Q4 2023 Match Group Inc Earnings Call

[music].

Welcome to the match group fourth quarter 2023 earnings Conference call.

All participants will be in a listen only mode.

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Please note this event is being recorded.

Speaker Change: I would now like to turn the conference over detainee Shelburne Senior Vice President of Investor Relations. Please go ahead.

Speaker Change: Thank you operator, and good morning, everyone. Today's call will be led by CEO, Bernard can and president and CFO, Gary slip or don't make a few brief remarks, and then we'll open it up for questions before.

Before we start I need to remind everyone that during this call. We may discuss our outlook and future performance. These forward looking statements may be preceded by words, such as we expect we believe we anticipate or similar statements. These statements are subject to risks and uncertainties and our actual results could differ materially from the.

Speaker Change: Use expressed today some of these risks have been set forth in our earnings release and our periodic reports with the S. E C with that I'd like to turn the call over to BK.

BK: Thanks, Tony Good morning, everyone and thank you for joining today's call.

BK: As I reflect on 2023, I am deeply proud of the accomplishments and progress that we made as a team just one year ago, we introduced an entirely new operating structure with several new leaders put in place across Tinder hinge M G Asia and E N.

BK: And it's been working together, we deepened our focus on execution and innovation, helping lay the foundation for sustained longer term growth at the same time, we recaptured financial momentum ending the year with strong revenue growth and our third consecutive quarter of rec.

BK: <unk> a O y.

BK: Before we dive into more detail regarding our ambitious plans and goals for this coming year I wanted to take a moment to recognize Fei I said to Luna as tenders, new CEO, which we announced earlier this month.

BK: Fay has been an impactful leader at match group for several years and most recently as C. O O of Tinder her intimate understanding of the online dating category as well as her deep expertise in strategy and business development. Among many other skills are just a few of the reasons why I believe Fay.

BK: <unk> is best suited to lead tender in its next chapter of growth.

BK: <unk> is also supported by Tinder strong management team, which we set in place last year, giving me the utmost confidence in their ability to execute together.

The plans for Tinder reflect our shared vision and I look forward to working with her and the team along this journey.

BK: Now taking a step back at match group, we come to work highly motivated every day to foster genuine human connections, but the tools and technologies that people use to connect match and date today must evolve to meet modern expectations of today's daters and as tinder once.

BK: Did a decade ago, it's imperative that we boldly innovate to create engaging joyful and exciting experiences for users on our apps. There are certain things that are table Stakes for us we need to continue to foster online communities, where women and all under represented groups of people.

BK: Can show up at their true authentic self feel safe and be respected but this new generation of singles. This digital first and expect platforms like ours to allow daters to showcase their unique personalities and engaging setting and be shown highly curated matches.

BK: In 2024, our Roadmaps are shaped with this in mind.

BK: First we are working to improve existing dating apps, beginning with our two largest brands tinder and hinge.

BK: Leveraging AI Tinder will focus on creating a more inclusive experience beginning with improving the gen Z and women's experiences while solving for key user pinpoints across the dating journey.

BK: At Tinder banner team are relentlessly focused on modernizing the existing experience for example, take tenders effortless swipe feature in 'twenty 'twenty four tinder plans to build on the swipe right and swipe left mechanism by adding in more discovery gestures to better align with too.

BK: As behaviors and expectations.

BK: Not only will users be able to like as they always have but now they will be able to swipe up to engage deeper and profiles and swipe down for a revamped new explore experience tinder.

BK: Tinder is also working on several features that give us that give women real and relevant experiences every time they come into the app.

BK: This will include increased trust and safety more focus on the right primary photos and improved curation of recommendations.

BK: By continuously improving the product building on what works while modernizing key features will produce an experience that aligns with what the next generations of Daters are expecting.

BK: 2023 was a year of execution and increase product velocity for Tinder, which set a strong foundation in 'twenty 'twenty four tinder is adopting a fast fail mentality.

Operator: Welcome to the Match Group fourth quarter 2023 earnings call. All participants will be in a listen-only mode.

BK: How did you that prioritizes rapid experimentation and testing.

BK: This approach is all about agility, if a new idea or feature doesn't yield the anticipated results. The team is prepared to quickly pivot absorbing valuable insights and move forward.

Operator: Did you need assistance? Please signal a conference specialist by pressing the star key followed by After today's presentation. There will be an opportunity to ask... To ask a question, you may press star then 1 on your telephone key. Thank you for watching, Star. Please note, this event is being recorded. I would now like to turn the conference over to Tani Shelburne, Senior Vice President of Investor Relations. Please go ahead. Thank you, operator. And good morning, everyone.

BK: We recognize that not every innovation will be a groundbreaking success. However, it's very willingness to embrace risk and learn from failures that fuels our growth.

BK: And when we do strike gold and not only elevates our business, but it sets a new standard for our users, which we will continually enhance.

Tani Shelburne: Today's call will be led by CEO Bernard Kim and President and CFO Gary Swidler. They'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 expect, we believe, we anticipate, or similar statements.

We look forward to sharing more over time, but I am confident that these changes will meaningfully transform tender in 'twenty 'twenty four and beyond as it builds on its roots and shapes of product experience that redefines dating yet again.

BK: Similarly, hinge is leveraging AI to further improve its powerful experience by re imagining meaningful connection.

Tani Shelburne: These statements are subject to risk 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 with the SEC. With that, I'd like to turn the call over to BK.

BK: Hinge envisions a focused and intention to experience that places guidance at the heart of a daters journey.

Hinge will aim to truly understand you and what you're looking for in order to introduce you to the right person sooner.

Bernard Kim: Thanks, Tani. Good morning, everyone, and thank you for joining us on today's call. As I reflect on 2023, I am deeply proud of the accomplishments and progress that we have made as a team. Just one year ago, we introduced an entirely new operating structure with several new leaders put in place across Tinder, Hinge, MGAsia, and E&E, and it's been working. Together, we deepened our focus on execution and innovation, helping lay the foundation for sustained, longer-term growth. At the same time, we recaptured financial momentum, ending the year with strong revenue growth and our third consecutive quarter of record AOI. Before we dive into more detail regarding our ambitious plans and goals for this coming year, I wanted to take a moment to recognize Faye Isoteluno as Tinder's new CEO, which we announced earlier this month.

BK: This redesigned experience will utilize the vast treasure trove of insights on profiles rich interactions and great dates that hinge has collected over several years.

Hinge will help users discover matches based on shared interests and highlight compatibility. In addition to many other features with the ultimate goal of improving dating outcomes for its users.

BK: This work will begin in 'twenty, 'twenty, four and I can't wait to share more as things progress.

BK: In 2023 we establish a central innovation team that has been making significant impact.

BK: In 'twenty 'twenty, four and beyond the team will focus on launching disruptive new brands that will grow the category and bringing those who may not have previously tried a traditional dating app. Additionally.

BK: Additionally, we're building internal technology capabilities in coordination with our central innovation teams to help improve our overall effectiveness as a company.

Bernard Kim: Faye has been an impactful leader at Match Group for several years, and most recently as COO of Tinder. Her intimate understanding of the online dating category, as well as her deep expertise in strategy and business development, among many other skills, are just a few of the reasons why I believe Faye is best suited to lead Tinder in its next chapter of growth. Faye is also supported by Tinder's strong management team, which we put in place last year, giving me the utmost confidence in their ability to execute together. The plans for Tinder reflect our shared vision, and I look forward to working with Faye and the team along this journey. Now, taking a step back, at Match Group, we come to work highly motivated every day to foster genuine human connections, but the tools and technologies that people use to connect, match, and date today must evolve to meet the modern expectations of today's daters.

While AI brings with it cost efficiencies and a potent optimization tool we view it as far more than just that.

BK: AI has played an important strategic role at match group for years from Trust and safety efforts to our matching algorithms and I believe it will play an even larger role moving forward.

BK: AI enables us to bring groundbreaking improvements across a daters journey, we expect it to touch every aspect of our apps by improving profile quality discover ability and matching and even more importantly, creating an even safer environment for our users to connect.

BK: N.

BK: The bets that we're making are bold and large scale changes like this do take time. However, we expect to make tangible progress through 'twenty 'twenty four as we rollout AI driven capabilities and feature enhancements within our existing apps and as new AI powered standalone apps begin testing in the.

Bernard Kim: And as Tinder once did a decade ago, it's imperative that we boldly innovate to create engaging, joyful, and exciting experiences for users on our app. There are certain things that are table stakes for us. We need to continue to foster online communities where women and all underrepresented groups of people can show up as their true, authentic selves, feel safe, and be respected.

BK: Market place.

BK: I am confident that early indications of momentum at Tinder, particularly from Gen Z and women will be evident in the second half of the year as a result of consistent brand narrative modernizing product and an ecosystem that celebrates human connection and inclusivity.

Bernard Kim: But this new generation of singles is digital first and expects platforms like ours to allow daters to showcase their unique personalities in an engaging setting and be shown highly curated matches. In 2024, our roadmaps are shaped with this in mind. First, we are working to improve existing dating apps, beginning with our two largest brands, Tinder and Hinge. Leveraging AI, Kindle will focus on creating a more inclusive experience, beginning with improving Gen Z and women's experiences, while solving for key user pain points across the dating journey. At Tinder, Faye and her team are relentlessly focused on modernizing the existing experience. For example, take Tinder's effortless swipe feature.

Ultimately, we recognize that our ability to deliver revenue growth and free cash flow is what gives us the freedom to pursue these ambitious roadmaps as we push the boundaries of innovation, we will maintain financial discipline, we will grow revenues.

BK: Maintain or enhance our margins and generate significant free cash flow, which will allow us to return capital to shareholders.

BK: 'twenty 'twenty four is about both delivering on our short term commitments and positioning our company for enduring long term growth.

BK: We've always been at the forefront adapting to technology shifts and will continue to lead this wave of change at the heart of our endeavors is an unwavering dedication to delivering products and services that delight our customers.

