Q1 2024 Match Group Inc Earnings Call
[music].
Operator: Welcome to the Match Group First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Tanny Shelburne, Senior Vice President of Investor Relations. Please go ahead.
Welcome to the match group first quarter 'twenty 'twenty four earnings conference call.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Tinney, Shelburne Senior Vice President of Investor Relations. Please go ahead.
Tanny Shelburne: Thank you, operator, and good morning everyone. 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. These statements are subject to risks and uncertainties, and our actual results could differ materially from those expressed today.
Tanny Shelburne: Thank you operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim and President and CFO, Gary Swedberg, 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.
Speaker Change: And future performance. These forward looking statements may be preceded by words, such as we expect we believe we anticipate or similar statements. These statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.
Tanny Shelburne: Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results. With that, I'd like to turn over the call to BK.
Speaker Change: Some of these risks have been set forth in our earnings release, and our periodic reports filed with the S. E C.
Speaker Change: During this call we will discuss certain non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our IR website. These non-GAAP measures are not intended to be a substitute for our GAAP results with that I'd like to turn over the call to BK.
Bernard Kim: Good morning, everyone. And thanks for joining us on today's call. I know much of our discussion today will focus on near-term trends and challenges. Both Gary and I will address those headwinds, and we will discuss them in Q&A. And while some of the current trends are challenging, that does not dissuade us from what we believe is a long-term opportunity. So I want to start with the big picture and that opportunity. As we look at the state of the dating industry today, one thing remains very clear.
BK: Good morning, everyone and thanks for joining today's call.
BK: I know much of our discussion today will focus on near term trends and challenges, both Gary and I will address those headwinds and we will discuss it in Q&A and while some of the current trends are challenging it does not dissuade us from what we believe is long term opportunity.
Speaker Change: So I want to start with the big picture and that opportunity.
Bernard Kim: For those daters looking to go on a date and meet someone in real life, our apps empower people to make meaningful connections like no other platform. In today's dating scene, many people still hold on to that nostalgic, romantic idea of meeting someone organically. However, the reality is that chances for a spontaneous meet-cute are becoming increasingly rare, even in settings like bars, where social interactions are expected.
Speaker Change: As we look at the state of the dating industry today, one thing remains very clear.
Speaker Change: For those theaters looking to go on a date and meet someone in real life, our apps empower people to make meaningful connections like no other platform.
Speaker Change: In today's dating scene, many people still hold on to that nostalgic romantic idea of meeting someone organically how.
Speaker Change: However, the reality is that chances for a spontaneous mi Q are becoming increasingly rare.
Speaker Change: Even in settings like bars, where social interactions are expected soon.
Bernard Kim: Single daters looking to meet someone are actually on their phones, using apps to navigate their social and romantic lives. Our apps are strategically designed to bridge this, leveraging technology to serve as a springboard to get you on a great date that may not have happened otherwise.
Speaker Change: <unk> data is looking to meet someone are actually on their phones using apps to navigate their social and romantic lives.
Speaker Change: Our apps are strategically designed to bridge this gap.
Speaker Change: Leveraging technology to serve as a springboard to get you on a great date that may not have happened otherwise.
Bernard Kim: That's why dating apps have become the primary way people meet today, particularly in more developed markets like the U.S. and Western Europe. But surprisingly, there are still so many people who don't use our apps and many more who aren't actively dating, creating a massive opportunity and a significant runway for growth as we aim to redefine the Meet Qute and create safer places for all singles to find a meaningful connection. Over the last two years, we've made meaningful progress at Match Group.
Speaker Change: That's why dating apps have become the primary way people meet today.
Speaker Change: Particularly in more developed markets like the U S and Western Europe.
Speaker Change: Surprisingly there are still so many people don't use our apps and many more who arent actively dating creating a massive opportunity and a significant runway for growth as we aim to redefine the meet cute and create safer places for all.
Speaker Change: Singles to find a meaningful connection.
Speaker Change: Over the last two years, we've made meaningful progress at match group.
Bernard Kim: Our brands have executed against well-defined product and marketing initiatives. Tinder continues to be an iconic brand worldwide and the entry point to dating for each new generation. Hinge has been a standout, demonstrating tremendous growth based on their brand promise for intentioned daters to get out on great dates. We are more confident than ever that the business is well on its way to generating a billion dollars in revenue.
Speaker Change: Our brands have executed against well defined product and marketing initiatives.
Speaker Change: Tinder continues to be an iconic brand worldwide and the entry point to dating for each new generation.
Speaker Change: Tinder has been a standout demonstrating tremendous growth based on their brand promise for intention daters to get out on great dates.
Speaker Change: We are more confident than ever that the business is well on its way to generating $1 billion in revenue.
Bernard Kim: Hinge is responding well in markets that we've entered and we're being very thoughtful about the user experience to help ensure that we're building a great community and truly delivering on our mission. We've launched several new apps tailored to select demographics where we see real potential. And these platforms within our emerging brands portfolio have performed very well. In particular, we want to call out the progress on Archer, which is focused on gay men and is demonstrating really strong momentum.
Speaker Change: Hinge is resonating well in markets that we've entered and being very thoughtful about the user experience to help ensure that we're building a great community and truly delivering on our mission.
Speaker Change: We've launched several new apps tailored at select demographics, where we see real potential.
Speaker Change: And these platforms within our emerging brands portfolio have performed very well in.
Speaker Change: In particular, we want to call out the progress on Archer, which is focused on gay men and demonstrating really strong momentum.
Bernard Kim: The app recently hit more than 700,000 downloads since its launch last year. Engagement is up even more, growing triple digits, which indicates that we have a strong ecosystem and users who love it. I also want to point out that we've achieved this growth without significantly increasing our investment in marketing since the beginning of the year.
Speaker Change: The App recently hit more than 700000 downloads since it launched last year.
Speaker Change: Engagement is up even more growing triple digits, which indicates that we have a strong ecosystem and users who are loving it.
Speaker Change: I also want to point out that we've achieved this growth without significantly increasing our investment in marketing since the beginning of the year.
Bernard Kim: The Archer team has revved up and continues to innovate the user experience to make it the most dynamic and engaging app for this community. Across the portfolio, we've continued to deploy resources more efficiently. The HyperConnect team is working on projects with most of our other businesses and has fantastic talent that we believe will continue to add value to our various brands.
Speaker Change: The Archer team has revved up and continues to innovate the user experience to make it the most dynamic and engaging app for this community.
Speaker Change: Across the portfolio, we've continued to deploy resources more efficiently. The hyper connect team is working on projects with most of our other businesses and has fantastic talent that we believe will continue to add value to our various brands.
Bernard Kim: We get a lot of questions about monthly active users, and I want to remind everyone that our business's approach is very different from other social platforms. Our goal is to see real, single users find a date and then get off of our app. We focus on attracting singles who want to make real connections and satisfying our daters who are earnest in their intentions by delivering great experiences. Tinder's international scale and reach have never been matched by any other dating app, and it's critical that we keep the ecosystem vibrant. For example, Tinder took decisive action by changing its community guidelines and moderation practices mid last year, which better enabled the removal of users who are not on the app for its intended purposes.
Speaker Change: Now we get a lot of questions about monthly active users and I want to remind everyone that our business is approach is very different from other social platforms.
Speaker Change: Our goal is to see real single users bind to date, and then get off of our apps.
Speaker Change: We focus on attracting singles, who want to make real connections and satisfying our dealers who are ernest in their intentions by delivering great experiences.
Speaker Change: Tenders international scale and reach has never been matched by any other dating app and it's critical that we keep the ecosystem vibrant.
Speaker Change: For example, Tinder took decisive action by changing its community guidelines and moderation practices mid last year, which better enabled the removal of users who are not on the app for its intended purpose is.
Bernard Kim: While the improvements to the ecosystem and benefits to the brand are undeniable, these actions did contribute to some of Tinder's MAU declines over the past nine months. We believe that actions like these are in the best interest of Tinder's long-term success, so we are willing to accept fewer MAU in the short term to create a safer ecosystem and better outcomes for our data.
Speaker Change: While the improvements to the ecosystem and benefits to the brand are undeniable. These actions did contribute to some of tenders and may you declines over the past nine months.
Speaker Change: We believe that actions like these are in the best interest of tenders long term success. So we're willing to accept fewer M. A U in the short term to create a safer ecosystem and better outcomes for our Daters.
Bernard Kim: Diving a little deeper into Tinder, we have heard loud and clear that some users, especially the Gen Z cohort, are looking for more from their dating apps. We have been in this business a long time, and we have consistently adapted our offerings to best serve the needs of different generations. And we understand and recognize that expectations for apps are changing. Tinder is working tirelessly to execute against their strategy, and I'm incredibly confident in the team's ability to satisfy these evolving expectations that users have.
Speaker Change: Diving, a little deeper into tinder, we've heard loud and clear that some users, especially the gen Z cohort are looking for more from their dating apps.
Speaker Change: We have been in this business a long time, and we have consistently adapted our offerings to best serve the needs of different generations.
Speaker Change: And we understand and recognize that expectations of apps are changing.
Speaker Change: Tinder is working tirelessly to execute against their strategy and I'm incredibly confident in the team's ability to satisfy these evolving expectations that users have by the end of the year, we expect to have a significantly improved product.
Bernard Kim: By the end of the year, we expect to have a significantly improved product. Similarly, pressures on discretionary consumer spending, especially among Tinder's younger user base, have negatively impacted Tinder's a la carte revenue. The team is doubling down on its efforts to improve the efficacy of its current ALC features and introduce new offerings at affordable price points. We expect to see improvements in ALC trends by the second half of the year.
Speaker Change: Yeah.
Speaker Change: Similarly pressures on discretionary consumer spending, especially among tenders younger user base have negatively impacted tenders Ala carte revenue.
Speaker Change: The team is doubling down on its efforts to improve the efficacy of its current ALC features and introduce new offerings at affordable price points we.
Speaker Change: We expect to see improvements in ALC trends by the back half of the year.
Bernard Kim: We know we have work to do to satisfy every new generation of data. The Tinder team is working to improve the dating journey at every point of the experience through innovation, especially with AI.
Speaker Change: We know we have work to do to satisfy every new generation of Daters.
Speaker Change: The Tinder team is working to improve the dating journey at every point of the experience.
Speaker Change: Through innovation, especially with AI.
Bernard Kim: We believe we can improve the quality of the profile, matching outcomes, safety features, and the post-match experience to make the entire Tinder platform more modern and deliver on their brand promise. I've asked our Chief Technology Officer and his central innovation team to work even more closely with Tinder's product team to expedite all these efforts, which are underway. And given Tinder's vast scale and knowledge about relationships and dating, there is no dating app better positioned to take advantage of these advances in technology.
