Q1 2023 Match Group Inc Earnings Call

May 3, 2023

Presentation, there'll be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

Draw. Your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Danny Shelburne SVP of Investor Relations. Please go ahead.

You operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim and President and CFO Gary Swindler.

I'll 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.

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 BK.

Thanks, Tony and good morning, everyone having.

Having served as CEO for nearly a full year I want to start off by highlighting the accomplishments. This team has achieved and all the opportunities ahead.

We've made changes to setup match group for long term growth, but there is a lot more work to do in areas to improve on.

We restructured match group's businesses to optimize internal operations increased cross brand collaboration and improve the speed to ship products.

These changes are having a real impact and the teams have never worked this closely together before.

We are working together to innovate tackled challenges and re accelerate growth.

Hinge continues to set the bar for what an a plus acquisition should look like we acquired hinge in 2018, when the App was generating just under $1 million in revenue.

Just five years later hinge has surpassed 1 million payers and is on track to generate approximately $400 million in total revenue for 2023.

Hinges exponential growth is largely due to the team's passion and ability to focus on product coupled with match group's expertise and operational support.

In addition to its meaningful traction in English speaking markets hinge is successfully expanding internationally and were impressed with these early results. The team also successfully launched a new subscription tier hinge acts and has so much runway ahead.

Continue to be impressed by the momentum at hinge and I'm excited to see them grow to new heights as part of the match group family.

Now turning to Tinder, where the majority of our energy has been focused as you. All know we've made some changes to the tinder leadership team and restructure tenders organization to immediately address the lack of output that was occurring.

These changes have shored up the frequent turnover and loss of institutional knowledge at Tinder was facing.

Just to give you. An example, we had roughly 15 vps and above voluntarily to part tinder in the months before the new leadership team took over since then we have not had a single person of that level voluntarily to part tender.

Back in February we shared a detailed product roadmap for 2023.

This roadmap is a culmination of our near term vision for Tinder and the whole organization has rallied around it.

The changes we've made are working in fact, the team is shipping and testing more features than they were at the height of their delivery in 2021.

Tinder recently launched weekly subscription packages in the U S. In addition to optimizing tiered pricing we launched these initiatives at the very end of Q1, and we're starting to see early revenue momentum beginning to build in April but it is still early.

One of the things I've learned in my role as CEO of Tinder is that data platforms have a delicate ecosystem and it's important to fully understand the impact new features or minor adjustments can have on the user experience not only for payers, but non payers as well.

So it is vital for our teams to rigorously test and ensure we're introducing the right features for the ecosystem as a whole.

This cautious approach to testing new features and rolling them out methodically is one reason why the revenue impact is muted at the start but will grow over time.

Another key focus has been redefining tenders brand narrative tinder rolled out its marketing campaign in Q1 and is having a strong initial impact.

Its primary focus was to improve perception, especially among young women.

As we detailed in our letter we have seen noticeable improvements in brand consideration and intent.

Marketing began in the U S and U K and then has now expanded to additional markets.

As a result, Tinder has started to see improved user growth in several key markets, including the U S and U K, but it is only the first step in a multi phased campaign.

As the team continues to build on this momentum and focus on execution I believe tinder is well positioned to exit 2023 with improved financial performance and longer term sustainable growth.

Zooming back out match group's purpose is to expand and innovate the dating experience for singles around the world. So everyone can find a meaningful connection.

I have tasked our new CTO to work with our leadership team to evaluate emerging technologies like AI, which we believe can be a massive unlock for the category.

The same way that the shift to mobile led to the creation of Tinder, which redefined the category just 10 years ago.

There is a significant opportunity to leverage AI and profile creation matching and discovery as well as throughout the post match experience to unlock new user adoption.

We believe we can leverage these new capabilities to drive the next phase of growth.

As a leadership team, we're cognizant of the delicate balance between achieving short term revenue wins, while driving sustained shareholder value.

We're focused on achieving both objectives prudently assessing the tradeoffs and opportunities to hit our 2023 expectations, while also delivering unique innovative and compelling user experiences for years to come.

And with that I'll kick it over to Gary.

Thanks, PK and Hello, everyone.

Our Q1 2023 total revenue was still not to the standards, we expect of ourselves coming in at $787 million down 1% year over year.

FX was a notable headwind once again as our total revenue would have been $822 million up 3% year over year on an FX neutral basis.

The year over year, FX headwind was $7 million more than we expected when we provided our Q1 outlook on our February earnings call. The.

The unexpected additional headwind resulted in total revenue slightly below the range that we provided on that call.

Direct revenue, which is revenue we earn directly from our users was down 1% year over year up 3% FX neutral in Q1.

This was driven by total payers down 3% year over year to $15 9 million and RPT up 2% year over year at $16 26.

On an FX neutral basis, Q1, RPT was up 6% year over year companywide.

Tinder slightly underperformed our expectations in the quarter Tinder direct revenue was flat year over year at $441 million up 4% FX neutral.

Tinder payers were relatively flat year over year in Q1 at $10 7 million and RPT was also relatively flat year over year at $13 80.

Tinder saw year over year subscription revenue growth, while Ala Carte revenue declined year over year impacted by the macro environment.

Tinder released weekly subscriptions and undertook pricing optimizations in several markets, including the U S towards the end of the quarter limiting their revenue impact on Q1.

User growth in the quarter was slightly below our expectations.

However in April we are starting to see much improved tinder performance as the top of the funnel has strengthened somewhat in the weekly subscription and pricing optimizations have begun to deliver tangible revenue contribution.

Tinder plans to test weekly subscriptions and pricing optimizations in additional markets this quarter.

Tinder introduce its marketing campaign in Q1, and it's achieving its objective of improving brand sentiment, especially among younger users, particularly women.

As a result of their campaign tenders market position in terms of downloads has improved in several key markets, most notably the U S and the UK.

Our hinge brand continues to perform very strongly hinge grew direct revenue, 27%, 30% FX neutral year over year slightly ahead of our expectations as performance in core English speaking markets continued to be outstanding.

Hinged payers were up 15% and totaled over $1 million in the quarter, while RVP of over $25 was up over 10% year over year.

The new subscription tiers at hinge continue to contribute as well with a 20% take rate of the more premium tier hinge ex consistent with our expectations.

And as we detail in the letter hinges European expansion continues to have major traction.

Our Mg Asia business saw year over year direct revenue declined 13% in Q1, though down only 3% FX neutral.

At hyper connect a Saar grew direct revenue, 4% year over year, though much stronger on an FX neutral basis, but her kuna in Paris, a year over year declines.

At Evergreen and emerging direct revenue declined 8% year over year, 6% FX neutral as we continued to moderate marketing spend at the evergreen brands, the emerging brands, including <unk> BLK and the league collectively grew direct revenue in excess of 50% year over year.

Both Mg Asia, and EMEA performance was consistent with our expectations.

Indirect revenue was $13 million in Q1 down 14% year over year as marketers globally continued to tighten advertising budgets and AD prices declined.

Operating income was $198 million in Q1, a 5% year over year decrease for a margin of 25%.

Q1, adjusted operating income or AOI was $263 million.

Down 4% year over year, representing a margin of 33%.

Q1, Oi margins were above our prior expectations. Despite the total revenue shortfall versus our expectations as we continued to focus on costs, reducing marketing spend further and rationalizing some additional overhead costs as well.

We incurred approximately $4 million of severance and similar costs in Q1.

Overall expenses, including SBC expense were essentially flat year over year in Q1.

Cost of revenue, including SBC expense grew 2% year over year and represented 30% of total revenue flat year over year.

Live streamer fees declined, but app store fees increased year over year, primarily due to the $8 million escrow payment to Google the last of which will be due in Q2.

Selling and marketing spend including SBC expense decreased $15 million or 10% year over year, the fourth consecutive quarter, where we've seen a year over year reduction as we continued to reduce marketing spend at our evergreen brands and to exercise ROI discipline overall.

We increased sales and marketing spend meaningfully year over year at hinge and modestly at tinder, but it was down year over year in virtually all other brands.

Selling and marketing spend was down two points year over year as a percentage of total revenue to 17%.

Product development costs, including SBC expense grew 25% year over year and were 12% of total revenue, primarily reflecting the impact of engineering hiring at Tinder in late 'twenty, one early 'twenty two and at hinge.

At this point hinders the only major business within our portfolio, we're hiring remains particularly active.

Interest expense increased 13% year over year in Q1, primarily due to the floating rate structure of our term loan but interest income also increased very meaningfully given higher rates, we are earning on our cash.

Our gross leverage was three five times trailing NOI and net leverage was three times at the end of Q1.

Our target remains for net leverage to be below three times, we ended the quarter with $578 million of cash cash equivalents and short term investments on hand.

We repurchased $2 6 million of our common shares in the quarter for $113 million.

At the end of Q1, we had only $2 7 million shares remaining under our existing buyback authorization. Our board of directors has authorized a new $1 billion buyback to replace the existing plan, which we expect to deploy over the next two to three years.

As we discussed in the shareholder letter, we expect to generate approximately $800 million of free cash flow. This year with further growth over the coming years going forward, we intend to return at least 50% of our free cash flow to shareholders in.

In consultation with our board of directors, we will determine the right timing and tools to use for return of capital.

Our capital allocation priorities are one to invest organically in our business to strengthen our balance sheet and three to make compelling acquisitions, we may up to return even more capital to shareholders. If we do not identify sufficient compelling investment or acquisition opportunities.

For Q2, 'twenty three we expect total revenue for match group of $805 to $815 million up 1% to 3% year over year.

We expect FX to be slightly more than a one point year over year headwind.

At Tinder, we expect direct revenue to be up low single digits year over year also with a little more than a one point year over year FX headwind on a sequential basis, we expect tinder direct revenue to increase in the low to mid single digit percentage range.

This strong sequential growth demonstrates that momentum is building and gives us confidence in achieving the strong exit rates, we anticipate in Q4.

We expect Tinder Q2 payers to decline year over year and sequentially. There are a number of initiatives in flight globally, including the introduction of weekly packages and the implementation of price changes, which are having various positive and negative impacts on payers and are being rolled out at various times in various markets.

It is important to understand that tinder in the U S elected to implement one of the higher price levels are tested which we believe will maximize direct revenue, but will correspondingly, having large negative impact on conversion and payors.

We expect that tinder sequential payer additions will be much stronger by the end of the year. Once these changes are implemented.

We expect him to deliver meaningfully accelerating Q2 year over year direct revenue growth driven by continued strong performance in hinges English speaking markets and the effects of the new pricing tiers and continued European expansion.

We expect Mg Asia to declined modestly year over year in Q2 and is essentially flat year over year on an FX neutral basis.

We expect our evergreen and emerging brands direct revenue to decline year over year at similar rates as was the case in Q1 with similar growth rates at each of the evergreen and emerging groups of brands as was the case in Q1 as well.

We expect Q2 indirect revenue to be closer to flat year over year as we broaden the opportunities we offer for advertising in our products.

We expect AOE of 275 million to $280 million in Q2, representing margin of approximately 34% at the midpoint of the ranges.

We expect overall marketing spend to increase year over year in Q2, specifically at Tinder and hinge with reductions in almost every other brand in the portfolio. We do expect to allocate some marketing dollars to our newly incubated app to support its introduction this summer.

We expect <unk> to continue to be a year over year headwind in Q2 that we expect to start placing funds into the Google escrow. After July per the terms, we have agreed to.

We expect to continue to be very cautious on spending in all other spending categories within our control.

We anticipate incurring approximately $4 million of severance and similar cost in Q2.

Given the emerging success of the recent initiatives of tender and the momentum we expect the business to continue to build over the coming quarters, we have confidence in in Q4 tinder year over year direct revenue growth will reach double digits as well the company's overall year over year total revenue growth.

We admittedly have had a modestly weaker Q1 and anticipate a slightly weaker Q2 than we expected when we provided our full year outlook back in November of last year.

As such there is an increasing likelihood that we will be closer to the lower end of our total revenue growth outlook for the full year.

That said marketing and product momentum is improving a tender and we had strong performance in April so we're eager to see how all of the initiatives continue to progress.

We also remain confident that hinges momentum will lead it to deliver approximately $400 million of direct revenue in 2023.

In terms of full year 2023, OE margin, we continue to target flat or better than the 35% we achieved last year.

We continue to expect improving year over year margins as the benefits of our cost savings initiatives take hold and tinder topline growth reaccelerate.

There continues to be a lot of developments in both legal systems and legislatures around the world regarding App store policies and we remain optimistic that further changes coming, especially as a result of a digital markets Act in the EU early next year the.

The most recent news was the epic games versus Apple appeal in the ninth circuit as a result of that decision. We are increasingly hopeful that we'll be able to promote less expensive payment methods with improved customer service to our users in the not too distant future.

When we provided our full year outlook last November I said that we expected to take a little time in the first half of 2023 to build momentum, but are confident that improved product momentum and our financial discipline position us for much stronger growth and profitability in the back half of the year as well as long term debt.

View has not changed we would have preferred to see a little more momentum at the outset of 'twenty three but we strongly believe the changes. We've made are working momentum is gradually building and we're positioned for much better financial performance by the end of this year, which should provide momentum into next year as well. Additionally.

Additionally, we believe that the combination of our updated capital allocation approach and our path to stronger growth can create a very compelling level of return for our shareholders.

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

Thank you.

We will now begin the question and answer session.

You ask a question you May press Star then one on the telephone keypad.

We are using a speakerphone please pick up your handset before pressing.

Keith.

