Match Group, Inc.

Good day and welcome to Match Group fourth quarter 2022 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 one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Taney Shelburne, SVP of Investor Relations. Please go ahead.

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 the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. With that, I'd like to turn the call over to BK.

Thanks, Tani. Good morning, everyone, and thank you for joining today's call. As we look back on 2022 and our Q4 results, it's clear that the year was challenging and our performance fell short of our expectations. But this is an organization that is not okay with missing our goals. And while the business continues to exhibit strong fundamentals and financial discipline, we have taken decisive steps, including restructuring for increased accountability and collaboration and recruiting key talent to set us up for long-term growth and maximize profitability. As I've previously shared during my first few months on the job, I went on an intense listening tour across Match Group. I've spoken to leaders and employees from all layers across the organization, as well as users across our portfolio to identify opportunities and pain points. One thing that was very obvious is that this organization welcomes change and embraces the culture shift that is required to drive shareholder value while serving our mission to create real and meaningful connections every day. The changes we made at Tinder have allowed it to quickly regain footing and prioritize product momentum. The results are evident in Tinder's 2023 roadmap and improved execution. No other brand in the category has the virality, the reach, and the scale that Tinder has. While it might take a few quarters, I'm confident by shoring up the talent there and judiciously investing in the team and the brand that we're going to accelerate Tinder's momentum and get us back to the financial performance that we all expect. I remain the interim CEO of Tinder and key senior leaders continue to report directly to me. I'm encouraged by the progress that Tinder has made both culturally and in terms of execution. In fact, In the second half of the year, Tinder saw a significant increase in the number of product features it delivered compared to the first half of 2022. I'm also very excited for the new marketing campaign, which launches later in Q1. This will allow us to begin shifting and establishing Tinder's brand story. After Tinder, we looked at the rest of the organization. From every conversation I had with our brand leaders, it became evident that Match Group had historically operated in a very siloed way. I'm a big believer that by increasing transparency across the organization, you increase accountability, while at the same time adding a healthy dose of friendly competition to the company's culture. That's why we announced last week that we revamped our leadership structure to create a more streamlined organization. With a focus on setting up the right team for the future, we restructured the management team around leaders with extensive knowledge and experience, supplemented with new talent that brings a renewed focus on innovation and growth. Hinge remains a standout in our portfolio, guided by Justin McLeod's founder-led mentality and mission-focused vision for the brand. Hinge continued its highly successful international expansion efforts, becoming one of the top three most downloaded dating apps across English-speaking Doc and Nordic countries in December. It will also launch its new premium subscription tier, Hinge X, to all users by the end of February. I've been impressed with Hinge's ability to create a differentiated, powerful dating app that resonates with so many singles across generations. and now expand their monetization by offering two subscription tiers that give users more control over how they date. Hinge is still very early in its international expansion and monetization efforts, but I believe there is a lot of upside as we continue to invest in the brand. I'm excited about our opportunities within Asia and the strong focus we have now in the region. We needed a product-focused leader on the ground in the market who knows how to engage and inspire teams. So I promoted Malgosia Green from Plenty of Fish to a newly created role as CEO of Match Group Asia. Malgosia will be moving to Asia to work directly with PEARS and HyperConnect to recapture growth and enhance profitability, as well as drive the go-to-market strategies for Hinge and Tinder across the region. Finally, evergreen and emerging brands, which consist of Match, Meetic, Plenty of Fish, OkCupid, and our emerging brands like BLK, Chispa, and The League, will be managed together for the first time. Hassam Hosseini will be taking on a newly created role as CEO of evergreen and emerging brands. Formerly the CEO of Match and Affinity Brands, Hassam brings an unmatched level of experience to this combined global team. Combining our evergreen brands under a shared direction will enable us to streamline operations and reduce duplicative work. It will also allow us to leverage our institutional knowledge to drive growth with attractive margins across our emerging brands, where we see significant untapped potential. Lastly, We're excited to welcome Will Wu as our new CTO who will work directly with all our brands to build upon Match Group's history of transformative innovation by continuing to incubate, launch, and grow entirely new experiences for our users. Will and I have known each other for a long time, and he has had a highly influential impact on social media products as we know them today. He's been able to build some of the most engaging user experiences for millennials and Gen Z, and his passion and dedication will be a great fit for the culture at Match Group. I know the team here is going to welcome his expertise, creativity, work ethic, and humility. And finally, through all of this, I would be remiss if I didn't take a moment to thank Gary. He has been instrumental in not only my onboarding, but has helped lead with strength and clarity even amid a very challenging operating backdrop. As such, I'm pleased to appoint Gary as President and CFO of Match Group, a clear demonstration in the trust I have in him and the value we put in his ability to drive our shared vision forward. As we begin a new year, I'm energized and ready to take on this next chapter in Match Group's history. We are navigating the current macroeconomic challenges, and we have a strong team and clear vision to execute upon. I look forward to sharing more on our efforts in future calls. With that, I'll hand the call over to Gary.

