Match Group Inc (MTCH) 2021 Q3 法說會逐字稿

Good morning, and welcome to the Match Group's Third Quarter 2021 Earnings Conference Call.

(Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Bill Archer, Head of Investor Relations and Corporate Development.

Please go ahead.

Thank you, operator, and good morning, everyone.

Today's call will be led by CEO, Shar Dubey; and CFO and COO, 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 Shar.

Thank you, Bill.

Good morning, and thank you all for joining the call today.

Today, Gary and I are doing this call from our brand-new offices in New York.

We had another strong quarter with over 25% year-over-year revenue growth, also a record EBITDA quarter for us.

Tinder, in particular, showed real strength with not only 20-plus percent revenue growth, but also adding a record number of subscribers and Payers this quarter.

It is a historical high for Tinder, even higher than the quarter when Tinder Gold rolled out.

I'm also excited to have our first woman CEO at Tinder.

Renate has seamlessly taken over the helm there, and the team hasn't missed a beat in their journey to transform the Tinder experience.

Explore, which is a new surface area within the Tinder app, rolled out globally a couple of weeks ago.

It is a dynamic interface, which allows users to connect with others through new experiences beyond the swipe that used to be Tinder.

These experiences can be tailored by market, it keeps Tinder at the center of culture, gives users new reasons to keep coming back, increases engagement and activity.

In fact, our successful Swipe Night series is coming to Tinder on Explore in a brand-new series starting November 7. Not only is it a very compelling Gen Z whodunnit story line, this time, it has a bunch of features like Fast Chat built in that should amplify the conversations that follow on Tinder.

Hinge had another great quarter across all metrics, doubling revenue again.

The one business that is seeing an unexpected softness is the main revenue-driving app at Hyperconnect, Azar.

It's had a few months of headwinds in some key markets in Asia.

Some of it is COVID, some of it is marketing performance, some product-related delays.

However, South Korea has finally opened up to international travel, and our teams were able to meet over the last couple of weeks in person.

We're working closely with them now on marketing the product roadmap in order to reverse the trend.

I am extremely optimistic about this team and technology assets as a long-term value creator for our portfolio, especially as we enter what we described in the shareholder letter as the next phase of Match Group's evolution in the dating category.

In fact, my long-term thesis was further validated in the last couple of weeks when the team there walked me through a new concept they're beta testing on some college campuses in Seoul.

It's called Single Town.

It is a platform where your digital self, in the form of real-time audio-powered avatar, can serendipitously meet others in virtual spaces, like a bar or you can sit down with someone in a park bench to have one-on-one or group conversation.

There is, for instance, a piano bar where people's digital selves are gathering around, but they're actually playing their pianos at home and jamming with others.

You can overhear conversations, join conversations.

You can tap into the digital avatars to see more of that profile, and you have basically a richer set of signals to help connect with someone.

It is metaverse experiences coming to life in a way that is transformative to how people meet and get to know each other on a dating or social discovery platform and is much more akin to how people interact in the real world.

It is super early, but we are seeing some encouraging early signals in terms of engagement among Gen Z in Seoul.

Already, the average daily time spent is about an hour and growing.

Some cultures are forming.

It is resonating with both genders.

And as we talked about in our letter, this next phase of dating apps, in particular, is going to be all about richer, more organic and more akin to real-life ways of discovering, meeting and getting to know people.

Technology is finally getting there.

And this underlying technology platform Hyperconnect has built that powers Single Town has been built in a way that it can be leveraged by other platforms easily.

So my long-term view on what this talented team and technology brings to the portfolio is ever stronger.

Finally, based on everything we're hearing and seeing, this coming season should be a strong one as people are ready to shake off the COVID malaise and get out there and date and meet.

It's also shaping up to be one of the busiest wedding seasons.

I feel good about a reenergized and much more social holiday season.

These social interactions are incredibly important for our collective mental health and well-being.

So I, for one, I'm rooting for a hell of a holiday season and a post-holiday peak season for us as we enter the new year.

And with that, I will hand it over to Gary to provide some more color on the quarter.