Speaker Change: We believe we can improve the quality of profiles match.
Speaker Change: Matching outcomes safety features and the post match experience to make the entire tinder platform more modern and deliver on their brand promise.
Speaker Change: I've asked our Chief Technology Officer, and his central innovation team to work, even more closely with tenders product team to expedite all of these efforts which are underway.
Speaker Change: And given tenders batch scale and knowledge about relationships and dating there is no dating app better positioned to take advantage of these advances in technology.
Bernard Kim: Tinder has become an industry-defining, highly profitable business over the past decade, and we have been innovating to solve some of the user pain points. As a result, we will have a healthier, more satisfying, and ultimately more valuable experience for daters to enjoy, and I am confident that Tinder's momentum will come back. We believe we have a real market opportunity and the right teams and strategies in place to get to that next level of growth, and we are determined to deliver that for all of our stakeholders.
Speaker Change: Tinder has become an industry defining highly profitable business over the past decade.
Speaker Change: We have been innovating to solve some of the user pain points.
Speaker Change: As a result, we will have a healthier more satisfying and ultimately more valuable experience for daters to enjoy and I am confident that tenders momentum will come back.
Speaker Change: We believe we have real market opportunity and the right teams and strategies in place to get to that next level of growth.
Speaker Change: And we are determined to deliver that for all of our stakeholders.
Bernard Kim: We continue to see significant growth runway at Hinge and in our emerging brands portfolio. We're executing on our turnaround plan for Tinder, and our central innovation teams are bringing renewed vigor to product innovation. We are excited to continue this work as giving people new, exciting ways to connect is what motivates us every day. And with that, let me turn it over to Gary.
Speaker Change: We continue to see significant growth runway at hinge and our emerging brands portfolio, we're executing on our turnaround plan for Tinder and our central innovation teams are bringing renewed vigor to product innovation.
Speaker Change: We are excited to continue this work as giving people new exciting ways to connect is what motivates us every day.
Speaker Change: And with that let me turn it over to Gary.
Gary Swidler: Thanks, PK. And hello, everyone.
Gary Swedberg: Thanks, PK and Hello, everyone. Thank you for joining US this morning are.
Gary Swidler: Thank you for joining us this morning. Our business demonstrated strong financial performance to start the year, with FX Neutral results coming in ahead of our expectations. Match Group's total revenue was $860 million, up 9% year over year and 12% FX neutral in Q1. Revenue per payer grew 16% while payers declined 6% year over year. We experienced $2 million more in FX headwinds than we anticipated at the time of our last earnings call. Nevertheless, we generated $267 million of free cash flow in the quarter.
Gary Swedberg: Our business demonstrated strong financial performance to start the year with FX neutral results coming in ahead of our expectations.
Gary Swidler: Tinder likewise delivered 9% year-over-year direct revenue growth, 12% FX neutral. Hinge grew direct revenue 50% year-over-year, ahead of our expectations for the second consecutive quarter. MGAsia's and Evergreen Emerging Brands Direct Revenue declined 6% and 4%, respectively, year-over-year, although MGAsia was up 7% FX neutral.
Gary Swedberg: Match group's total revenue was $860 million up 9% year over year, and 12% FX neutral in Q1.
Gary Swedberg: Revenue per payer grew 16%, while payors declined 6% year over year, we experienced $2 million more in FX headwinds than we anticipated at the time of our last earnings call, we generated $267 million of free cash flow in the quarter.
Speaker Change: Tinder, Likewise delivered 9% year over year direct revenue growth, 12% FX neutral.
Speaker Change: <unk> grew direct revenue, 50% year over year ahead of our expectations for the second consecutive quarter.
Speaker Change: M G Asia, and evergreen and emerging brands direct revenue declined, 6% and 4% respectively year over year, Although M. G Asia was up 7% FX neutral.
Gary Swidler: Azzar grew direct revenue 20% year-over-year FX neutral. The emerging brands collectively grew direct revenue 23% year over year. We welcome some new demographically focused apps to the E&E portfolio.
Speaker Change: Saar grew direct revenue, 20% year over year FX neutral.
Speaker Change: The emerging brands collectively grew direct revenue, 23% year over year, we welcomed some new demographically focused apps to the E&E portfolio Archer continues to show strong user growth as BK mentioned and the App experience continue to evolve to better satisfy the target audience.
Gary Swidler: Archer continues to show strong user growth, as BK mentioned, and the app experience continues to evolve to better satisfy the target audience. Q1 Tinder Direct Revenue was $481 million, driven by RPP that increased 20% year-over-year to $16.52 due to the effects of the U.S. price optimizations and weekly packages we rolled out starting in late Q1 2023. There was better stability at the top of the funnel at Tinder in the first quarter, with new users down only 4% year-over-year on a like-for-like basis, factoring in that we exited two countries.
Speaker Change: Q1, Tinder direct revenue was $481 million driven by our P. P that increased 20% year over year to $16.52 due to the effects of the U S price optimizations and weekly packages, we rolled out starting in late Q1 2023.
Speaker Change: There was better stability at the top of the funnel at Tinder in the first quarter with new users down only 4% year over year on a like for like basis factoring in that we exited two countries.
Gary Swidler: While Tinder also experienced a decline in monthly active users in the quarter, the decisions we made to change Tinder's policies and moderation practices starting last summer to enable easier elimination of users who are not on the app to really connect led to an approximately 2 million decline in Tinder MAU. This decline included bad actors and users who were some of the least engaged on the platform. We will fight this competition all year, but we'll have it fully anniversary by the end of 2024.
Speaker Change: While tinder also experienced a decline in monthly active users in the quarter. The decisions. We made the change tenders policies in moderation practices, starting last summer to enable easier elimination of users who are not on the app to really connect led to an approximately $2 million decline in tinder M. A U.
Speaker Change: This decline included bad actors and users who were some of the least engaged on the platform.
Speaker Change: We will fight this comp all year, but we'll have it fully anniversaried by the end of 'twenty 'twenty four.
Gary Swidler: We believe that these actions are beneficial to the overall ecosystem health, and we are already seeing signs of improvement in key engagement metrics that we track. For example, Tinder's ratio of daily active users to monthly active users reached some of its highest levels, well north of 40% in Q1, an improvement of 14 basis points versus Q1 of last year. Although impactful to MAU, we believe this was the right decision for the ecosystem.
Speaker Change: We believe that these actions are beneficial to the overall ecosystem health and we are already seeing signs of improvement in key engagement metrics that we track for example, tenders ratio of daily active users monthly active users reached some of its highest levels well north of 40% in Q1 an improvement of.
Speaker Change: 14 basis points versus Q1 of last year.
Speaker Change: Although impactful to the Mou. We believe this was the right decision for the ecosystem.
Gary Swidler: Tinder's payers declined 9% year-over-year in Q1 to just under $10 million, and we're down $255,000 sequentially, just slightly worse than our expectations. While growth in subscription revenue at Tinder was strong at 17% year-over-year, primarily due to the increase in RPP, Tinder continued to experience pressure on a la carte revenue, which was down 13% year-over-year in the quarter. We believe the decline in ALC revenue stems from user declines and lower average purchase volumes, in part due to weaker consumer discretionary spending among its younger user base, among other reasons. The weaker growth in ALC is a continuation of a trend that has been going on for a while now but has been becoming more severe of late.
Speaker Change: Tenders Payors declined 9% year over year in Q1 to just under $10 million and were down 255000 sequentially, just slightly worse than our expectations.
Speaker Change: While growth in subscription revenue at Tinder was strong at 17% year over year, primarily due to the increase in our P. P. Tinder continues to experience pressure on Ala Carte revenue, which was down 13% year over year in the quarter.
Speaker Change: We believe the decline in ALC revenue stems from user declines and lower average purchase volumes in part due to weaker consumer discretionary spending among its younger user base among other reasons.
Speaker Change: The weaker growth in ALC is a continuation of a trend that has been going on for a while now but has been becoming more severe of late.
Gary Swidler: Our Hinge brand continues to perform very well. Hinge Direct revenue was $124 million in Q1. Hinge payers were up 31% year-over-year to $1.4 million, while RPP of nearly $29 was up 14% year-over-year. Hinge's downloads continue to be strong in both core English-speaking and Western European markets, growing approximately 20% year-over-year globally in Q1.
Speaker Change: Our hinge brand continues to perform very well his direct revenue was $124 million in Q1 hinge.
Speaker Change: Hinge payers were up 31% year over year to 1.4 million, while our P. P of nearly $29 was up 14% year over year.
Speaker Change: He just downloads continued to be strong in both core English speaking in western European markets.
Speaker Change: Growing approximately 20% year over year globally in Q1.
Gary Swidler: We're confident that Hinge is in the very early stages of its monetization efforts, with payer penetration, defined as payers to monthly active users, just above half that at Tinder, providing ample room for expansion. The user growth trends, global expansion opportunities, and monetization runway give us optimism around Hinge's long-term outlook. We believe Hinge is on track to become a $1 billion revenue business. Match Group's Q1 AOI was $279 million, up 6% year-over-year, for a margin of 33%.
Speaker Change: We're confident that hinge is in the very early stages of its monetization efforts with payer penetration defined as payers to monthly active users just above half that of tinder, providing ample room for expansion.
Speaker Change: The user growth trends global expansion opportunities and monetization runway give us optimism around hinges long term outlook, we believe hinges on track to become a 1 billion dollar revenue business.
Speaker Change: Match group's Q1, Oi was $279 million up 6% year over year for margin of 33%.
Gary Swidler: Operating income was $185 million in Q1, down 7% year-over-year for a margin of 21%. Match Group AOI and OI each benefited from the increase in revenue as a result of growth at Tinder and Hinge, partially offset by an expected nearly $30 million or 20% year-over-year increase in selling and marketing expenses and an increase in cost of revenue due to higher app store fees. The increase in selling and marketing spend was primarily at Tinder, Hinge, and certain emerging brands, offset by declines in marketing spend at multiple other brands. Operating income was further impacted by increased SBC expense due to increased hiring activity to support product development efforts, unusually high forfeitures in the prior year period, and other factors.
Speaker Change: Operating income was $185 million in Q1 down 7% year over year for margin of 21%.
Speaker Change: Q1 match group AOE Oi each benefited from the increase in revenue as a result of growth at Tinder and hinge, partially offset by an expected nearly $30 million or 20% year over year increase in selling and marketing expenses and an increase in cost of revenue due to higher app store fees.