Thanks, BK. I feel great about my role and the other org changes we've made and think the hiring of Will Wu will be terrific. I'm very much looking forward to working with him and to continuing to see the company build its momentum. Now let me get into the numbers. As BK said, while not at the standards we hold ourselves to, our Q4 2022 total revenue was in line and our adjusted operating income exceeded the expectations that we set forth in our last earnings call. Total revenue was $786 million, down 2% year over year. FX was a notable headwind once again. Our total revenue would have been $846 million, up 5% year over year on an FX neutral basis. The FX headwind was less than we expected when we provided our outlook on our November earnings call, but that was offset by slightly more business weakness than we had forecasted, primarily in Europe. Our direct revenue was down 2% year over year. It grew 2% year over year in the Americas, with growth at Tinder, Hinge, BLK, and Chispa, but declines at the evergreen brands, which include Match, Plenty of Fish, and OKCupid. Direct revenue declined 4% year-over-year in Europe, but was up 8% on an FX-neutral basis, driven by Tinder and Hinge, with weakness at Meetic. Direct revenue declined 9% year-over-year in APAC and other, but was up 9% on an FX-neutral basis, driven by Tinder. Total payers were 16.1 million, a decrease of 1% year over year. Payers were down 2% year over year in the Americas, down 4% in Europe, and up 6% in APAC and other. Tinder payers globally were up 3% year over year, while all other brands were down 8% in aggregate. Q4 RPP was down 1% year over year at $16. RPP was up 4% in the Americas, driven primarily by higher average prices paid for subscriptions at Tinder and Hinge. RPP was up 1% year-over-year in Europe, where contributions from Tinder and Hinge were offset by the strength of the U.S. dollar compared to the euro and the British pound. RPP was down 14% year-over-year in APAC and other due to the strength of the dollar relative to the yen and the Turkish lira. On an FX-neutral basis, Q4 RPP was up 7% year-over-year company-wide, up 14% in Europe and up 3% in APAC and other. Tinder overall performed in line with our expectations in the quarter, delivering direct revenue of $444 million flat year over year, up 8% on an FX neutral basis. Tinder added just under 300,000 payers to just over 10.8 million. Tinder saw a 3% RPP decline year over year in the quarter, which again highlights the impact of FX. Tinder RPP was up 5% year over year on an FX neutral basis. All other brands' direct revenue was down 5% year over year in Q4, driven by an 8% payer decline, partially offset by 3% RPP growth. Hinge, BLK, and Chispa continue to drive growth, with Hinge up nearly 30% year over year. Our evergreen and emerging brands declined 9% year-over-year in terms of direct revenue, and our Asian brands saw direct revenue decline 16% year-over-year, in large part due to FX. We saw stability in pairs and hyperconnect direct revenue on a local currency basis, but we have yet to see a rebound in the Japanese market despite improvement in the COVID situation there. Indirect revenue was $15 million in the quarter, down 18% year-over-year, but similar in dollar terms to the other quarters of 2022. Q4 2021 was particularly strong for indirect revenue. Operating income was $107 million in Q4, a 54% year-over-year decrease for a margin of 14%. Operating income was impacted by $102 million in impairment charges on intangibles, primarily related to our MeTIC and HyperConnect businesses. The charges stem from declining financial performance at MeTIC, as well as the use of higher discount rates on HyperConnect's long-range forecasts due to the higher interest rate environment and higher market volatility overall. Our HyperConnect business outlook did not change meaningfully during the quarter. Adjusted operating income was $286 million, down 2% year-over-year, representing a margin of 36%. Q4 AOI and margin strength reflected our nimbleness on costs as we reduced marketing spend and rationalized some bonus and overhead costs. Excluding the impact of the $102 million of impairment charges, overall expenses, including SBC expense, were essentially flat year-over-year in Q4. Cost of revenue grew 1% year over year and represented 30% of total revenue, up one point year over year, driven by app store fees and hosting costs. Selling and marketing spend decreased $12 million, or 9% year over year, the third consecutive quarter where we've seen a year over year reduction, as we continue to reduce marketing spend at our lower growth brands and to exercise ROI discipline overall. Selling and marketing spend was down one point year-over-year as a percentage of total revenue to 16%. G&A expense was flat year-over-year and steady at 14% of revenue, reflecting lower legal fees but higher compensation expense. Product development costs grew 21% year-over-year and were 10% of revenue, primarily reflecting increased engineering headcount at Tinder and Hinge. Our gross leverage was 3.4 times trailing adjusted operating income, and net leverage was 2.9 times at the end of Q4. We ended the quarter with $581 million of cash, cash equivalents, and short-term investments on hand. We did not repurchase any shares in the quarter as we decided to allow our cash balance to build slightly, and we were concerned by the high volatility and weakness in the equity markets generally in Q4, which drove ours and many other stock prices down throughout the quarter. With our cash balance now strong, we will reconsider repurchases once the window reopens. We currently have 5.3 million shares remaining under our buyback authorization. When we look at our history as a public company, 2022 stands