Thanks, Shar.

We had a strong Q3 with total revenue of $802 million, up 25% year-over-year.

Our businesses, excluding Hyperconnect, produced total revenue of $748 million, up 17% year-over-year.

Total Payers reached 16.3 million in Q3, an increase of 16% from the prior year quarter.

Growth was strong in all geographies, up 11% year-over-year in the Americas, 13% in Europe and 36% in APAC and Other, where the count reflects a full quarter of contribution from Hyperconnect.

RPP was up 8% year-over-year to $16.06 in Q3, up 5% in the Americas, 6% in Europe and 17% in APAC and Other, again, reflecting a full quarter from Hyperconnect, where RPP exceeded $30.

Our Direct Revenue grew 17% in the Americas, 20% in Europe and 59% in APAC and Other, again due to full quarter Hyperconnect results.

APAC and Other now comprises approximately 22% of our Direct Revenue.

Tinder was a standout in the quarter, delivering Direct Revenue of $434 million, up over 20% year-over-year.

Tinder had phenomenal Payers growth, up 19% year-over-year, adding 1.7 million Payers, the most in its history, reaching 10.4 million.

Some of this growth did come at the expense of RPP, which grew 1% year-over-year in the quarter.

Tinder had a number of conversion wins in the quarter, particularly in the lower-priced subscription tier.

Tinder Platinum adoption is ahead of schedule with total Platinum subscribers reaching nearly 1 million.

Tinder engagement also remains very strong with both Swipe activity and daily average messages significantly above pre-pandemic levels.

All Other Brands grew Direct Revenue 32% year-over-year in Q3.

In this group, Hinge was the standout, growing Direct Revenue over 100% driven by RPP growth of north of 70% and Payers growth of 20%.

BLK, Chispa and Upward in aggregate grew Direct Revenue over 80% year-over-year in Q3.

Hyperconnect contributed $53 million of total revenue in the quarter, below our expected range.

Hyperconnect is facing pressure in its largest revenue-generating app Azar, especially in certain Middle Eastern markets.

It also faced delays in rolling out certain product initiatives and a challenging marketing environment.

We're working diligently with the Hyperconnect team to improve performance and deliver sustainable long-term growth.

Indirect Revenue reached $16 million, the highest ever in the quarter, up 40% year-over-year.

It appears our strong brands, relatively lower ad loads and contextual targeting have been especially appealing to advertisers in the current environment.

Operating income grew 10% year-over-year to $221 million, and EBITDA grew 15% year-over-year to $285 million in Q3.

EBITDA margins were 36%, but would have been 39% ex-Hyperconnect.

Overall expenses, including SBC expense, grew 32% year-over-year in Q3 with more than half of the total increase resulting from the acquisition of Hyperconnect.

Excluding the impact of Hyperconnect, cost of revenue grew 20% year-over-year, due to higher IAP fees and represented 27% of total revenue.

Sales and marketing spend, excluding Hyperconnect, was up $5 million due to slightly higher marketing spend across our portfolio, but was down 2 points year-over-year as a percent of total revenue to 18%.

G&A expense, ex-Hyperconnect, rose 8% year-over-year primarily due to an increase in legal fees and was 13% of revenue, down 1 point year-over-year.

Product development costs, ex-Hyperconnect, grew 37% year-over-year and were 7% of revenue as we increased headcount at several brands, mainly Tinder and Hinge.

Our gross leverage declined to 3.8x trailing EBITDA, and our net leverage was 3.3x at the end of Q3.

We believe our target of below 3x net leverage by the end of 2021 is within reach.

In a complex series of related transactions, we've repurchased $414 million aggregate principal amount of our 2022 Exchangeable Notes for approximately $1.5 billion in cash, using the proceeds from issuing 5.5 million shares of common stock, $500 million of new 3.625% 10-year unsecured debt and the unwind of the related bond hedges and warrants.

These transactions, which were executed in the third quarter but sales in the fourth quarter, created an embedded derivative on which we recorded a $39 million loss in Q3, but also on which we expect to recognize a $24 million gain in Q4.