Speaker Change: The increase in selling and marketing spend was primarily at tinder hinge in certain emerging brands offset by declines in marketing spend at multiple other brands.
Speaker Change: Operating income was further impacted by increased SBC expense due to increased hiring activity to support product development efforts unusually high forfeitures in the prior year period and other factors.
Gary Swidler: While SBC expense rose, the grant value of awards to employees was approximately flat year over year, as we focused on controlling the level of new equity awards to employees, which impacts future period SBC expense. Additionally, OI was impacted by a 94% year-over-year increase in depreciation expense due to increases in internally developed software placed in service, including at Tinder and HyperConnect. We repurchased approximately $200 million of our shares in Q1 at an average price of approximately $35 per share on a trade date basis, reducing our share count by approximately $6 million.
Speaker Change: While SBC expense rose the grant value of awards to employees was approximately flat year over year as we focused on controlling the level of new equity awards to employees, which impacts future period SBC expense.
Speaker Change: Additionally, Oi was impacted by a 94% year over year increase in depreciation expense due to increases in internally developed software placed in service, including at Tinder and hyper connect.
Speaker Change: We repurchased approximately $200 million of our shares in Q1 at an average price of approximately $35 per share on a trade date basis, reducing our share count by approximately $6 million.
Gary Swidler: This represented a deployment of roughly 75% of our Q1 free cash flow, delivering on our commitment to deploy more than 50% of our free cash flow for share repurchase. With our net leverage below our target at 2.3 times and $800 million remaining on our share buyback authorization, we expect to continue returning at least 75% of our free cash flow to shareholders for the remainder of the year. For Q2-24, we expect total revenue for Match Group to be $850-860 million, up 2-4% year-over-year and 5-6% FX-neutral.
Speaker Change: This represented a deployment of roughly 75% of our Q1 free cash flow delivering on our commitment to deploy more than 50% of our free cash flow for share repurchases.
Speaker Change: With our net leverage below our target of 2.3 times and $800 million remaining on our share buyback authorization. We expect to continue returning at least 75% of our free cash flow to shareholders for the remainder of the year.
Speaker Change: For Q2, 'twenty four we expect total revenue for match group of $850 million to $860 million up 2% to 4% year over year, and 5% to 6% FX neutral.
Gary Swidler: We expect direct revenue at Tinder to be $475 to $480 million in Q2, flat to up 1% year over year, up 3% to 4% FX neutral. The user growth and ALC revenue headwinds at Tinder, plus the effect of the anniversary of various monetization initiatives we implemented starting in late Q1 of last year, are impacting Tinder's direct revenue growth rate, which is below our target for the business. The Tinder team is focused on implementing monetization initiatives to strengthen revenue growth. These initiatives include revisions to existing ALC features and introducing new offerings.
Speaker Change: We expect direct revenue at tinder to be $475 million to $480 million in Q2 flat to up 1% year over year of 3% to 4% FX neutral.
Speaker Change: The user growth and ALC revenue headwinds at Tinder, plus the effect of the anniversary of various monetization initiatives. We implemented starting in late Q1 of last year are impacting tenders direct revenue growth rate, which is below our target for the business.
Speaker Change: The Tinder team is focused on implementing monetization initiatives to strengthen revenue growth.
Speaker Change: These initiatives include revisions to existing ALC features and introducing new offerings.
Gary Swidler: We expect our product work to lead to significantly better year-over-year trends in ALC revenue in the back half of this year. These initiatives are in addition to the extensive work being done to improve the app experience and the health of the ecosystem. We expect Tinder payers to decline at similar rates year-over-year in Q2 as they did in Q1, leading to a modest improvement in sequential payer trends in Q2 compared to Q1.
Speaker Change: We expect our product work to lead to significantly better year over year trends and a healthy revenue in the back half of this year.
Speaker Change: These initiatives are in addition to the extensive work being done to improve the app experience and the health of the ecosystem.
Speaker Change: We expect tinder payers to decline at similar rates year over year in Q2 as they did in Q1, leading to a modest improvement in sequential payer trends in Q2 compared to Q1, we.
Gary Swidler: We continue to anticipate positive sequential payer additions at Tinder in Q3. Across our other brands, we expect Q2 direct revenue of $360 to $365 million, up 5 to 7% year-over-year, 8 to 10% FX neutral. Within our other brands, we expect Hinge to deliver $125 to $130 million of direct revenue in Q2, with year-over-year growth of 38 to 44 percent. We expect Match Group AOI of $300 to $305 million in Q2, roughly flat year over year, and a margin of 35% at the midpoints of the range.
Speaker Change: We continue to anticipate positive sequential payer additions at Tinder in Q3.
Speaker Change: Across our other brands, we expect Q2 direct revenue of $360 million to $365 million, a 5% to 7% year over year, 8% to 10% FX neutral.
Speaker Change: Within our other brands, we expect Haynes to deliver $125 million to $130 million of direct revenue in Q2 year over year growth of 38% to 44%.
Speaker Change: We expect match group AOI of $300 million to $305 million in Q2, roughly flat year over year and margin of 35% at the midpoint of the ranges.
Gary Swidler: We expect overall Q2 marketing spend to be about $25 million higher than in the prior year quarter, largely due to increased spend at Hinge, Tinder, and some E&E brands. We opted into Apple's new App Store policies in the EU on April 1, so we expect at least $5 million per quarter of iApp fee savings going forward, assuming no further changes in App Store policies. We're complying with our settlement agreement with Google, which requires us to adopt Google Play billing, user choice billing, and or developer-only billing across our brands. This change is creating some modest conversion headwinds for us, but we're working to adjust to this new reality. And Google is making improvements on their end as well.
Speaker Change: We expect overall Q2 marketing spend to be about $25 million higher than in the prior year quarter, largely due to increased spend at hinge and tinder and some easy brands.
Speaker Change: We opted into Apple's new App store policies in the U on April one so we expect at least $5 million per quarter of <unk> savings going forward, assuming no further changes in app store policies.
Speaker Change: We're complying with our settlement agreement with Google, which requires us to adopt Google play billing user choice billing <unk> developer only building across our brands.
Speaker Change: This change is creating some modest conversion headwinds for us, but we're working to adjust to this new reality and Google is making improvements on their end as well, reflecting our Q2 expectations in the latest trends at Tinder. We currently expect low single digit year over year direct revenue growth rates, a tender for the remaining quarters of 2024.
Operator: Reflecting our Q2 expectations and the latest trends at Tinder, we currently expect low single-digit year-over-year direct revenue growth rates at Tinder for the remaining quarters of 2024, although they could be higher if some of the product initiatives deliver or ALC revenue or other trends improve beyond our current expectations. This updated rest-of-year outlook leads us to anticipate low-to-mid single-digit year-over-year direct revenue growth for Tinder for Given this, for the full year, we expect total company revenue growth to be near the lower end of our previously stated 6-9% year-over-year total revenue growth target range unless there is a material under-delivery of our expectations by our other brands, particularly Hintz.
Speaker Change: They could be higher if some of the product initiatives deliver or ALC revenue or other trends improve beyond our current expectations.
Speaker Change: This updated rest of year outlook leaves us to anticipate low to mid single digit year over year direct revenue growth for tinder for full year 2024.
Speaker Change: Given this for the full year, we expect total company revenue growth to be near the lower end of our previously stated 6% to 9% year over year total revenue growth target range, unless there is a material over delivery of our expectations by our other brands, particularly hinge.
Operator: For both Tinder and the whole company, we currently expect FX to be about a one point year over year headwind in the back half of the year. We remain focused on delivering an AOI margin of at least 36% for Match Group in 2024. We are continuously evaluating the previously disclosed investments in marketing and product innovation at Tinder, Hinge, and in New Experiences, and we'll adjust as appropriate. Our outlook is for Match Group to generate nearly $1.1 billion of free cash flow in 2024, and we expect to utilize at least 75% of our free cash flow for capital return for the remainder of the year. We believe that at our current stock price, our shares remain the best investment we can make with our capital. With that, I'll ask the operator to open the line for questions.
Speaker Change: We're both tinder and the whole company. We currently expect FX to be about a one point year over year headwind in the back half of the year.
Speaker Change: We remain focused on delivering AOI margin of at least 36% for match group in 2024.
Speaker Change: We are continuously evaluating the previously disclosed investments in marketing and product innovation at Tinder, hinge and a new experiences and will adjust as appropriate.
Speaker Change: Our outlook is for match group to generate nearly $1.1 billion of free cash flow in 2024, and we expect to utilize at least 75% of our free cash flow for capital return for the remainder of the year.
Speaker Change: We believe that our current stock price our shares remain the best investment, we can make with our capital.
Speaker Change: With that I'll ask the operator to open the line for questions.
Operator: 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. 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 Benjamin Black with Deutsche Bank. Please go ahead. Great, thank you for taking my call.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Gary Swidler: Thanks, Ben, for the question. First of all, in terms of trends that we're seeing at Tinder, I just want to point out a few different things. So first of all, you know, conversion has improved dramatically. And that's in part because, you know, we've lowered prices. Sorry, we've raised prices.
Speaker Change: The first question today comes from Benjamin Black with Deutsche Bank. Please go ahead.
Speaker Change: Yeah.
Benjamin Thomas Black: Great. Thank you for taking my question.
Benjamin Thomas Black: It'd be great to hear what's your answer.
Benjamin Thomas Black: It ends at Tinder net add will return to sequential growth.
Benjamin Thomas Black: Third quarter, despite steady decline compares were seeing today.
Benjamin Thomas Black: Thats something that Youre seeing maybe as it pertains to conversion trends that you can point to that optimism.
Speaker Change: Thank you.
Speaker Change: Thanks, Ben for the question.
Speaker Change: First of all in terms of trends that we're seeing at Tinder I just want to point out a few different things. So first of all you know conversion has improved dramatically and that's in part because we've lowered pricing.
Speaker Change: Sorry, we raise pricing.
Gary Swidler: We rolled out weekly subscription packages, which as a result of that, are lower prices, and that has led to improved conversion. But those subscribers that are signing up for the weekly subscription packages are there for a shorter duration period, so they're in the payer count for less time. So that's one of the trends that's going on inside of the business. We also have a declining user base. We have declining mail, and so we need conversion to work harder.
Speaker Change: Sorry, we rolled out weekly subscription packages, which is a result of that our lower prices and that has led to improved conversion right, but those subscribers that are signing up for the weekly subscription packages are there for a shorter duration period. So they are in the payer count for last time so that.
Speaker Change: One of the trends that's going on inside of the business. We also have declining user base. We are declining now and so we need conversion to work harder we need to generate more payers on a smaller user base. So those are the trends that are happening if you look at the.