Can you withdraw your question please.

<unk>.

At this time, we will call momentarily to assemble eyeball.

Our first question comes from James <unk> with Jefferies. Please go ahead.

Thanks for taking the question just for Gary can you talk specifically about the encouraging signs that youre seeing at Tinder in April is that primarily around the success you're seeing on price increases or are there other specific optimizations that are driving the uplift.

Thanks, James for the question. Good morning, we've actually seen improvement in several tinder kpis.

Here in April and really what I'm, referring to is new user sign ups as well as reactivation of old users.

And we've seen improvement because of the marketing campaign and other initiatives are tender has undertaken.

In terms of the revenue lift the new weekly subscriptions and price optimizations didn't rollout to any significant extent until April and now they're in five major countries, which is leading to incremental revenue. So we're seeing strength both in terms of top of the funnel and the revenue initiatives really take hold.

Going to test these price optimization in several geographies in Q2 and.

And as we rollout the weekly subscription packages and many more markets, that's going to add incremental revenue.

One month isn't enough to really make a call, but we feel optimistic given we're seeing the initiatives have success with the top of the funnel and on the revenue side and so as a result of that our outlook contemplates sequential revenue improvement in Q2, compared to Q1, and thats showing that what dk and the team are doing.

Tinder really is leading to results and thats, giving us much improved optimism.

Thank you.

Our next question comes from equal.

<unk>.

Please go ahead.

Hey, good morning, guys.

Taking the questions.

Hey.

On the product roadmap.

I wanted to focus on the product side not the monetization here.

Can you talk about what what are the most important products on the roadmap.

Maybe.

Hit on the women's experience.

Specifically as well how much left is there on that to get on par with competing getting ads.

Some of the commentary in the letter.

Pointing to users.

Got it thrive.

Although the third party apps and how that's been impacting experience on tinder.

Thanks for the question Yigal, Gary mentioned, our recent momentum.

That we've seen over the last month, and that's been really exciting for us, but what I wanted to jump in a little bit about is like our journey, because we had a bit of a start stop and then start a CAD.

Jumping in I actually thought we could have moved a lot faster, but we're really diligent around setting up a stable and solid culture with the team and what I wanted to do was really get the team focused and reduce some of the distractions in doing that we had to galvanize the organization around a clear road map.

Speaker 1: My person is starkey, followed by zero.

Pain and other initiatives are tender has undertaken.

Speaker 1: After today's presentation, there will be an opportunity to ask questions.

In terms of the revenue lift the new weekly subscriptions and price optimization didn't rollout to any significant extent until April and now they're in five major countries, which is leading to incremental revenue. So we're seeing strength both in terms of top of the funnel and the revenue initiatives really take hold.

Speaker 1: To ask the question. You may press Star, then one on your telephone C pad.

Speaker 1: To draw your question. Please press Star and you.

Speaker 1: Please note, this event is being reorted.

And this can be challenging to do with a lot of creative and technologists that are that have a lot of great swirling ideas, but for us to do that our CPO came up with this concept around three r's, relevancy, realness and respect and creating experiences within our ecosystem and our platform that.

Speaker 1: I would like to turn the conference over to anyny shelburn as VP of Investor ation. Please go ahead.

We're going to test these price optimization in several geographies in Q2.

Speaker 2: Thank you operator, and good morning everyone. Today's call will be led by CEO Bernard Kim and President and cefo Gary swwiitler. We'll make a few brief remarks and then we'll open it up for questions.

And as we rollout the weekly subscription packages and many more markets, that's going to add incremental revenue.

Ensure that our data are having a rewarding experience within tinder every single day.

Speaker 3: Before we start.

Speaker 2: 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.

When Youre asking me to kind of pick the most important features it's actually hard to do that with our roadmap because everything is intertwined and theres been a lot of thoughts about how these features go against one another and how they work together, but I guess I can maybe highlight three of those features.

Speaker 2: 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.

A tinder really is leading to results and thats, giving us much improved optimism.

Thank you.

Speaker 2: 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.

One of the features that I look for look forward to us rolling out more broadly is called just for you. This is a feature that was designed from the ground up based on in depth research that we have.

Our next question comes from equal revenue.

Speaker 2: To turn the call over to B K.

Please go ahead.

Speaker 4: Thanks tanny, and good morning everyone. Having served as CEO for nearly a full year, I want to start off by highlighting the accomplishments this team is achieved and all the opportunities ahead.

Hey, good morning, guys.

And the question.

Create matches.

Hey.

On the product roadmap.

With features and people that matter most to women.

I wanted to focus on the product side not the monetization here.

We want to do is deliver great matches. So women have a good experience and when women have a good experience that will lead to men, having a better experience as well I believe that just for you will lead to better matches conversation and hopefully real life meetings.

Speaker 4: We've made changes to set up match group for long-term growth, but there is a lot more work to do in areas to improve on.

And can you talk about what what are the most important products on the roadmap.

Maybe Jason.

To hit on the women's experience.

Speaker 4: We restructured match groups' businesses to optimize internal operorations, increased cross-brand collaboration and improve the speed to ship products.

Specifically as well how much left is there on that to get on par with competing getting absolute.

When it comes to the platform health, we are very focused on maintaining the quality of the user experience and the user base and this gets to real Miss.

Some of the commentary in the letter.

Pointing to users.

Speaker 4: These changes are having a real impact and the teams have never worked this closely together before.

<unk>.

Although use of third party apps and how that's been impacting experience something there. Thanks.

We want to utilize our technology and scale and policies to eliminate bad actors and spammers from our platform and we've started those efforts today and we're grinding through that throughout the year and this is I think going to lead to a healthier ecosystem will lead to better experiences and better revenue for <unk>.

Speaker 4: We are working together to innovate, tackle challenges and reaccelerate growth.

Yeah.

Thanks for the question Yigal, Gary mentioned, our recent momentum.

Speaker 4: Hinge continues to set the bar for what an a plus acquisition should look like. We acquired Hinge in 2018, when the app was generating just under $1 million in revenue. Just five years later, Hinge has surpassed one million payers and is on track to generate approximately $4 million in total revenue for 2020. -three.

And that we've seen over the last month, and that's been really exciting for us, but what I wanted to jump in a little bit about is like our journey, because we had a bit of a start stop and then start again.

As well.

Okay.

Another product that I'm personally really excited about is the high end member experience that is currently in development. We have a great team working on this this product set is compelling and I think we'll actually tap a new experience with in Tinder.

Speaker 4: Hinge's exponential growth is largely due to the team's passion and ability to focus on product, coupled with match group's expertise and operational support.

We're going to offer experiences for users to find the right matches faster.

Speaker 4: In addition to its meaningful traction in English-speaking markets, Hinge is successfully expanding internationally and were impressed with these early results. The team also successfully launched a new subscription tier hingex, and has so much runway ahead. I continue to be impressed by the momentum at Hinge and I'm excited to see them grow to new heights as part of the match group family.

<unk> way with less effort I'm really looking forward to that rolling out this year.

I've spent my career working with product teams and I think that we did the right things to build the right Foundation and we're starting to see that momentum really hard over the last couple of months as our product velocity has increased dramatically from where we were at this time last year. Thanks for the question.

Ensure that our daters are having a rewarding experience within tinder every single day.

Speaker 4: Now turning to Tinder, where the majority of our energy has been focused. As you all know, we've made some changes to the Tinder leadership team and restructure tinders organization to immediately address the lack of output that was occurring.

Thank you.

Our next question comes from Jason <unk> with Oppenheimer. Please go ahead.

Thanks for taking the question two so can you talk about the tender price testing in a bit more detail on why you feel confident that this is the right move strategically I don't completely understand about the weekly but the idea of just.

Speaker 4: These changes have shoed up the frequent turnover and loss of institutional knowledge at Tinder was facing.

One of the features that I look for look forward to us rolling out more broadly is called just for you. This is a feature that was designed from the ground up based on in depth research that we have to create matches.

Speaker 4: Just to give you an example, we had roughly 15 VPs and above voluntarial lead to part Tinder in the months before the new leadership team took over.

Price increases.

The longer term plans more premium and then you use the word additional color on what what significant Matt and then just secondly, more for housekeeping, but how are you thinking about specifically about.

Speaker 4: Since then we have not had a single person of that level voluntarily to part Tinder.

With features and people that matter most to women.

But we want to do is deliver great matches. So women have a good experience and when women have a good experience that will lead to men, having a better experience as well I believe that just for you will lead to better matches conversation and hopefully real life meetings.

Speaker 4: Back in February , we shared a detailed product roadmap for 2020 -three.

Second half Tinder net adds thanks.

Speaker 4: This road map is a culmination of our near-term vision for Tinder, and the whole organization has rallied around it.

Sure, let me jump in and take that Jason.

I know this is getting a lot of attention and so I want to try to explain kind of the philosophy behind what's going on at Tinder, because it's not just a case of random price testing here and there really what tinder has done has embarked on a comprehensive strategy around pricing and optimizing their business, which is something that really should be happy.

Speaker 4: The changes we've made are working. In fact, the team is shipping and testing more features than they were at the height of their delivery in 2021, and.

When it comes to platform health, we are very focused on maintaining the quality of the user experience and the user base and this gets to real Miss.

Speaker 4: Tinder recently launched weekly subscription packages in the U's in addition to optimizing Tier pricing. We launched these initiatives at the very end of Q1 and we're starting to see early revenue momentum beginning to build in April , but it is still early.

On a regular basis, but hasnt been happening until a couple of quarters ago, and really now they've thoughtfully gone through pricing strategy, and we talked a little bit about this in previous quarters, and where we think through discounts and offers and things like that that have existed to try to determine whether those makes sense from a long term value.

Speaker 4: one of the things I've learned in my role as CEO of Tinder is that dating platforms have a delicate ecosystem.

As well.

Speaker 4: And it's important to fully understand that impact new features or minor adjustments can have on the user experience, not only for payers, but non-payers as wellso it is vital for our teams to rigorously test and ensure we're introducing the right features for the ecosystem as a whole.

<unk> and.

Tinder continued to rationalize and optimize so that was kind of the first piece of it that I want to make sure people understand and as I said, it's part of a much more comprehensive and well thought through strategy that tinder is actually very good and the company generally is very good at thinking through and so now here in the first quarter at the very end of the first quarter, we've looked at <unk>.

To offer experiences for users to find the rats right matches faster in a fun way with less effort.

Speaker 4: This cautious approach to testing new features and rolling them out methodically is one reason why the revenue impact is muted at the start, but will grow over time.

I'm really looking forward to that rolling out this year.

I've spent my career working with product teams and I think that we did the right things to build the right Foundation and we're starting to see that momentum really hot over the last couple of months as our product velocity has increased dramatically from where we were at this time last year.

Speaker 4: Another key focus has been redefining Tinder's brand narrative.

Speaker 4: Tinder rolled out its marketing campaign in Q1 and it's having a strong initial impact.

<unk> and all the different geographies, where tinder operates and we believe that.

The prices of tender offers are well below the competitors well below market and so there is room to increase price in certain spots and we've tested variance to see what will be revenue maximizing because what I've talked about many times is we're not focused on a specific kpis, whether it's payers, our RVP and driving those we want to maximize overall revenue at <unk>.

Speaker 4: Its primary focus was to improve perception, especially among young women. As we detailed in the letter, we've seen noticeable improvements in brand consideration and intent.

Thanks for the question.

Thank you.

Speaker 4: Marketing began in the U's and U K and then has now expanded to additional markets.

Our next question comes from Jason <unk> with <unk>.

Oppenheimer. Please go ahead.

Speaker 4: As a result, Tinder has started to see improved user growth in several key markets, including the U's and U K, but it is only the first step in a multiphased campaign.

And so we tested various levels in the U S. In Q1, we settled on a level to rollout and thats going to have effect in Q on Q2 payers overall as we roll that through the system.

Speaker 4: As the team continues to build on this momentum and focus on execution, I believe Tinder is well positioned to exit 2023 with improved financial performance and longer-term sustainable growth.

And now we've expanded those price tests into four additional geographies, Canada, the UK, Australia, and Japan are four important geographies for tinder.

The longer term plans and more premium.

And then you use the word additional color on what you what significant Matt and then just secondly, more for housekeeping, but how are you thinking about specifically about.

And we don't know exactly what variants are going to make the most sense are going to maximize revenue in those geographies and we're going to test again, but if you assume that the same kind of varian prevails in those geographies as prevailed in the U S. We expect to see as the year rolls on additional impact on conversion and Payors.

Speaker 4: Zooming backout. Match Group's purpose is to expand and innovate the dating experience for singles around the world So everyone can find a meaningful connection.

Second half Tinder net adds thanks.

Sure, let me jump in and take that Jason.

Speaker 4: I have casked our new CTO to work with our leadership team to evaluate emerging technologies like AI, which we believe can be a massive unlock for the category.

From that change in price, but again, it will be revenue maximizing and so the fact that the changes that we've made in the U S appear to be working on appear to be driving incremental revenue. We expect the same thing in these other geographies, that's giving us confidence in incremental revenue revenue for Q2 and into Q3 and four at Tinder, but there.

Speaker 4: The same way that the ship to mobile led to the creation of Tinder, which redefined a category just 10 years ago.

On a regular basis, but hadn't been happening until a couple of quarters ago, and really now they've thoughtfully gone through pricing strategy, and we talked a little bit about this in previous quarters.

Speaker 4: There is a significant opportunity to leverage AI and profile creation, matching and Discovery, as well as throughout the post-match experience, to unlock new user adoption.