We had operating cash flow of $667 million in the quarter and free cash flow of $614 million.

We ended the quarter with $523 million of cash and short-term investments on hand.

For Q4, we expect total revenue for Match Group of $810 million to $820 million, which would represent 24% to 26% year-over-year growth.

Building off the conversion strength achieved in Q3, we expect Tinder's year-over-year Direct Revenue growth to accelerate towards the mid-20s percent range in Q4.

Our expectation is that Hyperconnect will deliver revenue in Q4 at similar levels to Q3.

Between weaker Q3 performance and lowered expectations for Q4, we have reduced Hyperconnect's revenue contribution by approximately $20 million for full year 2021.

We expect full year stand-alone Hyperconnect revenue to be about $210 million.

Despite softer performance at Hyperconnect, strength at Tinder and Hinge position us to deliver around $3 billion of total revenue in full year 2021, representing 25% year-over-year growth.

Notably, we expect Tinder's Direct Revenue growth to be above 20% in full year 2021.

We expect EBITDA of $285 million to $290 million in Q4, representing 16% to 18% year-over-year growth, and margins ex-Hyperconnect roughly in line with the prior year quarter.

For the full year, we expect EBITDA to be above our previously communicated high end of the range of $1.060 billion, up nearly 20% year-over-year.

Typically, we provide some initial thoughts on the upcoming year on our Q3 call.

For the past several years, our initial outlook has been mid-to-high teens revenue growth.

For 2022, we expect our businesses, ex-Hyperconnect, to once again deliver that level of growth driven by another strong year for Tinder and for Hinge, as it begins expansion into non-English-speaking markets.

With the full year of Hyperconnect revenue contribution included, we expect the company to grow total revenue closer to 20% year-over-year in 2022.

We will provide a more precise revenue outlook on our February call, once we see how the strategic changes at Hyperconnect and the new product initiatives across the portfolio begin to take hold.

Excluding impacts from IAP policy changes that go into effect in 2022, we expect to see about 1 point of margin improvement at our businesses ex-Hyperconnect and for Hyperconnect to achieve mid-single-digit EBITDA margins next year.

While we anticipate legal expenses to be meaningfully lower next year, we plan to reinvest a portion of that savings into important safety and corporate and social responsibility initiatives.

Also, given the highly competitive job market, we may reinvest to attract and retain crucial talent.

The level of investments we choose to make in these areas will impact the actual amount of margin expansion we achieve.

The biggest swing factor in our 2022 EBITDA outlook is what happens with App Store fees, which are an increasingly large percent of our revenue, up from 17% in 2020 to an estimated 19% in 2021, totaling over $550 million.

There are numerous actions across the globe scrutinizing Apple and Google's requirement that we use their payment system and pay a 30% fee.

A reduction in these fees would have numerous positive consequences, including enabling us to pass along benefits to consumers.

Google has agreed to reduce fees for subscriptions, though not à la carte from 30% to 15% starting January 1, 2022.

But they also still have a policy change to require use of their billing system scheduled to go into effect at the end of March 2022.

There are many unknowns regarding Apple's plans for IAP, including weather and how they intend to comply with the law banning mandatory IAP in South Korea and the injunction in the Epic decision, which requires them to eliminate the anti-steering provision by December 9, 2021.

We're going to watch these developments around the App Stores for at least another few months before we provide our EBITDA outlook for next year.

We're optimistic more changes in the ecosystem are likely.

There is a lot going on across our business, including a meaningful product evolution at Tinder and many of our other brands.

We're excited to execute on our product roadmap and to continue evolving the experience for our users.

We recognize that people around the world are increasingly turning to digital products to meet and socialize.

Our job is to continue to build new and exciting products and experiences that enable people to connect, something we have been a leader at for more than 25 years.

We're confident that if we remain focused on delivering outstanding products, we'll continue to deliver strong growth and financial results for our stakeholders for many more years to come.

With that, I'll ask the operator to open the line for questions.

