Match Shares Plunge After Disappointing Revenue Forecast

(Bloomberg) -- Match Group Inc. shares plummeted after the online dating behemoth gave quarterly forecasts that missed Wall Street estimates, due to mounting legal costs and economic factors that are denting sales growth. The shares slumped the most in a year.

The Dallas-based company said fourth-quarter revenue will be $545 million to $555 million. Wall Street was expecting $560 million. Adjusted earnings before interest, taxes, depreciation and amortization will be $205 million to $210 million in the period, also below analysts' estimates, according to data compiled by Bloomberg.

“Legal costs have jumped significantly this year from last,” Chief Financial Officer Gary Swidler said on a conference call with analysts Wednesday morning. In 2018, the company spent about $15 million on legal costs. This year, legal bills have climbed to around $40 million, Swidler said.

Match is involved with three high-profile lawsuits. The company is suing rival dating app Bumble over allegedly stealing intellectual property from its star performer, Tinder. At the same time, Tinder's founders are suing Match for allegedly misleading them about the app's valuation. And last month, the Federal Trade Commission sued Match, accusing it of deceiving consumers by using messages from fraudulent accounts to encourage users to sign up for subscriptions.

The FTC lawsuit, which now includes a Department of Justice investigation, is “meritless,” Swidler said on the call. “We are going to defend ourselves against that vigorously.” He added that the Tinder lawsuit is “purely a case of sour grapes” and said he expects Match will be compensated in the Bumble dispute. “A lot of these matters are going to resolve themselves in 2020,” Swidler said.

On top of the legal costs, sales are also being crimped by macro economic issues, such as Brexit and currency movements, Swidler said.

The shares fell as much as 11%, the most since November 2018. They were trading at $65.01 at 10:42 a.m. in New York Wednesday.

Match is partly owned by billionaire Barry Diller's IAC/InterActiveCorp. Match shares have gained more than sixfold since its initial public offering in 2015, largely driven by explosive growth in Tinder. Match's third-quarter revenue grew 22% from a year earlier, while Tinder sales surged 49%.

The company reported earnings per share of 51 cents for the third quarter, beating Wall Street estimates of 41 cents. Revenue was $541 million, matching analysts' expectations, according to data compiled by Bloomberg.

Match runs dozens of other dating sites like OkCupid and Plenty of Fish, which both reported strong growth in app downloads in the third quarter. Match is also expanding globally, acquiring dating apps in Japan and Egypt to cater to new audiences with different traditions and tastes.

Last month, IAC announced it was moving forward with a spinoff of Match, recommending a move to formally separate the two companies to a special board committee. In a company statement on Tuesday, Match said the committee was still evaluating the proposal.

To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz

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