Gary Swidler: We need to generate more payers on a smaller user base. So those are the trends that are happening. If you look at the payers on a year-over-year basis, we talked about how payers declined 9% in the first quarter, and we expect payers to decline at a similar level in the second quarter. I think if you do the math, you'll see that we need the product initiatives that we have planned at Tinder to improve user trends and improve conversion sufficiently so that the 9% year-over-year decline in payers improves a little bit, 8% or 7%.
Speaker Change: The payers on a year over year basis, we talked about how payers declined 9% in the first quarter and we expect payers to decline.
Speaker Change: At a similar level in the second quarter I think if you do the math, you'll see that we need the product initiatives that we have planned at tinder to improve the user trends and to improve conversion sufficiently that the 9% year over year decline in.
Speaker Change: In payers improves a little bit to 8% or 7% if that happens the math would show you that you get sequential payer improvement in the third quarter at Tinder and so that's what we're focused on I think we have enough initiatives enough product work going on to improve MAU too.
Gary Swidler: If that happens, the math would show you that you get sequential payer improvement in the third quarter at Tinder, and so that's what we're focused on. I think we have enough initiatives, enough product work going on to improve mail, to drive conversion, so that we should see sequential improvement in payers by Q3. And the other thing I would point out, which I think is probably obvious but just want to make sure, is that we've had a lot of noise in the Tinder payer count, especially sequentially, as a result of all of the payer actions we've taken, all the price changes, weekly subscriptions, etc.
Speaker Change: Drive conversion such that we should see the sequential improvement in payers by Q3.
Speaker Change: And the other thing I would point out, which I think is probably obvious but just want to make sure.
Speaker Change: Is that we've had a lot of noise in the tender payer count, especially sequentially as a result of all of the Payor actions. We've taken all the price changes weekly subscriptions et cetera, It's created a lot of noise for the last little while we're largely getting that behind US now right. The big changes that were made in the U S, which were very significant happy.
Gary Swidler: It's created a lot of noise for the last little while. We're largely getting that behind us now, right? The big changes that were made in the U.S., which were very significant, happened starting in the late first quarter of last year and really affected the second quarter.
Speaker Change: And starting in the late first quarter of last year and really affected the second quarter. So the payer count information should start to get a lot is.
Gary Swidler: The payer count information should start to get a lot smoother, a lot easier to understand. There'll be fewer significant changes going forward. I think the metrics will be much more clear for people. We're looking forward to that as well. Great, thank you very much. The next question comes from Nathan Feather with Morgan Stanley. Please go ahead.
Speaker Change: Smooth there are a lot easier to understand there'll be less significant changes going forward and so I think the metrics will be much more clear for people. So we're looking forward to that as well.
Speaker Change: Great. Thank you very much.
Bernard Kim: Thanks, Nathan, for that question. Sure, we have a lot of great examples across the portfolio of products that show true evolution. We've consistently seen that true product innovation can lead to material impacts on the user experience. We know that this can appeal to new demographics and expand the total industry. Our portfolio of brands, which have existed for more than 10 years, is a major benefit.
Speaker Change: The next question comes from Neil.
Neil: Further with Morgan Stanley. Please go ahead.
Neil: Hi, everyone. Thanks for taking my question.
Neil: How to reignite user growth at Tinder are there any key studies you draw it internally from the rest of your portfolio, especially with some brands are around for three decades.
Neil: Brand successfully evolve the product to appeal to the next generation and how do you incorporate key learnings from that for where tenders that today. Thanks.
Speaker Change: Thanks, Nathan for that question.
Neil: We have a lot of great examples across the portfolio of products that show true evolution.
Speaker Change: We've consistently seen that true product innovation can lead to material impacts on the user experience.
Speaker Change: We know that this can appeal to new demographics and expand the total industry.
Speaker Change: Our portfolio of brands, which have existed for more than 10 plus years as a major benefit.
Bernard Kim: Years ago, OKCupid introduced the freemium model, which gained traction with late millennials who have not yet embraced the hard paywall business like Match.com or Hinge. When Hinge launched, it was based on connecting friends of friends for dating. But eventually, Hinge's growth stalled.
Speaker Change: Years ago, Okay, Cupid introduced the freemium model, which gained traction with late millennials, who have not yet embraced the hard paywall business like match Dot com or.
Speaker Change: Or hinge when hinge launched it was based on connecting friends of friends for dating but eventually hinges growth stalled. So they did a full product tear down which was a really big and bold tough decision and redesigned hinge from the ground up to focus on creating.
Bernard Kim: So they did a full product teardown, which was a really big and bold, tough decision, and redesigned Hinge from the ground up to focus on creating great dates and an app that's designed to be deleted. And users around the world are now flocking to it. And if you look at Tinder, it was a massive innovation for the whole category. Tinder took the mobile phone and created an unprecedented experience that everyone loves.
Speaker Change: Great dates and an app that is designed to be deleted.
Speaker Change: And users around the world are now flocking to hinge and if you look at Tinder. It was a massive innovation for the whole category.
Speaker Change: Tinder took the mobile phone and created an unprecedented experience that everyone loved.
Bernard Kim: We talk about the swipe, but the double opt-in was also a category changer for women who are suddenly in much more control of the attention that they receive. We know what works, but we also know what doesn't. We're listening to our young daters today and working to address their needs. What we've learned from all of these lessons across the portfolio and the learnings that we have from our users is that the product changes that we need to make need to be big and bold to drive real change.
Speaker Change: We talk about the swipe, but the double opt in was also a category changer for women, who are suddenly and much more control of the attention that they received.
Speaker Change: So we know what works, but we also know what doesn't work well.
Speaker Change: We're listening to our young daters today.
Speaker Change: And working to address their needs.
Speaker Change: What we've learned from all of these lessons across the portfolio and the learnings that we have from our users is that product changes that we need to make it to be big and bold to drive real change.
Bernard Kim: We can't make small little changes to products and expect a massive impact. We're really lucky because we have people across the entire company that have launched products, love building them, and are super motivated to capture the opportunity ahead. So we're going full steam ahead on our strategy, and we're confident that it's going to work.
Speaker Change: We can't make small little changes to product and expect a massive impact.
Speaker Change: We're really lucky because we have people across the entire company that have launched products love building them and are super motivated to capture the opportunity ahead.
Speaker Change: So we're going full steam ahead on our strategy and we're confident that it's going to work.
Operator: The next question comes from Ken Gawrelski with Wells Fargo. Please go ahead.
Speaker Change: The next question comes from Ken, Colorado Ski with Wells Fargo. Please go ahead.
Gary Swidler: Thank you for the question. I appreciate it.
Ken: Thank you for the question I appreciate it.
Ken: You maintained the margin guidance for the full year, despite revenue expected to come in towards the lower end of.
Ken: Previous expectations.
Gary Swidler: You maintain the margin guidance for the full year despite revenue expected to come in toward the lower end of previous expectations. It would seem from the outside that you should take the opportunity to invest more in marketing to get tinder net payer growth in 3Q. What are we missing here? Why not be more aggressive here at this point?
Ken: It would seem from the outside that you should take the opportunity to invest more in marketing to get tender.
Speaker Change: There are no payer growth.
Speaker Change: Three Q what are we missing here.
Speaker Change: Why not be more aggressive here at this point.
Gary Swidler: Great question, Ken. Like we said earlier, it's really the product experience that needs to resonate first and foremost. While marketing is a component of top of the funnel growth, it needs to be combined with an evolving product experience that resonates with users. The answer to your question is that we really don't see a compelling reason to increase marketing to achieve payer growth. It really needs to come from product innovation. Our marketing today is much more about improving the Tinder brand narrative and making sure that Tinder is top of mind for data.
Speaker Change: Great question, Ken like we said earlier, it's really the product experience that needs to resonate first and foremost while marketing as a component of top of funnel growth and needs to be combined with evolving product experience that resonates with users.
Speaker Change: The answer to your question is that we really don't see a compelling reason to increase marketing to achieve payor growth it really needs to come from product innovation.
Speaker Change: Our marketing today is much more about improving the tinder brand narrative and making sure that tinder is top of mind for Daters.
Gary Swidler: While we do expect this to have some positive impact on users, particularly women and Gen Z, it's not a lever we can pull to drive short-term pay or growth. And remember, Tinder's marketing spend is more about brand marketing and not direct response. So it isn't about spending more just to simply hit a quarterly pay or not. Thanks for the question.
Speaker Change: While we do expect this to have some positive impact on users, particularly women in Gen Z. It's not a lever we can pull to drive short term payer growth.
Speaker Change: And remember tenders marketing spend is more about brand marketing and not direct response.
Speaker Change: So it isn't about spending more just to simply hit a quarterly payer number.
Speaker Change: For the question.
Speaker Change: Thank you.
Operator: The next question comes from Jason Helfstein with Oppenheimer. Please go ahead.
Speaker Change: The next question comes from Jason <unk> with Oppenheimer. Please go ahead.
Gary Swidler: Thanks for taking the question. Maybe I'll ask, and some of this you did allude to, but maybe elaborate, so what's changed specifically since February at Tinder, which is driving low-to-mid teens or low to mid-teen revenue, or low to mid single-digit revenue growth versus the prior six to eight percent, as subs are still expected to turn positive in the third quarter. Just elaborate, I mean, obviously, you talked about some of the kind of safety things you've done on the platform, but just elaborate a little bit more. Thank you. Why don't I take a shot at that?
Jason: Thanks for taking the question.
Jason: Maybe I'll ask and some of it is you did allude to but maybe elaborate.
Jason: So what's changed specifically since February Tinder, which is <unk>.
Jason: The low to mid teens.
Jason: Low to mid teen revenue.
Jason: The low to mid single digit revenue growth versus the prior 6% to 8%.
Jason: As subs are still expected to turn positive in the third quarter.
Speaker Change: Just elaborate I mean, obviously you talked about some of the kind of safety things you've done to the platform, but just elaborate a little bit more thank you.
Gary Swidler: Why don't I take a shot at that, Jason? So, you know, a couple of things have changed. I mean, one, you know, our year over year payer growth expectations have come down a little bit, right? We had the negative nine in the first quarter, we're predicting something similar, and we'd like to see, obviously, improvement in that metric. As I mentioned to Ben, you know, we're confident that all the product initiatives and things we have going on will lead to that in the third quarter. So that's what we really need to see.
Speaker Change: Sure why don't I take a shot at that Jason. So a couple of things have changed I mean, one our year over year payer.