There will be corresponding negative effects on.

On the payers' numbers through those quarters depends on what variance prevail to determine what significant means but obviously there is an inverse correlation between the price and the impact on payers and what I can tell you is I think as this all washes through the system late in the year, we think that we will see a significant improvement in sequential payers at tinder.

We think through discounts and offers and things like that that have existed to try to determine whether those makes sense from a long term value perspective.

Speaker 4: We believe we can leverage these new capabilities to drive the next phase of growth.

Speaker 4: As a leadership team, we're cognizant of the delicate balance between achieving short-term revenue wins while driving sustained shareholder value. We're focused on achieving both objectives: prudently assessing the trade-offs and opportunities to hit our 2023 expectations, while also delivering unique, innovative and compelling user experiences for years to come.

And we've looked at some of those programs and have eliminated them because we didn't think they made sense from a long term value perspective. So you saw some impact on payers going back to last year and that continued in the first quarter as tinder continuing to rationalize and optimize so that was kind of the first piece of it that I want to make sure people understand and as I.

And so we need to have all of these pricing changes play out these optimizations play out and once we do that the business will be.

Where it should have been and ultimately we will return back to sort of a more normal cadence of payer net adds so hopefully that's helpful to give people a better understanding of what's going on.

Said, it's part of a much more comprehensive and well thought through strategy that tinder is actually very good and the company generally is very good at thinking through and so now here in the first quarter at the very end of the first quarter, we've looked at pricing and all the different geographies, where tinder operates and we believe that.

Speaker 4: And with that I'll kick it over to Gary.

Speaker 4: Thanks B K and hello everyone.

<unk>.

This is a project that's never going to truly finish so theres a big bulk of work, that's a little bit of catch up but ultimately on a regular basis, we need to be optimizing price, we need to be thinking through the dynamics in these markets and tinder is going to do so going forward.

Speaker 5: Our Q1 2023 total revenue was still not to the standards we expect of ourselves, coming in at $787 million down 1% year-over-year.

Speaker 5: Fx was a notable headwind once again, as our total revenue would have been $822 million, up 3% year-over-year on an FX neutral basis.

Our next question comes from Glenn Salmon.

Yes.

Speaker 4: The year-over-year FX headwind was $7 million more than we expected when we provided our Q1 outlook on our February earnings call.

Mr. <unk>. Please go ahead.

Tinder and so we tested various levels in the U S. In Q1, we settled on a level to rollout and thats going to have effect in Q on Q2 payers overall as we roll that through the system.

Speaker 5: The unexpected additional headwind resulted in total revenue slightly below the range that we provided on that call.

And either we.

We can hear you.

Hey, guys, sorry about that can you hear me now.

We can.

Speaker 4: Direct revenue, which is revenue we earned directly from our users, was down 1% year-over-year, up 3% FX neutral in Q1.

And now we've expanded those price tests into four additional geographies, Canada, the UK, Australia, and Japan, so for important geographies for tender.

Okay good stuff.

So I just wanted to ask a little bit more about tinder.

Tenders brand campaign, it sounds like you're happy with the early returns on it.

Speaker 5: This was driven by total payers down 3% year-over-year to 15.9 million and rppp up 2% year-over-year at $16 in 26 cents.

We don't know exactly what variants are going to make the most sense are going to maximize revenue in those geographies and we're going to test again, but if you assume that the same kind of varian prevails in those geographies as prevailed in the U S. We expect to see as the year rolls on additional impact on conversion and Payors.

Sure.

Can you talk a little bit more about where it goes from here you mentioned is.

Expanding into new markets.

Speaker 5: On an FX-neutral basis. Q1 rppp was up 6% year-over-year company-wide.

As regular marketing support of this nature something you see as an ongoing thing that the brand needs to be supported regularly happy with the creative is there are there any iterations coming along those lines and maybe if I can just slip in one more.

Speaker 5: Tender slightly underperformed our expectations in the quarter. Tender direct revenue was flat year-over-year at $441 million up 4% FX neutral.

From that change in price, but again it'll be revenue maximizing and so the fact that the changes that we've made in the U S appear to be working on appear to be driving incremental revenue. We expect the same thing in these other geographies, that's giving us confidence in incremental revenue revenue for Q2 and into Q3 and four at Tinder, but there.

To Dk our care Gary you had obviously the board made a fairly significant change in making a commitment to return 50% of free cash flow.

Speaker 5: Tinder payers were relatively flat year-over-year in Q1 at 10.7 million, and rppp was also relatively flat year-over-year at 13 and eighty.

Every year.

Speaker 5: Tinder saw year-over-year subscription revenue growth, while alcte revenue declined year-over-year, impacted by the macro environment.

And obviously buybacks are going to be a big part of that maybe just one quick one are you considering a dividend.

There will be corresponding negative effects on.

On the payers' numbers through those quarters it depends on what variance prevail to determine what significant means but obviously there is an inverse correlation between the price and the impact on payers and what I can tell you is I think as this all washes through the system late in the year, we think that we'll see a significant improvement in sequential payers a tender.

Great. Thanks, so much Dan for the question I'll handle the first part and Gary can handle the second part of the question first I want to thank you for asking that question around the marketing campaign, because we have a fantastic team that has been working really hard to get this campaign out in the marketplace.

Speaker 5: Tinder released weekly subscriptions and undertook pricing optimizations in several markets, including the U's, towards the end of the quarter, limiting their revenue impact on Q1.

Speaker 4: User growth in the quarter was slightly below our expectations.

And so we need to have all of these pricing changes play out these optimizations play out and once we do that the business will be.

Speaker 4: However in April we've started to see much improved Tinder performance, as the top of the funnel has strengthened somewhat and the weekly subscription and pricing optimizations have begun to deliver tangible revenue contribution.

One of the observations that I made upon joining tinder and leading that organization is that historically, we have relied too much on virality of the app to spread in the marketplace.

Where it should have been and ultimately we will return back to sort of a more normal cadence of payer net adds so hopefully that's helpful to give people a better understanding of what's going on.

We have not invested enough in that brand narrative and that narrative has kind of taken its own story.

Speaker 5: Tinder plans that test weekly subscriptions and pricing optimizations in additional markets this quarter.

And that's why this team that we put in place went in with a tremendous amount of passion and energy and speed and the idea that it all starts with the swipe really tells the story around the multiple different possibilities that can come from jumping into Tinder first time are jumping in the second time in the great experiences that come from that.

<unk>.

Speaker 5: Tinder introduced its marketing campaign in Q1 and its achieving its objectives of improving brand sentiment, especially among younger users, particularly women.

Speaker 5: As a result of that campaign, Tinder's market position in terms of downloads has improved in several key markets, most notably the U's and the U K.

<unk>.

Now this is a multi staged approach and the goal of the campaign initially is to drive brand perception.

Speaker 5: Our Hinge brand continues to perform very strongly. Hinge grew direct revenue 27%, 30% FX neutral year-over-year, slightly ahead of our expectations as performance in core English-speaking markets continued to be outstanding.

Our next question comes from Glenn Salmon.

Yes.

New Street Research. Please go ahead.

So the good news around that is we're actually starting to see really strong early momentum specifically with the market that we're targeting women ages 18 to 24, and we see increases of over three points in both brand consideration as well as intense that's great progress just knowing that we're a couple of months.

Dan are you there we.

We can't hear you.

Speaker 5: Hinge payers were up 15% and total over one million in the quarter, while RP of over $25 was up over 10% year-over-year.

Hey, guys, sorry about that can you hear me now.

Ken.

Okay good stuff.

So I just wanted to ask a little bit more about tenders brand campaign. It sounds like you're happy with the early returns on it.

Speaker 5: The new subscription tiers at Hinge continue to contribute as well, with the 20% take rate of the more premium tier, Hinge x, consistent with our expectations.

And we're in major markets here in the United States and in the UK I personally see it all over Los Angeles, especially in my commute from Manhattan Beach over to the Tinder headquarters now as Gary has said we started to see some really strong improvement in top of funnel. So thats great to see as well, but this is.

Maybe can you talk a little bit more about where it goes from here.

Speaker 5: And as we detail on the letter Hinge's, European expansion continues to have major traction.

Mentioned is expanding it into new markets, but.

Speaker 5: Our MG Asia business saw year-over-year direct revenue declined 13% in Q1, though down only 3% FX neutral.

<unk> is regular marketing support of this nature something you see as an ongoing thing that the brand needs to be supported regularly.

The first stage so what we're starting off is building that positive brand platform, which we then can build upon as our marketing teams are working super closely with our product teams and then down the road I'm really excited about those next stages of the campaign, which can describe more of our product features and and.

With the creative is there are there any iterations coming along those lines and maybe if I can just slip in one more.

Speaker 5: At Hyperconnect Azar grew direct revenue 4% year-over-year, though much stronger on an FX-neutral basis, but haon pairis a year-over-year declines.

BK or chair Gary you had obviously the board made a fairly significant change in making a commitment to return 50% of free cash flow every year.

Speaker 4: At evergreen and emerging direct revenue declined 8% year-over-year, 6% FX neutral as we continue to moderate marketing spend at the evergreen brands. The emerging brands, including cheesspa, bll K and the League, collectively grew direct revenue in excess of 50% year-over-year.

What that means for the overall community in Tinder.

And obviously buybacks are going to be a big part of that maybe just one quick one are you considering a dividend.

We expect that the long term effects of these campaigns will be to improve a brand perception and then accelerate downloads and registrations.

Barry you want to take the second part sure on capital allocation as we talked about in the letter the company generates a significant amount of cash flow and we don't want to just build cash on the balance sheet for the sake of building cash on the balance sheet, we want to return it to shareholders and so.

Speaker 5: Both MG Asia and E performance was consistent with our expectations.

Speaker 4: Indirect revenue was $13 million in Q1, down 14% year-over-year as marketers globally continued to tighten advertising budgets and ad prices declined.

But I made upon joining tinder and leading that organization is that historically, we have relied too much on virality of the app to spread in the marketplace. We have not invested enough in that brand narrative and that narrative has kind of taken its own story and that's why this team that we put in place when.

It's our responsibility to look with our board of directors and all of the tools that are available to return capital to shareholders, which really include dividends and buybacks and so we're not going to rule anything out.

Speaker 5: Operating income was $198 million in Q1 of 5% year-over-year decrease, for a margin of 25%.

<unk> authorized a new large share buyback and that's our plan is to implement that but the world has evolved valuations have evolved we're not happy with where our stock price is and to the extent that dividend make sense at some point in the future.

Speaker 5: Q1, adjusted operating income, or AI, was $263 million down 4% year-over-year, representing a margin of 33%.

And with a tremendous amount of passion and energy and speed and the idea that it all starts with a swipe really tells the story around the multiple different possibilities that can come from jumping into tinder first time or jumping in the second time and the great experiences that come from that.

Speaker 5: Q1, AI and margins were above our prior our expectations, despite the total revenue shortfall versus our expectations as we continue to focus on costs, reducing marketing spend further and rationalizing some additional overhead costs as well.

We're not afraid to consider that so we will look at all the tools, we constantly evaluate them.

And we will see kind of what we think makes the most sense.

As a way to return capital to shareholders. So that's our thinking on capital allocation.

Speaker 5: We incurred approximately $4 million of severance and similar costs in Q1.

Now this is a multi staged approach and the goal of the campaign initially is to drive brand perception.

Okay very helpful. Thank you both.

Speaker 5: Overall expenses, including BC expense, were essentially flat year-over-year in Q1.

The good news around that is we're actually starting to see really strong early momentum specifically with the market that we're targeting women ages 18 to 24, and we see increases of over three points in both brand consideration as well as intense that's great progress just knowing that we're a couple of months in <unk>.

Your next question comes from Scott.

Speaker 5: Cost of revenue, including BC expense, grew 2% year-over-year and represented 30% of total revenue flat year-over-year.

Hi, Julien.

Cooler ISI. Please go ahead.

Okay. Thank you very much for taking my question.

Speaker 5: Live streor fees declined, but app store fees increased year-over-year, primarily due to the $8 million escrow payment to Google, the last of which will be due in Q2.

Could you please talk about Andrew.

You're guiding to $400 million and.

Annual revenues, you're reiterating your guide, but how should we think about and just sustainable growth and margin profile as an asset and.

And we're in major markets here in the United States and in the U K I personally see it all over Los Angeles, especially in my commute from Manhattan Beach over to the Tinder headquarters now as Gary has said we started to see some really strong improvement in top of funnel. So that's great to see as well, but this is the.

Speaker 5: Selling and marketing spend, including BC expense, decreased $15 million or 10% year-over-year. The fourth consecutive quarter where we've seen a year-over-year reduction, as we continue to reduce marketing spend at our evergreen brands and to exercise ROI discipline overall.

What gives you confidence that hinge and tinder both can grow concurrently thank you.

Yes.

Sure, let me take that one thanks Rolla.

I would say first of all on hand, obviously, we're very pleased with the traction that the brand has and by that I mean, a couple of things first of all its residents.

First stage so what we're starting off is building that positive brand platform, which we then can build upon as our marketing teams are working super closely with our product teams and then down the road I'm really excited about those next stages of the campaign, which can describe more of our product features and and what.

Speaker 5: We increased sales and marketing spend meaningfully year-over-year Hinge and modestly a tender, but it was down year-over-year at virtually all other brands.

Its ability to resonate in markets outside of core English speaking markets, that's something that was not assured and when we go into a market like France, which is different than a market like Germany culturally and the fact that the brand resonates and gets organic traction in both markets. That's really encouraging and tells you that the that the brand really has the ability to expand around the world.

