately 90% year over year, driven by RVP growth of 60% to nearly $24 and reaching about 850000 payers.

<unk> upward in aggregate grew direct revenue over 70% year over year in Q4.

Yes.

Hyperkinetic contributed about $50 million of total revenue in the quarter the.

The business saw improved performance in December compared to preceding months.

It was also significantly impacted in the quarter by FX, especially against the Turkish Lira is Turkey is a large market for hyperconnected.

Indirect revenue reached $18 million, the highest ever in a quarter up 12% year over year. This was off a very strong Q4 2020.

Q4, operating income grew 9% year over year to $232 million for margins of 29% and adjusted operating income, which we formerly called adjusted EBITDA grew 18% year over year to $290 million for margins of 36%.

Adjusted operating income margins would have been two five points higher excluding hyper connect.

Overall expenses, including SBC expense grew 31% year over year in Q4 was slightly less than half the total increase resulting from the acquisition of hyper connect.

Excluding the impact of Hyperconnected cost of revenue grew 21% year over year, primarily due to higher <unk> and represented 28% of total revenue.

Sales and marketing spend excluding hyperconnected decreased $12 million as we pulled back marketing spend across our portfolio to maintain our ROI discipline in a crowded holiday marketing environment.

That did have some impact on payers, especially at our marketing heavy brands like match.

Sales and marketing spend was down five points year over year as a percentage of total revenue to 16%.

G&A expense, excluding Hyperconnected rose, 38% year over year, primarily due to an increase in legal fees.

G&A comprised 14% of revenue up two points or $28 million year over year.

<unk> was less than we had anticipated as the former Tinder employee litigation came to a conclusion on December one.

Product development costs, excluding Hyperconnected grew 31% year over year and were 8% of revenue as we increased head count in several brands primarily tender.

Our gross leverage declined to three seven times trailing adjusted operating income and our net leverage was two nine times at the end of Q4, achieving the target of below three times that we set at the time of our separation.

We ended the quarter with $827 million of cash cash equivalents and short term investments on hand, we have agreed to pay $441 million to settle the former junior employee litigation and all related claims and arbitrations, we expect to pay this amount from cash on hand in Q1 2022.

For full year 2022, we expect the company to deliver 15% to 20% year over year growth driven by another strong year for both Tinder, where we expect high teens year over year growth and hinge.

Our outlook includes approximately $85 million of negative year over year FX impact on total revenue.

Thats approximately $60 million worse than what we expected at the time of our last earnings call in early November which is about two points of growth.

In addition to the FX impact our revenue growth outlook is more conservative than what we shared in early November due to continued COVID-19 impact, especially in Asia, and particularly the rise of the omicron variant, which is impacting us in the early goings of 2022.

Keep in mind that we are a global business and while we may be getting ready to move past <unk> in the U S and Europe Asia still has to get through that period. So we expect our performance will continue to be somewhat impacted likely until sometime in Q2.

In aggregate our 'twenty two revenue outlook has been reduced by about three points of growth since November due to the FX and COVID-19 impacts.

Our revenue outlook for 2022 also assumes momentum builds in the second half of the year.

There remains much uncertainty about what happens next with the pandemic, but we have increased confidence that while the first part of 2022, maybe tougher than we initially anticipated the second half could be stronger.

We're hopeful that once we get past the effects of omicron, we could even have that summer of love that wed expected back in 2021. After the vaccines were introduced.

We expect overall company margins to be roughly flat inclusive of hyper connect which we expect to be better than breakeven in 2022.

For the full year, we expect 50 to 100 basis points of margin improvement, excluding hyperconnected as we incur lower year over year legal expenses and lower fees on Google subscriptions, which we plan to partially reinvest in safety and CSR initiatives as well as higher employee costs, given the ongoing war for talent.

Note that despite google's recent fee cut which covered only subscription revenue, we actually expect to pay a greater percentage of our revenue to the app stores in 2022 than in 2021 as more of our users come in via App for instance, on our fast growing hinge app most payers use iOS.

And we pay a full 30% on that revenue.

Our margin outlook reflects current App store policies, our outlook includes over $650 million of App store fees in 2022, primarily to Apple.

Our outlook does not include implementation of Google's previously announced requirement of mandatory use of its payment system. Starting in April 2022 were that to happen, we would incur approximately $50 million of additional costs for the remainder of the year.