Bernard Kim: In 2024, Tinder plans to build on the swipe right and swipe left mechanism by adding more discovery gestures to better align with today's behaviors and expectations. Not only will users be able to like as they always have, but now they will be able to swipe up to engage deeper in profiles and swipe down for a revamped new explore experience. Tinder is also working on several features that give women real and relevant experiences every time they go into the app. This will include increased trust and safety, more focus on the right primary photos, and improved curation of recommendations. By continuously improving the product, building on what works, while modernizing key features, we'll produce an experience that aligns with what the next generations of daters are expecting. 2023 was a year of execution and increased product velocity for Tinder, which set a strong foundation. In 2024, Tinder is adopting a fast fail mentality, a strategy that prioritizes rapid experimentation and testing. This approach is all about agility.

And with that I will turn it over to Gary.

Gary: Thanks, PK and Hello, everyone. Thank you for joining us this morning.

Gary: Our business demonstrated strong financial performance again this quarter Tinder.

Gary: Tinder once again delivered double digit year over year direct revenue growth as did the company as a whole.

Gary: We achieved record quarterly alloy for the third consecutive quarter and record Oi for the second consecutive quarter further validating the steps we've taken to strengthen the business.

Match group's total revenue for Q4 was $866 million up 10% year over year, an acceleration from 9% year over year in Q3.

Gary: For the full year match group delivered total revenue of $3 $4 billion up 6% year over year with Oi of $1.3 billion representing margin of 37%.

Gary: Excluding the $40 million, we received as part of the Google settlement full year AOE margins would've been up 80 basis points compared to 2022 meeting our goal of flat or better year over year Oi margin.

Gary: Q4, Tinder direct revenue was up 11% year over year at $493 million.

Bernard Kim: If a new idea or feature doesn't yield the anticipated results, the team is prepared to quickly pivot, absorbing valuable insights and moving forward. We recognize that not every innovation will be a groundbreaking success. However, it's this very willingness to embrace risk and learn from failures that fuels our growth.

Gary: Tinder or P. P was up 21% year over year at $16.49 due to the effects of the U S price optimizations and weekly packages, we rolled out earlier in 2023.

Gary: We did see a continued pressure on users at tinder, both in the U S and globally during the November and December holiday months, resulting in a mid single digit year over year decline in new user registrations and reactivation in Q4.

Bernard Kim: And when we do strike gold, it not only elevates our business, but it sets a new standard for our users, which we will continually enhance. We look forward to sharing more over time, but I am confident that these changes will meaningfully transform Tinder in 2024 and beyond as it builds on its roots and shapes a product experience that redefines dating yet again. Similarly, Hinge is leveraging AI to further improve its powerful experience by reimagining meaningful connections. Hinge envisions a focused and intentioned experience that places guidance at the heart of a dater's journey. Hinge will aim to truly understand you and what you're looking for in order to introduce you to the right person sooner.

Gary: Q4, Tinder Payors declined 8% year over year to $10 million slightly below our expectations.

Gary: For the year Tenda delivered direct revenue of $1.9 billion up 7% year over year with Oi margins in excess of 50%.

Gary: Our hinge brand continue to perform very well hinge direct revenue growth accelerated to 50% year over year, a further six point acceleration over Q3.

Gary: Hinge Q4 payers were up 33% year over year to 1.4 million, while our P. P of over $28 was up 13% year over year in Q4.

Gary: For the full year his delivered direct revenue of $396 million, just shy of our $400 million target, primarily due to slower top of funnel growth in Q4 than we were anticipating.

Bernard Kim: This redesigned experience will utilize the vast treasure trove of insights on profiles, rich interactions, and great dates that Hinge has collected over several years. Hinge will help users discover matches based on shared interests and highlight compatibility in addition to many other features with the ultimate goal of improving dating outcomes for its users. This work will begin in 2024, and I can't wait to share more as things progress. In 2023, we established a central innovation team that has been making a significant impact. In 2024 and beyond, the team will focus on launching disruptive new brands that will grow the category and bring in those who may not have previously tried a traditional dating app. Additionally, we're building internal technology capabilities in coordination with our central innovation teams to help improve our overall effectiveness as a company.

Gary: Historically hinge has not seen a seasonal slowdown during Q4 like many brands see.

Gary: This Q4 for the first time hinge hinge did see that seasonal slowdown.

That said hinge has had a very strong start to 2024 in terms of top of funnel in every market and among virtually every age and gender cohort. So there's been a clear bounce back.

Match Group Q4, <unk> was $362 million up 27% year over year, including $40 million that was returned to us as part of the Google litigation settlement for margins of 42%.

Gary: Excluding the $40 million AOI would have been up 13% year over year and margins would have been 37%.

Gary: Operating income was $260 million in Q4 for a margin of 30%, 25% after adjusting out the impact of the Google settlement.

Gary: Q4, 2022 included in impairment of intangibles of approximately $100 million and Oi margin would've improved three five points if not for the impairment in 2022.

Bernard Kim: While AI brings with it cost efficiencies and a potent optimization tool, we view it as far more than just that. AI has played an important strategic role at Match Group for years, from trust and safety efforts to our matching algorithms, and I believe it will play an even larger role moving forward. AI enables us to bring groundbreaking improvements across a gator's journey.

Gary: Overall expenses, including SBC expense were down 11% year over year in Q4 down 5%, excluding the Google settlement excluding the.

Settlement cost of revenue, including SBC expense grew 5% year over year in Q4 and represented 29% of total revenue down one point year over year.

Gary: Excluding the settlement App store fees increased $17 million year over year 20 basis points as a percent of total revenue in the fourth quarter.

Bernard Kim: We expect it to touch every aspect of our apps by improving profile quality, discoverability, and matching, and, even more importantly, creating an even safer environment for our users to connect. The bets that we are making are bold, and large-scale changes like this do take time. However, we expect to make tangible progress through 2024 as we roll out AI-driven capabilities and feature enhancements within our existing apps and as new AI-powered standalone apps begin testing in the marketplace. I am confident that early indications of momentum at Tinder, particularly from Gen Z and women, will be evident in the second half of the year as a result of a consistent brand narrative, modernizing product, and an ecosystem that celebrates human connection and inclusivity. Ultimately, we recognize that our ability to deliver revenue growth and free cash flow is what gives us the freedom to pursue these ambitious roadmaps.

Gary: Selling and marketing costs, including SBC expense increased $32 million or 25% year over year in Q4, primarily due to increased spend at tinder.

Gary: Selling and marketing spend was up two points as a percentage of total revenue at 18%.

Gary: G&A costs, including SBC expense declined 2% year over year in Q4, and two points as a percent of revenue to 12% as legal and professional fees declined by $11 million year over year.

Gary: Product development costs, including SBC expense grew 21% year over year in Q4, primarily as a result of higher compensation expense due to increased head count at hinge and Tinder and were up one point as a percent of total revenue at 11%.

Gary: For Q1, 'twenty four we expect total revenue for match group of $850 million to $860 million up eight 9% year over year.

Gary: We expect FX to be a two point year over year headwind in Q1.

Gary: At Tinder, we expect direct revenue to be $480 million to $485 million up 9% to 10% year over year in Q1 again, we expect FX to be a two point year over year headwind.

Gary Swidler: As we push the boundaries of innovation, we will maintain financial discipline; we will grow revenues, maintain or enhance our margins, and generate significant free cash flow, which will allow us to return capital to shareholders. 2024 is about both delivering on our short-term commitments and positioning our company for enduring long-term growth. We've always been at the forefront, adapting to technological shifts, and we'll continue to lead this wave of change. At the heart of our endeavors is an unwavering dedication to delivering products and services that delight our customers. And with that, I will turn it over to Gary. Thanks, BK, and hello, everyone.

Gary: We expect our P P and payer year over year trends to be broadly in line with what we saw in Q4 with Q1, demonstrating less than half the sequential decline in number of payors than we saw in Q4.

Gary: Across our other brands, we expect direct revenue of $355 million to $360 million up 7% to 8% year over year.

Gary: Within our other brands, we expect hinge to deliver approximately $120 million of direct revenue in Q1 year over year growth of approximately 45%.

Gary: We believe that macroeconomic conditions and consumers' willingness to spend has remained relatively stable since our last earnings call. We have not seen any additional impact on our subscription or ALC revenue.

We expect match group of $270 million to $275 million in Q1, representing year over year growth of 6% and margin of 32% at the midpoint of the ranges.

Gary Swidler: Thank you for joining us this morning. Our business demonstrated strong financial performance again this quarter. Tinder once again delivered double-digit year-over-year direct revenue growth, as did the company as a whole. We achieved record quarterly AOI for the third consecutive quarter, and record OI for the second consecutive quarter, further evaluating the steps we've taken to strengthen the business. Match Group's total revenue for Q4 was $866 million, up 10% year-over-year, an acceleration from 9% year-over-year in Q3. For the full year, Match Group delivered total revenue of $3.4 billion, up 6% year-over-year, with AOI of $1.3 billion, representing margin of 37%, excluding the 40 million dollars we received as part of the Google settlement full year AOI margins would have been up 80 basis points compared to 2022 meeting our goal of flat or better year-over-year AOI margin, Q4 Tinder Direct Revenue was up 11% year-over-year at $493 million.

We expect overall Q1 marketing spend to increase by approximately $30 million year over year collectively at Tinder and hinge compared to the levels. These brands. We're spending at in early 'twenty three as we seek to reinvigorate user growth at Tinder and continue the stellar user growth at hinge in both core and European expansion markets during our peak.

Season in the first quarter.

Gary: That said, we continue to monitor closely for marketing efficacy and can pull back if we don't see the desired results.

Gary: We enter 2024 was solid revenue momentum and believe we are positioned to deliver total revenue of between 3.565 and $3.665 billion representing year over year growth of 6% to 9%.

Gary: At Tinder, we expect direct revenue of $2.025 billion to $2.075 billion or growth of 6% to 8% year over year. We believe this revenue target for Tinder provides the new leadership with sufficient room to focus on ecosystem improvements product improvements and user growth initiatives to drive sustainable long.

Gary Swidler: Tinder RPP was up 21% year-over-year at $16.49 due to the effects of the U.S. price optimizations and weekly packages we rolled out earlier in 2023. However, we did see continued pressure on users at Tinder, both in the U.S. and globally, during the November and December holiday months, resulting in a mid-single-digit year-over-year decline in new user registrations and reactiv Q4 Tinder payers declined 8% year-over-year to $10 million, slightly below our expectations.