Speaker 5: Selling and marketing spend was down two points year-over-year as a percentage of total revenue to 17%.

Speaker 5: Product development costs, including SBC expense, grew 25% year-over-year and were 12% of total revenue, primarily reflecting the impact of engineering hiring at Tinder in late 21, early 22 and at Hinge.

That means for the overall community in Tinder.

We expect that the long term effects of these campaigns will be to improve a brand perception and then accelerate downloads and registrations.

Yeah.

And the fact that the brand has significant organic traction in a market like India, which is obviously very different in France, or Germany or any other European market with.

Speaker 5: At this point hinges the only major business within our portfolio where hiring remains particularly active.

Any marketing or other efforts by hinge in that market, that's a very encouraging sign for global expansion as well. So that's the first point and we really do believe that the product experience at hinge as well as their brand story around designed to easily to are both really resonating with users and.

Speaker 5: Interest expense increased 13% year-over-year in Q1, primarily due to the floating rate structure of our term loan. But interest income also increased very meaningfully given higher rates. We are earning on our cash.

The ability to look with our board of directors and all of the tools that are available to return capital to shareholders, which really include dividends and buybacks and so we're not going to rule anything out.

Speaker 4: Our gross leverage was three point five x trailing AI and net leverage was three x at the end of Q1.

That's really a critical fact, the other thing I would point out is that hinges.

Speaker 4: Our target remains for net leverage to be below three X. we ended the quarter with $57 million of cash, cash equivalents and short-term investments on hand.

Very early in its monetization journey, it's got a lot of runway on monetization. It's got a lot of runway globally on user growth. So it still has a lot to do and a lot of runway and we're focused on on capturing that and it's just really a matter of time for all that to happen. So when you factor that all together in terms of kind of what do we think that means from.

Authorized a new large share buyback and that's our plan is to implement that but the world has evolved valuations have evolved we're not happy with where our stock price is and to the extent that dividend make sense at some point in the future.

Speaker 5: We repurchased two point six million of our common shares in the quarter for $113 million.

Speaker 5: At the end of Q1, we had only two point seven million shares remaining under our existing buyback authorization. Our Board of Directors has authorized a new one billion dollar buyback to replace the existing plan, which we expect to deploy over the next two to three years.

We're not afraid to consider that so we will look at all the tools, we constantly evaluate them.

Numbers perspective, we think that hinge can maintain growth rates around what it's going to do this year on a percentage basis and drive to be a $1 billion plus revenue business over the next few years.

And we will see kind of what we think makes the most sense as a way to return capital to shareholders. So that's our thinking on capital allocation.

Okay very helpful. Thank you both.

Speaker 5: As we discussed in the shareholder letter, we expect to generate approximately $8 million of free cash flow this year, with further growth over the coming years. Going forward, we intend to return at least 50% of our free cash flow to shareholders.

If you look at let's say, a four or five year plan.

Your next question comes from.

And I think it can do that by making the right levels of investments over the next few years in international expansion just as we're doing in Europe. This year and so I think that that will put some pressure on margins of hinge over the next couple of years as the growth continues to be very strong and then gradually the business will get to a level of margin thats more can.

Hi, Julien with Evercore ISI. Please go ahead.

Speaker 5: In consultation with our Board of Directors, we will determine the right timing and tools to use for return of capital.

Okay. Thank you very much for taking my question.

Could you please talk about Andrew.

Speaker 5: Our capital allocation priorities are: 1- to invest organically in our business, 2- to strengthen our balance sheet. And 3- to make compelling acquisitions.

You're guiding to $400 million.

<unk> annual revenues are you reiterating your guide, but how should we think about hinges sustainable growth and margin profile as an asset and.

<unk> with the overall company level of margins.

Speaker 4: We may opt to return even more capital to shareholders if we do not identify sufficient compelling investment or acquisition opportunities.

And so we're looking forward to seeing that kind of financial performance out of out of hinge.

What gives you confidence that hinge and tinder both can grow concurrently thank you.

A lot of effort in the shareholder letter to talk about how we think there's ample opportunity for both tinder and hinge to grow at the same time that we think the cannibalistic effects of tinder on hand, sorry of hinge on Tinder.

Yeah.

Sure, let me take that one thanks Rolla.

Speaker 5: For Q2 23, we expect total revenue from match group of 805 to $815 million, up 1% to 3% year-over-year.

What I would say first of all on hand, obviously, we're very pleased with the traction that the brand has and by that I mean, a couple of things first of all its residents.

Speaker 5: We expect FX to be slightly more than a one point year-over-year headwind.

Not as much as people may think so I'm not going to reiterate all of that there, but I will just emphasize on that we said in the letter which is important to understand which is that which is that the product experience at tinder and hinge are different and the brand ethos of tinder in hand are different and consumers understand that.

Its ability to resonate in markets outside of core English speaking markets, that's something that was not assured and when we go into a market like France, which is different than a market like Germany culturally and the fact that the brand resonates and gets organic traction in both markets. That's really encouraging and tells you that the brand really has the ability to expand around the world.

Speaker 4: At Tinder. We expect direct revenue to be up low single-digits year-over-year. Also, with a little more than a one point year-over-year FX headwind on a sequential basis. We expect Tinder direct revenue to increase in the low to mid-single-digit percentage range.

Speaker 5: This strong sequential growth demonstrates that momentum is building and gives us confidence in achieving the strong exit rates we anticipate in Q4 and.

And some consumers prefer one to the other but many especially young users use both because they use them for different purposes, and they like certain aspects of one in certain aspects of the other and so all of that tells us that we can grow hinge and tinder simultaneously and that the overall impact of having both of those brands in a given market is accretive to match.

And the fact that the brand has significant organic traction in a market like India, which is obviously very different in France, or Germany or any other European market.

Speaker 4: We expect Tinder Q2 payers to decline year-over-year and sequentiallythere are a number of initiatives in flight globally, including introduction of weekly packages and the implementation of price changes, which are having various positive and negative impacts on payers and are being rolled out at various times in various markets.

Without any marketing or other efforts by hinge in that market. That's a very encouraging sign for global expansion as well. So that's the first point and we really do believe that the product experience at hinge as well as their brand story around designed to easily to are both really resonating with users and that's really a critical.

Group's overall growth much like we're seeing in the French market with some of the data that we provided in the shareholder letter. So hopefully that gives you. Some some color to your questions. Yeah. That's helpful. Thanks Jay.

Speaker 4: it'is important to understand that tender in the? U's elected to implement one of the higher price levels attested, which we believe will maximize direct revenue but will correspondingly have a large negative impact on conversion and payers.

In fact, the other thing I would point out is that hinge is very early in its monetization journey. It's got a lot of runway on monetization. It's got a lot of runway globally on user growth. So it still has a lot to do and a lot of runway and we're focused on on capturing that and it's just really a matter of time for all that to happen. So when.

Our next question comes from John <unk> with Cowen. Please go ahead.

Great. Thanks, I thought there was interesting color in the shareholder letter on tenders paying user opportunity in North America and Europe in the 18 to 34 demo of given tenders recent paying user growth challenges what do you see as kind of key drivers of getting both lapsed <unk> never been users to the platts.

Speaker 5: We expect that Tinder sequential payer additions will be much stronger by the end of the year once these changes are implemented.

You factor that all together in terms of kind of what do we think that means from a numbers perspective, we think that hinge can maintain growth rates around what it's going to do this year on a percentage basis and drive to be a $1 billion plus revenue business over the next few years.

Speaker 5: We expect Han to deliver meaningfully accelerating Q2 year-over-year direct revenue growth, driven by continued strong performance in Hinge's English-speaking markets and the effects of the new pricing tiers and continued European expansion.

And as a follow up it feels like what you laid out implies there's ample runway overtime for further tender payer paying user growth. Thanks.

Speaker 5: We expect MG Asia to decline modestly year-over-year in Q2 and be essentially flat year-over-year on an FX neutral basis.

If you look at let's say, a four or five year plan.

Thanks.

And I think it can do that by making the right levels of investments over the next few years in international expansion just as we're doing in Europe . This year and so I think that that will put some pressure on margins of hinge over the next couple of years as the growth continues to be very strong and then gradually the business will get to a level of margin that's more <unk>.

Yeah.

Sure. Thanks, John So it's important to understand that reactivating lapsed users at Tinder has always been one of its key components of growth and something that they've actually been very good at historically and as you point out and we said in the letter there's a very large pool of lapsed users for Tinder to go ahead and reactivate.

Speaker 4: We expect our evergreen and emerging brands direct revenue to decline year-over-year at similar rates, as was the case in Q1, with similar growth rates at each of the evergreen and emerging groups of brands, as was the case in Q1 as well.

Speaker 4: We expect Q2 indirect revenue to be closer to flat year-over-year as we broaden the opportunities we offer for advertising in our products.

Consistent with the overall company level of margins.

But what we've seen in the last few quarters is that the tinder as tinder product experience has not met some users' expectations tenders ability to reactivate those lapsed users has declined as well. So if you put it kind of simply tender hasnt given lapsed users enough reason to come back to the product and so as.

So we're looking forward to seeing that kind of financial performance out of out of hinge. We took a lot of effort in the shareholder letter to talk about how we think there's ample opportunity for both tinder and hinge to grow at the same time that we think the cannibalistic effects of Tinder on hand, sorry of hinge on Tinder are.

Speaker 4: We expect AI of 275 to $28 million in Q2, representing margin of approximately 34% at the midpoint of the ranges.

Speaker 4: We expect overall marketing spend to increase year-over-year in Q2, specifically a tender and Hinge with reductions in almost every other brand in the portfolio. We do expect to allocate some marketing dollars to our newly incubated app to support its introduction this summer.

As the team led by BK improves the product experience, we're optimistic that tender success rate and reactivating. These lapsed users will also increase and we can really say the same thing for attracting new users as well as that as the product experience and the brand narrative improve tinder should do a better job of attracting new <unk>.

Not as much as people may think so I'm not going to reiterate all of that there, but I will just emphasize on that we said in the letter which is important to understand which is that.

Speaker 5: We expect ifps to continue to be a year-over-year headwind in Q2, though we expect to stop placing funds into the Google escrow after July for the terms we have agreed two

Which is that the product experience at Tinder and hinge are different and the brand ethos of tinder in hand are different and consumers understand that and some consumers prefer one to the other but many especially young users use both because they use them for different purposes, and they like certain aspects of one in certain aspects of the other and so all of that.

Users now obviously, it's much easier to re attract lapsed user who has used the product before then someone new who has never tried it but tinder has to succeed on both fronts, attracting lapsed users and new users to achieve the level of growth in terms of overall user growth that we think tinder needs to achieve so it needs to push.

Speaker 5: We expect to continue to be very cautious on spending in all other spending categories within our control.

Speaker 4: We anticipate incurring approximately $4 million of severance and similar cost in Q2.

<unk> tells us that we can grow hinge and tinder simultaneously and that the overall impact of having both of those brands in a given market is accretive to match group's overall growth much like we're seeing in the French market with some of the data that we provided in the shareholder letter. So hopefully that gives you some some color to your questions.

Speaker 5: Given the emerging success of the recent initiatives a Tinder and the momentum we expect the business to continue to build over the coming quarters, we have confidence that in Q4, Tinder year-over-year direct revenue growth will reach double digits, as will the company's overall year-over-year total revenue growth.

On both fronts and accomplish that but as you said in the letter again makes clear Theres, a big pool of lapsed users in the developed markets Europe, North America for Tinder to go and reactivate and Theres, a really big pool of never tried users in other geographies in APAC and the rest of the world that have.

Helpful. Thanks, Jay.

Speaker 5: We admittedly have had a modestly weaker Q1 and anticipate a slightly weaker Q2, than we expected when we provided our full year outlook back in November of last year.

Your next question comes from John <unk> with Cowen. Please go ahead.

Never tried tinder, so theres ample runway for growth both in terms of reactivating lapsed users and also attracting first time users that tinder can go and it's really just a question of <unk>.

Speaker 4: As such, there is an increasing likelihood that we will be closer to the lower end of our total revenue growth outlook for the full year.

Product and brand execution to really achieve the level of user growth that we would like to see it.

Speaker 5: That said, marketing and product momentum is improving a tender and we had strong performance in April , So we're eager to see how all the initiatives continue to progress.

Thank you.

Speaker 5: We also remain confident that Hinge's momentum will lead it to deliver approximately $4 million of direct revenue in 2020. -three and.

Our next question comes from line.

And as a follow up it feels like what you laid out implies there is ample runway overtime for further tender payer paying user growth. Thanks.

With.

Multifamily go ahead.

Great. Thanks, maybe just one on on hinge.

Speaker 5: In terms of full year 2023 AI margin, we continue to target flatter, better than 35% we achieved last year.

Thanks.

As we think about international expansion I think you are now in all the major markets in.

Yeah.

In Europe, how are you thinking about second half expansion any thoughts or timing around when.

Speaker 4: We continue to expect improving year-over-year margins as the benefits of our cost savings initiatives take hold and tiler top line growth accelerates.

Might enter Asia understanding those markets are still a little bit difficult right now thank you.

Thanks, Lauren for the question.

Speaker 5: There continues to be a lot of developments in both legal systems and legislatures around the world regarding app store policies and we remain optimistic that further changes coming, especially as a result of the digital markets act in the EU early next yearthe most recent news was the Epic games versus Apple appeal in the ninth circuit. As a result of that decision, we're increasingly hopeful that we'll be able to prote less expensive payment methods with improved customer service to our users in the not too distant future.