Even though we are unable to forecast further change in App store policies. At this time, we remain optimistic that more changes to the App store ecosystem are likely and we will continue to update you.

For full year 2022, we expect SBC expense of 175 to 185 million.

Reflecting additional hiring and the continued competitive market for talent.

Capex of approximately $70 million of a $10 million lower than in 2021.

And adjusted operating income to free cash flow conversion of approximately 80%, excluding the $441 million legal settlement, we do not expect to be material U S. Federal cash taxpayer in 2022.

We have initiatives underway in countries, where tinder is still offers age based discounts to eliminate these discounts these changes which have begun in earnest in Q1 will impact tinder payers beginning in Q1, but we expect these changes to be revenue neutral.

For Q1, we expect total revenue for match group of $790 million to $800 million, which represents 18% to 20% year over year growth.

We expect this to be driven by year over year payers growth in the low to mid teens in year over year RVP growth in the mid single digits as is typical for us. However.

However, the effects from omicron could shift these metrics somewhat.

We anticipate about $25 million of year over year FX headwinds in Q1, meaning that growth would be more than four points higher on an FX neutral basis.

We expect tenders year over year direct revenue growth to be in the high teens in Q1 and that Haynesville remain on its growth trajectory and deliver direct revenue growth over 70% year over year in Q1.

We anticipate that Hyperconnected will deliver revenue in Q1 at similar levels to Q4 'twenty one.

We expect adjusted operating income of $260 million to $265 million in Q1, representing margins in the low 30% range typical for a first quarter for us despite about two five points of pressure from adding hyperconnected.

Our company has all the ingredients to continue to deliver on our mission of helping people make meaningful connections through our technology Tinder.

Tinder has an exciting product roadmap and a growing global user base to continue to convert.

Hinges product continues to gain traction and the business has meaningful opportunities ahead, including in many international markets.

There is so much we can do with Hyperconnected.

Not only deploy their video and audio tech capabilities across our apps, but have them help us build exciting new meta versus dating apps and immersive user experiences, which we can potentially make use of across our portfolio.

Our financial performance is strong with room to grow already best in class margins and potential App store reform benefits. We strongly believe that the next phase of our business is going to be very exciting.

With that I'll ask the operator to open the line for questions.

We will now begin the question and answer session.

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At this time, we will pause momentarily to assemble the roster.

Okay.

And our first question will come from John Blackledge of Cowen. Please go ahead.

Great. Thanks.

Gary could you expand a bit on the margin expectations for 2020 to maybe go through the puts and takes of the margin guide and then secondly, kind of which markets outside of Japan are being kind of impacted by.

By homegrown. Thank you.

Sure I'm happy to do that.

First of all as I said, our outlook for margins for this year inclusive of hyper connect is that they would be relatively flat, which we actually think.

Strong performance, especially in this environment and hyperkinetic contribute over a point of margin headwind for the year.

If you look through the puts and takes we probably have a bit over two points I would say of margin improvement from legal expense savings and google's reduction from 30% to 15% on subscriptions.

But we're currently forecasting that we could reinvest more than half of that savings into hiring new people and retaining our existing talent, especially in the very competitive market that we're operating in for talent right now.

We also plan to reinvest some of for some of the savings are smaller portion into important initiatives for us, including around CSR and user safety, where we're putting incremental resources.

And on top of that as I said in my remarks, we're also spending a larger and larger portion of our revenue on App store fees given that more of our payers are coming in through the app stores that probably creates about a point or so of margin headwind for us, but we're offsetting that by being by operating leverage.

On the sales and marketing side, so I would say those probably wash out in a relatively neutral.

And then the last kind of put and take that I would point you choose what I mentioned about Google as previously announced requirement.

To us they're in a payment system, which are supposed to put into effect at the end of March frankly, its really difficult for me to fathom, Google, making that policy change given all the legal and regulatory pressures that they're facing and.

And recall that they delayed this policy once before they've made exceptions for certain markets. So we'll see how that plays out but.

So thats kind of my thinking around that at this point in time.

So hopefully thats helpful on the margin side I'm, sorry, what was the second question around.

Around Japan.

The other markets, yes. So.

Yes look I would say look it's a little bit everywhere right. We're not back to normal as Shar said, we're not seeing the strength in new users yet and so that is effective is everywhere. It's most pronounced in Japan.