Gary: Long term growth.

Gary: Our outlook assumes modest improvement in tinder user trends over the course of 2024, but not yet a return to year over year user growth.

Gary: We expect payer growth to improve through the year, achieving positive sequential payer net adds in Q3 and positive year over year payer growth by Q4.

Across our other brands, we expect direct revenue to be 1.480 to 1.5 $300 billion or 6% to 10% year over year growth.

Gary Swidler: For the year, Tinder delivered direct revenue of $1.9 billion, up 7% year-over-year, with AOI margins in excess of 50%. Additionally, our Hinge brand continues to perform very well. Hinge direct revenue growth accelerated to 50% year-over-year, a further 6-point acceleration over Q3. Hinge Q4 payers were up 33% year-over-year to $1.4 million, while RPP of over $28 was up 13% year-over-year in Q4. For the full year, Hinge delivered direct revenue of $396 million, just shy of our $400 million target, primarily due to slower top-of-funnel growth in Q4 than we were anticipating. Historically, Hinge has not seen a seasonal slowdown during Q4 like many brands see. This Q4, for the first time, Hinge did see that seasonal slowdown.

Gary: Within our other brands at hinge, we expect direct revenue of $535 million to $545 million, which represents growth of 35% to 38% year over year with a continued focus on driving share gains in hinges core and European markets.

Gary: We've assumed FX to be a 1.5 point headwind to full year 'twenty for total revenue growth.

Gary: We expect 'twenty 'twenty four indirect revenue of approximately $60 million up approximately 8% year over year.

Gary: For 2020 for our current anticipation is for margins to be at least 36%.

Gary: Our margin will largely depend on the various brands levels of revenue growth and how we calibrate certain investments that are critical to achieve our organic growth plans.

Gary: There are several key investment areas that are impacting margins that we'd like to call out.

Gary Swidler: That said, Hinge has had a very strong start to 2024 in terms of top of funnel in every market and among virtually every age and gender cohort. So there's been a clear bounce back. Match Group Q4 AOI was $362 million, up 27% year-over-year, including $40 million that was returned to us as part of the Google litigation settlement for margins of 42%. Excluding the $40 million, AOI would have been up 13% year-over-year, and margins would have been 37%. Operating income was $260 million in Q4 for a margin of 30%, 25% after adjusting out the impact of the Google settlement. Q4 2022 included an impairment of intangibles of approximately $100 million, and the OI margin would have improved 3.5 points if not for the impairment in 2022. Overall expenses, including SBC expenses, were down 11% year-over-year in Q4, down 5% excluding the Google settlement.

Gary: The first is that tinder in both product innovation and marketing as we reinvent the tinder experience, we're putting substantial incremental resources into product to improve the experience and cater better to women in Gen Z and in marketing to build a better brand narrative and higher awareness of the new and improved experience.

Gary: For 'twenty 'twenty, four we estimate $30 million to $40 million in incremental tinder expense from increased product innovation and marketing spend in 24 compared to 23.

Gary: The second is AI related investments in key brands and the development of new AI centric products as we believe AI can help improve our users' experience and bring resistors into the category as well as potentially expand our Tam.

Gary: We have a long list of product features being rolled out at tinder and hinge as well as plans to test new and different products that leverage AI throughout 2024.

Gary: Our current expectations for incremental 2020 for AI related spend of $20 million to $30 million of cross match group.

And finally investment in hinge, we're confident that hinge can be a billion dollar top line business and it has an ambitious plan over the next few years to build off its well regarded product and the traction. It has achieved in all markets entered.

Gary Swidler: Excluding the settlement, cost of revenue, including SBC expense, grew 5% year-over-year in Q4 and represented 29% of total revenue, down one point year-over-year. Excluding the settlement, App Store fees increased $17 million year-over-year, 20 basis points as a percent of total revenue in the fourth quarter. Selling and marketing costs, including SBC expense, increased $32 million, or 25% year-over-year in Q4, primarily due to increased spend at Tinder. Selling and marketing spend was up two points as a percentage of total revenue at 18%. G&A costs, including SBC expense, declined 2% year-over-year in Q4 and 2 points as a percent of revenue to 12%, as legal and professional fees declined by $11 million year-over-year.

Gary: While we anticipate significant operating leverage in this business long term during this hyper growth phase, we're managing the business to roughly flat margins in 2024 to ensure we're continuing to invest in the product innovation expansion markets and brand to help us realize hinges full potential.

Gary: In dollar terms that means that $40 million to $50 million incrementally is going into hinges product and marketing in 2024 compared to 2023.

Gary: All three of these investment areas are elective and can be calibrated as this year proceeds.

Gary Swidler: Product development costs, including SBC expense, grew 21% year-over-year in Q4, primarily as a result of higher compensation expense due to increased headcount at Hinge and Tinder and were up one point as a percent of total revenue at 11%. For Q124, we expect total revenue from Match Group to be $850-860 million, up 8-9% year-over-year. We expect FX to be a two-point year-over-year headwind in Q1. For Tinder, we expect direct revenue to be $480 to $485 million, up 9 to 10% year-over-year in Q1. Again, we expect FX to be a 2-point year-over-year headwind.

Gary: Because of the cost reduction actions and natural operating leverage of our business, we're able to target margins of at least 36%, while reinvesting roughly $100 million into the three key investment areas, which we expect to not only help us deliver growth this year, but position us for long term success specifically.

Gary: To one achieve sustained user payer and revenue growth at tinder to to capitalize on hinges full potential and three to ensure that we're the ones who introduced the next great innovation in the business of connecting people.

Gary: Importantly, we expect to begin to see tangible results from this investment this year not necessarily full payback on a dollar basis, but as BK outlined we expect to see better product experience at tinder, including improved satisfaction, among women and Gen Z and hinge, making progress on delivering its revenue goals and expanding market.

Gary Swidler: We expect RPP and payer year-over-year trends to be broadly in line with what we saw in Q4, with Q1 demonstrating less than half the sequential decline in the number of payers than we saw in Q4. Across our other brands, we expect direct revenue of $355-$360 million, up 7-8% year-over-year. Within our other brands, we expect Hinge to deliver approximately $120 million of direct revenue in Q1, a year-over-year growth of approximately 45%. We believe that macroeconomic conditions and consumers' willingness to spend have remained relatively stable since our last earnings call.

Gary: Sure.

Gary: We also expect to see AI driven features in our core brands as well as in new experiences we're positioned to make these investments and move our business strategically forward, while holding our already attractive margins approximately flat year over year.

Gary: As some of you may know Apple recently announced changes to their App store fee policies in response to the upcoming implementation of the digital markets Act in the European Union on March six.

Gary Swidler: We have not seen any additional impact on our subscription or ALC revenue. We expect Match Group AOI of $270 to $275 million in Q1, representing year-over-year growth of 6% and a margin of 32% at the midpoints of the ranges. We expect overall Q1 marketing spend to increase by approximately $30 million year-over-year collectively at Tinder and at Hinge compared to the levels these brands were spending at in early 2023 as we seek to reinvigorate user growth at Tinder and continue the stellar user growth at Hinge in both core and European expansion markets during our peak season in the first quarter. That said, we continue to monitor closely for marketing efficacy and can pull back if We enter 2024 with solid revenue momentum and believe we're positioned to deliver total revenue of between $3.565 and $3.665 billion, representing year-over-year growth of 6-9%. For Tinder, we expect direct revenue of $2.025 to $2.075 billion, or growth of 6% to 8% year-over-year.

Gary: We continue to analyze these changes and our preliminary estimate is an approximately $20 million annualized benefit.

Gary: However, apples new policies are merely a proposal and could change materially over time.

Gary: We expect any savings that we achieved from Apple's changes will help us meet or exceed our margin objective for the year.

Gary: Given the March implementation date, we don't anticipate significant Q1 impact.

Gary: Our $20 million annualized estimate does not include the benefit from use of alternative app stores or payment processors, nor have we included any benefits from policy changes in geographies outside the EU, which would be substantial for us.

Gary: We have said before that the DMA was likely to lead to changes to App store policies in the EU and likely globally.

Gary: We have seen the first brick fall in this regard and we expect more to come.

Gary: This is in addition to the recent decision by the U S. Supreme Court in the epic versus Apple case, and epics wind versus Google and its antitrust case.

Gary: We have not included any further benefits from App store changes in our outlook at this time as we want to watch how all of this continues to evolve, though we would point out that the $650 million, we paid to App stores in 2023 provides ample room for reduction.

Gary Swidler: We believe this revenue target for Tinder provides the new leadership with sufficient room to focus on ecosystem improvements, product improvements, and user growth initiatives to drive sustainable long-term growth. Our outlook assumes modest improvement in Tinder user trends over the course of 2024, but not yet a return to year-over-year user growth. We expect payer growth to improve through the year, achieving positive sequential payer net ads in Q3 and positive year-over-year payer growth by Q4. Across our other brands, we expect direct revenue to be $1.480 to $1.530 billion, or six to ten percent year-over-year growth. Within our other brands, at Hinge, we expect direct revenue of $535-545 million, which represents growth of 35-38% year-over-year, with a continued focus on driving share gains in Hinge's core and European markets. We've assumed FX to be a 1.5 point headwind to full year 24 total revenue growth.

Gary: We're pleased by the financial results, we achieved in the back half of 'twenty three in terms of both revenue growth and profitability. We have plans in place to deliver solid 24 financial performance, while enabling marketing and product initiatives to lead to improved user growth and position the business for sustained long term growth.

We continue to believe that match group provides a rare combination of revenue growth stellar profitability and substantial free cash flow generation. We have plans in place to supplement our shareholders' return with significant return of capital via share repurchases or potentially other means we believe few if any.

Gary: Companies in our space offered this combination of attributes to shareholders with that I'll ask the operator to open the line for questions.

Gary: We will now begin the question and answer session.

Gary: You ask a question you May press Star then one on your telephone keypad.

Gary Swidler: We expect 2024 indirect revenue of approximately $60 million, up approximately 8% year-over-year. For 2024, our current anticipation is for AOI margins to be at least 36%. Our margin will largely depend on the various brands' levels of revenue growth and how we calibrate certain investments that are critical to achieve our organic growth plans. There are several key investment areas that are impacting margins that we'd like to call out.