I'm really excited about hinges performance like Gary mentioned, we're on track to hit $400 million this year and Thats incredible from where we started with <unk> joining the family just five years ago.

But what we've seen in the last few quarters is that the tender as tinder product experience has not met some users' expectations tenders ability to reactivate those lapsed users has declined as well.

The progress at hinge has made so far has been fantastic, but hinge international expansion continues to be one of my top priorities for this year.

So if you put it kind of simply tender hasnt given lapsed users enough reason to come back to the product and so as the as the team led by BK improves the product experience, we're optimistic that tender success rate and reactivating. These lapsed users will also increase and we can really say the same thing for attracting new.

When we go into these markets, we don't just localized the apps, but we actually culturalize. These apps and make the experience what makes sense for data in each of these individual markets that also extends across our marketing message. So to use a European term redo a bespoke approach of going to market, but also entrenching ourselves in these.

Speaker 5: When we provided our full year outlook last November , I said that we expected to take a little time in the first half of 2023 to build momentum, but our confident that improved product momentum and our financial discipline position us for much stronger growth and profitability in the back half of the year, as well as long term.

New users as well as that as the product experience and the brand narrative improve tinder should do a better job of attracting new users now obviously, it's much easier to re attract lapsed user who has used the product before and someone new who has never tried it but tinder has to succeed on both fronts, attracting lapsed users and <unk>.

As well so our plan this year is to establish hinge across Europe as the intention dating app is really important for us that we that we continue on a steady path throughout the year. We are in most markets today, but we have a lot more work to do and thats going to unveil.

Speaker 4: That view has not changed. We would have preferred to see a little more momentum at the outset of 23, but we strongly believe the changes we've made are working. Momentum is gradually building and we're positioned for much better financial performance by the end of this year, which should provide momentum into next year as well. Additionally, we believe that the combination of our updated capital allocation approach and our path to stronger growth can create a very compelling level of return for our shareholders.

New users to achieve the level of growth in terms of overall user growth that we think tinder needs to achieve so it needs to push on both fronts and accomplish that but as you said in the letter again makes clear Theres a big pool of lapsed users in the developed markets Europe , North America for Tinder to go and reactivate and theirs.

Itself over the next year.

We're actually going to consider new markets outside of Europe in 2024, but we're focused on Europe in 2023.

For the question Lauren.

A really big pool of never tried users in other geographies in APAC and the rest of the world that have never tried tinder. So theres ample runway for growth both in terms of reactivating lapsed users and also attracting first time users that tinder can go and it's really just a question of product and brand execution.

Our next question comes from Alex <unk>.

Speaker 4: With that. I'll ask the operator to open the line for questions.

Got it.

Goldman Sachs. Please go ahead.

Speaker 6: Thank you. We will now begin the question and the answer session.

Thank you for taking my questions. So in the context of your Q2 revenue guide, which anticipates a low single digit growth can you give us a bit more color on how should we should think about the building blocks. If you updated 23 revenue guide what are the different assumptions that went into the guide initially and how did this evolved since then.

Speaker 1: You you ask a question, you may press Star than one on your telephone. Te had.

Speaker 1: If you're using a speaker phone, please pick up your handset before pressing the key.

<unk> to really achieve the level of user growth that we would like to see attempts.

Speaker 1: To withdraw your question. Please press Star and PE.

Thank you.

Speaker 1: At this time we will cause momentuntarily to stble ardgust.

<unk> update and then lastly, what are some potential areas of upside or downside when thinking through 'twenty three revenue growth. Thank you.

Our next question comes from Lauren.

With Morgan Stanley . Please go ahead.

Great. Thanks, maybe just one on on hinge.

Speaker 1: My first question comes from James P V of Jeffrey. Please go ahead.

Sure I'll take that one so as we talked about in the letter we're confident that we're going to get to Q4, Tinder direct revenue growth and total company revenue growth rates year over year in the double digits, it's still a little early to pinpoint exactly what level.

Think about international expansion I think you are now in all the major markets.

Speaker 2: Thanks for taking the question. Just for Gary, can you talk specifically about the encouraging signs that you're seeing at tender in April ? Is that primarily around the success you're seeing on price increases, or are there other specific optimizations that are driving the uplift?

Europe , how are you thinking about second half expansion any thoughts or timing around when.

The app might enter Asia understanding those markets there are still a little bit difficult right now thank you.

Thanks, Lauren for the question.

In there because we are only at the beginning of May there is a lot of initiatives in flight a lot of momentum building in the business. So we really need to see a little bit more how things are going to play out, but obviously April has been encouraging as I talked about and so we feel good about the potential for exit rates in Q4, and so if you look at kind of what we achieved in Q1, you look at what our.

I'm really excited about hinges performance like Gary mentioned, we're on track to hit $400 million this year and Thats incredible from where we started with him joining the family just five years ago.

Speaker 4: Thanks James, for the question. Good morning, we've actually seen improvement in several tender KPIs here in April and really what I'm referring to is new user sign-ups as well as reactivations of old users, and we've seen improvement because of the marketing campaign and other initiatives a tender has undertaken.

The progress at hinge as made so far has been fantastic, but hinge international expansion continues to be one of my top priorities for this year. When we go into these markets. We don't just localize the ads, but we actually culturalize. These apps and make the experience what makes sense for daters in each of these individual mark.

Our outlook is for Q2, and then what we think is going to happen by Q4, you extrapolate Q3 to get there.

Speaker 4: On terms of the revenue lift. The new weekly subscriptions and price optimizations didn't roll out to any significant extent until April and now they're in five major countries, which is leading to incremental revenue. So we're seeing strength both in terms of top of the funnel and the revenue initatives really take hold. We're going to test these price optimizations in several geographies in Q2.

You end up with a growth rate overall of around five or so percent sort of in that in that neighborhood. The biggest swing factor, which I'm sure is apparent to you and to others as well is really whats going to happen in terms of the tender trajectory.

That also extends across our marketing message so to use a European term redo a bespoke approach of going to market, but also entrenching ourselves in these markets as well. So our plan. This year is to establish hinge across Europe as the intention dating app is really important for us.

The marketing campaign the momentum at the top of the funnel as well as all of the revenue initiatives that we have in place are really going to determine where exactly we land for the full year growth rate and certainly the Q4 exit rate. So that's really the big swing factor.

Speaker 4: And as we roll out the weekly subscription packages in many more markets, that's going to add incremental revenue.

That we that we continue on this steady path throughout the year, we are in most markets today.

Speaker 4: one month isn't enough to really make a call, but we feel optimistic, given we're seeing that initiatives have success with the top of the funnel and on the revenue side, and so, as a result of that, our outlook contemplates sequential revenue improvement in Q2 compared to Q1, and that's showing that what BK and the team are doing- a tender really is leading to results and that's giving us much improved optimism.

And we've given I think a lot of color on what we're seeing and what gives us confidence in where we're going the other thing that we are monitoring is the macro environment.

We have a lot more work to do and Thats going to unveil itself over the next year, we're actually going to consider new markets outside of Europe in 2024, but we're focused on Europe in 2023. Thanks for the question Lauren.

As I mentioned is having impact on Ala Carte Tinder, which is a reasonably significant component of its revenue.

And right now, we're not seeing any big movement, one way or the other in terms of our expectations.

Our next question comes from Alexander <unk> with Goldman.

And what's actually happening out of cart. So our trajectory for the year assumes at Ala Carte kind of continues the way it's been with not modest major swings up or down that is a potential swing factor or a change in assumption, but right now we don't see any evidence that our assumptions around ala carte or inappropriate and so thats, all I think properly baked into our outlook at this.

Speaker 7: Thank you.

Goldman Sachs. Please go ahead.

Speaker 1: My next question comes from eagol or unit city. Please go ahead.

Thank you for taking my questions. So in the context of your Q2 revenue guide, which anticipates a low single digit growth can you give us a bit more color on how should we should think about the building blocks that you updated 23 revenue guide what are the different assumptions that went into the guide initially and how did this evolved since then.

Speaker 8: The more Vice ta the questions. Just, you tender on the product road map and I want to focus on the product side, not not the monetization. Here you talk about what? one of the most important products on the road map?

Point so.

Those are the things that we're watching as the year progresses.

Thank you.

This update and then lastly, what are some potential areas of upside or downside when thinking through 'twenty three revenue growth. Thank you.

Our next question comes from Benjamin Black with Deutsche Bank. Please go ahead.

Speaker 8: Maybe take some time to hit on the women's experience more specifically as well. How much lift is there on that to get on par with with competing getting absence? To think about, some of the commentary in the letter point to users they're trying to drive other users, the third-party apps, and how does an impact that impact experience on in there?

Great. Thanks for the questions of pivoting to cost you, obviously reiterated the guide.

Sure I'll take that one so as we talked about in the letter we're confident that we're going to get to Q4.

And margins to be at least flat in 'twenty three.

Tinder direct revenue growth and total company revenue growth rates are year over year in the double digits, it's still a little early to pinpoint exactly what level in there because we're only at the beginning of May there is a lot of initiatives in flight a lot of momentum building in the business. So we really need to see a little bit more how things are going to play out but obviously.

If we look beyond <unk> change it what are the major swing factors that could drive upside or downside there.

Room to tighten up the cost structure any further and how should we be thinking about the tradeoff between revenue growth and expense moderation of the legacy Brian.

Speaker 9: Thanks for the question. All Gary mentioned our recent momentum that we've seen over the last month and that's been really exciting for us. But what I wanted to jump in a little bit about is like our journey because we had a bit of a start, stop and then start again.

What's sort of baked into your outlook there. Thank you.

April has been encouraging as I talked about and so we feel good about the potential for exit rates in Q4, and so if you look at kind of what we achieved in Q1, you look at what our outlook is for Q2 and then what we think is going to happen by Q4, you you extrapolate Q3 to get there.

Sure.

In terms of margins.

First of all we're committed to maintaining flat or better margins for the year and so that is one of our guiding principles around us I think the biggest swing factor of the year is what I just talked about with Alexander's question, which is really around tenders trajectory Tinder has a very high margin business and the more growth we get out of tender the more higher margin, we get out of a tender.

Speaker 9: Jumping in. I actually thought we could have moved a lot faster, but we're really diligent around setting up a stable and solid culture with the team and what I wanted to do was really get the team focused and reduced some of the distractions. In doing that, we had to galvanize the organization around a clear road map and this can be challenging to do with a lot of creative and technologists that are that have a lot of great swirling ideas.

And up with a growth rate overall of around five or so percent sort of in that in that neighborhood. The biggest swing factor, which I'm sure is apparent to you and to others as well is really whats going to happen in terms of the tender trajectory.

The more that's going to help improve the overall company margin. So that's the biggest swing factor. So obviously driving growth at Tinder is job one in terms of your question around cost savings, we are being very disciplined around cost very thoughtful on the marketing side on expenses generally.

Speaker 9: But for us to do that, our CPO came up with this concept around three ours.

Speaker 9: Relevancy, realness and respect.

There is always more you can do but our first goal is to drive revenue growth and so we want to be thoughtful about the tradeoffs generally between cost savings and revenue growth and we're going to we're going to protect the ability to continue to grow revenue because as I said before that really is job one within the confines of maintaining flat or better margins for the company for the full.

Speaker 9: And creating experiences within our ecosystem and our platform that ensure that our daters are having a rewarding experience within Tinder every single day.

And we've given I think a lot of color on what we're seeing and what gives us confidence in where we're going the other thing that we're monitoring is the macro environment, which I mentioned is having impact on Ala Carte Tinder, which is a reasonably significant component of its revenue and right now we're not seeing any big movement.

Speaker 9: When you're asking me to kind of pick the most important features. It's actually hard to do that with our road map because everything is intertwined and there's been a lot of thought about how these features go against it one another and how they work together. But I guess I can maybe highlight three of those features.

Year.

In terms of the tradeoffs, we're making at the evergreen brands that is obviously a source of.

One way or the other in terms of our expectations on what's actually happening out of cart. So our trajectory for the year assumes at Ala Carte kind of continues the way it's been with not modest major swings up or down that is a potential swing factor or a change in assumption, but right now we don't see any evidence that our assumptions around ala carte or inappropriate.

Reducing marketing spend there to spend more in marketing at Tinder and hinge and as we see momentum in those businesses. It makes us want to spend more into those marketing efforts and so we're trying to calibrate that which is our job in terms of managing our portfolio right now I feel like our outlook for the year contemplates a sufficient level of <unk>.

Speaker 9: one of the features that I look forward to us rolling out more broadly is called just for you. This is a feature that was designed from the groundup based on in-depth research that we have to create matches.

And so that's all I think properly baked into our outlook at this point so that those are the things that we're watching as the year progresses.

Speaker 9: With features and people that matter most to women.

Marketing spend at the evergreen brands to maintain declines in those brands that are manageable and allow us to invest at the levels. We feel we need to invest in at both hinge tender as well as some new initiatives like the league and the new App that we're talking about rolling out in the summer. So I think all of that is appropriately incorporated into <unk>.

Speaker 9: What we want to do is deliver great matches, So women have a good experience, and when women have a good experience, that will lead to men having a better experience as well. I believe that just for you will lead to better matches, conversations and hopefully, real-life meetings.

Thank you.

Our next question comes from Benjamin Black with Deutsche Bank. Please go ahead.