Where we have pretty significant shortfall in 2021 versus what we were expecting Japan to contribute we are the number one and number two apps in pairs and tinder. So it's a meaningful number when you aggregate the effect on our 2021 in Japan versus what we were thinking and thats going to carry through into 2022 because of <unk>.

That market is nowhere near gone back to normal aside from Japan. There is a couple of other markets in Asia Korea is also very strictly enforcing our restrictions around the pandemic and so that's another market, which is clearly not gone back to normal and Theres other ones in Asia as well that are smaller for us even India hasnt fully bounce back as.

An example, it's better than it was at the depths, but it's improved meaningful but its still down significantly from pre pandemic. So theres a number of markets, especially across Asia, where there are some lingering effects but.

But Japan is really the most meaningful one for us.

Thank you.

Okay.

The next question comes from Justin Patterson of Keybanc. Please go ahead.

Great. Thank you very much on tinder explore those metrics assured look really encouraging how should we think about the.

Product initiatives like explorer affecting the arc of Tinder growth over the next few years. Thank you.

Hi, Justin.

So Tim to explore.

What it did it allowed us to create a successfully a new surface area and experience without hurting the very efficient slight machine.

And the goal now is to have new and personalized experiences that are fun interactive useful in helping spark connection.

And we've already got 70% of our users adopting the experience.

And we're seeing high levels of engagement and likes messages and conversation.

Looking ahead.

Our plan is to continuously launch and feature a variety of novel and engaging experiences here.

We talked about the <unk>.

Our music mode launch in the latter.

Soon to come for example is going to be.

An experienced that to fund grip on the classic blind date experience.

Explore you know.

Also allows us to have geographically tailored programming.

So in Brazil, we're about to launch Carnival mode on Valentine's day, it's going to be and explore experience that allows members to opt in to match with others that are celebrating carnival.

Their major cities.

Sao Paolo Salvador et cetera, and people can share their favorite parties, where they're traveling to.

Carnival is the most important cultural moment in Brazil, and it is a moment that connect people and it's a great example of how explore enables a fluid virtually in real life experience.

Additionally, as you can imagine this new.

This area of the visa explore trials also provides us opportunities for integrations with third parties to drive sort of new experiences in the App and offline.

And it keeps it gives people a reason to keep coming back and check out these new experiences.

And then you have this.

The adoption and engagement on this of this area increases it does provide new opportunities to us to merchandise revenue feature of both existing and new revenue features. So that's why we're so excited about this whole new surface area that we've created.

The next question comes from Deepak Mass, Nevada of Wolfe Research. Please go ahead.

Hey, guys. Thanks for taking the question.

One maybe for Gary can you just give some color on monthly cadence on that they arrived in the Americas and Europe during <unk> and it was most of the declines in the month of December due to omicron.

And also maybe perhaps what you're seeing in January so far.

You want to add some color by Brian that'll be great Joe. Thanks, So much.

Sure happy to do that and good to hear your voice first of all I would just point out that as a general matter its not unusual for us to see kind of limited sequential growth and payers Q4 over Q3. So overall the trend is not.

Typical for US and then I would point out to a number of factors to think about as you look at the Q4 payer payers' numbers and results. The first would you rightly point out is omicron right. We saw a spike kind of in that early part of December .

Especially in some of the western markets and it.

It did affect our payer numbers starting in December so there was a change in trend.

After omicron burst onto the scene.

And so that's that's a big part of what happened in the end of Q4.

We've called out many times kind of the lingering COVID-19 impacts we see in some markets that haven't returned back to normal Asia, particularly Japan, that's another factor around payers and the performance in Q4.

And then I also mentioned that we had reduced marketing spend because we just can't hit our ROI hurdles, especially as some of our marketing heavy brands match as an example, and others of the established brands were impacted in Q4, as we pulled back on marketing spend to protect our return expectations. So those things I think together are.

Key trends that we saw looking at Q1, we're not expecting a massive shift in some of those things we still have omicron lingering we feel like we're getting closer to the end, but it continues to be an issue in a number of markets and as we said in the earlier remarks, it hasn't even really worked its way through the Asian markets Korea.

Japan, they've got the the hatches battened down to prepare for it and thats going to affect People's behavior in those markets. So while we're moving through it in the West you still got to go through it in some of the Asian markets and so that's going to be an effect here in early 2022, and then hopefully we'll get through this and we'll have an inflection point in the.

In the pandemic and the impact on People's Social lives and David the only other thing, which I just want to add is that and we say this all the time, we don't manage our results for specific payer growth or RPT growth or whatever we're managing it for revenue growth and so we are making trade offs all the <unk>.