Gary: If youre using a speakerphone please pick up your handset before pressing the keys.

Gary: To withdraw your question. Please press Star then two.

Gary: At this time, we will pause momentarily to assemble our roster.

Gary: The first question today comes from sweat at coach area from Evercore ISI. Please go ahead.

Evercore ISI: Okay. Thank you for taking my question.

Gary Swidler: The first is at Tinder, in both product innovation and marketing. As we reinvent the Tinder experience, we're putting substantial incremental resources into product to improve the experience and cater better to women in Gen Z, and in marketing to build a better brand narrative and higher awareness of the new and improved experience. For 2024, we estimate $30 to $40 million in incremental Tinder expense from increased product innovation and marketing spend in 2024 compared to 2023. The second is AI-related investment in key brands and the development of new AI-centric products, as we believe AI can help improve our users' experience and bring new users into the category, as well as potentially expand our TAM. We have a long list of product features being rolled out at Tinder and Hinge, as well as plans to test new and different products that leverage AI throughout 2024. Our current expectations for incremental 2024 AI-related spend of $20 to $30 million across match groups, and finally, investment in Hinge. We're confident that Hinge can be a billion-dollar top line business, and it has an ambitious plan over the next few years to build off its well-regarded product and the traction it has achieved in all markets it enters.

Evercore ISI: Anything you can comment on Elliott stake in the company and your conversations with them. Thus far and then my follow up is for Gary.

Evercore ISI: Gary.

Evercore ISI: Could you please provide more color on your level of confidence in.

Gary: It adds turning positive in third quarter and positive year over year growth in the fourth quarter. Thanks a lot.

Speaker Change: Great. Thanks, right. After the first question.

Speaker Change: We've had collaborative dialogue with Elliott over the past few weeks ever since we learned about their stake in the company we.

Speaker Change: We are looking forward to continuing to engage with all of our shareholders, including Elliott.

And then on your questions around Tinder net adds you know I think as we've said in the letter and in our remarks, we have high confidence that we're going to see sequential improvement in tinder by Q3 on the net add side and then we will get some modest payer growth year over year by Q4, and that's a combination.

Speaker Change: <unk> are a few things most notably the product and marketing initiatives. We have that are that have been put in place through the course of 'twenty three and into 'twenty, four which we think will will drive the level of growth we need to achieve those those goals.

Speaker Change: Sequential net adds in Q3, and then payer growth year over year in Q4.

Speaker Change: And it's you know it's a series of things not just one specific thing that we're relying on or expecting to drive that as a series of improvements and initiatives.

Gary Swidler: While we anticipate significant operating leverage in this business long-term, during this hyper-growth phase, we're managing the business to roughly flat AOI margins in 2024 to ensure we're continuing to invest in product innovation, expansion markets, and brand to help us realize Hinge's full potential. In dollar terms, that means that 40 to 50 million dollars more are going into hinges product and marketing in 2024 compared to 2023. All three of these Because of the cost-reduction actions and natural operating leverage of our business, we're able to target margins of at least 36% while reinvesting roughly $100 million into the three key investment areas, which we expect to not only help us deliver growth this year but position us for long-term success. Specifically, to 1.

Speaker Change: That tinder has in the plans and so we think that will culminate in achieving the goals around payer net ads by the middle of this year.

Speaker Change: The next question comes from Lauren Shannon with Morgan Stanley. Please go ahead.

Lauren Shannon: Great. Thanks.

Lauren Shannon: Back on <unk>.

Lauren Shannon: What do you believe caused tinder user growth to be negative despite the incremental marketing spend and how will the marketing message evolved in 2024, if at all.

Lauren Shannon: And then just one on the once your EBITDA guide is that 25 million below the street is that just the incremental marketing pleasure you've been thinking about or are there. Other drivers there that we should take into account.

Lauren Shannon: And how should we think about the cadence of the tinder marketing spend through 'twenty four.

Speaker Change: Yeah. So I think it's important to understand kind of what went on in 'twenty three.

So that you can understand kind of the trajectory of the business you know we put in place a new brand narrative tinder something that we hadn't focused on for a long time. We finally did that in 2023 and when you try to put in place a brand narrative.

Gary Swidler: Achieve sustained user, payer, and revenue growth at Tinder. 2. To capitalize on Hinge's full potential. And 3.

Gary Swidler: To ensure that we're the ones who introduce the next great innovation in the business of connecting people. Importantly, we expect to begin to see tangible results from this investment this year, not necessarily full payback on a dollar basis, but as BK outlined, we expect to see a better product experience at Tinder, including improved satisfaction among women in Gen Z, and Hinge making progress on delivering its revenue goals and expanding market share. We also expect to see AI-driven features in our core brands, as well as in new experiences. We're positioned to make these investments and move our business strategically forward while holding our already attractive margins approximately flat year over year. As some of you may know, Apple recently announced changes to their App Store fee policies in response to the upcoming implementation of the Digital Markets Act in the European Union on March 6.

Speaker Change: And start to tell that story it takes time to build and so it doesn't translate into user growth.

Speaker Change: Immediately and in fact, what we saw in 23 was pretty good progress on the user growth side in the first half of the year as a result in part of the marketing initiatives I think we hadn't been in the market very effectively on the marketing side in a while and so we did see some really good user growth improvement from let's call. It February of last.

Speaker Change: Last year until the middle of the year and then in the second half of the year.

Speaker Change: Trends kind of reverted to where they had been down kind of mid single digits on the user side year over year.

Speaker Change: And.

Speaker Change: While we saw that step back we did continue to see movement in some key metrics that we focus on for the brand campaign brand consideration and improvement in consideration, particularly among younger women and so we were satisfied that the brand campaign was doing what we expected it to do over the course of 2010.

Gary Swidler: We continue to analyze these changes, and our preliminary estimate is an approximately $20 million annualized benefit. However, Apple's new policies are merely a proposal and could change materially over time. We expect any savings that we achieve from Apple's changes will help us meet or exceed our margin objective for the year. However, given the March implementation date, we don't anticipate a significant Q1 impact. Our $20 million annualized estimate does not include the benefit from the use of alternative app stores or payment processors, nor have we included any benefits from policy changes in geographies outside the EU, which would be substantial for us. We have said before that the DMA was likely to lead to changes to App Store policies in the EU and, likely globally. We have seen the first brick fall in this regard, and we expect more to come. This is in addition to the recent decision by the U.S. Supreme Court in the Epic v. Apple case and Epic's win v. Google in its antitrust case.

Speaker Change: Three.

Speaker Change: The campaign has been very resonant with the target demographic and it's been very well awarded by some of the AD publications and so we're continuing to invest in that marketing campaign, we're continuing to do it in the key global markets and we're trying to have an always on philosophy, so theres not gaps.

Speaker Change: In the marketing and that's what we've <unk>.

Speaker Change: Budgeted for for this year and I would just point out, though that marketing can only do so much kinder like many of our brands is a product driven company and so on marketing can help on the user growth side, the user growth really needs to be driven by product and product innovation and marketing needs to be aligned with product to <unk>.

Speaker Change: Drive people back to the app or to reconsider the app or considered for the first time once product has really innovated and improved so that is part of the plan for 2024.

Operator: We have not included any further benefits from App Store changes in our outlook at this time, as we want to watch how all of this continues to evolve, though we would point out that the $650 million we paid to App Stores in 2023 provides ample room for reduction. We're pleased by the financial results we achieved in the back half of 23 in terms of both revenue growth and profitability. We have plans in place to deliver solid 24 financial performance while enabling marketing and product initiatives to lead to improved user growth and position the business for sustained long-term growth. We continue to believe that Match Group provides a rare combination of revenue growth, stellar profitability, and substantial free cash flow generation.

Speaker Change: We are spending pretty heavily in Q1 on the marketing side.

Speaker Change: As you pointed out because we do want to drive users back to the App. After the refresh and so that is part of the plan for the first quarter I do think that you know.

Speaker Change: People may be didn't quite understand the magnitude of what we are planning to spend in the first quarter on tinder marketing I do think that accounts for maybe the gap in expectations versus what sell side analysts had for the quarter and so you know that.

Speaker Change: And that plus a little bit of user softness that we saw in Q4, which leads to revenue softness and therefore aoi's off as well are probably the two factors.

Speaker Change: We are planning to continue to spend heavily in the first quarter I would say after that the marketing cadence is probably pretty evenly spread throughout the rest of the year, but as we say we're nimble on the marketing side and to the extent, we don't see the expected.

Operator: We have plans in place to supplement our shareholders' return with a significant return of capital via share repurchases or potentially other means. We believe few, if any, companies in our space offer this combination of attributes to shareholders. With that, I'll ask the operator to open the line for questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: User growth trends or effectiveness of the marketing campaign, we can adjust and pull back and so we're pushing hard in the first quarter at Tinder and frankly at hinge as well and then we'll sort of recalibrate and see but right now I'd say, it's spread pretty evenly the rest of the way.

Speaker Change: Great. Thank you.

The next question comes from Chris <unk> with UBS. Please go ahead.

Swetha Kojuria: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Swetha Kojuria from Evercore ISI. Please go ahead. Okay, thank you for taking my call.

Speaker Change: Yeah.

Chris: Great. Thanks for taking my question can you just talk a little bit more about what those early learnings have been around the tender product refresh and how that is really tying into the marketing spend for tender that you are talking about this year.

Chris: <unk>.

Speaker Change: I'll take that one great question, Chris the refreshing December was our first step in the product Modernizations that we're undergoing at the team.

Bernard Kim: BK, anything you can comment on Elliot's stake in the company and your conversations with them thus far? And then my follow-up is for Gary. Could you please provide more color on your level of confidence in the internet ads turning positive in the third quarter and positive year-over-year growth in the fourth quarter? Great. Thanks, Shweta, for the first question.

Speaker Change: It's been less than two months since the refresh went by and we're already seeing encouraging signs for example over 80% of our daily users are currently using dark mode and as for prompt and quizzes. We're excited about the early adoption rates quizzes are already seeing a 15% adoption rate.

