IPO Report: Match Group (MTCH)

Francis Gaskins |

Match_Group.jpgMatch Group (MTCH) is the world's leading provider of dating products. The company is based in Dallas, TX.

Seven other companies are scheduled for the week of Nov 16. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: J.P. Morgan, Allen & Company, BofA Merrill Lynch, Deutsche Bank Securities, BMO Capital Markets, Barclays, BNP PARIBAS
Co-managers: Cowen and Company, Oppenheimer, PNC Capital Markets, SOCIETE GENERALE, Fifth Third Securities

End of lockup (180 days): Tuesday, May 17, 2016
End of 25-day quiet period: Monday, December 14, 2015

MTCH scheduled a $433 million IPO with a market capitalization of $3.1 billion at a price range midpoint of $13 for Thursday, Nov. 19, 2015 on Nasdaq.

Summary

MTCH is the world's leading provider of dating products.

MTCH operates a portfolio of over 45 brands, including Match, OkCupid, Tinder, PlentyOfFish, Meetic, Twoo, OurTime and FriendScout24, each designed to increase its users' likelihood of finding a romantic connection.

Valuation

Glossary

Accumulated deficit (mm)

.

.

-$129

     

Per share dilution

.

.

$12.09

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Match Group (MTCH)

$3,120

2.9

31.2

14.2

14.3

14%

annualizing Sept 9 mos

       
             

Conclusion

Neutral plus

Mostly growth by acquisition of dating sites

Has probaby already acqured most of the available dating sites

Now has to rely on internal growth

Sept 9 mos rev +18% to $808mm

Operating income growth rate -9%

Net income -2%

P/E of 31, seems high for a company with declining rate of growth in net income & operating income

Price to sales of 2.9

Price to tangible bk of 14.3

Business

MTCH is the world's leading provider of dating products.

MTCH operates a portfolio of over 45 brands, including Match, OkCupid, Tinder, PlentyOfFish, Meetic, Twoo, OurTime and FriendScout24, each designed to increase its users' likelihood of finding a romantic connection.

Through its portfolio of trusted brands, MTCH provides tailored products to meet the varying preferences of its users.

MTCH currently offers its dating products in 38 languages across more than 190 countries, and MTCH had approximately 59 million MAU, and approximately 4.7 million paid members, using its dating products for the quarter ended September 30, 2015.

Market

MTCH’s target market includes all adults in North America, Western Europe and other select countries around the world who are not in a committed relationship and who have access to the internet, which, based on a study by Research Now commissioned by MTCH in July 2015, MTCH estimates at approximately 511 million people, compared to an estimated 360 million people in 2011.

Consumer preferences within this population vary significantly, influenced in part by demographics, geography, religion and sensibility. As a result, the market for dating products is fragmented, and no single product has been able to effectively serve the dating category as a whole.

Given wide ranging consumer preferences, MTCH approaches the category with a brand portfolio strategy, through which MTCH attempts to offer dating products that collectively appeal to the broadest spectrum of consumers.

Compound Annual Growth Rates

MTCH believes that this approach maximizes its ability to capture additional users, as demonstrated by its MAU and paid member count compound annual growth rates between the quarter ended September 30, 2011 and the quarter ended September 30, 2015 of 63% and 23%, respectively.

MTCH increasingly applies a centralized discipline to learnings, best practices and technologies across its brands in order to increase growth, reduce costs and maximize profitability.

This approach allows MTCH to quickly introduce new products and features, optimize marketing strategies, reduce operating costs and more effectively deploy talent across MTCH’s organization.

Mobile Technology

Coinciding with the general trend toward mobile technology, MTCH has experienced a meaningful shift in its user base from desktop devices to mobile devices, and now offer mobile experiences on substantially all of its dating products.

During the quarter ended September 30, 2015, pro forma for PlentyOfFish, 73% of MTCH’s new users signed up for its products through mobile channels, as compared to only 35% during the quarter ended September 30, 2013.

This shift has enabled MTCH to reach groups of users which had previously proven elusive, such as the millennial audience; for example, Tinder, a mobile-only product, has been able to tap into this audience rapidly over the last few years.

Additionally, in previously desktop-oriented products like Match, the shift to mobile has led to increased usage of MTCH’s products, as mobile users on average access its products at meaningfully higher rates than do those users who access its products on desktop.

Operates 4 of the Top 5 Revenue Dating Applications

According to data obtained from mobile analytics firm AppAnnie, during the three months ended June 30, 2015, MTCH operated four of the top five revenue grossing dating applications across the Apple App Store and Google Play Store in North America, and three of the top five worldwide, in each case, pro forma for the acquisition of PlentyOfFish, which MTCH completed on October 28, 2015.

Intellectual Property

MTCH relies heavily upon the use of trademarks (primarily Match, Meetic, OkCupid, OurTime, Tinder and The Princeton Review, and associated domain names, taglines and logos) to market its dating products and applications and build and maintain brand loyalty and recognition.

MTCH has an ongoing trademark and service mark registration program, pursuant to which MTCH registeres its brand names and product names, taglines and logos and renew existing trademark and service mark registrations in the United States and other jurisdictions to the extent MTCH determines it to be necessary or otherwise appropriate and cost-effective.

In addition, MTCH has a trademark and service mark monitoring policy pursuant to which MTCH monitors applications filed by third parties to register trademarks and service marks that may be confusingly similar to ours, as well as potential unauthorized use of MTCH’s material trademarks and service marks. MTCH’s enforcement of this policy affords it valuable protection under current laws, rules and regulations.

Competition

MTCH competes primarily with other companies that provide similar dating and matchmaking products, including eHarmony, Spark Networks (Jdate, ChristianMingle), Zoosk, Parship, ElitePartner, e-Darling and Badoo.

In addition to other online dating brands, MTCH competes indirectly with offline dating services, such as in-person matchmakers, and social media platforms. Arguably, MTCH’s biggest competition comes from the traditional ways that people meet each other, and the choices some people make to not utilize dating products or services.

5% Shareholders Pre-IPO

IAC/InterActiveCorp.                              100%              

Dividends

No dividends are planned.

Use of Proceeds

MTCH expects to receive $404 million from its IPO and use it for the following:

to repay related-party indebtedness issued to IAC after the initial public offering price has been determined, but prior to the closing of this offering. The aggregate principal amount of such indebtedness will be equal to the total net proceeds to MTCH from this offering, assuming the underwriters exercise in full their option to purchase additional shares.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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