out as a year we did not hit our growth targets, delivering 7% top line and 6% AOI growth, respectively. Some of the miss was due to macro factors, including consumer weakness and particularly FX. On an FX neutral basis, our top line growth was 14% in 2022. But our business overall, and Tinder in particular, decelerated as the year went on, and product execution was not what we expected it to be, especially in the first half of the year. For the full year 2022, Tinder direct revenue was approximately $1.8 billion. Hinge delivered $284 million in direct revenue, slightly below our $300 million expectation, due primarily to our decision to delay the rollout of Hinge X. Evergreen and Emerging had $730 million in direct revenue, and our Asia brand delivered $322 million in direct revenue. Fortunately, we made critical corrective changes in the middle of the year, which have begun delivering results. It's still very early, and it will require some patience through 2023 to see the momentum build, but we're increasingly confident we're on course to deliver results consistent with our standards. For Q1 23, we expect total revenue for match group of $790 to $800 million, roughly flat year over year. For Tinder, we expect direct revenue to increase slightly year over year. We expect Hinge to deliver Q1 year-over-year direct revenue growth of over 25%, driven by continued strong performance in its core English-speaking markets, the introduction of the two new pricing tiers, and continued European expansion. The early testing of the new Hinge tiers is going well, with take rate consistent with our expectations, higher conversion impact than we expected, and no notable cannibalization of a la carte revenue. We expect the tiers to be globally rolled out by the end of February. We expect our evergreen and emerging brands direct revenue to be down under 10% year-over-year in aggregate, and our Asian brands to decline just under 15%, driven in large part by FX. We expect Q1 indirect revenue to be down close to 10% year-over-year, given ad budgets broadly are being slashed due to macroeconomic concerns. We expect adjusted operating income of $250 to $255 million in Q1, representing margin of about 32% at the midpoints of the ranges. IEP fees continue to be a headwind and will also now include an $8 million payment into the Google litigation escrow, which was a cost we didn't incur last Q1. We expect marketing spend to be up year over year at Tinder and Hinge with reductions elsewhere in the portfolio. we expect to incur $3 to $5 million of severance and similar costs in Q1 related to our personnel reductions and cost savings initiatives. Macroeconomic factors are impacting our business consistent with our expectations thus far in early 2023. That, coupled with improved product execution at our Tinder brand, gives us increasing confidence that Match Group can deliver 5% to 10% year-over-year revenue growth in 2023. We believe Tinder is positioned to deliver a similar range of growth. We also remain confident that Hinge's momentum will lead it to delivering nearly $400 million of direct revenue in 2023, approximately $100 million more than in 2022. We expect the company overall, as well as Tinder, to have accelerating year-over-year revenue growth as we move through 2023, driven by improved product execution leading to improved revenue momentum at Tinder. In terms of AOI, we expect improving year-over-year margins in the back half of the year as the benefits of our cost savings initiatives take hold and Tinder top-line growth accelerates. Our cost savings initiatives are focused on right-sizing headcount and reducing overhead costs, including office expenses and professional fees. We expect to reduce our global workforce by approximately 8% in aggregate. We've already reduced roles in the U.S. In other countries, this process is ongoing. We expect to incur $6 million of severance and similar costs related to our cost savings initiatives in 2023. We're also reallocating marketing spend from lower growth businesses to higher growth ones in 2023 to keep overall spend close to flat. Our financial outlook reflects no change to current App Store policies, though we believe that the stores are moving to comply with aspects of the Digital Markets Act that is now in effect in Europe. The stores are also facing continued legal setbacks and restrictions in other markets globally, such as India. We continue to expect changes in the App Store ecosystem, but the timing and shape of the changes is challenging to predict. We expect to be a U.S. federal cash taxpayer in 2023. The precise amount we will pay depends in part on our stock price, which affects the compensation expense deductions we can take. We currently expect to convert low 70% of our AOI into free cash flow in 2023. We expect 2023 SBC expense of $230 to $250 million with the year-over-year increase driven by previous hiring as well as our desire to remain competitive on compensation. We've made a lot of critical changes since BK arrived mid last year, including revamping the Tinder team, streamlining our organizational structure, implementing cost savings initiatives, and hiring critical new talent. These changes are just beginning to pay dividends. We expect it to take a little time in the first half of 2023 to build momentum, but are confident that improved product momentum and our financial discipline position us for much stronger growth and profitability in the back half of the year, as well as longer term. We look forward to delivering a combination of strong growth, profitability, and cash flow generation for our shareholders. With that, I'll ask the operator to open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Igal Arunian with Citi. Please go ahead.