<unk>.

In terms of price optimizations, and so forth and so that does move the payers' numbers around I called out one in my remarks around discounting at Tinder that we're adjusting policies. There so youre going to continue to see us make those decisions.

That could have effects on payer numbers, but ultimately we think are the right thing to do for the business and certainly to grow revenue the way we want to grow revenue.

That's very helpful. Thanks, Gary.

Sure.

The next question comes from Lauren Chung of Morgan Stanley . Please go ahead.

Great. Thanks, I was intrigued by your comments that that hinges is on its way to become the second largest global dating app within a few years time could you talk about where you see hinge RP P. Heading over the long term and then how should we think about the 22 revenue growth for our hedge that's embedded in the full year guide. Thanks.

I can take that Gary.

Hi, Lauren.

No no.

He is one of the best designed product for what I call intentioned dating.

And that sort of reflects in how rich the profile is the way you consume them the way you communicate on the platform.

And the team has kept innovating and pulling ahead of competition every year.

You know the way they've implemented audio which bay.

Basic audio for instance, but they did it in the form of voice prompts and how that became such a resident in social socially viral feature.

<unk> is an example of how they approach product development.

And this particular product I think has a pretty big resonance.

Among the large segment of audience. It is differentiated in the market and that's what gives us confidence about the international rollout.

On monetization specifically.

And just made real progress on RVP as you know this past year and we certainly don't think its near its ceiling.

But our expectation this year in 2022 is for hinge to do over $300 million in revenue and it's going to be driven by both strong <unk> growth as well as continued growth in RP.

Great. Thank you.

The next question comes from Brent Thill of Jefferies. Please go ahead.

Good morning, Gary on the second half recovery I'm curious if you could just shed a little more of your plan and what.

The recovery looks like and when.

When you talk about Japan can you also just frame up.

For last year, with Japan, getting growth and kind of what your expectations and I believe that your second largest market.

Maybe drilling a little bit in terms of how you're expecting that region to bounce back.

Sure happy to do that.

So look I would say that our outlook for right now is assuming that we gradually come out of the omicron impacts.

By geography first in the West Europe , and the U S. And then ultimately in Asia, and I think that's going to take some time into the second quarter, a little hard to tell if maybe Asia handle things differently once they've seen what people have done over here, but right now that's our assumption.

And as we come out of the Omicron impact what we're assuming is that activity behavior goes back to pre <unk> levels, but not back to pre pandemic levels.

So kind of the fog of omicron lifts and we go back to where we thought we were in October of.

Last year as opposed to where we were in 2019 as an example, now that could be a wrong assumption because I don't know how people are going to behave depending on how confident they feel how much of it and we reached a all this let's say sometime in the spring and so that is a swing factor in our outlook, but.

We're not assuming a huge summer of love right now in our outlook that would clearly provide upside or at least the ability to reach the higher end of the outlook. If that happened I think it's entirely possible I know a lot of people feel like as soon as we get to those warm summer months, there's going to be a real big wave, but we're not forecasting that.

At the moment until we see some evidence that really this is over and that is how people are going to behave but we'll have to wait and see right now.

We're more sober on our forecast because we've been head faked a few times and that's been going on for a long time and no. One has had a great ability to predict kind of what the what the pandemic brings and what the effects are so that's how we're forecasting but we remain very optimistic that people are going to want to go out and data and socialize in big numbers once they feel the risk is down.

And they are ready to do that and we clearly have not gone that yet we're hoping it happens kind of in the summer months spring and summer months, but remains remains to be seen.

I would also just say.

On our forecast that we don't have a significant amount included four.

Key new initiatives the tender.

The Tinder virtual goods as an example, we don't have a lot included for hinge international because those are really more 23 items in our minds in 2022, but to the extent, we're able to accelerate some of those or we see bigger impact early on that we are currently anticipating that could also be a swing factor on our second half on our.

Overall 2022, so those are some of the puts and takes there.

We are trying to quantify how much Japan has cost us as I said, we've got the number one number two apps.

Our pairs App has felt a significant amount of impact Tinder has felt some I don't have a great estimate, but it wouldn't surprise me, if it's $35 $40 million of impact on our 2021.

We would have seen that revenue had Japan been operating more normally so it is a big market for us, it's a big contributor and the impact is pretty meaningful.