Jason: Growth expectations have come down a little bit right. We had the negative nine the first quarter, we're predicting something similar we'd like to see obviously improvement in that metric as I mentioned to ban we're confident that all the product initiatives and things we have going on will lead to that in the third quarter. So that's what we really need to see.
Jason: And I would I would point out sort of two specific things that have really changed since we did our last earnings call. You know the first thing and we talked a little bit about this in the letter in the remarks. The first thing is that we've seen increasing ALC weakness in this economic environment at Tinder and so that's putting pressure on revenue because the PERC.
Gary Swidler: And I would point out sort of two specific things that have really changed since we did our last earnings call. You know, the first thing, and we talked a little bit about this in the letter and the remarks, the first thing is that we've seen increasing ALC weakness in this economic environment at Tinder. And so, you know, that's putting pressure on revenue because the purchase volume that a user is making is lower than it was previously.
Jason: <unk> volume that a user is making is lower than it was previously so we have initiatives in place to try to resolve that but that's a critical driver of revenue and not putting more pressure on revenue than what we expected three months ago, and then you know because we have declining now and I've talked about how we need to drive conversion we need initiatives.
Gary Swidler: So we have initiatives in place to try to resolve that, but that's a critical driver of revenue, and that's putting more pressure on revenue than we expected three months ago. And then, you know, because we have declining now, and I talked about how we need to drive conversion, we need initiatives to really drive revenue growth. And so, you know, we have those going in a number of different ways across the world, but those have been delivering a little bit less than what we were expecting when we last provided the outlook in February. So we need those initiatives to work a little bit harder. And, you know, we'd like to see, obviously, improvement in Mao as well. That would help offset some of the pressures we've seen.
Jason: To really drive the revenue growth and so we have those going in a number of different ways across the world, but those have been delivering a little bit less than what we were expecting when we last provided the outlook in February so we need those initiatives to work a little bit harder and we'd like to see obviously improvement in MAU as well that would <unk>.
Jason: Offset some of the pressures, we see and so those are the things that have really moved the ALC.
Gary Swidler: So those are the things that have really moved the ALC degradation a little bit more severe headwind there, and the fact that some of our monetization initiatives have been under-delivering a bit versus what we'd like to see. But as I said to Ben, if we can get modest improvement in year-over-year payer growth, that will still lead to sequential payer growth in Q3. And so, you know, sequential payer growth in and of itself doesn't lead to year-over-year revenue growth.
Jason: Degradation in a little bit more severe headwind there and the fact that some of our monetization initiatives have been under delivering a bit versus what we'd like to see but as I said to Ben and we can get modest improvement in year over year payer growth that will still lead to the sequential payer growth in Q3 and so.
Jason: Sequential payer growth in of itself doesn't lead to year to year over year revenue growth, we need to see year over year payer growth and year over year revenue prepare growth combined that's what leads to.
Gary Swidler: We need to see year-over-year payer growth and year-over-year revenue per payer growth combined. That's what leads to, you know, year-over-year revenue growth. And so that's what we need to make sure is working the way we want it to.
Jason: Year over year revenue growth and so that's what we need to make sure is working the way we want it to.
Speaker Change: Okay. Thank you.
Operator: The next question comes from Chris Kuntarich with UBS. Please go ahead.
Speaker Change: The next question comes from Chris <unk> with UBS. Please go ahead.
Bernard Kim: Great, thanks for taking the question. Maybe one around your product efforts. Last year, you were more focused on pricing, and now that focus seems to be shifting towards product tweaks that should be driving more conversion events. Can you just talk to us about the visibility you have into those monetizations from last year versus the conversion-focused product tweaks ahead of you? Thank you.
Chris: Great. Thanks for taking my question, maybe one around your product efforts flat.
Chris: Last year was more focused on pricing and now that focus seems to be shifting towards product tweaks that should be driving more conversion events can you just talk to us about the visibility you have into those monetization from last year versus the conversion focused product suite.
Speaker Change: Thank you.
Bernard Kim: I'll take that one. Last year, we implemented a number of monetization initiatives, which we know how to do really well. And we have a great team behind it. That drove short-term revenue growth at Tinder. But to really achieve long-term growth at Tinder, we need to reimagine the product to better satisfy women and Gen Z. This is a much more significant undertaking for sustained long-term growth and less certain than implementing monetization optimizations and initiatives.
Speaker Change: I'll take that one last year, we implemented a number of monetization initiatives, which we know how to do really well and we have a great team behind it that.
Speaker Change: That drove short term revenue growth at tinder, but to really achieve long term growth at tinder, we need to re imagine the product to better satisfy women and Gen. Z. This is a much more significant undertaking for sustained long term growth.
Speaker Change: And less certain than implementing monetization optimizations and initiatives.
Bernard Kim: We are confident that we have the right team in place, and we're focused on this, and the series of planned initiatives that we will deliver to improve the product experience, we feel really strong about. This will drive user growth, payer growth, and revenue growth over time. So to be clear, what we're talking about is not really a series of conversion tweaks but a longer-term strategic undertaking. Thanks for that question, Chris.
Speaker Change: We are confident that we have the right team in place and we're focused on this and a series of planned initiatives that we will deliver to improve the product experience. We feel really strong about this will drive user growth payer growth and revenue growth over time.
Speaker Change: To be clear.
Speaker Change: What we're talking about is not really a series of conversion tweaks, but longer term our longer term strategic undertaking.
Speaker Change: Thanks for that question Chris.
Speaker Change: Thanks.
Operator: The next question comes from Dan Salmon with New Street Research. Please go ahead.
Speaker Change: The next question comes from Dan Salmon with New Street Research. Please go ahead.
Bernard Kim: Okay, great. Thanks for taking the question. Good morning, everybody.
Daniel Salmon: Okay great.
Daniel Salmon: Thanks for taking my question good morning, everybody.
Daniel Salmon: I'd like to talk a little bit.
Daniel Salmon: Just first to ask about it.
Daniel Salmon: The early learnings you see in terms of tests of the AI photos select or on Tinder.
Daniel Salmon: I think.
Daniel Salmon: Wording in the letter was about launching it more widely in the summer just curious if you had a little bit more details on the timeline. That's first half of the year and later on in the summer months.
Daniel Salmon: Maybe just more broadly here your view around AI development around the company.
Daniel Salmon: BK mentioned, so hyperconnected has been helping a lot of businesses.
Daniel Salmon: Our specialty there.
Speaker Change: Yes, Im sure well who's got a lot of attention.
Speaker Change: A lot of his time focused on this.
Speaker Change: More broadly how you're thinking about the road map for AI based products across your suite of apps.
Speaker Change: Okay.
Bernard Kim: I'd like to talk AI a little bit, and first, to ask about any of the early learnings you've seen from the tests of the AI photo selector on Tinder. And I think the wording in the letter was about launching it more widely in the summer. Just curious if you had a little bit more details on the timeline, if that's the first half of the year or later in the summer months.
Bernard Kim: Maybe just more broadly, your view around AI development around the company. BK mentioned how HyperConnect has been helping a lot of businesses. And I know AI is a specialty there. I'm sure Will Wu's got a lot of attention, a lot of his time focused on this, but just more broadly, how you're thinking about the roadmap for AI-based products across your suite of apps. Thanks.
Speaker Change: Thanks for that question I, absolutely love talking about AI and photos collector and.
Speaker Change: And we'll work closely with our hyper connect team in conjunction with our Tinder team to create this great feature that we think is really scalable and really go back to that data experience.
Bernard Kim: Thanks for that question. I absolutely love talking about AI and photo selector. And we'll work closely with our HyperConnect team in conjunction with our Tinder team to create this great feature that we think is really scalable. And to really go back to that dating experience, when a dater makes a decision to download Tinder or one of our other apps, they're really putting themselves out there. And the first step that we ask daters to do is create a profile. That can immediately be a barrier to entry.
Speaker Change: When a data makes a decision to download tinder or one of our other apps. They are really putting themselves out there and the first step that we ask daters to do is create a profile.
Bernard Kim: Some of our users can kind of put their hands up in the air and say, okay, I'll do that later. But we can now help a person create a profile using AI and overcome that barrier. We're testing it right now, and we're launching it this summer.
Speaker Change: That immediately can be a barrier to entry some of our users can kind of put their hands up in the air and say, Okay. I'll do that later, but we now can help a person create a profile using AI and overcome that barrier. We're testing it right now and we're launching this summer.
Bernard Kim: Now, I've tried it myself, and I personally have over 10,000 photos on my phone, and I wouldn't even know where to start if I were building my own dating profile. But Photo Selector magically chooses 10 photos for me, goes through all 10,000 photos in less than a minute, and it actually ends up showing parts of my personality that I wouldn't really think to showcase. Based on the 10 photos that they picked, my profile would show that I went to a Taylor Swift concert, love to cook, and I love my dog.
Speaker Change: Now I've tried it myself and I personally have over 10000 photos on my phone and I wouldn't even know where to start if our building my own dating profile.
Speaker Change: But photo select or magically chooses 10 photos for me goes through all 10000 photos in less than a minute and it actually ended up showing parts of my personality that I wouldn't have really thought to showcase.
Speaker Change: Based on the 10 photos that APAC my profile would show that I that I went to a Taylor Swift concert love to Cook and I Love My dog.
Bernard Kim: If I were doing this on my own, I'd probably just stick my corporate headshot, which is an okay photo, but it really doesn't tell much about me. If we can help people create better profiles, we believe that this is going to help them find better matches and have better conversations, which leads to better outcomes. This is just one example of the power of AI, and we plan to expand on this throughout the entire dating journey.
Speaker Change: If I was doing this on my own I'd, probably just stick my corporate head shot which is an okay photo, but it really doesn't tell much about me.
Speaker Change: We can help people create better profiles. We believe that this is going to get to better matches and had better conversations which lead to better outcomes.
Speaker Change: This is just one example of the power of AI and we plan to expand on this throughout the entire dating journey.
Operator: Thanks for that question. The next question comes from Justin Patterson with KeyBank. Please go ahead. Great. Thank you very much. Good morning. I wanted to ask a bit about Henge. You had outlined the path, the one
Speaker Change: For that question.
Operator: The next question comes from Justin Patterson with KeyBank. Please go ahead. Great, thank you very much.
Speaker Change: The next question comes from Justin Patterson with Keybanc. Please go ahead.
Justin Tyler Patterson: Great. Thank you very much good morning.
Justin Tyler Patterson: But about edge.
Justin Tyler Patterson: The path to $1 billion the letters I appreciate that.
Justin Tyler Patterson: It's actually diluted the margins are on that.