Gary Swidler: We've had collaborative dialogue with Elliott over the past few weeks, ever since we learned about their stake in the company. We are looking forward to continuing to engage with all of our shareholders, including Shweta. On your questions around Tinder net ads, I think, as we've said in the letter and in our remarks, we have high confidence that we're going to see sequential improvement in Tinder by Q3 on the net ad side and that we will get some modest pay or growth year over year by Q4. And that's a combination of a few things, most notably, you know, the product and marketing initiatives we have that have been put in place through the course of 23 and into 24, which we think will drive the level of growth we need to achieve those goals of sequential net ads in Q3 and then pay or growth year over year in Q4. Um, and it's, you know, it's a series of things.

Speaker Change: And prompts are not that far behind this is a strong indicator of user engagement, especially considering how recently these features were introduced.

Speaker Change: I'd like to add that it's important to remember that these features are optional so not all users will adopt them, but their presence offers more ways for users to engage.

Speaker Change: Our approach last fall testing numerous features independently before combining them into a broader refresh has created tremendous learning across tinder.

These tests have taught us quickly to identify what works and what doesn't work informing our fail fast strategy for 2024.

Speaker Change: And as Gary mentioned, we are leaning in on our marketing strategy. However, it's crucial to leverage marketing spotlight new product features therefore, we might adjust our spend levels to align with the rollout of new features throughout the year.

Gary Swidler: It's not just one specific thing that we're relying on or expecting to drive that. It's a series of improvements and initiatives that Tinder has in the plans. And so we think that will culminate in achieving the goals around parent ad ads by the middle of this year. The next question comes from Lauren Schenick with Morgan Stanley. Please go ahead.

Speaker Change: The next question comes from Justin Patterson with Keybanc. Please go ahead.

Justin Patterson: Great. Thank you very much and good morning could you elaborate a little bit more about the slowdown that occurred during December and what drove the re acceleration I know you talked about that we haven't really seen seasonality and hedged before so I'm curious how that seasonality compares to what you've seen toward some of your more mature apps in there.

Lauren Schenick: Great, thanks. If looking back on 2023, what do you believe caused Tinder user growth to be negative despite the incremental marketing spend? And how will the marketing message evolve in 2024, if at all? And then, just one on the one to the EBITDA guide, it was about 25 million below the three. Is that just the incremental marketing push you've been speaking about? Or are there other drivers there that we should take into account?

Speaker Change: Thank you.

Sure, let me take that Justin so.

Speaker Change: We do see seasonality in most of our apps, especially the larger ones in the period and kind of November and December that typical we see it at Tinder, we see it at other brands because users in many parts of the world tend to focus on the holiday season, and they pulled back from their daily activities in that period, and then what we tend to see.

Gary Swidler: And how should we think about the cadence of Tinder marketing spend through 24? So I think it's important to understand kind of what went on in 23. So that you can understand kind of the trajectory of the business. You know, we put in place a new brand narrative for Tinder, something that we hadn't focused on for a long time; we finally did that in 2023. And when you try to put in place a brand narrative and start to tell that story, it takes time to build.

As you know right after Christmas through Valentines day, we actually see a very strong period, that's our peak season from right. After Christmas too to Valentine's day, when people start looking for love and so that's kind of the cadence that we typically see in the business we haven't.

Gary Swidler: And so it doesn't translate into user growth, you know, immediately. And in fact, what we saw in 23 was pretty good progress on the user growth side in the first half of the year, as a result of some of the marketing initiatives. I think we hadn't been in the market very effectively on the marketing side for a while. And so we did see some really good user growth improvement from, let's call it, February of last year until the middle of the year. And then in the second half of the year, the trends kind of reverted to where they had been, you know, down, kind of mid single digits on the user side, year over year.

Speaker Change: Seen that historically at hinge, but I think now that the business has achieved some reasonable level of scale in some of the core markets like the U S. We are starting to see that seasonality.

Speaker Change: Like we do at Tinder and other brands and so I'm expecting that we'll see that going forward, but 2023 was the first time.

That we've seen that.

Speaker Change: The good news is that that is in the rearview mirror for us at this point.

Speaker Change: Hinge got off to a very strong start in January kind of picked off picked up where it had left off before the holiday period, we've seen really good strength in all the geographies, where it operates across all gender and age cohorts and so we're very pleased with what's happened thus far in January.

Gary Swidler: And, you know, while we saw that step back, we did continue to see movement in some key metrics that we focus on for the brand campaign, such as brand consideration and improvement in consideration, particularly among younger women. And so we were satisfied that the brand campaign was doing what we expected it to do. Over the course of 2023, you know, the campaign has been very successful with the target demographic. And it's been very well awarded by some advertising publications.

Speaker Change: And that's very encouraging because when a brand gets off to a strong start in the peak season, it tends to bode well for its performance for the rest of the year and so we're happy to see that and.

Speaker Change: And we're looking forward to his performing well in 2024.

Speaker Change: The next question comes from Zach Morrissey with Wolfe Research. Please go ahead.

Gary Swidler: And so we're continuing to invest in that marketing campaign. We're continuing to do it in the key global markets, and we're trying to have an always-on philosophy.

Zach Morrissey: Great. Thank you.

Zach Morrissey: I appreciate the color on the kind of product roadmap with the share that you've provided in the letter.

Gary Swidler: So there are no gaps in marketing. And that's what we've budgeted for, for this year. I would just point out, though, that marketing can only do so much.

Zach Morrissey: Wanted to kind of focus more on this ala carte opportunity, let me state it.

Zach Morrissey: So can you share any kind of preliminary details on kind of new.

Zach Morrissey: I'll, let karri offering products that you have planned in the second half of this year and how that may differ versus kind of what it is currently offered in the app.

Gary Swidler: Tinder, like many of our brands, is a product-driven company. And so while marketing can help on the user growth side, user growth really needs to be driven by product and product innovation. And marketing needs to be aligned with product to drive people back to the app or to reconsider the app, or consider it for the first time, once product has really innovated and improved.

Zach Morrissey: And then do you see this more as a payer penetration or monetization driver here this year.

Zach Morrissey: Yeah.

Karri: Hey, Vivek. Thanks for the question, we're going to hold back on diving into the specifics of our upcoming ALC offerings for competitive reasons, but what I can share historically, our two main ALC features super likes and boost have been helping users gain more visibility and stand out.

Gary Swidler: So that is part of the plan for 2024. We are spending pretty heavily in Q1 on the marketing side, as you pointed out, because we do want to drive users back to the app after the refresh. And so, you know, that was part of the plan for the first quarter. I do think that, you know, people maybe didn't quite understand the magnitude of what we were planning to spend in the first quarter on Tinder marketing. I do think that accounts for maybe the gap in expectations versus what sell-side analysts had for the quarter.

Karri: But we are we actually have not launched any new ALC features for a long time.

Karri: We're now exploring additional ALC features that can bring even more value to our users our team will vigorously test new offerings to see what resonates most with our Daters and in this effort, we've mobilized our portfolio of brands to partner and collaborate with Tinder on these tests.

Karri: This approach is similar to how the swipe apps actually tested weekly subs to tune the right offering before we introduce them on tinder and hinge. This team effort will be instrumental in Trialing. Some of these potential new features before we roll them out on tinder.

Gary Swidler: And so, you know, that plus a little bit of user softness that we saw in Q4, which leads to revenue softness, and therefore AOI softness as well, are probably the two factors. We are planning to continue to spend heavily in the first quarter. I would say after that, the marketing cadence is probably pretty evenly spread throughout the rest of the year. But, you know, as we say, we're nimble on the marketing side, and to the extent we don't see the expected user growth trends or the effectiveness of the marketing campaign, we can adjust and pull back. And so we're pushing hard in the first quarter at Tinder and, frankly, at Hinge as well, and then we'll sort of recalibrate and see, but right now, I'd say it's Great. The next question comes from Chris Kuntarich with UBS. Please go ahead.

Karri: Expect to see a new ALC offering from us in the second half of this year.

Karri: The next question comes from Benjamin Black with Deutsche Bank. Please go ahead.

Benjamin Black: Good morning, and thank you for taking my question I guess.

Benjamin Black: With new leadership in place what I guess any.

Benjamin Black: Any different so we expect.

Benjamin Black: And the strategy there how should we think about things like product uplift velocity and marketing strategy. For instance, I think you guys mentioned renewed focus on ecosystem improvement.

Benjamin Black: And VK and now that you have.

Benjamin Black: Permanent successor in place at Tinder.

Benjamin Black: <unk> Europe euro sort of evolving thank you.

Thanks, Ben for the question now over the last 18 months they have been a real partner to me she's so passionate about tinder and knows the business and product inside out.

Chris Kuntarich: Thanks for taking the question. Can you just talk a little bit more about what those early learnings have been around the Tinder product refresh and how that is really tying into the marketing spin for Tinder that you're talking about this year?

Benjamin Black: We stabilized and returned tender to revenue growth and I believe that Fei is only going to accelerate that momentum.

Benjamin Black: The team is fully aligned and clear on their goals.

Bernard Kim: Great question. The refresh in December was our first step in the product modernization that we're undergoing as a team. It's been less than two months since the refresh went live, and we're already seeing encouraging signs. For example, over 80% of our daily users are currently using dark.

Benjamin Black: He has been instrumental in shaping our roadmap and now as CEO, she's pushing forward with modernizing the product boosting development speed.

Benjamin Black: And bringing vital leadership.

Benjamin Black: And her focus will be particularly in enhancing women's experience and the overall ecosystem health health at Tinder.

Bernard Kim: And as for prompts and quizzes, we're excited about the early adoption rates. Quizzes are already seeing a 15% adoption rate, and prompts are not that far behind. This is a strong indicator of user engagement, especially considering how recently these features were introduced. I'd like to add that it's important for us to remember that these features are optional, so not all users will adopt them, but their presence offers more ways for users to engage. Our approach last fall, testing numerous features independently before combining them into a broader refresh, has created tremendous learning. These tests taught us quickly to identify what works and what doesn't, informing our fail fast strategy for 2020.

Benjamin Black: She will share more of our planned later this year, but the core focus is clear, making tinder more engaging for younger users and ensure like superior experiences for women.