Great. Thanks for the questions are pivoting to cost you, obviously reiterated the guide.

Speaker 9: When it comes to platform health, we are very focused on maintaining the quality of the user experience in the user base, and this gets to realness.

AI and margins to be at least flat in 'twenty three.

Our outlook for the year and.

Leaves us with the ability to generate flat or better margins as we've been saying.

If we look beyond App store, if you change it what are the major swing factors that could drive upside or downside there.

Great. Thank you very much.

Speaker 9: We want to utilize our technology and scale and policies to eliminate bad actors and spammers from our platform and we've started those efforts today and we're Grinding through that throughout the year and this is, I think, going to lead to a healthier ecosystem, will lead to better experiences and better revenue for us as well.

The room to tighten up the cost structure any further and you know how should we be thinking about the tradeoff between revenue growth and expense moderation of the legacy brands or what sort of baked into your outlook. There. Thank you.

Our next question comes from Justin Patterson with Keybanc. Please go ahead.

Great. Thank you very much perhaps.

Multipart Big picture question.

Sure so in terms of margins.

BK, you're not alone in saying AI as a meaningful platform shift like mobile matching does have a solid history of navigating platform shifts, albeit with new brands, often emerging and legacy brands slowing canadians' out how you think this can transform the dating experience and how it changes the opportunity set for the existing brands and and some new ones.

First of all we are committed to maintaining flat or better margins for the year and so that is one of our guiding principles around us I think the biggest swing factor of the year is what I just talked about with Alexander's question, which is really around tenders trajectory Tinder has a very high margin business and the more growth we get out of tender the more higher margin, we get out of tinder.

Speaker 9: Another product that I'm personally really excited about is the high-end member experience that is currently in development. We have a great team working on this.

Speaker 10: This product set is compelling and I think we'll actually tap a new experience within Tinder. We're going to offer experiences for users to find the R right matches faster, in a fun way, with less effort. I'm really looking forward to that rolling out this year.

We're incubating if thats something you can build organically or acquire your way into and then for Gary How does AI change your expense profile over time. Thank you.

The more that's going to help improve the overall company margins. So that's the biggest swing factor. So obviously driving growth of Tinder is job. One in terms of your question around cost savings, we are being very disciplined around cost very thoughtful on the marketing side on expenses generally.

Great just and I'll take the first part of that question look I think the last couple of months have been super inspiring for me personally as well as our teams were aligned with our leadership team and our management team around AI.

Speaker 9: No I've spent my career working with product teams and I think that we did the right things to build the right foundation and we're starting to see that momentum really hunt over the last couple of months as where our product velocity has increased dramatically from where we were at this time last year.

Thinking that AI could be transformative to the total category.

The way that I guess I think about it is is the data experience and improving that date are experienced by utilizing AI. Maybe if you can like step through an experience of some of our data are in our apps and then they sometimes need help getting unstopped core thinking about how do I open up the conversation and use.

Speaker 9: Thanks for the question.

Speaker 11: Thank you.

Speaker 1: My next question comes from Jason helalthing with albenheima. Please go ahead.

All year.

In terms of the trade offs, we're making at the evergreen brands that is obviously a source of.

Speaker 12: Thanks for taking the question to So can you talk about the tender price testing in a bit more detail why you feel confident that this is the right move strategically I' comple tely understand about the weekically but the idea of just like the pricing increase at the kind of.

Reducing marketing spend there to spend more in marketing at Tinder and hinge and as we see momentum in those businesses. It makes us want to spend more in to those marketing efforts and so we're trying to calibrate that which is our job in terms of managing our portfolio right now I feel like our outlook for the year contemplates us a sufficient level.

<unk> Bill phone, a friend and sometimes that trend is not available.

Imagine that AI can instantaneously help instead, maybe helping nudging people to take great gate date ideas.

Speaker 9: No the, the longer term plans, more premium, and then you use the word additional color on what you what significant meant. And then, just secondly, more for housekeeping. What? How are you thinking about? Specifically about second half? kindernet adds: thanks.

Opening up a conversation how to.

By continue that conversation in some cases closing out a conversation and not grossing someone in in our apps.

It's really still very early but the team is focusing on how this can transform dating.

Speaker 4: Sure let me jump in and take that Jason. I know this is getting a lot of attention and so I want to try to explain kind of the philosophy behind what's going on a Tinder, because it's not just a case of random price testing here and there. Really, what Tinder has done is embarked on a comprehensive strategy around pricing and optimizing their business, which is something that really should be happening on a regular basis but hadn't been happening until a couple of quarters ago.

But one thing that I do want to clarify is that I do not believe that AI can replace IRL dating.

True human connections are core to our business and we think that we can utilize AI to help people get together in the real world, we have a great team, including our new CTO working on this and we're embracing really new exciting ideas, we're really excited to present more updates to you.

Our outlook for the year and.

It leaves us with the ability to generate flat or better margins as we've been saying.

Great. Thank you very much.

Our next question comes from Justin Patterson with Keybanc. Please go ahead.

Speaker 4: And really now they've thoughtfully gone through pricing strategy- and we talked a little bit about this in previous quarters- where we think through discounts and offers and things like that that have existed to try to determine whether those makekes sense from a long term value perspective. And we've looked at some of those programs and have eliminated them because we didn't think they made sense from a long term value perspective.

All in the upcoming quarters, and we have to make some decisions around either we build we buy or we partner, but it's still too early to say.

Great. Thank you very much perhaps multipart big picture question decay, you're not alone in saying AI as a meaningful platform shift like mobile matched does have a solid history of navigating platform shifts, albeit with new brands, often emerging and legacy brands slowing can you tease out how are you.

Yes, just picking up on that in terms of expenses. It is kind of early to say what is going to happen from AI in terms of expenses just because we don't know exactly what kind of efforts are going to be needed I would point out a couple of things. Obviously, one we're mindful that some of these areas of AI and the folks needed to undertake those efforts can be very expensive and so we.

This can transform the dating experience and how it changed the opportunity set for the existing brands and and some new ones you're incubating.

Speaker 5: So you saw some impact on payers going back to last year and that continued in the first quarter as as Tinder continued to rationalize and optimize. So that was kind of the first pieceof it that I want to make sure people understand and it, as I said, it's part of a much more comprehensive and well thought through strategy that Tinder is actually very good in.

Is that something you can build organically or acquire your way into and then for Gary How does AI change your expense profile over time. Thank you.

Want to do this in a smart way certainly we will try to leverage outside vendors third parties wherever we can and I'm sure more and more of those are going to crop up. So we're not planning to build a massive team focused on these efforts and really ballooned expenses as a result of that.

Speaker 4: The company generally is very good at thinking through.

Speaker 4: And so now here in the first quarter, at the V end of the first quarter, we looked at pricing and all the different geographies where tender operates and we believe that the prices the tender offers are well below the competitors, well below market, and so there's room to increase price in certain spots and we've tested variance to see what will be revenue maximizing.

We'll also tell you that we have significant capabilities in this area already at Tinder as well as at hyper connect so that we can leverage some of those capabilities and certainly a place like hyper connect where in Korea. These these types of engineers are much more readily available and much less costly gives us a good platform to expand those efforts and so we're very.

Thinking that AI could be transformative to the total category.

The way that I guess I think about it is like is the data experience and improving that date are experienced by utilizing AI, maybe we can like step through an experience of some of our data are in our apps and then they sometimes need help getting on stock or thinking about how do I open up a conversation and usually.

Speaker 4: Because what I've talked about many times is we're not focused on a specific K P? I, whether it's payers are R P P and driving those. We want to maxize overall revenue a tender And so we tested various levels in the U? U's. In Q1 we've settled on a level to roll out and that's going tohave effactfect on Q2 payers overall as we roll that through the system.

Mindful of trying to keep the expenses.

Their control as we build out the AI efforts and will leverage either outside parties or the capabilities, we already have like the hyper connect business.

Bill phone, a friend and sometimes a friend is not available.

Imagine that AI can instantaneously help instead, maybe helping in nudging people to take great Gate date ideas.

Our next probably have time for one or two more.

Speaker 4: And now we've expanded those price test into four additional geographies: Canada, the U? K ustralian Japan, for important geographies for tender and we don't know exactly what variance are going to make the most sense, are going to maximize revenue in those geographies. That we're to test again. But if you assume that that the same kind of variance prevails and those gegraphies preailin theu's, we expect to see as the year rolls on additional impact on conversion and payers from that change in price.

Sorry go ahead operator.

Thank you. Our next question comes from Brad Erickson with RBC. Please go ahead.

Opening up a conversation how to buy.

By continue that conversation in some cases closing out a conversation and not grossing someone in in our apps.

Yes. Thanks, just a couple follow ups here I think.

Historically the company had looked at some of these features geared for women and it largely I guess not really decided to pursue them. So I guess just what's.

It's really still very early but the team is focusing on how this can transform dating.

What's changed and maybe speak to any testing data from these early efforts kind of reinforced the thesis there and how do you think about payer penetration on that those products relative to tinder overall, and then I might have missed it from earlier, but just quickly on the free cash flow guide I think that was a little bigger step down versus the revenue revenue or EBITDA.

But one thing that I do want to clarify is that I do not believe that AI can replace IRL dating.

Speaker 4: But again it will be revenue maximizing And so the fact that the changes that we've made in the? U's appear be working and appear to be driving incremental revenue. We expect the same thing and these other geographies, that's giving us confidence and incremental revenue revenue for Q2 and into Q3 for a tender. But there will be corresponding negative effacts on the payers numbers through those quarters.

Maybe just anything to call out there thats driving that any comments on sort of general free cash conversion relative to EBITDA going forward. Thanks.

We're really excited to present more updates to you all in the upcoming quarters and we have to make some decisions around either we build we buy or we partner, but it's still too early to say.

Sure why don't I take that.

Try to do relatively quickly on the <unk>.

Women's experience.

Speaker 4: Depends on what vari prevail to determine what significant means. But obviously there's an inverse correlation between the price and the impact on payers. What I can tell you is I think, as this all washes through the system late in the year, we think that we will see a significant improvement in sequential payers a tender. So we need to have all of these pricing changes play out, these optximizations play out and once we do that the business will be where it should have been and ultimately will return back to sort of a more normal cadence of payer that.

I think maybe there's a little confusion around two things women's experience on dating apps has always been front and center and very important it's important to attract and retain women.

Yes, just picking up on that in terms of expenses is kind of early to say what is going to happen from AI in terms of expenses just because we don't know exactly what kind of efforts are going to be needed I would point out a couple of things. Obviously, one we're mindful that some of these areas of AI and the folks needed to undertake those efforts can be very expensive.

And that obviously helps attract and retain men and so we've always been very focused on that aspect of the experience.

That's a little different than women, making the first move and things like that what we're talking about really is the fundamental experience of women on the dating apps are they finding the people that they want to find are they treated respectfully. Those are the things that are really critical to women enjoying their experience on the app and that's really what we're focused on and talking about so it's.

And so we want to do this in a smart way certainly we will try to leverage outside vendors and third parties wherever we can and I'm sure more and more of those are going to crop up. So we're not planning to build a massive team focused on these efforts and really balloon expenses as a result of that.

Speaker 4: So hopefully that's helpful to give people a better understanding what's going on. And you know this is a project that's never going to truly finish, So there's a big bulk of work. That's a little bit of catch up, but ultimately, on a regular basis, we need to be optimizing price, we need to be thinking through the dynamics in these markets and tendinders is going to do so going forward.

Not a payers thing it's not a revenue thing in particular, that's not to say there won't be some levels of revenue associated with improving the women's experience, but we're talking about making the experience at tinder in particular really something that women enjoy and come back for and seek out.

I will also tell you that we have significant capabilities in this area already at Tinder as well as at hyper connect so that we can leverage some of those capabilities and certainly a place like Hyperconnected were in Korea. These these types of engineers are much more readily available and much less costly gives us a good platform to expand those efforts and so.

And that's what we're trying to evolve and that's going to be a large body of work over multiple quarters. It's not just one feature here or there.

We're very mindful of trying to keep the expenses under control as we build out the AI efforts and will leverage either outside parties or the capabilities, we already have like the hyper connect business.

Speaker 1: Our next question comes from Dan sandmer. moy new new Street research, keep go head.

In terms of your question on free cash flow, we are becoming more and more of a cash taxpayer so that might be something that people have underestimated, but I do think we're going to generate approximately.

$800 million this year and I do think that number will increase over time. So there's a significant amount of free cash flow generation, which factors into our capital allocation policy.

Speaker 13: Any either.

Speaker 13: We CAn't hear you.

Our next probably have time for one or two more.

Speaker 14: Thank you, Sorry about that. Do your now.

Sorry go ahead operator.

Speaker 15: Again.

Speaker 14: Okay good stuff. So I just wanted to ask you a little bit more about Tinder's brand campaign. It sounds like you're happy with the early returns on it. Maybe can you talk a little bit more about where it goes from here. You mentioned is expanding it into new markets, but is regular marketing support of this nature something you see is an ongoing thing?

Thank you. Our next question comes from Brad Erickson with RBC. Please go ahead.

Got it thanks.

Sure.

Yes. Thanks, just a couple follow ups here I think.

Our next question comes from Cory Carpenter with Jpmorgan. Please go ahead.

The company had looked at some of these features geared for women and that largely I guess, not really decided to pursue them. So I guess just.

Thank you Gary touched on the App store is a bit in your prepared remarks, but hoping you can expand on your thoughts around some of the developments like the epic.

