Ticker Bullets | MTCH | 3Q18 Initial Takeaways

11/07/18 07:02AM EST

Takeaway: The 4Q guide is so absurd that it shouldn't be viewed as anything more than a sandbag to rebase 2019 expectations.  The sub guide may follow suit.  


KEY POINTS

  1. 3Q18 = Clean Print: We're going to be brief here since the next two bullets warrant more attention.  MTCH produced revenue and EBITDA upside, subscribers beat on accelerating total and Tinder net adds, including the non-Tinder brands that produced its largest net gain since 1Q16.  We also estimate that MTCH ended 3Q18 with enough subscribers to exceed 4Q18 consensus revenue estimates leading into the print.  
  2. 4Q18 Guide = Sandbag: We suspect that mgmt is trying to rebase 2019 expectations before it has to issue guidance on the next print.  MTCH's guide at the mid-point is basically calling for no sequential revenue growth, which would be all but impossible even if MTCH didn't pick up any new subs in 4Q18.  Remember that MTCH hasn't received a full quarter's worth of revenue from its 3Q18 subs adds, which means that the quarterly revenue run-rate from its reported sub base is higher than what MTCH reported for 3Q18 revenues.  That said, MTCH's guidance actually translates to declining 4Q18 subs, which seems beyond reason, even before considering that it ended 3Q18 on a particularly strong note given its strength in net adds (MTCH reports average subscribers not ending).  Mgmt may point to Fx, but that is predominately a y/y headwind that can't explain the screeching sequential halt implied by its guide.  In short, either the wheels are suddenly falling off the bus, or mgmt is making sure that consensus doesn't get too far ahead of its skies for 2019 (as they did following the last print) following another quarter of particularly strong net adds.
  3. 4Q18 Sub Guidance May Disappoint: As a reminder, we were concerned heading into this print that MTCH may guide light for 4Q18 sub adds; we suspect that is more likely following the the aforementioned sandbag.  Note that consensus had increased 4Q18 sub add estimates inline with what MTCH had guided to for 3Q18 (~300K); even though mgmt had previously alluded to a quarterly sub add run-rate for 2018 inline with its historical pre-Gold average (~220K).  It's not MTCH can't edge 300K; in fact the aforementioned strength in 3Q18 average sub additions suggests MTCH is starting 4Q from a strong ending 3Q base.  But mgmt may not be comfortable enough with that hurdle, especially since our tracker was initially flagging a relatively muted start to 4Q18.  All said, this may be a kitchen-sink quarter to clear the decks for 2019.  

Ticker Bullets | MTCH | 3Q18 Initial Takeaways - MTCH   Total Net Adds
Ticker Bullets | MTCH | 3Q18 Initial Takeaways - MTCH   Rev APRU Scen 3Q18  v2
Ticker Bullets | MTCH | 3Q18 Initial Takeaways - MTCH   Risks Deck   Tracker

Let us know if you have any questions or would like to discuss further. 

Hesham Shaaban, CFA
Managing Director


@HedgeyeInternet 

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