Benjamin Black: Now as for my role I have a ton of rewarding work to do across the portfolio. There's a wealth of exciting innovation sprints across match group that I'm deeply involved in.

Benjamin Black: Now at the same time I'm committed to maintaining a close and effective partnership with Bay and the Tinder leadership team. We will ensure that we continue to drive hinder growth together as a team.

Benjamin Black: The next question comes from Mark Kelley with Stifel. Please go ahead.

Benjamin Black: Yes.

Mark Kelley: Great. Thanks very much.

Mark Kelley: One probably for BK.

Bernard Kim: And as Gary mentioned, we are leaning in on our marketing. However, it's crucial to leverage marketing to spotlight new products. Therefore, we might adjust our spend levels to align with the rollout of these new features throughout the year. The next question comes from Justin Patterson with KeyBank. Please go ahead. Great. Thank you very much and good morning.

Mark Kelley: A lot of AI commentary in the note.

Mark Kelley: And in your prepared remarks I guess my question is is the goal to have like a unified AI infrastructure on the backend that will be utilized across the portfolio or do you think there are.

Mark Kelley: <unk> unique needs across each individual brand, where it makes sense to maybe modify those AI capabilities and I guess second to that I know you gave us guidance for the full year in terms of margins, but any cost implications.

Justin Patterson: Could you elaborate a little bit more about the hinge slowdown that occurred during December and what drove the re-acceleration? I know you talked about that we haven't really seen seasonality in hinge before, so I'm curious how that seasonality compares to what you've seen with some of your more mature apps in there. Sure, let me take that, Justin.

Speaker Change: That we should be aware of thank you.

Thanks, Mark I was actually hoping that someone had asked me about AI and I wanted to share some of my thoughts around AI.

Gary Swidler: So, you know, we do see seasonality in most of our apps, especially the larger ones, in the period of kind of November and December. That's typical; we see it at Tinder, we see it at other brands, because users in many parts of the world tend to focus on the holiday season, and they, you know, pull back from their dating activities in that period. And then what we tend to see is, you know, right after Christmas through Valentine's Day, we actually see a very strong period, that's our peak season, from right after Christmas to Valentine's Day, when people start looking for love. And so that's kind of the cycle that we typically see in the business. We haven't done so.

Speaker Change: I mean, I believe that AI is existential to the future of match group and our business.

Speaker Change: AI will help us create improved user experiences and will truly make our products better and that puts us in a different category from other companies that are just looking at optimizing through AI and slight improvements.

Speaker Change: This technology is revolutionary for dating and we're bringing it to life across our entire.

Speaker Change: Portfolio.

Speaker Change: I envision AI to be felt through the entire experience influencing everything from.

Gary Swidler: I've seen that historically at Hinge, but I think now that the business has achieved some reasonable level of scale in some of the core markets like the U.S., we are starting to see that seasonality like we do at Tinder and other brands. And so I'm expecting that we'll see that going forward, but 2023 was the first time that we've seen that. The good news is that that is in the rear view mirror for us at this point.

Speaker Change: Profile creation to matching and connecting for data literally everything.

Speaker Change: Our data as a team and deep understanding of Davey of dating and singles is a rich resource for informing our AI dating models internally.

Speaker Change: Our two biggest brands tinder and hinge have their own AI strategies tailored to its unique needs and listening daters and what they want.

Gary Swidler: Hinge got off to a very strong start in January, kind of picking up where it had left off before the holiday period. We've seen really good strength in all the geographies where it operates across all gender and age cohorts, and so we're very pleased with what's happened thus far in January. That's very encouraging because when a brand gets off to a strong start in the peak season, it tends to bode well for its performance for the rest of the year. And so we're happy to see that, and we're looking forward to Hinge performing well in 2023. The next question comes from Zach Morrissey with Wolf Research. Please go ahead.

Speaker Change: Now we do have the central innovation team working across the entire portfolio on moonshot ideas and incubating new products and our talented team at hyperkinetic is playing a crucial role in supporting all of these initiatives across the company I'm really excited about this revolution going across in.

Speaker Change: IR team.

Speaker Change: Gary mentioned in his comments that we are investing $20 million to $30 million in AI innovation and I absolutely believe it's the right thing for us to do to drive enduring strength better experiences and future growth for our business.

Zach Morrissey: Great, thank you. So I appreciate the color on the Tinders kind of product roadmap for this year that you provided in the letter. And I wanted to kind of focus more on this a la carte opportunity that you stated. So can you share any kind of preliminary details on the kind of new a la carte offering products that you have planned for the second half of this year and how that may differ versus what is currently offered in the app? And do you see this more as a pair penetration or monetization? Eric Sheridan.

Speaker Change: The next question comes from Igor <unk> with Citigroup. Please go ahead.

Igor: Hey, Good morning, guys, just one follow up on the AI thought.

Igor: Obviously lots of talk around it here just trying to understand how much of AI contribution is kind of embedded into the expectations for 2024, when you see it having a more meaningful impact.

Igor: Maybe at least for this year do you see it as more of a driver for payers or for RTP or does it kind of contributes to both.

Eric J. Sheridan: Hey, Zach, thanks for the question. We're going to hold back on diving into the specifics of our upcoming ALC offerings for competitive, but what I can share historically are two main ALC features. Superlikes and boosts have been helping users gain more visibility and stand out, but we have not actually launched any new ALC features for a long time. We're now exploring additional ALC features that can bring even more value to our youth. Our team will vigorously test new offerings to see what resonates most with our data. And in this effort, we've mobilized our portfolio of brands to partner and collaborate with Tinder on these tests. This approach is similar to how the Swype apps actually tested weekly subscriptions to tune the right offering before we introduced them on Tinder and YouTube.

Igor: <unk>.

Speaker Change: Why don't I jump in and take that one so as BK said, we've got a lot of exciting AI initiatives planned for tinder for hinge and for new products as well that we're going to roll out of the course of 2024.

Speaker Change: So we do have very high expectations for delivery of all of these products and features.

That we think they will enhance the user experience and so I think it's logical to think that they would benefit our P. P. Because it'll be a better experience people should see more value in the product and be willing to pay more but I would tell you that at this point given that it's still very early in the evolution of these various products in.

Speaker Change: Features we haven't included any notable revenue in our 2024 outlook from the AI efforts as BK mentioned, we've put in all of the cost, which we've estimated at $20 million to $30 million. So we can go hire people do the work to build out these different products and features and roll them out over the course of the year.

Eric J. Sheridan: This team effort will be instrumental in trialing some of these potential new features before we roll them out on Tinder. Expect to see a new ALC offering from us in the second half of this year. The next question comes from Benjamin Black with Deutsche Bank. Please go ahead.

Speaker Change: But we are waiting on the revenue side now you might view that as a conservative assumption and it very well could be but I think at this point in time, it's the right thing to do and we'll obviously continue to update.

Benjamin Black: Good morning and thank you for taking my question. I guess with the new leadership in place, what... Any difference should we expect in Tinder's strategy? How should we think about things like product output velocity, and marketing strategy, for instance?

Speaker Change: What we're seeing from the AI initiatives as the year progresses.

Speaker Change: The next question comes from Cory Carpenter with Jpmorgan. Please go ahead.

Bernard Kim: I think you guys also mentioned a renewed focus on ecosystem improvements and decay. Now that you have a permanent successor in place at Tinder, how do you imagine your role evolving? Thanks, Ben, for the question. Now, over the last 18 months, Faye has been a real partner to me.

Cory A. Carpenter: Anything you would call out or highlight on the engineered products and that you think can be particularly impactful in driving that tinder payer turnaround in second half.

Cory A. Carpenter: And Gary just to just to clarify the 20 million App store benefit is that included in the guide or is that something that would be upside.

Bernard Kim: She's so passionate about Tinder and knows the business and product inside out. We've stabilized and returned Tinder to revenue growth, and I believe that Faye is only going to accelerate that momentum. The team is fully aligned and clear on their goals.

Gary: I'll take the first part of that question Corey.

We feel really good about the progress that we've made a tender over the past few months and the results have align really well with our expectations.

Gary: We've demonstrated tenders capability to deliver they've achieved double digit revenue growth for the last two quarters consecutively and I'm really excited about the continued strong execution velocity and the product and marketing Roadmaps for 2024 now.

Bernard Kim: Faye has been instrumental in shaping our roadmap, and now, as CEO, she's pushing forward with modernizing the product, boosting development speed, and bringing in vital leaders. And her focus will be particularly on enhancing women's experience and the overall ecosystem health at 10 years.

Bernard Kim: She will share more of her plan later this year, but the core focus is clear, making Tinder more engaging for younger users and ensuring superior experiences for women. Now, as for my role, I have a ton of rewarding work to do across the portfolio. There are a wealth of exciting innovation sprints across Match Group that I'm deeply involved in. Now, at the same time, I'm committed to maintaining a close and effective partnership with Faye and the Tinder leadership. We will ensure that we continue to drive kinder growth together. The next question comes from Mark Kelley, CFO. Please go ahead. Great, thanks very much. I probably have one for BK.

Gary: Now we acknowledge that Q4 was a large sequential payor decline, but we are optimistic about the future as we see these decline moderating.

Gary: Looking ahead, we're confident that in Q3.

Gary: Kinder payers will turn positive on a sequential basis.

Gary: This confidence stems from marketing coupled with several product initiatives that are underway.

Gary: Our key strategies include enhancing the visibility and value of our paid packages and dynamically showing the right offer to the right user at the right time.

Gary: Now. Additionally, our monetization team is working on more market specific conversion strategies and experimenting with unbundling certain premium features at currently sit behind a paywall.

Mark Kelley: You know, a lot of AI commentary in the notes. And in your prepared remarks, I guess my question is, is the goal to have a unified AI infrastructure on the back end that will be utilized across the portfolio, or do you think there are, you know, unique needs across each individual brand where it makes sense to maybe modify those AI capabilities? And secondly, I know you gave us guidance for the full year in terms of margins, but are there any cost implications that we should be aware of? Thanks, Mark.

Gary: And then on the DMA question Corey.

Speaker Change: We've got this margin floor in our financial outlook and so the $15 million that would probably accrue in 2024, because we're saying its $20 million annualized. So if you say, it's three quarters, let's call. It $15 million that obviously helps us achieve our margin target or even gives us an ability to exceed the margin target.

