Investing.com — Match Group Inc (NASDAQ:MTCH).’s outlook has been revised from positive to stable due to weak operating performance of its leading brand, Tinder, according to S&P Global Ratings. Tinder, which accounts for approximately 60% of Match’s revenue and 80% of EBITDA, has been experiencing low Monthly Active Users (MAU) and a decrease in paying customers.
Tinder’s revenue grew by 3% in the nine months ending on September 30, 2024. However, the number of paying users has been dropping every quarter since September 30, 2022. In the first quarter of 2024, Tinder’s MAU decreased by 9% year over year, making it challenging for the company to increase its paying user base.
Changes in consumer preferences, branding issues, and delays in product innovation due to management changes are believed to be contributing factors to the declining operating trends. Despite Tinder’s attempts to improve its ecosystem through the introduction of new features, there is a substantial risk that these changes could lead to an increase in the churn of paying customers in the second half of 2025. As a result, efforts to improve Tinder’s monetization could be delayed until 2026.
S&P Global Ratings has revised its forecasts and now expects Match to increase its revenue by 3%-5% in 2026, down from the previously expected growth rate of approximately 7% in 2025 and 2026.
The strong performance of Hinge, another brand in Match’s portfolio, partially offsets Tinder’s weak performance. Hinge’s revenue grew by 44% in the nine months ending on September 30, 2024, driven by new subscription tiers and further international expansion. Although Hinge accounts for approximately 20% of Match’s revenue and has one-fourth of Tinder’s MAUs, it continues to gain market share from its competitors.
Hinge’s lower EBITDA margins, however, could present Match with an unfavorable product mix. As of September 30, 2024, Hinge’s contribution margin was roughly 30%, compared to Tinder’s contribution margin of roughly 50%. S&P Global Ratings predicts EBITDA margins to decline about 50 basis points to 35.8% in 2024, due to significant investments in Hinge and limited network scale.
Match has updated its capital allocation plan to prioritize shareholder returns, following the announcement of a new CFO appointment effective March 2025. This plan includes a new share repurchase authorization and a newly instituted quarterly dividend. Despite this, the company’s Free Cash Flow (FCF) generation largely depends on Tinder’s performance, which carries some execution risk.
Despite flat revenues, the stable outlook reflects the expectation that the company will report stable to modest EBITDA margin increases over the next 12 months due to cost savings offsetting higher business investments. S&P Global Ratings also believes that Match’s adjusted net leverage will remain below 3x over the next 12 months, despite the company returning 100% of its FCF generation to shareholders.
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