(Operator Instructions)

And your first question today comes from Mario Lu with Barclays.

Great.

A couple of questions on Tinder.

The first one is on Payers.

So I was wondering if you could provide any additional color regarding the key drivers or regions that attributed to Tinder's 800,000 sequential Payer growth in the quarter?

How should we think about the normalized cadence of Tinder Payer growth going forward?

Yes, I can take that.

So generally, Q3 is a good quarter for Payer ads.

But this one was in the historically high for Tinder.

And it's across all regions mostly because a lot of the growth in Payers in Q3 came as a result of what we normally referred to as under-the-hood revenue optimization.

So a combination of merchandising and paywall optimizations drove conversion and Payer growth.

Some of this increased conversion was in lower-priced tiers, which were dilutive to RPP as Gary mentioned.

The one thing I want to emphasize, we generally always focus on revenue growth.

Sometimes, it comes through Payer growth and sometimes through RPP, sometimes both.

And so we don't worry too much about the cadence necessarily, but we're definitely always focused on revenue features to increase revenue overall.

Got it.

And just a quick follow-up on the Tinder RPP growth.

You mentioned the lower-priced tiers being successful as being one contributor.

What about -- any color about Platinum still being a contributor to RPP growth?

And then any color you can provide regarding the expectations from these new features such as Explore and whether they will accelerate Tinder RPP in the next few quarters?

Sure.

So yes, the RPP dilution came because some of the conversion features helped Payer growth in the lower tier -- lower-priced tiers.

But Platinum has been exceeding our expectations.

Gary said close to 1 million at the end of September.

We've actually now passed that.

And it will continue to be a driver of RPP growth.

In terms of Explore, it is new.

It's only been out for a couple of weeks, but we have early evidence of this.

And we expect the Explore experiences should increase engagement and reactivation.

And this, in turn, ought to provide more revenue optimization opportunities over time, both in terms of conversion as well as RPP growth, meaning both conversion from new Payers but also à la carte revenue opportunities on -- through that interface.

The next question comes from Jason Helfstein with Oppenheimer.

Maybe just dig a little more deeper.

So as far as the fourth quarter acceleration in Tinder Direct Revenues, just maybe talk about like what's driving the confidence for that plus 25%.

Sure, Jason.

It's Gary.

I'll take that.

I would say generally, Tinder has really been performing very strongly and increasingly strongly as the year has gone on.

And the engagement with the product is really even well stronger than it was pre-pandemic.

So we really feel good about the dynamics overall at Tinder.

And what we're expecting is that in Q4, we're going to see both Payer and RPP growth.

The momentum that we had on the Payer growth should continue into Q4.

So I'm expecting a similar level of year-over-year Payer growth in Q4 as we saw in Q3.

And I think we'll also be able to achieve some RPP growth as well, which we didn't see as much in Q3, but I think we'll see that in Q4.

So when you combine the additional RPP growth with similar level of Payer growth, you're going to get overall Direct Revenue growth kind of approaching the mid-20s at Tinder as I said earlier.

So we feel very good about that.

The one thing that I just would remind people is that seasonally, Q4 tends to be weaker for Tinder around Payer growth.

Especially when we've seen a very strong Q3, it does make kind of the sequential Payer increase more challenging.

So that's the thing we are expecting to see from a sequential perspective in Q4.

But year-over-year, I'm expecting similar levels of growth on Payers as what we saw in Q3.

And just last reminder would be we don't really manage the business specifically around RPP growth or Payers growth.

We're looking for Direct Revenue or overall revenue growth.

So we don't get as focused on one metric versus the other.

There's obviously trade-offs as we saw in Q3, but we continue to manage to drive a strong level of revenue growth.

And we're positioned to do that in Q4.

The next question comes from Cory Carpenter with JPMorgan.

On the App Store, certainly a lot of moving parts.

But based on what we know today, Gary, is there any further guidance you could provide on the way to frame potential App Store relief just as we head into 4Q and 2022?

Shar, do you want to take that one?

Yes.