Thanks. Good morning, guys. I want to ask about Tinder, and you spent a good amount of time in the investor letter talking about the Tinder product roadmap. Maybe we can just dig in a little bit deeper on that. You mentioned you're starting to execute on that roadmap. Maybe some kind of practical examples of that and highlight where we are and how much there is left to get through this year. And then second question on Tinder, and you talked about the three components of, you know, expanding the core experience of deeper engagement, broadening, monetization, and then optimization. We highlighted that optimization is going to drive two-thirds of Tinder's revenue growth in 2023. Just can you expand on that a little bit, why that's happening and how we can expect the other two components to contribute to revenue growth over time? Thanks.

Thanks, Agal. I can take that one. It's been pretty clear when I joined last May that I wasn't happy with the state of the Tinder roadmap. So we moved quickly and we made changes to the team and we pushed really hard over the next six months thinking about our product roadmap and where we want to take the business. It was important to lock a roadmap that everyone was aligned on. We focused on two key areas, experience for our daters on our platform and future areas for monetization. As we were laying out the product roadmap, we actually found some problems in the foundation that we had to prioritize and fix. So the team rallied quickly on focusing on that. Our emphasis has always been on the health of our ecosystem, given that these foundational improvements will lead to better user experience and enable further monetization. Unfortunately, we head into 2023 with less momentum than what we would like. But as we build momentum in the first half of the year, it sets us up for a second half of the year for accelerated growth. The chart that we include in the letter actually shows a challenging environment that Tinder was facing. A la carte revenue was under significant pressure given the macro environment. But I'm really proud the way that the team moved really quickly in coming together with solutions to offset this weakness. In fact, they did it in three ways. Number one, They changed the merchandising approach around ALC, which was no longer working in this macro environment. Number two, they rolled out primetime boosts. And number three, they rolled out a new optimization called compound boosts, which collectively helped offset a good amount of the ALC weakness. I've been impressed with how quickly the team has worked together to produce results. This wouldn't have been possible with the team six months ago. The other big priority that I've been making sure the team is focused on is a clear and detailed product roadmap for 2023. For the first time ever, we've published that in the letter alongside delivery dates. I'm holding myself and the Tinder team accountable for delivery of that product roadmap. By its nature, when we have a roadmap like this, we have to test and iterate all these features. Some will be optimized over time and some will be more successful than we expect. In general, once we roll them out, it'll take some time to translate into visible payer and revenue metrics. I'm confident that it's a strong roadmap and that this Tinder team is going to execute on it. This will lead to wins that will be visible in financial results and metrics in the back half of the year. A big initiative for Tinder is to cater to Gen Z through a series of initiatives around authentic content and self-expression. We have some really creative and interesting features that we're currently concepting and we plan to integrate into Tinder. We'll be talking more about that as the year goes on. Another place that we think Tinder can really change the game is by leveraging machine learning to enhance recommendations. We're already using machine learning for safety and moderation, and that technology is really improving, and I think it'll be very beneficial when applied to RECs. We have resources inside the group that we can leverage to build this technology out, and it's something that we're working on in 2023. Not only do we have these resources at Tinder, but HyperConnect also has a significant team of machine learning talent that we think we can utilize to move faster in this area. You asked about pricing optimization, and I believe there's a lot of low-hanging fruit around optimizing pricing. We haven't been focused in this area for a long time, and we recently put our best talent from Match Group against these initiatives. We have a lot of confidence that we can achieve significant revenue improvements by tackling this area. This actually reduces the risk and improves our chances of delivering our financial targets. So I feel really good about the fact that two-thirds of Tinder's 2023 revenue growth is delivered by just pricing and product optimizations. Lastly, we plan on broadening monetization to meaningfully unlock power users at Tinder. This is an area that we see a lot of opportunity. Last year, we acquired The League, which has a $1,000 weekly subscription, and we think there could be a demand for a high-priced tier at Tinder, which is the largest pool of daters on the planet. We're in the very early stages of testing the appetite for an ultra-premium subscription tier at Tinder. It's too early to say when and if we're actually going to launch this, but the possibilities are super intriguing.

Thanks so much. That was really helpful.

The next question comes from Lauren Shane with Morgan Stanley. Please go ahead.

Great, thanks. You mentioned in the letter that the year is off to a solid start performance-wise. Just wondering if you could expand on those comments and what you're seeing specifically, and is the improvement broad-based or specific? to some brands or regions. And then just maybe following up on the last question, what are some of the KPIs or trends that you're seeing internally that give you confidence in Tinder re-accelerating to mid-teens revenue growth by the end of the year? Thank you.