Justin Tyler Patterson: Looking toward that.
Justin Tyler Patterson: Ed.
Justin Tyler Patterson: Revenue target, how do you think about the margin potential there.
Justin Tyler Patterson: Closer to tinder over.
Justin Tyler Patterson: And then just maybe perhaps an update on where margins are today asset signal, but those were approaching at corporate average.
Speaker Change: Okay. Thank you.
Gary Swidler: Thanks, Justin. Why don't I take that?
Speaker Change: Thanks, Justin why don't I take that so hinge margins are expected to be in the high 20% range for the year. So short of the corporate number and they're about stable with where they were last year and I would point out really a couple of things going on that are affecting.
Gary Swidler: So, you know, hinge margins are expected to be in the high 20s percent range for the year, so short of the corporate number. And they're about stable with where they were last. And I would point out, really, you know, a couple of things going on that are affecting the Hinge margins. The first thing is, we're making a significant investment in marketing, really across all the markets that Hinge is focused on. So there are 17 markets; we're not marketing in every single one, but there's a significant effort going on on the marketing side to build brand awareness, especially in these newer European countries.
Speaker Change: The hinge margins. The first thing is we're making a significant investment in marketing really across all the markets that hinges focus onto their 17 markets were not marking in every single one but there's a significant effort going on on the marketing side to build brand awareness, especially in these newer European countries and the Rev.
Gary Swidler: And revenue generation lags that, so it's an investment, and the revenue will start to help generate operating leverage for the business over time. We're generating more revenue from Europe this year than we did last year, and that will continue to grow. So that's one thing that's going to lead to improved margins at Hinge over time. The second thing is, we're making a big investment in people there.
Justin Tyler Patterson: New generation lags that so it's an investment and the revenue will start to help generate operating leverage for the business over time, we're generating more revenue from Europe. This year than we did last year and that will continue to grow. So that's one thing that's going to lead to improve margins at hinge over time. The second thing is we're making a big investment in people there we continue to expand.
Gary Swidler: You know, we continue to expand headcount, particularly in product development, to continue to build out a better and better product experience. And so that investment is happening up front, but those investments should lead to revenue generation, which should also lead to operating leverage over time. And so I'm confident that as Hinge scales, the investments that we're making in marketing, and the investments in people will pay off, and the margins will start to approach, you know, company levels. I think we have a good line of sight to get there.
Justin Tyler Patterson: Head count, particularly in product development.
Justin Tyler Patterson: You know to continue to build out a better and better product experience and so that investment is happening upfront, but those investments should lead to revenue generation, which also should lead to operating leverage over time, and so I'm confident that is hinged scales.
Justin Tyler Patterson: The investments that we're making in marketing investments in our people will pay off and the margins will start to approach.
Justin Tyler Patterson: Company levels I think we have a good line of sight to get there where exactly hinge margins land is really going to depend on how fast and how big that business scales tail.
Gary Swidler: Where exactly the hinge margins land is really going to depend on, you know, how fast and how big that business scales. So, you know, the more scale it achieves, the more I have confidence that margins will continue to improve. I think there's a path for them to get to company levels. I think there's a path that they could be higher, but we'll have to see how that plays out and at what rate that plays out.
Justin Tyler Patterson: So the more scale it achieves the more I have confidence that margins will continue to improve I think there's a path to get the company level I think there's a path that could be that they could be higher but we'll have to see how that plays out and at what rate that that plays out I would tell you that.
Gary Swidler: I would tell you that, you know, Hinge margins, Hinge is investing more in marketing dollars than Tinder does. And that's because Tinder has such a high level of brand awareness in all the markets where it operates. You know, it was a big viral sensation when it burst onto the scene.
Justin Tyler Patterson: Hinge margins hinges investing more in marketing dollars than Tinder does.
Justin Tyler Patterson: And that's because tinder has such a high level of brand awareness in all the markets, where it operates as a big viral sensation when it burst onto the scene. It hasn't had to spend the marketing dollars that others, who came after it including hinge have had to do so.
Gary Swidler: It hasn't had to spend the marketing dollars that others who came after it, including Hinge, have had to do. So, you know, I think Hinge is always going to have margins that are below Tinder's level for that reason. We are spending a little bit more on marketing at Tinder. And so, you know, the gap is closing a little bit as Hinge improves its margin. But I do believe that, you know, that's the dynamic we have, that Tinder is, you know, the higher-margin business, but Tinder is the higher-margin business, and that Hinge will be somewhere around company margins.
Justin Tyler Patterson: I think hinge is always going to have margins that are below tenders level for that reason, we are spending a little bit more marketing at tinder and so the gap is closing a little bit as hinge improved its margin, but I do believe that.
Justin Tyler Patterson: That's the dynamic we had that tinder is the higher margin business, but.
Justin Tyler Patterson: The tender is a higher margin business, but that hinge will be somewhere around company margins and that all assumes no change in app store fees, which of course could be a big margin driver as well. So we'll see how that all plays out but those are the dynamics that I see as hinge continues to grow and mature.
Gary Swidler: And that all assumes no change in App Store fees, which of course, could be a big margin driver as well. So we'll see how that all plays out. But those are the dynamics that I see as Hinge continues to grow and mature. Great, thank you. The next question comes from Cory Carpenter.
Speaker Change: Alright, thank you.
Operator: The next question comes from Cory Carpenter with J.P. Morgan. Please go ahead. Thank you.
Speaker Change: The next question comes from Cory Carpenter with Jpmorgan. Please go ahead.
Cory Alan Carpenter: Thank you Gary could you expand on how Youre planning to maintain your 36% or better margin target. This year. Despite the softer revenue outlook and more broadly are there any incremental areas you've identified to reduce costs. Thank you.
Gary Swidler: Sure, happy to take that. So first of all, I would say early in the year we provide an outlook of 6 to 9% total company year over year revenue growth. And, you know, we were prepared to deliver 36% margins, even at the low end of that. So, you know, what's happened in terms of the performance thus far this year, we still have a plan to get 36% margins, even if we're toward the lower end of our previously stated total company revenue range. Now, obviously, we need to prepare for contingencies. And, you know, I'm not expecting this to happen.
Cory Alan Carpenter: Sure happy to take that so first of all I would say you know early the year, we provided an outlook of 6% to 9% total company year over year revenue growth.
Cory Alan Carpenter: And we were prepared to deliver 36% margins even at the low end of that so you know what's happened in terms of the performance. Thus far this year, we still have a plan to get to 36% margins. Even if it were towards the lower end of our previously stated total company revenue range now, obviously, we need to prepare for contingencies.
Gary Swidler: But if there were further deterioration, to maintain that margin level, we would have to take some additional actions. And so, you know, to your question, the first place we would look is things that don't impact revenue significantly. So corporate overhead, as an example, we would look to try to adjust areas that won't impact revenue generation. But I don't think there's, you know, massive opportunity in those kinds of areas because we've been judicious and we've been fiscally responsible for a while. But that's a place that we could definitely look into.
Speaker Change: I'm not expecting this to happen, but if there were further deterioration to maintain that margin level, we have to take some additional actions and so to your question.
Speaker Change: The first place, we would look or things that don't impact revenue significantly so corporate overhead as an example, we would look to try to adjust areas that won't impact revenue generation I don't think there's massive opportunity and those kinds of areas because we've been judicious and we've been fiscally responsible for a while.
Gary Swidler: After that, you start to get into areas that have more effect on revenue. So marketing would be one. Obviously, we have a very large marketing budget of over $500 million for the year.
Speaker Change: But that's a place that we could definitely look after that you start to get into areas that have more effect on revenue. So marketing would be one obviously, we have a very large marketing budget over $500 million for the year.
Speaker Change: We try to be very judicious with marketing across the businesses we.
Speaker Change: Monitor for a return on that investment of course.
Speaker Change: But the good news is we don't lock into a lot of marketing commitments and to the extent we have to make adjustments. There. We can and we can be very nimble, but again there could be knock on effects on revenue generation. If we adjust marketing I think we're pretty well optimized on the marketing side, so that but that would be another place look it's a big expense line for us.
Gary Swidler: You know, we try to be very judicious with marketing across the businesses. We, you know, monitor for return on that investment, of course. But the good news is, you know, we don't lock into a lot of marketing commitments. And to the extent that we have to make adjustments there, we can, and we can be very nimble. But again, there could be knock-on effects on revenue generation if we adjust marketing. I think we're pretty well optimized on the marketing side. But that would be another place to look.
Speaker Change: And then as we talked about a lot on the last earnings call and people are aware.
Speaker Change: We've got a number of innovation bets that are that are going on right now that are critical to driving future growth those tend to be very margin dilutive in the early years, because we're making investments in those businesses and they are pre revenue. So in the event that we needed to find other places to look at we would look at all of those bets even more carefully.
Gary Swidler: And then, as we talked about a lot on the last earnings call, and people are aware, we've got a number of innovation bets that are going on right now that are critical to driving future growth. Those tend to be, you know, very margin dilutive in the early years because we're making investments in those businesses, and they're pre-revenue. So in the event that we needed to find other places to look at, we would look at all those bets even more carefully.
Speaker Change: <unk>.
Speaker Change: <unk> consistently reevaluating them.
Speaker Change: But that would be perhaps a luxury that we would not have as much of again, there would be knock on effects on revenue in the future years on growth in the future years, if we curtailed some of those but we'd have to look at that so those are the tradeoffs that you'll have to Megan.
Gary Swidler: We are, you know, consistently reevaluating them. But that would be, perhaps, a luxury that we would not have as much of. Again, there would be knock-on effects on revenue in future years, on growth in future years, if we curtailed some of those. But we'd have to look at that. It's a big cost that you have to make. And, you know, obviously, they get tougher and tougher, you know, if things were to deteriorate. So we're, you know, job one is really to generate improved trends, improve revenue growth, and avoid the need to, you know, take any further cost action.
Speaker Change: Obviously, they get tougher and tougher.
Speaker Change: If things were to deteriorate, so where are the job one is really to generate improved trends improved revenue growth and avoid the need to take any further cost actions.
Speaker Change: Thank you.
Operator: The next question comes from Ygal Arounian with Citi. Please go ahead.
Speaker Change: The next question comes from Yigal <unk> with Citi. Please go ahead.
Speaker Change: Yes.
Bernard Kim: Hey, thank you. Good morning, everyone.
Yigal: Hey, Thank you.
Yigal: Good morning, everyone.
Yigal: I want to follow up on the on the <unk>.
Yigal: Product side, and particularly around women in Gen Z.
Speaker Change: For women, you called out a better product recommendations, but our outcomes there.