I don't think we're going to get that recovery really in the first half of this year, we will see if we get it in the second half.

Thanks, Gary.

Okay.

The next question comes from Yigal Iranian of Wedbush Securities. Please go ahead.

Hey, good morning.

Gary why don't you talk.

On the on the Applebee's you talk about some of the jurisdictions and.

Some of what they're taking up to create fairness could.

Expand on that a little bit and what your expectations are as we as we move through the year and then.

Maybe a little bit more on Apple and Google It sounds like you're not building any expectation for changes in apples.

<unk>.

Is that right and.

What's the what's the process there to get to.

About 15% or what.

Whatever kind of.

Agreement, we might end up.

And then with Google.

If they do.

Change.

The structure on the workarounds for fees there'll be any change to how you think about.

Reinvesting those savings that you are currently seeing.

I am not sure we had all of that question because it was a little bit of feedback on the line.

But let me kind of take a shot at it first of all if we get the Google.

Savings we've talked about this generally on App store. So I wouldn't say, it's just specific to Google, but obviously, we're going to look at how to deploy any changes. They make we have the ability to return some of that to customers in the form of discounting to them. We also will have higher.

Return on our marketing spend because we will be paying less to the stores and so we'll be able to spend more into marketing, which should enhance our growth. So there's a number of things that we can do with with any savings that we achieve.

From the App stores over time, and like we said we remain optimistic that some of that is coming but this is a slow process on the regulatory front and so right now we have not made any further assumptions around that.

<unk> in our numbers for 2022.

I can add a more I think you had questions about sort of what are the key legislations.

Around the world.

There has been a lot of momentum on this issue.

Mandatory I App is now deemed illegal in South Korea, and more recently in Netherlands, and both Dodge and more importantly, EU law.

It has been surprising to see apples response of noncompliance and these countries. Despite the $5 million Euro per week fine Theyre announced objective.

The lines.

And more consequentially here in the U S. Just like end of last week 35 state attorney generals and the Doj.

Filled an amicus brief supporting epic's position.

And.

Pine that that decision was wrongly decided.

Also this week.

The open App markets Act.

That addresses app store policies, including I App.

Which seems to have bipartisan support in the Senate is expected to move out of committee hopefully this week.

So.

There is little that both sides agreed to these days the fact that.

This has such bi partisan support chose.

How unfair.

Inequitable some of these policies are deemed to be.

So.

As Gary said, the timing of all of this.

Regulation legislative changes are hard to predict.

It is the single the actual fees are the single biggest expense line for us at the moment, they exceeded $550 million last year.

Increased meaningfully this year.

And we remain optimistic that changes coming and obviously theres a lot of good we can do with that in addition to margin expansion reinvestment et cetera.

Yes, the only other thing I would add kind of on Google and its potential policy change is that Shar said, you've got all these countries and jurisdictions, saying mandatory IAP is not acceptable it's illegal in Korea et cetera. It seems very surprising to me that in the face of all of that Google would make a global change.

And make IAP mandatory on March 31 that just kind of.

It defies logic to me.

But they'll have to make the decision they make and then we'll have to see kind of what makes sense.

In reaction to that so we'll see how that plays out over the next couple of months, but that's how I sort of handicap, just given where the trends are blowing which are very very clear as shar said the U S. Senate Subcommittee has taken up a bill around there is taking up a bill around this as well.

It just seems very hard for me to believe that they would require people to use.

Their payment system in that environment, but we'll see how it plays out.

Okay. That's very helpful. Thank you.

Sure. Thanks for the question.

The next question comes from Alexandria, Staiger of Goldman Sachs. Please go ahead.

Great. Thanks for taking my questions I have two on hydro connect so first of all it's great to see that several brands have begun leveraging hyper to connect technology can you maybe walk us through the impact you've seen both from an engagement perspective, but also from a cost savings perspective, and then to what degree.

Can you also leverage hydro connect monetization strategies and learnings across your portfolio of apps for example, or especially at Tinder and then maybe lastly, where do we sit in terms of like integrating hybrid connect.

Team the company and how should we think about any additional investments necessary.

From here.

Sure, let me take a shot at that and charged certainly can add.

First of all we continue to make great great progress working with hyper connect we have a lot of confidence in the team and their innovation. Our teams are collaborating really well globally. We're learning from them, they're learning from us. So it's really going well from that standpoint, and we think they are very quick on product they're innovative.

They move they move fast so that's all great from our perspective.