Thanks, Lauren. Why don't I try to take that one? So when we met on our last earnings call, you know, we told you that we were seeing significant pressure on our ALC revenue, which was really driven by macro factors, particularly younger consumers that were feeling pressure from the economic environment. And that was especially acute at our Tinder brand, where we have a lot of younger consumers. That impacted our Q4 performance, and it was also really a potential overhang on our 2023 performance as well. But since we met last time, a couple of things have happened. The first one, which BK mentioned, was that Tinder put out a lot of initiatives to reverse the trends in ALC. And you can see from the chart that's in the letter, they did succeed in reversing a lot of the decline we are seeing in ALC. Not all of it, but a significant portion. And the other thing, and this is very important over the last few months, is that we've really seen stability in our ALC trends. And so we have not seen further degradation, which was a risk when we spoke last time. I'd also want to add that we haven't seen any impact on our subscription revenue trends. That's at Tinder and business-wide. I think our subscription trends remain extremely resilient to any economic pressure. But it's ALC where we've been impacted by some of the macro things going on. And I would also say that, as you know, dating has a bit of a peak season that starts at the end of December and runs through Valentine's Day. And so we watch the peak season, which tends to be a good harpinger of what's coming in Q1 and for the rest of the year. And what we've seen is really stability in those trends, kind of the typical pop that we see in trends in the peak season. We did see that this year as well, which tells us that the macro trends have not led to worsening consumer demand. They've not put incremental pressure on the consumer demand in the ALC. So that's been particularly encouraging and gives us more confidence in our 2023 outlook than we had last time. So just to summarize, while we see pressure on ALC, and in fact, we see ALC revenue down year over year at Tinder in particular, we don't think those trends are worsening. And so with stable ALC trends and with subscription revenue being resilient, that gives us that confidence. in the outlook for 2023 and the fact that we think as the year progresses, we'll start to see improved momentum as well. And I would tell you that the peak season trends that we're seeing are not just a Tinder phenomenon, but we're seeing good stability of peak season trends across all of our businesses. I would also tell you that, you know, we think that the Americas business is pretty strong. It's a little bit weaker in Europe and certainly was in the fourth quarter. But in general, we think Europe is a little bit weaker, you know, than the Americas. In terms of the Tinder reacceleration as the year goes on, as we've talked about a few times now, we're very clear that the problem was largely a product execution one, and we're really pleased with the strides the team has made over the last six months in improving on product execution. And BK mentioned the Tinder team has a clear and strong product roadmap for 2023, and we see them executing on it. We see them shipping product and moving forwards. The other thing which BK also alluded to is that we have more confidence in Tinder achieving its goals in 2023 from a financial perspective and accelerating its momentum to achieve that double-digit growth by Q4. The roadmap is not dependent on one or two big swing initiatives that we have to achieve. Rather, it's a series and a large number of smaller initiatives that really contribute to the growth. So that really does reduce the risk that we see in achieving the financial objectives for the year. And BK specifically pointed out that two-thirds of the revenue growth for the year for Tinder are coming from optimizations. which we have a high confidence in, strong line of sight, too, and we've done before, and we think they're highly achievable now that we've got the right team focused on those optimizations. So, you know, while there's a lot of work still left to be done, and it's really early in the year, we don't want to get ahead of ourselves, I feel like we have a strong line of sight to getting back to that mid-teens growth by Q4.

Very helpful. Thank you.

The next question comes from Mario Liu with Barclays. Please go ahead.

Great. Thanks for taking the questions. I have a couple on Tinder. In terms of the fourth quarter payer number decline of 300K quarter on quarter, just curious if you could talk a bit more about the main drivers there. And then given the payer definition, just curious if those payers, you know, were the ones that only bought on the card previously and stopped for large reasons for the decline. Thanks.

Sure, let me take that one as well. So, you know, the fourth quarter Tinder's payer number was really affected by a couple of things, which I, you know, kind of just alluded to. The first is the overall, you know, macro weakness and the pressure on the consumer, the younger consumer, consumers with less discretionary income, which is definitely impacting Tinder and the Tinder payer numbers generally. as well as the product weakness and lack of product momentum that Tinder did not achieve in 2022. And so that manifest itself throughout the year and led to a weaker Q3 and Q4 from a Tinder payer perspective, as well as a Tinder revenue growth perspective. And so those are really the two key factors that are affecting what you see in the Tinder payer number in Q4. The thing that maybe we didn't talk about as much on the last call, which we did end up doing starting in Q4, and we're going to continue to do in Q1 and probably through most, if not all, of 2023, is we are doing a bigger focus on pricing optimizations. And that's a big initiative for us. We're basically at Tinder eliminating more of the intro pricing and discount pricing than we had been planning to previously. That's having an adverse effect on the Tinder payer numbers. And that's what happened in Q4. But it's relatively neutral to revenue. And so, you know, our goal is to get Tinder to much more optimal price points. which again will impact the payer numbers there. But longer term, it's a revenue positive. We'll essentially have fewer payers, but at higher price points. So that's an ongoing project through the year, which is going to have some effect on tender payer numbers. As you know, we tend to target overall revenue goals, not specifically RPP or payer numbers at Tinder. And there's going to be volatility in both those, depending on the level of optimizations we do through the year, depending on our roadmap, depending on whether we do higher priced tiers or not at Tinder. There's a lot of variables. that could be traded off by us in terms of RPP versus payers, but we're somewhat indifferent to those two metrics. We are focused much more on revenue and revenue generation. The other part of your question I just wanted to quickly address is, you know, you asked about whether there was any impact from people who are just buying ALC products but are not subscribers of Tinder, and did that have any effect on the Tinder subscriber numbers or payer numbers? And I would tell you that there are relatively small, really pretty tiny component of overall Tinder payers. We don't see that many Tinder payers who are only taking ALC, but not a subscription. So that's not really, that trend hasn't changed. And that's not a really a meaningful impactor on the payer numbers that you see in Q4 or in any other quarter. So the price optimizations are probably the one additional factor that I would highlight that affected those numbers.