What's changed maybe speak to any testing data from these early efforts kind of reinforced the thesis there and how do you think about payer penetration on that those products relative to tinder overall, and then I might have missed it from earlier, but just quickly on the free cash flow guide I think that was a little bigger step down versus the revenue revenue or EBITDA.

It feels early duals concessions in the UK etcetera, and just what you think the potential impact could be to match. Thank you.

Speaker 14: The brand need to be supported regularly. Happy with the creative, was there other iterations coming along those lines? And maybe, if I can just look in one more to dec ay Gary, obviously the Board made a fairly significant change in making a commitments to return 50% of free cash flow every year and obviously buybacks are going to be a big part of that.

This is an important question Cory and they left you like one minute for me to answer it but I'll do the best that I can so look there's been a lot of positive developments.

Just anything to call out there that's driving that any comments on sort of general free cash conversion relative to EBITDA going forward. Thanks.

Sure why don't I take that.

To do relatively quickly and look on the women's experience.

Speaker 14: Maybe just one quick one are you considering a dividend?

We'll be the first to admit that the progress in these areas are a lot slower than any of us would like the wheels of justice turn slowly as an expression for a reason, but ultimately we think that we're going to get to a point, where theres going to be meaningful changes to the app store ecosystem to make them more fair and to benefit consumers. So you <unk>.

I think maybe there's a little confusion around two things women's experience on dating apps has always been front and center and very important it's important to attract and retain women and that helps attract and retain men and so we've always been very focused on that aspect of the experience that's a little different than women, making the first move and things like that what we're talking.

Speaker 9: greatade. Thanks so much Dan, for the question. I'll handle the first part and Gary can handle the second part of the question. First, I want to thank you for asking that question around the marketing campaign, because we have a fantastic team that has been working really hard to get this campaign out in the marketplace.

Epic Apple Theres also been things going on in the U K CMA.

About really is the fundamental experience of women on the dating apps are they finding the people that they want to find are they treated respectfully. Those are the things that are really critical to women enjoying their experience on the app and that's really what we're focused on and talking about so it's not a payers thing it's not a revenue thing in particular.

Speaker 9: one of the observations that I made upon joining Tinder and leading that organization is that historically we've relied too much on viality of the app to spread in the marketplace.

<unk> decision as well as other things in various markets that we think make it likely that developers will at a minimum be able to offer alternative payment systems to customers, which we think will result in improved conversion and also really enhanced customer satisfaction. So we're looking forward to that.

Speaker 9: We have not invested enough in that brand narrative and that narrative is kind of taken its own story and that's why this team that we put in place when in with a tremendous amount of passion and energy and speed, and the idea that it all starts with a swipe really tells this story around the multiple different possibilities that can come from jumping into Tinder first time.

That's not to say there won't be some levels of revenue associated with improving the women's experience, but we're talking about making the experience at tinder in particular really something that women enjoy and come back for and seek out.

In the EU and in some other jurisdictions like India, we think theres going to be changes that are going to result in app store fee changes as well, particularly as a result of the DMA.

And that's what we're trying to evolve and that's going to be a large body of work over multiple quarters. It's not just one feature here or there.

Speaker 9: We're jumping in the second time and the great experiences that come from that.

In Europe or in the EU in 2024, so thats, a big one to monitor which I think people generally are aware of.

Speaker 9: Now this is a multistaged approach and the goal of the campaign initially is to drive brand perception.

No specifically if theres epic Apple case is going to result in App store fee relief, but its very possible. It remains to be seen if that's going to lead ultimately to App store fee relief and then when you sort of factor all this in with all of these different changes and things going on in all these different jurisdictions I think what it means is the app stores have to ask themselves.

Speaker 9: The good news around, that is, we're actually starting to see really strong early momentum, specifically with the market that we're targeting women ages 18 to 24, and we see increases of over three points in both brand consideration as well as intent.

$800 million this year and I do think that number will increase over time. So there's a significant amount of free cash flow generation, which factors into our capital allocation policy.

A question, which is are they going to respond to these changes in a piecemeal basis and have different policies and fee structures and approaches in different markets or are they going to have one global policy that addresses all of these really significant and valid concerns and change app store policies to reflect a more fair app store eco.

Speaker 10: That's great progress, just knowing that we're a couple months in and we're in major markets here in the United States and in the U K. I personally see it all over Los Angeles, especially in my commute from Manhattan Beach over to the Tinder headquarters. Now, as Gary has said, we started to see some really strong improvement in top of funnels. That's great to see as well, but this is the first stage.

Got it thanks.

Sure.

Our next question comes from Cory Carpenter with Jpmorgan. Please go ahead.

Thank you Gary you touched on the App stores a bit in your prepared remarks, but hoping you can expand on your thoughts around some of the developments like the epic it feels early google's concessions in the U K et cetera, and just what you think the potential impact could be to match. Thank you.

System for consumers and so that's what remains to be seen I think that probably plays out over the next 12 months and so we need to keep watching it.

Speaker 9: So what we're starting off is building that positive brand platform which we then can build upon, as our marketing teams are working super closely with our product teams and then down the road. I'm really excited about those next stages of the campaign which can describe more of our product features and what that means for the overall community and Tinder.

But I know Theres a lot of moving pieces on that I know you are trying to follow it closely and so I really do appreciate your efforts in that regard and we will continue to update on it.

This is an important question Cory and I left you like one minute for me to answer it but I'll do the best that I can so look there's been a lot of positive developments.

In terms of App store over the last six months and a lot of different jurisdictions. There is stuff going on in the court systems in different places there's stuff going on in the legislative process and Theres a lot of developments will be the first to admit that the progress in these areas are a lot slower than any of us would like the wheels of justice turn slowly as an expression for a re.

Take one more quick one question.

And our next question will come from Thomas do anyway.

Please go ahead.

Speaker 10: We expect that the long-term effects of these campaigns will be to improve a brand perception and then accelerate downloads and registrations.

Hey, Thanks for taking my question I just have one quickly is it possible to get a little bit more color on the new App that you guys are launching this summer.

Yeah.

Speaker 9: Gary, you want to take the second part sure, on capital allocation you, as we talk about in a letter, the company generates a significant amount of cash flow and we don't want to just build cash on the balance sheet for the sake of building cash in the balance sheet. We want to return it to shareholders, and so it's our responsibility to look, with our Board Directors, at all the tools that are available to return capital shareholders, which really include dividend and buybacks, and so're not going to rule anything out.

I can take that question.

But ultimately we think that we're going to get to a point, where theres going to be meaningful changes to the app store ecosystem to make them more fair and to benefit consumers. So you mentioned epic Apple Theres also been things going on in the U K CMA decision as well as other things in various markets that we.

We have a big announcement planned for later this month and we're really looking forward to telling everyone about it then.

I'm personally really excited about it so that's all that I can say on that one but to end closes out I want to thank everyone for joining our call and really appreciate everyones time.

<unk> make it likely that developers will at a minimum be able to offer alternative payment systems to customers, which we think will result in improved conversion and also really enhanced customer satisfaction. So we're looking forward to that.

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Speaker 4: The Board authorized a new large share buyback and that's our plan to implement that. But you, the world has evolved, valuations of evolved. We're not happy with where our stock price isand to the extent that you, dividend makes sense at some point in the future, we're afraidto consider that. So we'll look at all the tools, we constantly evaluate them and we'll see kind of what we think makes the most sense as a way to return the capital to shareholders.

In the EU and in some other jurisdictions like India, we think theres going to be changes that are going to result in app store fee changes as well, particularly as a result of the DMA.

In Europe or in the EU in 2024, so that's a big one to monitor which I think people generally are aware of.

Speaker 5: So that's our thinking on capital allocation.

Speaker 14: ok very helpful, Thank you, goodbye.

No specifically, if there's epic Apple case is going to result in App store fee relief, but its very possible. It remains to be seen if that is going to lead ultimately to app store fee relief.

Speaker 1: Our next question comes from sh majuria with a core. I SI Please go ahead.

And then when you sort of factor all this in with all of these different changes and things going on in all these different jurisdictions I think what it means is the app stores have to ask themselves. The question, which is are they going to respond to these changes in a piecemeal basis and have different policies and fee structures and approaches in different markets or are they going to have one global policy that addresses all.

Speaker 16: Okay Thank you very much for taking my question. Could you please talk about hing you? You're guiding to four million in annual revenues, are you're reiterating your guide? But how should we think about Hinge sustainable growth and margin profile as an asset, and what gives you confidence that hing inder both can grow concurrently? Thank you.

All of these really significant and valid concerns and change App store policies to reflect a more fair app store ecosystem for consumers and so that's what remains to be seen I think that probably plays out over the next 12 months and so we need to keep watching it.

Speaker 4: Sure let me take that one thanks. What? What I would say first of all, on Hinge, obviously we're very pleased with the traction that the brand has and and by that I mean a couple of things. You know, first of all it's to resonance. You know it's a ability to resonate in market outside of core English speaking market. That's something that was not aassured.

But I know Theres a lot of moving pieces on that I know you are trying to follow it closely and so I really do appreciate your efforts in that regard and we will continue to update on it.

Speaker 4: And when we go into a market like France, which is different than a market like Germany culturally, and the fact of the brand resonates and gets organic traction and both markets, that's really encouraging and tells you that the that the brand really has the ability to expand around the world and know the fact that the br has significant organic traction, the market like India, which obviously very different than France or Germany or any other European market, without any marketing or other efforts by hing in that market.

Take one more quick one question.

My last question will come from Thomas <unk> with <unk>.

Please go ahead.

Hey, Thanks for taking my question I just have one quickly is it possible to get a little bit more color on the new App that you guys are launching this summer.

Yes.

I can take that question.

We have a big announcement planned for later this month and we're really looking forward to telling everyone about it then.

Speaker 5: That's a very encouraging sign for you know, global expansion as well. So that's the first point and we really do believe that the product experience that Hinge as well as there brand story around designed to be leaded, are both really resonating with users and that's really a critical fact. The other thing I would point out is that hinges very early and it's monetization journing.

I am personally really excited about it. So that's all that I can say on that one but to end close this out I want to thank everyone for joining our call and really appreciate everyones time.

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Speaker 5: It's got a lot of runway mzation. It's got a lot of runway globally on user growth. So it's still has a lot to do and a lot of runway and we're focused on on capturing that and it's just really a matter of time for all that to happen. So when you factor that all together in terms of kind of what do we think that means from a numbers perspective? You know we think that Hinge can maintain growth rates around what it's going to do this year on a percentage basis and drive to be a billion dollar plus revenue business over the next few years.

Speaker 5: Know, if you look at, let's say, a four or five year plan, and I think it can do that by making the right levels of investments over the next few years in international expansion, just as we're doing in Europe this year. andso I think that that will put some pressure on margins. A hing over the next couple of years of the growth continues to be very strong and then gradually the business will get to a level ofmargin that's more consistent with the overall company level margins and so we're looking forward to seeing that kind of financial performance out of out of hing.

Speaker 4: We took a lot of effort in the shareholder letter to talk about how we think there's ample opportunity for both Tinder and hing to grow at the same time and that we think the cannibalistic of facts of Tinder on hing- sorry, of Hinge on tinder- are not as much as as people may think. So I'm not going to reiterate all that there, but I will just emphasize that we said in the letter which is important, understand which is that, which is that the product experience at Tinder and Hinge are different and the brand eth, those of Tinder and Hinge our different and and consumers under understand that and some consumer prefer one to the other but many, especially young users, use both because the use them for different purposes and they like certain aspects of one and certain aspects of the other.

Speaker 4: And so all of that tells us that we can grow Hinge and Tinder simultaneously and that the overall impact of having both of those brands in a given market is accretive to match groups, overall growth, much like we're seeing in the French market with some of the data that we provided in a shareholder letter. Hopefully that gives you some some color to your question.

Speaker 16: Yeah that's helpful, thanksg.

Speaker 1: My next question comes from John blackwo with Co. Please go ahead.

Speaker 5: Great I thought there is interesting color in the shareholder letter on tenders paying user opportunity in North America. In Europe in the 18 to 34 demo Gi tender's recent paying user growth challenges. What you you see is as kind of key drivers of getting both the lapse and or never been users to the platform and as a follow up it feels like what you laid out implies there's ample runway over time for further tender payer paying user growththanks.

Speaker 4: Sure thanks, John . So it's important to understand that reactivating laps users- tender has always been one of its key components of growth and something that they've actually been very good at historically. And as you point out and we said in the letter, there's a very large pool of laps users for tender to go ahead and reactivate. But what we've seen in the last few quarters is that the tender as a tender product experience has not met some users expectations.

Speaker 4: Tender' ability to reactivate those lapsed users has declined as well. So, if you put it kind of simply, tender hasn't given laps users enough reason to come back to the product and so as, as the team led by B K improves the product experience, we're optimistic that tender success rate in reactivating these laps users will also increase.

Speaker 17: And we can really say.

Speaker 4: The same thing for attracting new users. As well as that, as the product experience and the brand narrative improve, Tinder should do a better job of attracting new users. Now obviously it's much easier to reattract the last user who use the product before than someone knew who's never tried it. But Tinder has to succeed on both bronts- attracting last users and new users- to achieve the level of growth in terms of overall user growth that we think Tinder needs to achieve.

Speaker 4: So it needs to push on both fronts and accomplish that. But you know, as you said in the letter again makes clear, there's a big pool of llast users in the developed markets to Europe , North America for Tinder to go and reactivate and there's a really big pool of never tried users in in other geographies and aac and the rest of the world that have never tried Tinder.