In terms of investment we continue to look at that we are investing in adding people to help them build some of the things that we want to plug in across our apps and all of that is kind of baked into our numbers for the year and I said hyperconnected would be better than breakeven even with all of that investment included so we will continue to match.

We see margins improve from there as we get the operating leverage on on the investment and on their capabilities.

In terms of kind of what's happened so far just to give you. Some concrete examples we rolled audio and video rooms, and one to one video chat using their technology onto two of our apps match and <unk> thus far.

If you use the European business <unk> as the example, what we call the live Cafe with audio and video has been really well received by their user base usage of the features continues to grow people are returning to engage with the product the feedback is very positive.

And so we're very excited about how thats all going and in fact, we're planning a major live events at <unk> on the technology for Valentine's day. So that's another good example.

Event, that's coming up that uses the technology to be current.

So that's an example of kind of engagement and how thats going in and <unk> and Hyperconnected continuing to build out capabilities and features and working hand in glove and so it's great not only for the user base, but also going well from a collaborative standpoint.

At match, if you want to use that as an example, we did replace a third party vendors technology on the video side with hyper connect and so not only did that lead to some cost savings for us but also.

Means we have much more responsiveness to changes we want to make and things we want to try we think the product overall is much better using hyperconnected and.

So having that in house has led to not only cost savings, which you asked about but also benefits in terms of the overall quality that we're excited about so when you look at both whats, having a match and meeting with hyper connect technology. Thus far we're extremely encouraged and what that's doing is it's leading us to have more confidence to roll that out on more.

Of our apps and so we're planning to bring that out into our payers app and a part of it into our plenty of fish app over the coming time.

And so we will continue to roll it out across the portfolio and as you alluded to we are thinking about what we might do at tinder and so more to come on that topic, but obviously.

There is great potential there if we can find some things to leverage from hyperconnected into the tender platform and we are looking at that we think explore provides a great place to try some of those features and technologies.

So much much more to come but I think from a collaborative standpoint from a using their technology standpoint across our apps things are tracking according to plan if not maybe ahead of it and it's really going as well as we could have expected.

Hopefully that answers. Your question. Yes go ahead. The next question comes from Schweitzer catch area of Evercore ISI. Please go ahead.

Okay. Thank you could you please comment or provide more detail on tinder coin. So you got the you talked in your letter about 12 markets that its available and you also earlier on this call said you don't expect a meaningful impact this year, but perhaps if you could talk about or frame.

What kind of contribution you can expect maybe 2023 and beyond.

Thank the future could look like that would be great and then just a quick follow up on your comments on HVAC pricing for tenders, how should we think about the your growth and the impact on that even understood. It's <unk>.

Revenue neutral thank you.

Maybe I start with the tender coins and then Gary can jump in.

Sure Tim.

Tinder coins is currently testing in 12 markets.

And the use cases are both.

For Incentivising Southern core actions and also increasing access to existing revenue products and we are seeing some increased engagement and retention from these incentive and there are there's a bunch of testing going on on various sort of monetization experiences.

The plan is to accelerate the rollout in Q2 and be globally out by Q3, However, the biggest value of coins to us is.

Its ability to power new economies, such as the virtual goods and that is a is a whole new construct that we are hoping to be able to test in the back half of the year and hence we're not counting on any sort of meaningful.

Contribution to 2022 revenue, it's more a 2023 and beyond revenue contribution.

In terms of the age based pricing.

And changing that discount first of all that is done in certain.

In large markets for us like the U S that is.

It had been eliminated so the big one now that's happening in Q1 is in the U K and so there will be a pronounced impact on payers in Q1 from that change in the UK that youre going to see and.

And we are going to move that through a couple of other European markets as well and then there's a couple in Asia, where we have to make those changes.

I think New Zealand is another one so there's a handful some are smaller some are larger but theres going to be a noticeable kind a pronounced impact on payers at tinder outside of the U S.

Coming in Q1, and it will probably continue into Q2, but like I said, we will manage that in a way that we think it'll be largely revenue neutral, but it will have some some notable effect on payors in the beginning part of the year for sure.

Okay. Thanks, Gary Thanks, Sir.

The next question comes from Mario Lu of Barclays. Please go ahead.

Great. Thanks for taking the question.

Was hoping if you could elaborate on what dating in the meta versus looks like and within the smartphone in particular.

So just.

Wondering that features like hinges voice.

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