Great. Thanks Gary. And then in terms of tender growth for this year, I know you're planning towards total revenue, but in terms of the five to 10% expected growth for this year and slight growth in 1Q, is there any additional color you can provide just in terms of the drivers of growth between the payer users and then RPP?

Yeah, I mean, because there's a lot of swing factors in that, I don't really want to get locked in specifically to kind of an outlook for RPP specifically or payers growth specifically. I would tell you that sitting here today, our forecast kind of calls for relatively balanced growth between payers and RPP for the year, but it could shift depending on what initiatives succeed more than others. You know, what we prioritize as the year goes on, what succeeds in testing. So, you know, that's our best guess sitting here right now, but we don't have religion around that. And it really could shift, but I would tell you it's relatively balanced. The other thing that I would just point out to you is that I do expect that softer Tinder payers growth in the first half of the year and stronger Tinder's payer growth in the back half of the year because the momentum is building, the initiatives will be rolled out as the year goes on. And so opposite of what we saw in 2022 where you had strong payers growth in the beginning of the year and then not enough initiatives that led to weaker payers growth in the back half of last year, you're going to have a bit of the opposite effect this year where you've got this product momentum building, payers momentum building, momentum in the business generally, and that should carry through to stronger revenue growth, obviously, which is already in our outlook, as well as stronger payers growth year over year in the back half of the year. So those are the trends that we're expecting for the year. Hopefully that's helpful.

Great. Thank you.

Sure.

The next question comes from Alexandra Steiger with Golden Facts. Please go ahead.

Thank you so much for taking my question. Shifting gears to Hinge, first, could you maybe share some feedback and early learnings from the recently launched Hinge X and Plus tiers? And then second, how should we think about the revenue growth opportunity beyond 23 and the $400 billion revenue guide you provided? through the lens of payer net ads and then also upper growth. Thank you.

Thanks, Alexandra, for the question. We spent the last few months refining the HingeX value proposition, and we've been testing it on a small percentage of the Hinge user base. We're really pleased with where it stands, and we're confident that it will deliver the expected contribution to our $400 million plan this year. The global rollout is planned for the end of February, and after it goes live, we'll continue to optimize it. It's important to understand that when you launch a new premium tier, you unlock a new kind of buyer, and the price points will pay dividends over multiple years. While we will benefit in 2023 from some incremental revenue from the higher price tier, the long-term value will be realized over time in terms of higher RPP and conversion. HingeX is a unique feature that directly leans into Hinge's designed-to-be-deleted motto. And if it works, we believe it will lead to even more success for Hinge and create even more relationships around the world.

Great. Thank you.

The next question comes from Justin Patterson with KeyBank. Please go ahead.

Great. Thank you very much. Good morning. Bernard, could you talk about just in broader detail why you found this to be the right organizational structure and how the different teams are incentivized? And then perhaps related to that, could you talk about some of the top priorities for Will and where we can see his imprint as product lead over the next year? Thank you.

Thanks, Justin, for the question. I've spent the last eight months digging in and learning about the organization and have been really impressed with what I've seen. Following the positive impacts from the changes at Tinder, it became clear to me that we could do more by being more efficient and making some structural changes to the organization that could help us grow and continue to innovate. We believe by reorganizing the company into four pillars, Tinder, Hinge, Asia, and Evergreen and Emerging, we're better aligned to focus on key areas of growth and double down on our strategy. At Tinder and Hinge, there's significant upside, so we want to continue to invest in the teams there. And now I have a direct line of sight into each of those businesses. In Asia, I saw it was important to have a product-focused leader on the ground working with those businesses to recapture growth and drive profitability. With Evergreen and Emerging, we have similar businesses that we've now combined into one global organization. With this, there should be many opportunities to share learnings and be more nimble and more efficient. And then with the Emerging brand and our new bets, this team has built and launched new businesses before, and there's been a lot of experience bringing these products to market, serving unique demographics. We think there will be really exciting opportunities coming out of this group as well. As I've said in the letter, ultimately, I believe that this new org structure will improve transparency and accountability across the entire company. We're also really excited that we're adding Will Wu to the team as CTO. I've personally known Will for a long time, and I know how passionate he is about product and innovation. He has an incredible track record on innovation and has changed the way that Gen Z has interacted on social media platforms. He's a really low ego guy and he just wants to win. He'll be based with me and the Tinder team in Los Angeles. And I think he'll work really well with our teams all across Match Group.

I think in response to your question is that on the incentives, we tend to be pretty creative on our incentive structures. You know, for example, the Hinge team is incentivized around its own performance. The performance of the business is a significant part of their incentives, and we've done that in other situations as well. And we are working on some other incentive programs around achieving specific goals in specific areas of the company. So we are trying to tailor incentives to drive more of the results that we're seeking, and that's something that we're actively working on.

Great. Thank you.

The next question comes from Corey Carpenter with JP Morgan. Please go ahead.