Speaker 5: So there's ample runway for growth, both in terms of reactivating the last users and also attracting first time users that Tinder can go and it's really just a question of product and brand execution to really achieve the level of user growth that we would like to see attend.

Speaker 18: Thank you.

Speaker 1: My next question comes from Lauren jinkquwith. mor-tage, anily go ahead.

Speaker 14: Great thingss may would just one on Hinge. If you think about international exp, ansion- I think you're now- and all the major markets that in Europe . How are you thinking about second half expansion? Any thoughts or timing around when the app might enter Asia? ersunderstanding, those markets are still a little bit difficult right nowthank.

Speaker 9: Thanks Lauren, for the question. I'm really excited about Hinge's performance. Like Gary mentioned, we're on track to hit $4 million this year and that's incredible from where we started with Hinge joining the family just five years ago.

Speaker 9: The progress that hinga has made so far is the fantastic, but Hinge international expansion continues to be one of my top priorities for this yearwhen we go into these markets, we don't just localize the apps, So we actually culturalize these apps and make the experience what makes sense for daters in each of these individual markets. That also extends across our marketing message.

Speaker 9: So to you the European term, we do a bespoked approach of going to market but also entrenching ourselves in these markets as well. So our plan this year is to establish Hinge across Europe as the intention dating.

Speaker 10: It's really important for us that we continue on this steady path throughout the year. We are in most markets today, but we have a lot more work to do, and that's going to unveil itself over the next.

Speaker 10: Year we're actually going to consider new markets outside of Europe in 2024, but we're focused on Europe in 2023. thanks for the question, marn.

Speaker 1: My next question comes from Alexander grevery with goodldmanstack. Please go ahead.

Speaker 14: Thank you for taking my questions. So, in the context of you Q2 revenue guide, which anticipates low single-digit growth, can you give us a bit more color on how should we should- think about the building box if you updated 23 revenue guide? What are the different assumptions that went into the guide initially and how did these evolve since the last update?

Speaker 14: And then lastly, what are some potential areas of upside or done downside when thinking through 23 revenue growth? Thank you.

Speaker 5: Here I'll take that one So as we talked about in the letter you, we're confident that we're going to get to Q4, Tinder direct revenue growth and total company revenue growth rates year over year in the double digits. It's still a little early the pinpoint exactly what level in there because we're only at the beginning of May. There's a lot of initiatives and played, a lot of momentum building in the business, So we really need to see a little bit more how things are going to play out.

Speaker 5: But obviously April has been encouraging, as I talked about, and so we feel good about the potential for exit rates in Q4. So if you look at kind of what we achieve in Q1, you look at what our outlook is for Q2 and then what we think is going to have my Q4, you extrapolate Q3 to get there, you end up with a growth rate overall of around five or so percent, sort of in that, in that neighborhood.

Speaker 5: The biggest swing factor, which I'm sure is the parent to you into others as well, is really, you know what's going to happen in terms of the tender trajectory, the marketing campaign, the momentum at the top of the funnel, as well as all the revenue initives that we have in place. ourare really going to determine where exactly we land for the full year growth rate and certainly the qfour x rate.

Speaker 5: So that's really the big swing factor and we've given, I think, a lot of color on what we're seeing and what gives us confidence in where we're going. The other thing that we're monitoring is the macro environment which I mentioned is having impact on AL C. C a tender which is a reasonably significant component of its revenue and you know right now we're not seeing any big movement one way the other terms- of our expectations on what actually happening AL a cart.

Speaker 4: So our trajectory for the year assues that AL C of continues the way it's been, with not, you know, major swings up or down. That is a potential swing factor or change in assumption. But right now we don't see any evidence that our assumptions around AL a cart are in appropriate and so that's all, I think, properly baked into our outlook at this point So that those are the things that we're watching of the year progress.

Speaker 19: Thank you.

Speaker 1: My next question comes from Benjamin barke with: don't you B Please go ahead?

Speaker 20: Thanks for the questionions of pivoting to cost you obvious, serious SER to the guy for AI margin to be at least flat in 23. So if we look beyond absolute few changes, what are the major swing factors that could drive offside downside, there room to tighten up the cost structure any further? And how should we thinking about the trade-off between revenue growth and expense moderation of the legacy brands?

Speaker 21: What sort the baked in your outlook therethank.

Speaker 4: Pure So in terms of margins, you know first of all we're committed to maintaining flat better margins for the year and so you know that is one of our guiding principles around this. So I think the biggestyou know swing factor the year is what I just talked about with Alexander's question, which is really around tinders's trajectory. tinders of very high margin business and the more growth we out tender, the margin we get of tender, the more that's going to help improve the overall company margins.

Speaker 5: So that's the biggest swing factor. So obviously, driving growth ththe Tinder is job one in terms of your question around cost savings, you know we we are being very disciplined around costs, very thoughtful on the marketing side on on expens is generally know there's always more you can do, but our first goal is to drive revenuegrowth And so we want to be thoughtful about the tradeoffs generally between cost savings and revenue growth and we're going to we're going to protect the ability to continue to grow revenue because of said before, that really is job one within the confines of maintaining flat better margins for the company for the full year.

Speaker 4: In terms of the trayoffs we're making at the evergreen brands, you know that is obviously a source know reducing marketing spend there to spend more and marketing tind and hing, as we see momentum in those businesses, it makes us want to spend more into those marketing efforts and so we're trying to calibrate that which is our job terms of managing a portfolio right now.

Speaker 5: I feel like our outlook for the year contemplates a sufficient level of marketing spend at the evergreen brands to maintain, you know, declines in those brands that our manageable and allow us to invest at the levels we feel we need to invest in at both Hinge Tinder, as well as some new initiatives like the League and the new P that're talking about rolling out in the summer.

Speaker 5: So I think all of that is appropriately incorporated into our outlook for the year and leaves us with the ability to generate flatter, better margins, as we've been saying.

Speaker 21: Great Thank you very much.

Speaker 1: The next question comes from Justin Patterson. With you, Please go ahead.

Speaker 22: Great Thank you very much. Perhaps a multipart picture your question day. You're not alone in saying AI is the meaningful. platformshifts, like mobile match does have all history of navigating platform shifts, albeit with new brands, often in emerging and legacy brand slowing. Can you tease out how you think this can transform the dating experience and how it changes the opportunity set through the existing brands and and some new ones you re inkqbating?

Speaker 22: Is that something you can build organically or acquire your way into? And then for gairary, how does AI change your expense profile over time? Thank you.

Speaker 9: greatay. Justin, I'll take the first part of that question. Well, I think the last couple of months have been super inspiring for me personally, as well as our teams.

Speaker 9: We're aligned with our leadership team and our management team around AI, that thinking that AI could be transformative to the total category.

Speaker 9: The way that I guess I think about it is like is the data experience and improving that dataor experience by utilizing AI. Maybe you can like step through an experience of of. You know, some of our data are in our apps and then they sometimes need help getting unstock or thinking about. You know how do I open up a conversation and usually built phone a friend and sometimes that friend is not available.

Speaker 9: Imagine that AI can instantaneously help, instead maybe helping and nudging people to pick great date ideas, opening up a conversation, how to like continue that conversation in some clate cases closing out a conversation and not ghosting someone in our apps.

Speaker 10: It's really still very early, but the team is focusing on how this can transform dating.

Speaker 9: But one thing that I do want to clarify is that I do not believe that AI can replace IRL dating.

Speaker 9: True human connections are core to our business and we think that we can utilize AI to help people get together in the real world.

Speaker 10: We have a great team, including our new ctto, working on this and we're embracing really new exciting ideas.

Speaker 10: We're really excited to present more updates to you all in the upcoming quarters and we have to make some decisions around. Either we build, we buy or we repartner. But it's still too early to say.

Speaker 5: Yes and just picking up on that in terms of expenses, it is kind of early to say what is going to happen from AI in terms of expenses, just because we don't know exactly what kind of efforts are going to be needed. I would point out a couple of things, obviously. 1, we're mindful that some of these areas of AI and the folks needed to undertake those efforts can be very expensive, and so we want to do this in a smart way.

Speaker 4: Certainly we'll try to leverage outside vendors, third parties, wherever we can, and I'm sure more and more of thoseare going to crop up. So we're not planning to build a massive team focused on these efforts and really balloon expenses as a result of that. I will also tell you that we have significant capabilities in this area already- a tender as well as a hyperconnectsso that we can leverage some of those capabilities, and certainly a place like Hyperconnect, where in Korea these types of engineers are much more readily available and much less costly- give us a good platform to expand those effortsand So we're very mindfulof trying to keep the expenses under control as we build out the AI efforts, and we'll leverage either outside parties or these capabilities we already have, like the Hyperconnect business.

Speaker 3: I ly up time for one or twoish was PIC.

Speaker 23: Very good Opera.

Speaker 1: Thank you. Your next question time from Brad ericksonand RBC. Please still ahead.

Speaker 21: Yes I think it's just a couple follow-ups here. I think historically the company had looked at some of these features geared for women and had largely- I ess- not really decided to pursue them. So I guess just what's changed? Maybe speak any testing data from these early efforts kind of reinforce the theis there? And how do anything about payer penetration on that, those products relative to Tinder overall?

Speaker 24: And then I mightt have missed it from earlier. But just quickly on the free cash flow guide, I think that was a little bigger step down versus the UE revenue or EBITDA. So maybe just anything that call out there that's driving that. Any comments on sort of general free cashconversion relative EBITDA going forwardthank?

Speaker 5: Sure what Don T I take? That I'll try to do relatively quickly. Look on the women's experience. I think maybe you know there's a little confusion around two things. Women's experience on dating <expletive> has always been front and center and very important. It's important to attract and retain women and that obviously helps toattract and retain men, and so we've always been very focused on that aspect of the experience.

Speaker 4: Know, that's a little different than women making the first move and things like that. What we're talking about really is the fundamental experience of women on the dating apps. Are they finding the people that they want to find? Are they treated respectfully? Those are the things that are really critical to women enjoying their experience on the app and that's really what we're focused on and talking about.

Speaker 4: So it's not a payers thing, it's not a revenue thing in particular. That's not to say there WOn't be some levels of revenue associated with improving the women's experience, but we're talking about making the experience at tender, in particular, really something that women enjoy and come back for and seek out, and and that' what we're trying to evolve andthat's going to be a large body of work over multiple quarter, S. It's not just one feature here or there.

Speaker 4: In terms of your question on on free cash flow, you know we are becoming more and more of a cash taxpayer, So that might be something that people have underestimated, but I do think we're going to generate approximately, you know, eight million this year and I do think that number will increase over time. So you know there's a significant amount of free cash flow generation which factors into our capital allocation policy.

Speaker 25: Got a thanks.

Speaker 26: Sure.

Speaker 1: Our next question comes from correy Carpenter with jt Morgan did so ahad.

Speaker 3: Thank you, Gary. Touched on the app stores a bit in your prepared remarks but hoping you could expand on your thoughts around to Lim developments like the eic and Apple appeals lyning, Google's concession in the U K, et cetera, in just what you think the potential impact could be to match. Thank you.

Speaker 5: There's an important question court, and they left like one minute for me to answer, but I'll do the best that I can. So look, there's been a lot of positive developments in terms of app store over thelast six months in a lot of different urisdictions' stuff going on the court systems in different places' stuff going on in the legislative process, and there's a lot of developments.

Speaker 4: You know we'll be the first to admit that the progress in these areas are a lot slower than any of us would like know. The wheels of Justice turn slowly, as you know- an expression for reason- but ultimately we think that we're going to get to a point where there's going to be meaningful changes to the app store ecosystem to make them more fair and to benefit sumers.

Speaker 4: So know, you mention Epic Apple "S also been things going on in U K C M M a decision, as well as other things in various markets that we think make it likely that developers will a minimum, the to offer alternative payment systems two customers, which we think will result in improve conversion and also really enhance custommer satisfaction. So we're looking forward to that.

Speaker 4: In the E? U and in some other jurisdictions like India, we think there's going to be changes that are going to result in app store fee changes as well, particularly as a result of the D M? A in euro or in the? U in 2020 four. So that's a big one to monitor which I think people generally are aware of. You know, I don't know specifically if this Epic Apple case is going to result in app store fee relief, but it's very possible.

Speaker 17: It remains to be seen if that's going to lead ultimately to app store fee relief. And then we sort of factor all this in with all these different changes and things going on in all these different jurisdictions. I think what it means is the app stores have to ask themselves a question: which ES are they're going to respond to these changes in a piece meal basis and have different policy, these and fee structures and approaches in different markets, or they're going to have one global policy that addresses all of these really significant and valid concerns and change app store policies to reflect a more fair app store ecosystem for consum.

Speaker 4: And so that's what remains to be seen. I think that probably plays out over the next 12 months and so we need to keep watching it.

Speaker 4: But I know there's a lot of moving piece on that. I know you're trying to follow it closely, and so I really do appreciate your efforts in that regard, and we'll continue to update on it.

Speaker 8: Take one more crow question.

Speaker 1: The last question will come from pomas. Still anyways people, Please go ahead.

Speaker 27: Thanks for taking my question. I just have one quickly. Is it possible to get a little bit more color on the new app that you guys are launching the summer?

Speaker 9: I can take that question. We have a big announcement plan for later this month and we're really looking forward to telling everyone about it. Then I'm personally really excited about it. So that's all that I can say on thatt 1, but to end and closes out, I want to thank everyone for joining our call and really appreciate everyone's time.

Speaker 1: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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