Speaker Change: Sure.
Speaker Change: Calling out here and talking on the call a lot about being bolder.
Speaker Change: On the product side. So can you just.
Bernard Kim: I want to follow up on the product side, and particularly around women and Gen Z. For women, you called out better product recommendations, better outcomes there, and, you know, you're calling out here and talking on the call a lot about being bolder on the product side. So can you just tell me what that means on the bolder side, like, what are the product expectations for women in Gen Z and how we should think about that?
Speaker Change: Help us understand what what.
Bernard Kim: And then on the safety side with, you know, losing MAUs, as you did that, and, you know, kind of cleaned up some of that, understand the impact on the MAU loss. How should we think about, not the comps year over year, but how you expect that to drive improvement over time and how we should see that? Thanks.
Speaker Change: What that means on the baldor side like what are the product expectations around the women in Gen Z and how we should think about that and then.
Speaker Change: On the safety side with <unk>.
Speaker Change: Losing I may use.
Speaker Change: Did that kind of cleaned up some of that.
Speaker Change: I understand the impact on the Mou loss, how should we think about.
Speaker Change: Not the comps year over year, but how you expect that.
Speaker Change: <unk> improvement.
Speaker Change: Over time, and how we should see that.
Speaker Change: Great question.
Bernard Kim: Gen Z and women, and their experience in particular, is our top priority. They are literally the most critical demographic for all dating apps. We know that women need to feel empowered and respected when they're on our apps.
Speaker Change: Ken Xie and women.
Speaker Change: And women's experience in particular is our top priority.
Speaker Change: They are literally the most critical demographic for all dating apps.
Speaker Change: We know that women need to feel empowered and respected when theyre on our apps.
Speaker Change: We have a series of initiatives to improve outcomes for women to make sure they're getting great matches.
Bernard Kim: We have a series of initiatives to improve outcomes for women to make sure they're getting great matches. Now on the trust and safety side, we have a very aggressive approach to removing bad actors, especially when we get reports from users. But recently, as we mentioned in the letter and in my opening remarks, we changed Tinder's community guidelines to remove people from Tinder who weren't there yet. Whether they were trying to grow their social media following or were not very active, they had negative impacts on user perception of the Kindra product.
Speaker Change: Now on the trust and safety side, we have a very aggressive approach to removing bad actors, especially when we get reports from users.
Speaker Change: But recently as we mentioned in the letter and in my opening remarks, we changed tenders community guidelines to remove people from Tinder, who werent there to date.
Speaker Change: Whether they are trying to grow their social media following or were not very active they had negative impacts on user perception of the tinder product.
Bernard Kim: So we made this change, and as Gary said, we think we lost about two million MAU, but it was the right call for Tinder because it's more important that we're delivering great matches and authentic users and also getting them out to meet in real life. These trade-offs are important, and the team has continued to evaluate and make hard decisions if it yields a healthier ecosystem. I'm going to give you an example.
Speaker Change: So we made this change and as Gary said, we think we lost about $2 million M. A U but it was the right call for tender because it's more important that we're delivering great matches and authentic users.
Speaker Change: And also getting them out to meet in real life.
Speaker Change: These trade offs are important and the team has continued to evaluate and make hard decisions if it yields a healthier ecosystem.
Speaker Change: Man. It give you. An example, tinder is going to start start requiring face photos.
Bernard Kim: Tinder is going to start requiring face photos. We believe that will be great for the ecosystem because it will increase the authenticity of people's profiles, but we also think that it's very likely to impact MAU as we weed out some people who are really not there to date, or it actually creates extra time for users to get comfortable with this change. However, as I talked about earlier, the AI Photo Selector will help make selecting photos easier, and we believe this will minimize the impact on MAU. This is something that we'll test and monitor, but we obviously think this is the right call for the user experience and the wider ecosystem. Thanks for that question.
Speaker Change: We believe that will be great for the ecosystem, because it'll increase the authenticity of People's profiles, but we also think that it's very likely to impact Mou as we read out some people who are really not there to date or it actually create extra time to get comfortable with this change.
Speaker Change: However, as I talked about earlier AI photos select or will help make selecting photos easier and we believe this will minimize the impact on Mou.
Speaker Change: This is something that will test and monitor but we obviously think this is the right call for the user experience and the wider ecosystem.
Speaker Change: Thanks for that question.
Operator: The next question comes from Jian Li with Evercore ISI; please go ahead.
Speaker Change: The next question comes from James Lee with Evercore ISI. Please go ahead.
Gary Swidler: Great. Thanks for taking the question. A couple.
Speaker Change: Yeah.
James Edward Heaney: Oh, great. Thanks for taking my question a couple of first.
James Edward Heaney: If you can talk about the macro assumptions baked into the guide.
Gary Swidler: First, if you can talk about the macro assumptions that came out of this guide. Are you assuming that what you're seeing today in macro persists, and any improvement in payer growth is purely driven by, say, pricing optimization of product development? And also, on E&E, this interesting call-out on Archer.
James Edward Heaney: Are you assuming that what are you seeing today and macro persist and any improvement in Paraguay was this purely driven off say pricing pricing optimization on product development and also one knee is interesting call out on the Archer if you can double click on it as well.
Gary Swidler: If you could double-click on, you know, the growth mostly coming from user and conversion or any particular price action you've taken. And how should we think about, like, growth drivers for this product or for emerging in general in the next year, just given your comments in the letter about emerging starting to offset evergreen potentially next year? Thanks a ton.
Archer: Well, it's mostly coming from merger and conversion or any particular price action, you've taken and how should we think about like growth driver for this product for emerging in general in the next year just given your comments in the letter of the margin starting to offset evergreen potentially next year. Thank you Tom.
Archer: Yeah.
Gary Swidler: So let me jump in and take some of those. I mean, first of all, at Archer, I would just point out it's a pre-revenue business. So really, what's happening is that we're seeing strong user growth. But we haven't yet gotten to the point where we're monetizing that business. I think that can come in the relatively short term because the key thing to enable us to monetize is just to grow users sufficiently if there's liquidity in the market. We're getting to that point where we have enough users, or daters, on that app, and so we can start to roll out some initial monetization features. So, you know, that is part of the plan.
Tom: So let me jump in and take some of those I mean first of all it Archer I would just point out.
Tom: It's a pre revenue business. So really what's happening is that we're seeing strong user growth, we haven't yet gotten to the point, where we're monetizing that business I think that can come in the relative short term because the key thing to enable us to monetize is it has to grow user sufficiently that there's liquidity in the market, we're getting to that point, where we have enough users day.
Tom: Orders on that App and so we can start to roll out some initial monetization features so.
Tom: That is part of the strategy and as you asked about I would think about the the emerging brands as a series of business is a series of bricks that are kind of like stacked on top of each other so we've got a number of demographic.
Gary Swidler: And as you asked, I would think about the emerging brands as a series of businesses, a series of bricks that are kind of like stacked on top of each other. So we've got a number of demographic apps in that portfolio, and we're generating more and more revenue because we're stacking more and more bricks of demographically focused apps. So we have one focused on the Asian community, we have one focused on the Hispanic community, one focused on the black community, one focused on the gay male community, and all of those are generating revenue.
Tom: And that portfolio and we are generating more and more revenue because we're stacking more and more bricks of demographically focused app. So we have one focused on the 8-K, we have one focus on the Hispanic community one place in the Black community. One plays on the gaming community and all of those are generating revenue and grow our growing pool of demographically tailored.
Gary Swidler: And that's a growing pool of demographically tailored apps generating revenue. And obviously, as we get Archer to the monetization stage, that will be a bigger piece of the equation. And so we've got moderating declines going on at the evergreen brands because we're managing those businesses to a sort of, you know, managed decline, a reasonable level of decline. And we're able to generate enough revenue in the emerging brands now to basically offset the declines that we see consistently in the evergreen brands.
Tom: <unk> generating revenue and obviously as we get Archer to the monetization stage that will be a bigger piece of the equation and so we've got moderating declines going on at the evergreen brands, because we're managing those businesses to get to a sort of <unk>.
Tom: Managed decline a reasonable level of decline and we're able to generate enough revenue in the emerging brands now to basically offset the declines that we see consistently in the in the evergreen brands. So that's what's happening in the <unk> brand as a whole and what we're trying to do is reduce redundancies.
Gary Swidler: So that's what's happening in the E&E brands as a whole. And what we're trying to do is, you know, reduce redundancies there, use a common tech platform, and be as efficient as possible and drive as strong margins as we can in that business. We're taking out a significant amount of cost. We've estimated $60 million.
Tom: Their use of common tech platform and be as efficient as possible and drive as strong margins as we can in that business. We're taking out a significant amount of costs, we've estimated $60 million and so it will have a <unk>.
Gary Swidler: And so we'll have a business that should start to grow again modestly if that all comes to fruition. At margins, that'll be, you know, quite attractive from the corporate perspective. That's the goal in the E&E business.
Tom: A business that should start to grow again modestly.
Tom: If that all comes to fruition at margins that'll be quite attractive from a corporate perspective, that's the goal and the <unk> businesses.
Gary Swidler: I think you also asked a question about macro trends, and what I would say is, you know, we're not assuming a significant change in macro, which is really having an effect on Tinder ALC, so that's where it's relevant. In the Tinder ALC, what we're trying to do there is find other ways to offset the macro trends by adding offerings, by adjusting offerings, by offering things at different price points, all those things together to offset the headwinds we're seeing.
Tom: I think you also asked a question about macro trends and what I would say is we're not assuming a significant change in macro which is really having the effect on tinder ALC, So that's where it's relevant.
Tom: In the tender.
Tom: I'll see what we're trying to do there is find other ways to offset the macro trends by adding offerings by adjusting offerings by offering things at different price points all of those things together to offset the headwinds we're seeing but for the rest of the year, we're not assuming significant changes.
Tom: And the macro environment, but we've done this once before if you remember.
Gary Swidler: But for the rest of the year, we're not assuming significant changes in the macro environment. But, you know, we did this once before, if you remember, way back when, we adjusted the way we were merchandizing a la carte offerings at Tinder because we started to see some pushback on them; we were offering more expensive bundles in a weaker economic environment, and so we adjusted our merchandising. And we're looking at, you know, similar kinds of changes again to adapt to a tougher macro environment, adjusting the pricing, adjusting what we offer and how we offer it, so we think we can, you know, improve the demand and cater better to the current economic climate, especially among those younger users at Tinder. So hopefully, that responds to your question.
Tom: Way back when we adjusted the way we were merchandising Ala carte offerings at Tinder, because we started to see some pushback on them, we are offering more expensive bundles in a weaker economic environment and so we adjusted our merchandising and we're looking at similar kinds of changes again to adapt to a tougher macro.