Thanks for the question. So you left the 23 outlook unchanged, but given a weaker dollar, this doesn't apply a bit of a downgrade on an FX neutral basis. Just hoping you could talk about what's driving your more cautious view on an FX neutral basis and your decision to keep the reported guide unchanged versus going through the FX. And maybe perhaps specifically any changes to your outlooks at certain brands that were driving this. Thank you.

Yeah, I mean, I wouldn't quite characterize it that way. You know, I don't think just because we have a 5% to 10% range, it's a pretty broad range for the year. And just because we're not adjusting it right now doesn't mean it's implicitly a decreased outlook. You know, Corey, as you know, FX has been really volatile for the last 12 or 13 months, and it's been particularly volatile in just the last few weeks, as well as since our last earnings call. I think at our last earnings call, it was like a three-point headwind for the full year 23. Now it's basically a neutral, and I think it's down to about a three-point headwind in Q1. So, you know, based on that level of volatility, plus, you know, there's still a lot of uncertainty out there around macro. So we feel like our trends are stable and we've been really happy with peak season, but it's hard to deny there's a lot of uncertainty on the macro front for full year 23. And certainly for the first half of the year, I think pretty much every company is calling that out in their earnings calls. So given all of that, you know, we just didn't think it was prudent to start adjusting our guidance ranges at this very early stage in the year. It's February 1st after all. So we left that unchanged. But obviously, as you rightly point out, to the extent there are FX tailwinds, that would be a swing factor either to a higher level within our range or potentially above the top end of our range, depending on what kind of tailwind we get from FX as the year goes on. I would rather kind of wait and see how some of that plays out, whether we see some level of stability around FX. And then, of course, we'll revisit it. I'm sure we'll revisit it next quarter as well. And overall, in terms of your question, I don't think there's really significant changes to our business outlook really at any of our businesses. As I said in the answer to the question that Lauren asked, we've actually seen a good start to the year across most of the businesses. And so, you know, we feel like things have firmed up, but we're also cognizant of the fact there's a lot of risk and uncertainty and things to battle through. And so we feel good about kind of where we are from an outlook perspective at this point in time. But, you know, there's still a lot of innings to play in the game. So we're going to see how it plays out.

Thank you.

The next question comes from Deepak Mathaban with Wolf Research. Please go ahead.

Great. Thanks for taking the question. Just want to ask about the Tinder CEO search process. Can you provide an update there? What has been the challenge and how important is it for a new leader to buy in with the product roadmap that you currently have for 2023 since you're putting a lot of efforts into these? Thank you so much.

Thanks, Deepak, for the question. We're continuing to look for a candidate, but we want to make sure that we're finding the right person that will work well with the Tinder team. In the meantime, the current leadership team is working really well together. The team has now been in place for six months, and they've gone through the kind of gelling well together stage to fully execution mode. We're making really good progress and we feel actually really good with where we are. So there's no rush to add a CEO. We're only going to do it if the person really brings a lot to the table. Thanks so much for that question, Deepak.

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

Hey, good morning. Thanks for taking the question. Gary, you mentioned that AOI margins should be at least flat in 2023. Beyond sort of app store fee changes, what are the swing factors that could potentially drive upside or downside here? Also, you know, how should we be thinking about the quality margin cadence throughout the year? And then finally, you know, when should we expect to see the impact from the 8% reduction in force? Thank you.

So on your question, Ben, first of all, I want to say we're very focused on making sure we deliver at least flat, if not improved margins year over year this year. That is a goal for us. It's one of the drivers behind implementing the cost savings plan. So we're very committed to making sure that that happens. In terms of the swing factors aside from App Store relief, and by the way, you know, I think App Store relief is likely to be a 2024 event, but we're waiting to see how the regulatory processes continue to play out. But that could be a significant event for us as soon as 2024. I think there's a few swing factors. The first really would be around Tinder executing on its product roadmap better than what we're expecting. So getting some improved revenue growth on the Tinder side would be very margin beneficial. Same thing would be true on the new hinge tiers. That would be upside to the extent they perform better. And right now they're performing as we expect, but it's still a very small test. And so we'll see how that continues to play out. And then a recovery in Japan would be very helpful for us as well, which you'd like to think is going to happen at some point this year, but it's not currently baked into our forecast. Just generally any macro improvement, macro tailwinds, which is not what we're expecting as the year goes on, but Any of that would be very helpful. But because we can't rely on those things, you know, in this environment, we implemented this cost savings plan, and it's going to generate meaningful savings for us in terms of marketing spend, headcount, overhead, et cetera. When I look at kind of the trends for the year, which you asked about, We are expecting some margin degradation in the first half of the year, which we're expecting to be lower growth for us, and we won't have the effects yet of significant cost savings implemented. But as the year progresses and we deliver enhanced revenue growth, which is what we're expecting and we've talked about throughout this call, and we also get the compounding benefits of the cost savings initiatives in the back half of the year, we're expecting there to be year-over-year margin improvement. And so when you put that together, you know, less strong margin the first half of the year, improvement in the second half of the year, that's how we get to a flat or better margin target for the full year, and we have confidence that we can deliver that. I'd also note that, you know, we're including the severance and other costs, but if you were to exclude those, then the margin in the first half would actually be better than what we're providing in terms of our outlook. Um, you know, the other thing I just want to highlight, you, you raised, uh, I app fees in the first quarter of 23, we have about 5 million of incremental headwinds from I app fees, just as you know, more hinge revenue and, and continued mix shift towards app. And then we've got the $8 million. Of headwinds from having the Google litigation escrow this year, which we didn't have last year. So that's $13 million of incremental costs that are essentially out of our control. plus you layer on top of that the severance and other cost savings initiative costs. So you have pretty significant year-over-year headwinds from those kinds of items. The other thing in terms of margins I just would throw out for your awareness is that we, like many tech companies, hired a lot of people late in 2021, early 2022, particularly in product development, engineering heads at Tinder and Hinge, which has created incremental product development costs for us, which have been visible for the last few quarters. and continue to be but that's going to moderate because we've really slowed hiring and you know we're reducing heads in some places we're constricting our hiring really to hinge and a couple of other strong growth business at this point so you're going to see moderating product development uh year-over-year cost increases as 2023 goes on and we're confident of that given the hiring trends so that's a margin uh tailwind for us as well so those are some factors to think about as you model out kind of our margin trajectory and cadence for the year.