Speaker Change: As the year goes on and so it's helpful. In that regard to kind of push us maybe at the top end or higher than kind of what people might be expecting and so it's definitely a positive from our perspective.

Bernard Kim: I was actually hoping that someone would ask me about AI, and I wanted to share some of my thoughts on AI. I mean, I believe that AI is essential to the future of Match Group and our AI will help us create improved user experiences and will truly make our products better. And that puts us in a different category from other companies that are just looking at optimizing through AI and slight improvements. This technology is revolutionary for dating, and we're bringing it to life across our entire portfolio. I anticipate AI to be felt through the entire experience, influencing everything from profile creation to matching and connecting for dates. Literally everything.

Speaker Change: Obviously, we've got a lot of investment going on and so we'll have to think about whether any of that should be reinvested, but ultimately I do think it's a $15 million positive for the year.

Speaker Change: The next question comes from Youssef Squali with tourists Securities. Please go ahead.

Youssef Squali: Thank you.

Youssef Squali: So the company has been talking about steps to reduce duplicative functions and migrate the evergreen and emerging brands onto one technology platform to consolidate the brands onto a single Tech stack, where are you in that process.

Youssef Squali: What kind of cost savings or margin impact are you baking in in 2024, and ultimately how do you how much do you anticipate to be deriving from that over time. Thanks a lot.

Bernard Kim: Our data as a team and deep understanding of dating and singles is a rich resource for informing our AI dating models internally. Our two biggest brands, Tinder and Hinge, have their own AI strategies tailored to their unique needs and listening to daters and what they want. Now we do have this central innovation team working across the entire portfolio on moonshot ideas and incubating new products, and our talented team at HyperConnect is playing a crucial role in supporting all of these initiatives. I'm really excited about this revolution going across the entire Gary mentioned in his comments that we are investing 20 to $30 million in AI innovation, and I absolutely believe it's the right thing for us to do to drive enduring strength, better experiences, and future growth for Please go ahead.

Sure. We haven't spent a lot of time addressing that so I appreciate the question.

Speaker Change: Whats been happening and this is related to our <unk> business, both the emerging businesses and the evergreen businesses.

Speaker Change: Where we're trying to be more efficient what we've started to do is centralized teams and reduce redundancies in various aspects of the <unk> business. So if you look at the marketing function you look at the customer care function other aspects of their operations, we are reducing duplication and that's leading to some savings this year.

Speaker Change: On an ongoing basis. So that's kind of the first piece of what's going on there, but the second and more important piece is that we've got a number of brands within that many portfolio inside the company, we're consolidating the technology platforms onto a single technology platform.

Speaker Change: We did a couple of the smaller brands last year, we're going to do a couple more brands. This year and then we're going to some of the bigger brands next year. So it's a multi year.

Speaker Change: Process and the reason for that is you know it has customer implications and so you have to be cautious.

Ygal Arounian: Hey, good morning, guys. Just one follow-up on the AI thought, and as obviously, there is lots of talk around it here, and just trying to understand how much AI contribution is kind of embedded into the expectations for 2024 when you see it having a more meaningful impact. And maybe, at least for this year, do you see it as more of a driver for payers or for RPP? Or can it contribute to both? Why don't I jump in and take that one?

Speaker Change: It is a complex and risky undertaking and we want to do it right and not have any unexpected consequences and so we're working kind of very deliberately and very carefully to make all that happen when those consolidations take place we do see significant cost savings from them and so that's where we really start to get the financial benefit.

Speaker Change: So as I mentioned, we got a little bit as a result of what we did last year, we'll get a little bit more as well, we'll do this year and then the.

Speaker Change: The real benefits will accrue fully by 2026, where we will see all the benefits of having one single platform and will have reduced all of the various redundancies.

Gary Swidler: So, as BK said, we've got a lot of exciting AI initiatives planned for Tinder, for Hinge, and for new products as well, that we're going to roll out over the course of 2024. So we do have very high expectations for delivery of all these products and features, and we think they will enhance the user experience. And so I think it's logical to think that they would benefit RPP because it'll be a better experience, people should see more value in the product, and be willing to pay more. But I would tell you that at this point, given that it's still very early in the evolution of these various products and features, we haven't included any notable revenue in our 2024 outlook from the AI efforts. As BK mentioned, we've put in all the costs, which we estimated at 20 to $30 million.

Speaker Change: I would estimate that there's probably a 10 point margin improvement in the <unk> business.

Speaker Change: Once all of those cost savings are fully included so that's a substantial amount of money on a business that is somewhere between six and $700 million of revenue.

Speaker Change: And so you know.

Speaker Change: That enables us to reinvest the savings into growth businesses around the company, whether that's into tinder, whether that's at the hinge or wherever we want to put it. That's the plan. Once those savings are achieved so this is a pretty significant undertaking for the company. It gives us the ability to reinvest the dollars that are coming out.

Speaker Change: As a result of the platform consolidations and we're working very hard and carefully to make all that happen.

Gary Swidler: So we can hire people, do the work to build out these different products and features, and roll them out over the course of the year, but we are waiting on the revenue side. Now, you might view that as a conservative assumption, and it very well could be.

Speaker Change: The next question comes from Ross Sandler with Barclays. Please go ahead.

Great. Thanks, Gary can we go back to the.

Cory A. Carpenter: But I think at this point in time, it's the right thing to do. And we'll obviously continue to report on what we're seeing from the AI initiatives as the year progresses. The next question comes from Cory Carpenter with J.P. Morgan. Please go ahead.

Ross Sandler: The app store fees topic in the DMA. So it sounds like based on public statements anyway that Spotify and fortnite have.

Ross Sandler: Very little interest in paying Apple anything.

Ross Sandler: For apps that are side loaded where theres direct billing in that App at least in Europe. So would you guys fall into that camp and has a $20 million that you called out just from.

Cory A. Carpenter: Thanks. Anything you would call out or highlight on the Tinder product roadmap that you think could be particularly impactful in driving that Tinder payer turnaround in the second half? And Gary, just to clarify, the $20 million App Store benefit, is that included in the guide? Or is that something that would be upside? Thank you.

Ross Sandler: The fee changes that have been announced assuming that you actually have to pay them.

Bernard Kim: I'll take the first part of that question, Cory. We feel really good about the progress that we've made at Tinder over the past few months, and the results have aligned really well with our expectations. We've demonstrated Tinder's capability to deliver. They achieved double-digit revenue growth for the last two consecutive quarters.

Ross Sandler: For these changes and then I guess the second question is if Google kind of matches a similar fee structure and then this is kind of becomes the global standard what would that total number look like in some future state versus the 'twenty you called out thanks a lot.

Speaker Change: Yeah. So it's one of the reasons why in answer inquiries question.

Bernard Kim: And I'm really excited about the continued strong execution velocity and the product and marketing roadmaps for 2024. Now we acknowledge that Q4 was a large sequential payor decline, but we are optimistic about the future as we see these declines moderate. Looking ahead, we're confident that in Q3, Tender pairs will turn positive on a sequential basis.

Speaker Change: Is it included or not there's still a lot of uncertainty around this.

Speaker Change: I think if you just do the straight calculation as we understand the policy changes.

Speaker Change: That Apple put in place you get to that $20 million number for a full year, but I think there's still a lot of questions and as you point out Spotify has raised questions and concerns Microsoft has raised them others have raised them and so you have to decide whether to opt in to this or not we have not yet done so and so we're still considering what this all mean.

Bernard Kim: This competence stems from marketing coupled with several product initiatives that are underway. Our key strategies include enhancing the visibility and value of our paid packages and dynamically showing the right offer to the right user at the right time. Now, additionally, our monetization team is working on more market-specific conversion strategies and experimenting with unbundling certain premium features that currently sit behind a paywall. And then on the DMA question, Cory, we've got this margin floor in our financial outlook. And so, you know, the 15 million that would probably accrue in 2024 because we're saying it's 20 million dollars annualized. So if you say it's three quarters, let's call it 15 million dollars.

Means which is why you know just kind of putting it into the guidance or not is not exactly the way. This all works and so we're still looking at it making sure we understand it and frankly, if you understand the dynamics of all of this this is what Apple has proposed complies with the digital markets Act in Europe. The European Commission actually has to accept that this proposed.

Speaker Change: We'll comply and that in of itself is far from assured and so I think that will continue to play itself out over the next weeks or or months.

Speaker Change: As we get through that March six deadlines. So we'll see how this all plays out from our perspective. The good news is that we expected the DMA to lead to changes.

Speaker Change: On the App store side, and we've started to see that and it's hard for us to fathom that it will end there because even if the changes that Apple has proposed or what goes into place in the EU.

Gary Swidler: That obviously helps us achieve our margin target or even gives us an ability to exceed the margin target as the year goes on. And so, you know, it's helpful in that regard to kind of push us maybe at the top end or higher than what people might be expecting. And so it's definitely a positive from our perspective. You know, obviously, we've got a lot of investment going on. And so we'll have to think about whether any of that should be reinvested. But ultimately, I do think, you know, it's a 15 million dollar positive. The next question comes from Youssef Squali with Truist Securities. Please go ahead.

Speaker Change: We're a consumer in the U S or Europe consumer in the U K right next door to the EU you start to wonder well why are customers in EU getting benefit and we're not getting the same benefits and some of your the government in those jurisdictions you'd say well our citizens deserve the same benefits as what we're seeing in the European Union and so that's why.

Speaker Change: In my remarks, I said, we think it's the first brick I think theres more to come and just so you have an order of magnitude in your mind.

Speaker Change: We probably get five or six times the savings if the Apple changes as currently proposed were to be implemented in the rest of the world because while we have a relatively small percentage of our revenue in the European Union and that comes from the from iOS. We've got a lot in the U K, we've got a lot in North America.

Youssef Squali: Hi guys. So the company has been talking about steps to reduce duplicative functions and migrate the evergreen and immersion brands onto a single technology platform to consolidate the brands onto a single tech stack. Where are you in that process? What kind of cost savings or margin impact are you expecting from 2024? And ultimately, how much are you deriving from that? Thanks for watching!