Tom: <unk> adjusting the pricing adjusting what we offer and how we offer it. So we think we can.
Tom: Improve the demand and cater better to the current economic climate, especially among those younger users at tinder.
Speaker Change: So hopefully that responds to your questions.
Gary Swidler: Yep, perfect. Thanks. The next question comes from James Heaney with Jeffreys. Please go ahead. Great. Thank you for taking the time.
Speaker Change: Perfect.
Operator: The next question comes from James Heaney with Jeffreys. Please go ahead. Great.
Tom: The next question comes from James <unk> with Jefferies. Please go ahead.
James Edward Heaney: Great. Thank you for taking the question in the letter you reiterated your confidence in sequential payer growth in Q3 and flowing user declines in the back half of the year. So I'm just curious what this would imply for Q4 payers and to the extent you can talk about Q1. Thank you.
Gary Swidler: Sure. Thanks, James.
Speaker Change: Sure. Thanks, J I'm happy to take the question and so you know we are expecting as I talked about as it related to Q3 sequential payer ads, we're expecting improved year over year payer growth as the year goes on we haven't seen that yet, but it's critical that we generate that through either product.
Gary Swidler: I'm happy to take the question. And so, you know, we're expecting, as I talked about as it related to Q3 sequential payer ads, we're expecting improved year-over-year payer growth as the year goes on. We haven't seen that yet, but it's critical that we generate that through either product initiatives to drive conversion and or MAU improvement. And so we need to be on the path to see improving year-over-year payer growth as the quarters go on. I still think that we have a path to get to year-over-year payer growth in Q4, but obviously, the weaker trends at the beginning of the year make that path a bit tougher.
Speaker Change: Initiatives to drive conversion and our Mou improvement and so we are we need to be on the path to see improving year over year payer growth as the quarters go on I still think that we have a path to get to year over year payer growth in Q4, but obviously the weaker trend at the beginning of the year make that path a bit tougher and so we have more.
Gary Swidler: And so we have more wood to chop to get there by Q4, and we need initiatives at Tinder to drive us to that outcome. I do want to say that I'm sure you understand this, but there seems to be some confusion between users on the one hand and payers on the other hand, so I want to explain how we use those terms. We talk about new users at Tinder, which really means registrations, new sign-ups, sometimes downloads, there's a substitute for that, and reactivations. That's new users on Tinder. And we also talk about MAU, which we refer to here.
Tom: More wood to chop to get there by Q4, and we need initiatives at Tinder to drive us to that outcome.
Speaker Change: I do want to say that.
Tom: I'm sure you understand this but there seems to be some confusion between users on the one hand and payers on the other hands I want to explain how we use those terms, we talk about new users at Tinder, which really means registrations new sign up sometimes downloads are used as a substitute for that and reactivation that new users at tinder.
Tom: <unk>.
Tom: Can you also talk about <unk>, which we referred to here collectively all of that as users our user growth at Tinder and that is critical to be able to do.
Gary Swidler: Collectively, all of that is users or user growth at Tinder, and that is critical to be able to drive improved trends. And so we're very focused on initiatives to do that. Improvement in new users or users collectively at Tinder is what will enable us to drive year-over-year payer growth because, obviously, payers come as users improve. There's a lag, but people sign up, they're on the platform, and we ultimately convert them into payers. And so those things are related.
Tom: Drive improved trends and so we're very focused on initiatives to do that.
Tom: Improvement in users in new users or users collectively of Tinder is what will enable us to drive year over year payer growth, because obviously payers come as users improve theres, a lag but people sign up there on the platform and we ultimately convert them into payers and so those things are related so the fact that we believe we can get stronger user.
Gary Swidler: So the fact that we believe we can get stronger user growth in the back half of the year through all of our product initiatives, app ecosystem cleanup, etc., should generate improved payer growth as well. Maybe we won't get quite to it at the very end of this year. It may go into next year, but we're right now positioned to see improved payer growth in Q4 and then going into Q1 as well.
Tom: Growth in the back half of the year through all of our product initiatives app ecosystem cleanup et cetera should.
Tom: <unk> improved payer growth as well, maybe we won't get quite to it at the very end of this year. It may go into next year, but we're right now positioned to see improved payer growth in Q4, and then going into Q1, as well and so that bodes well for the longer term trends in the business because as we improve the user growth and as we have initiatives driving conversion we should start.
Gary Swidler: And so that bodes well for the longer term trends in the business because as we improve user growth and as we have initiatives driving conversion, we should start to see improved payer growth and, therefore, improved revenue growth as well. That's the goal. That's what we're trying to achieve through the four-prong strategy that Tinder is executing. So hopefully, that addresses your question, James. Yes, thank you. I think we might have time for one more question.
Tom: To see improved payer growth and therefore improved revenue growth as well that's the goal that's what we're trying to achieve through the four pronged strategy that tinder.
Tom: <unk> is executing on.
Speaker Change: So hopefully that addresses your question James.
Speaker Change: Yes. Thank you.
Speaker Change: Okay. I think we have time, maybe for one more question.
Operator: The next question comes from Curtis Nagle with Bank of America. Please go ahead. Terrific. Maybe just one real quick one and then a follow-up.
Speaker Change: The next question comes from Curtis Nagle with Bank of America. Please go ahead.
Curtis Smyser Nagle: Terrific, maybe just one real quick one and then a follow up Gary for Ya just mentioned initial head counts coming into hinge on any other parts of the business, where we will see growth and then just one on the.
Gary Swidler: Gary, for you, I just mentioned the initial headcount coming into Hinge. Any other parts of the business where we'll see growth? And then just one on the ACL products, right? Any risk, I guess, of cannibalizing subscription revenue? It sounds like you're going to take some features, right, that you have in premium and put them into ACL offerings at more affordable price points. And then just what is the assumption in terms of... contribution from a la carte in terms of revenue growth in the back half of the year?
Curtis Smyser Nagle: ACL products right any risk I guess.
Curtis Smyser Nagle: Cannibalizing subscription revenue it sounds like Youre going to take some features that you havent premium would have been to ACO offerings at more affordable price points and then just what is the assumption in terms of.
Curtis Smyser Nagle: Contribution from our cart in terms of.
Curtis Smyser Nagle: Revenue growth in the back half of the year.
Gary Swidler: So, we don't have a lot of time, but I'll try to answer that relatively quickly. On the Hinge headcount, you know, I did mention we are making significant investments there, primarily in product development.
Speaker Change: So just we don't have a lot of time, but I'll try to answer that relatively quickly.
Speaker Change: On the hinge head count I did mentioned, we are making significant investments there it's primarily in product development.
Speaker Change: We.
Speaker Change: We do have a significant investment plan at the company overall on the head count side, but I do think that will moderate as the year goes on if you look at head count costs. They are up a lot in the first quarter year over year, but there are some SBC effects and there are things that I think will normalize and so I think that that headwind will abate as the year goes on hinge is the primary place.
Gary Swidler: You know, we do have a significant investment planned at the company overall on the headcount side, but I do think that will moderate as the year goes on. If you look at headcount costs, they're up a lot in the first quarter year over year, but there are some SBC effects and other things that I think will normalize. And so I think that that headwind will abate as the year goes on.
Gary Swidler: Hinge is the primary place where we're investing in headcount, and I talked a little bit about the margin consequences there. There is some additional investment at Tinder and in some of the central innovation AI efforts. Those are the primary areas where we're investing in headcount. We're being really judicious elsewhere across the company. So that's kind of one piece of it.
Speaker Change: We're investing in head count and I talked a little bit about the margin consequences. There there is some additional investment at tinder.
Speaker Change: And in some of the central innovation AI efforts those are the primary areas, where we're investing in head count we're being really judicious elsewhere across the company. So that's kind of one piece of it on the Ala Carte cannibalization that is a factor that we grapple with there is the potential risk for Ala carte to cannibalize subscription.
Gary Swidler: On the a la carte cannibalization, you know, that is a factor that we grapple with. There is the potential risk for a la carte to cannibalize subscription, and so we need to test and manage every new feature that we roll out on the a la carte side, which we do to make sure we understand the cannibalization. If it's revenue-accretive, we're still comfortable doing that, but you might see knock-on effects on subscribers but overall better revenue generation on the a la carte side. So that's something that we manage, that balance. It's a critical skill that we have, and we're going to continue to do so.
Speaker Change: And so we need to test and manage every new feature that we rollout on the Ala Carte side, which we do to make sure we understand the cannibalization. If it's revenue accretive we're still comfortable doing that but you might see knock on effects on subscribers, but overall better generation on the Ala Carte side. So that's something that we manage that balance its a critical skill that we have.
Speaker Change: And we're going to continue to do so.
Gary Swidler: You know, we have a lot of a la carte products and adjustments in the pipeline for Tinder in the back half of the year. So I'm expecting, you know, a la carte revenue growth in the back half of the year or improvement from where we are now, at least. And I do think that the percentage of Tinder's revenue that we generate from a la carte should start to increase as we grow a la carte.
Speaker Change: We have a lot of Ala carte products and adjustments in the pipeline for tinder in the back half of the year, So im expecting Ala Carte revenue growth in the back half of the year or improvement from where we are now at least and.
Speaker Change: I do think that the percentage of tinder revenue that we generate malakar should start to increase as well as we're growing Ala Carte I don't think it'll be dramatic it's around 20% probably tick up to 21%, 22%. So that's what we expect to see in the back half of the year as we rollout more of these Ala carte focused initiatives at Tinder.
Gary Swidler: I don't think it'll be dramatic. It's around 20 percent, probably going to tick up to 21 percent, 22 percent. So that's what we expect to see in the back half of the year as we roll out more of these a la carte focused initiatives at Tinder. So hopefully that addresses your question. I think we are out of time, but I'll turn the call back over to BCAT. Thanks, Gary.
Speaker Change: So hopefully that addresses your question I think we are out of time, but I'll turn the call back over to BK.
Bernard Kim: Thanks Gary and thanks everyone for joining today's call. Gary and I appreciate your questions and thank you so much for your interest. We're all really excited about the business that we're building and the opportunities ahead. We look forward to continuing the conversation. Thank you all.
BK: Thanks, Gary and thanks, everyone for joining today's call Gary and I. Appreciate your questions and thank you. So much for your interest. We're all really excited about the business that we're building and the opportunities ahead.
BK: We look forward to continuing the conversation and have a great day. Thank you all.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
BK: Okay.
BK: Yes.
BK: Yes.
BK: [music].