Very helpful. Thank you very much.

The next question comes from John Blackledge with Cowen. Please go ahead.

Thanks. Just coming back to Tinder, could you discuss further the rationale for the upcoming global Tinder marketing campaign?

Thanks. Thanks, John, for the question. When I started working with the Tinder team, I saw a real opportunity for marketing. Frankly, this is an area we need to make more investment to drive a brand story that better reflects all the positive outcomes that Tinder is responsible for. There has actually never been a Tinder global brand campaign before, and it's been years since we've actually had a defined marketing campaign in general. I think that the perception has taken a hold about Tinder is too limited. We want people to come into the platform feeling comfortable, whatever their relationship intent is. The team has some really provocative and creative ideas, and this campaign will celebrate all of the relationship possibilities that Tinder creates every single day. We think that this will drive top of funnel growth over time. We intentionally moved Melissa into the Tinder CMO role because she has a track record of big, bold, attention-grabbing campaigns at OkCupid, and I know she and the team will do great things together at Tinder. We're really excited to roll out our first campaign and see the reaction. Stay tuned.

Thank you.

The next question comes from Shweta Kajuria with Evercore ISI. Please go ahead.

Okay, thank you. Most of my questions have been addressed, but if you could please talk about Japan. You mentioned that you're not seeing much progress there, but that could drive upside. Any sense on when you think that could happen or a commentary on what you're seeing right now? And then the follow-up I have is, How do you, it sounds that you're very confident now with the guidance, reiterating the reported guidance for the full year. Could you please talk about, Gary, the level of conservatism and or, you know, the confidence you have in delivering to this for both top line and margins? Thank you.

Well, you know, I think on the margin outlook, you know, obviously that's much more in our control. And, you know, we've taken steps that we know are going to lead to more cost discipline. You know, obviously we can go further if the conditions dictate. So I feel very confident in the flat or better margins. That is something that we are extremely committed to. You know, I think you rightfully pointed out that based on what we've seen so far this year, we feel incremental confidence in our outlook for the year. But as I said in response to Corey's question, I think it's really just a little too early, you know, really one month into the year to start further adjusting our outlook. And, you know, we tend to try to be conservative and thoughtful when we provide the guidance. So especially in an environment where there's a lot of uncertainty and a lot of things that that remain unknown. I think that's the right course and the prudent course to take. So we're sticking by it. But I think it's fair to say that what we've tried to get across this morning is that the start to the year has been very solid for us. And that is giving us confidence that what we're seeing is going to come to fruition as the year goes on. know japan is a wild card um you know i think that the government there is really trying to take steps to fully get covid behind it trying to discourage real from wearing masks and things like that but as we've talked about previously um you know there's been a reasonable amount of you know less socialization in that market because of all the restrictions that came from covid and so when you know kind of society there is going to really rebound back to much more normal levels of socialization is really hard to say all i can tell you is we haven't seen it so far it's been a number of quarters now and as a result of that we're not assuming that it happens in 2023 at some point it's likely we're going to come to you and say we've seen a rebound in that market i cannot tell you you know precisely when that's going to be so again From a conservatism standpoint, we're not assuming that rebound in the Japanese market this year. But we're hoping we're wrong and it'll come sooner. And we're looking for catalysts to try to spur activity in that market, which would be meaningful upside to us because Japan is such an important market for both our pairs brand and our Tinder brand. So we'll have to wait and see. But again, right now, based on what we're seeing in conservatism, it dictates not assuming anything from a rebound standpoint in the Japanese market.

Okay, that makes sense. Thanks a lot, Gary.

No problem. All right, with that, I know we're at time, so we're going to sign off. But thank you, everybody, for joining us. We appreciate the continued support, and we'll talk to you in the next quarter.

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