Speaker Change: And so there is really significant benefits in those jurisdictions. If these policy changes are made so that's where the significant benefits to us really would be either further changes to the policies or expansions of the geographies and I think both of those things are very very possible the impact of further changes.

Gary Swidler: Sure, we haven't spent a lot of time addressing that, so I appreciate the question. You know, what's been happening, and this is related to our E&E business, both the emerging businesses and the evergreen businesses, where we're trying to be more efficient. What we've started to do is centralize teams and reduce redundancies in various aspects of the E&E business. So if you look at the marketing function, you look at the customer care function, other aspects of their operations, we're reducing duplication, and that's leading to some savings this year and on an ongoing basis. So that's kind of the first piece of what's going on there. But the second and more important piece is that, you know, we've got a number of brands within that mini portfolio inside the company; we're consolidating the technology platforms onto a single technology platform.

On Google is not nearly as dramatic as the Apple side I think that's that's where we could see really meaningful.

Speaker Change: <unk> forward and we're excited to see kind of where this goes because we've been waiting for this for a long time and this is the first tangible movement that we've seen from the regulators and as I mentioned in my remarks, that's on top of some of the other things that have happened from a court perspective, which look.

Speaker Change: Look like they're going to open up the ability to use other app stores, which again is very significant for us.

Speaker Change: Or other processors for payments as well, which again is very significant for us. So there's a lot of moving pieces to this while we can quantify today is the 20 million based on the changes have been made but I think you have to think a little bit more broadly about what's more likely to happen here over the next little while.

Gary Swidler: We did a couple of the smaller brands last year, and we're gonna do a couple more this year, and then we're gonna do some of the, you know, bigger brands next year. So it's a multi-year process. And the reason for that is, you know, it has customer implications. And so you have to be cautious; it's a complex and risky undertaking, and we wanna do it right and not have any unexpected consequences. And so we're working kind of very deliberately and very carefully to make all of that happen.

The next question comes from Brad Erickson with RBC. Please go ahead.

Brad Erickson: Yes, Thanks for squeezing me on.

Brad Erickson: One of the questions we've been getting from investors a lot lately is just given the impact you've seen on these pricing optimizations on tinder, just curious if you'd ever consider any sort of like alternative path there on pricing in 2024, and maybe rolling things back et cetera.

Gary Swidler: When those consolidations take place, we do see significant cost savings from them. And so that's where we really start to get the financial benefit. So, as I mentioned, we got a little bit as a result of what we did last year. We'll get a little bit more as well. And we will do this year.

Brad Erickson: Payers back on earlier, and then maybe just to clarify here as well.

Brad Erickson: Talking about the RVP growth.

Brad Erickson: I think looking out to the second half of the year.

And it sounds like maybe AI could be having something to do with that but then yes, you were pretty clear that like not really in the forecast maybe if you could just reconcile that a bit thanks.

Gary Swidler: And then, you know, the real benefits will accrue fully by 2026, when we'll see all the benefits of having one single platform, and we'll have reduced all of the various redundancies. I would estimate that there is probably a 10-point margin improvement in the E&E business once all of those cost savings are fully included, so that's a substantial amount of money on a business that is somewhere between $600 million and $700 million in revenue. That enables us to reinvest the savings into growth businesses around the company, whether that's Tinder, whether that's Hinge, or wherever we want to put them. That's the plan once those savings are achieved, so this is a pretty significant undertaking for the company. It gives us the ability to reinvest the dollars that are coming out as a result of the platform consolidations, and we're working very hard and carefully to make all of that happen.

Speaker Change: Yes look I think that.

Speaker Change: We look at all of these different levers all the time, but as we've talked about many times, we're focused on increasing revenue not specifically increasing revenue prepare or payers just for the sake of moving either those kpis and so we remain focused with our Northstar on revenue.

Speaker Change: But as we prioritize things.

Speaker Change: We have the ability to focus a little bit more on payers and potentially make some more impact there because theres always choices to be made on the product roadmap. So we're mindful of the fact that everyone is.

Speaker Change: Very focused on whats going to happen with payers, we have enough in the roadmap to achieve the payor pivot in the third quarter as we described earlier and to get the payer growth in the fourth quarter.

Speaker Change: So naturally you would expect that over the course of the year as the benefits of all the pricing optimizations and we described it start to subside, we will get to a better balance by the fourth quarter in terms of payer growth and <unk> growth.

Gary Swidler: The next question comes from Ross Sandler with Barclays; please go ahead. Great, thanks. Gary, can we go back to the app store fees topic and the DMA? So it sounds like, based on public statements anyway, that Spotify and Fortnite have very little interest in paying Apple anything for apps that are sideloaded, where there's direct billing in that app, at least in Europe.

Speaker Change: To equate to the revenue growth that we're expecting in the fourth quarter. So we will start to see this kind of normalize and become more balanced over the course of the year.

Speaker Change: As things wash through we're not going to go to sort of abnormal efforts to drive payers because I don't think that's healthy for the business but.

Speaker Change: We are obviously cognizant of the various concerns around this and I do think you will naturally see it become much more balanced as the year goes on.

Ross Sandler: So would you guys fall into that camp? And is that $20 million that you called out just from the fee changes that have been announced, assuming that you actually have to pay them for these changes? And then, and I guess the second question is, you know, if Google kind of matches a similar fee structure, and then this kind of becomes the global standard, what would that total number look like in some future state versus the 20 you called out? Thanks a lot.

Speaker Change: Alright, I want to thank everybody for joining us. This morning, I think we're right at time, we appreciate it as always and we look forward to seeing everyone again next quarter. Thank you so much.

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

Speaker Change: Okay.

Speaker Change: Yes.

Gary Swidler: Yeah, so, you know, it's one of the reasons why, in answering Cory's question, you know, is it included or not, there's still a lot of uncertainty around this. You know, I think if you just do the straight calculation, as we understand the policy changes that Apple put in place, you get to that 20 million number for a full year. But I think there's still a lot of questions, and as you point out, Spotify has raised questions and concerns, Microsoft has raised them, and others have raised them. And so, you know, you have to decide whether to opt into this or not. We have not yet done so.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Yeah.

Gary Swidler: And so, we're still considering what this all means, which is why, you know, just kind of putting it into the guidelines or not is not exactly the way this all works. And so, we're still looking at it, making sure we understand it. And frankly, if you understand the dynamics of all this, this is what Apple has proposed complies with the Digital Markets Act in Europe. The European Commission actually has to accept that this proposal complies, and that in and of itself is far from assured.

Gary Swidler: And so, I think that will continue to play itself out over the next weeks or months, you know, as we get to that March 6th deadline. So, we'll see how this all plays out. From our perspective, you know, the good news is that we expected the DMA to lead to changes on the App Store side, and we've started to see that. But it's hard for us to fathom that it will end there, because even if the changes that Apple has proposed are what goes into place in the EU, you know, if you're a consumer in the U.S. or you're a consumer in the U.K And so, if you're the government in those jurisdictions, you'd say, well, our citizens deserve the same benefits as what we're seeing in the European Union.

Gary Swidler: And so, that's why, in my remarks, I said we think it's the first brick. I think there's more to come. And just so you have, you know, an order of magnitude in your mind, we'd probably get five or six times the savings if the Apple changes as currently proposed were to be implemented in the rest of the world. Because while we have a relatively small percentage of our revenue in the European Union that comes from iOS, we've got a lot in the U.K., we've got a lot in North America, and so there are really significant benefits So, that's where, you know, the significant benefits to us really would be, either further changes to the policies or expansions of the geographies. And I think, you know, both of those things are very, very possible.

Gary Swidler: You know, the impact of further change on Google is not nearly as dramatic as on the Apple side. I think that's, you know, that's where we could see really meaningful steps forward. And, you know, we're excited to see kind of where this goes because we've been waiting for this for a long time, and this is the first tangible movement that we've seen from the regulators. And as I mentioned in my remarks, that's on top of some of the other things that have happened, you know, from a court perspective, which, you know, look like they're going to open up the ability to use other app stores, which, again, is very significant for us, or other processors for payments as well, which, again, is very significant for us.

Gary Swidler: So, there are a lot of moving pieces to this. What we can quantify today is the $20 million based on the changes that have been made, but I think you have to think a little bit more broadly about what's more likely to happen here over the next little while. The next question comes from Brad Erickson with RBC. Please go ahead. Yeah, thanks for squeezing me on.

Brad Erickson: One of the questions we've been getting from investors a lot lately is just, you know, given the impact you've seen on these pricing optimizations on Tinder, just curious if you'd ever consider any sort of alternative path there on pricing in 2024, maybe rolling things back, etc., as a way to get payers back on earlier. And then maybe just to clarify as well, you talk about the RPP growth for Tinder, I think looking out to the second half of the year, and it sounds like maybe AI could be having something to do with that. But then, yeah, you were pretty clear that AI is not really in the forecast. Maybe if you could just reconcile that a bit.

Gary Swidler: Thanks. Yeah, look, I think that we look at all of these different levers all the time, but as we've talked about many times, we're focused on increasing revenue, not specifically increasing revenue per payer or payer just for the sake of moving either of those KPIs. And so we remain focused on our North Star of revenue. But as we prioritize things, you know, we have the ability to focus a little bit more on payers and potentially make some more impact there because there are always choices to be made on the product roadmap. So we're mindful of the fact that everyone is, you know, very focused on what's going to happen with payers. We have enough in the roadmap to achieve the payer pivot in the third quarter, as we described earlier, and to get to payer growth in the fourth quarter.

Gary Swidler: So naturally, you would expect that over the course of the year, as the benefits of all the pricing optimizations and weekly subscribers start to subside, we'll get to a better balance by the fourth quarter in terms of payer growth and RPP growth, you know, to equate to the revenue growth that we're expecting in the fourth quarter. So we will start to see this kind of normalize and become more balanced over the course of the year. As things wash through, we're not going to go to sort of abnormal efforts to drive payers because I don't think that's healthy for the business. But, you know, we are obviously cognizant of the various concerns around this. And I do think you will naturally see it become much more balanced, you know, as the year goes on.

Gary Swidler: All right. I want to thank everybody for joining us this morning. I think we're right on time. We appreciate it, as always, and we look forward to seeing everyone again next quarter. Thank you so much. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.