You know what, I'm going to take the opportunity to talk about the App Store a little bit more broadly and all the puts and takes that we're seeing and what we think is likely to happen.

So now that there's been a flurry of activity on the App Store front, particularly in the last few months.

South Korea became the first country to outlaw mandatory IAP.

Additionally, at this point, there are either active investigations, litigation or proposed legislation across the globe, including countries in Europe, U.K., Japan, India, Australia and the U.S. so here's what we see at a practical level.

Google appears to be complying with the South Korea law.

That does not seem to be the case with Apple yet.

Google has reduced its fees on subscriptions, but not on à la carte from 30% to 15%, which is going to be effective January 1, 2022.

Now recall, Google had a while ago announced that they will be enforcing mandatory IAP, and they delayed that decision to March 31, 2022.

And we are as of now unsure where they stand on that policy change.

Interestingly, it's been a while since the Apple and Google App Store economics are not in sync.

And so we have to see how Apple responds to the Google change in rates for subscription.

The anti-steering provision injunction ordered by the judge on the Epic case, Apple has appealed it, but -- and they have not yet communicated how they intend to comply with it.

So all that to say, there was a lot of things sort of have happened, happened, about to happen.

It is meaningful for us.

As we said in the letter, our 2021 IAP fees are expected to be north of $550 million, and it will be materially higher in 2022.

About 70% of our revenue comes from subscription.

And since Google does not yet require mandatory IAP, approximately 80% of our IAP fees actually goes to Apple.

So a lot of moving parts, and we have not yet accounted for any impact from changes to IAP fees in our outlook.

Generally in Q4, we expect very, very minimal impact.

But depending on -- given all the scrutiny that's going around the world and some of the developments in the last few months, I do think this will continue to break.

And it will be a beneficial change to consumers and to developers.

And depending on when and what and how this breaks, the outcome for us is pretty varied.

So we're watching some of these milestones that are coming up in the next few months.

Hopefully, it will give us some more clarity, and we will be able to communicate a little better in our next call.

The -- my final thought on this is I've never seen a point in this IAP App Store issue where there's been so much activity around the world.

And at some point, Apple has to take a step back and ask themselves whether this is still the right thing to do.

And so another reason why I think this will change in some way.

The next question comes from Shweta Khajuria from Evercore ISI.

Okay.

Let me try 2, please.

Possible to please comment on recent development related to the lawsuit and your position on the case?

And then the second question is, could you please talk about the trends you're seeing in APAC, particularly in Japan?

And you touched on Korea, but generally in APAC and the recovery in that region and what is baked in your 2022 top-line growth guidance?

Sure.

Let me take a crack at that.

On the litigation, unfortunately, there's really not much that we can say about that right now.

It's an active litigation, jury -- it's a jury trial.

And the jury selection started at the beginning of this week, and opening statements are going to be next Monday, this coming Monday.

So this is occurring right now here in New York.

And look, there's always uncertainty in a jury trial, but we feel extremely good about our position and that the plaintiff case is meritless.

And we're going to go in and defend ourselves vigorously.

So we'll be watching that as it plays out over the coming weeks.

As far as the APAC trends go, I can say a lot more about that.

And what I would say is, really, Japan is the biggest area of focus for us in Asia because that is our #2 market.

We derive significant revenue in the Japanese market.

And really, they only recently lifted their fourth state of emergency.

They had the Olympics, and after the Olympics, they had pretty significant spike in COVID from their perspective.

And they've taken some pretty significant actions and really some restrictions on dining and other socializing really only lifted last week.

So that geography continues to be impacted by COVID in a pretty significant way.

And we have not yet seen a return to normal levels of socializing in that market.

And that is impacting our business in a significant way.

We have the #1 and #2 apps in Japan in Pairs and Tinder.

And so we have meaningful presence there.

Notably, the trends are not just affecting us.

They're affecting all the dating apps in that market.

But because we are so large in that market, it is affecting us significantly.

So we're optimistic that the drivers that make Japan a great dating market with lots of potential growth continue to be there.

And we think this will resolve itself over time as people in Japan start to go back out and get COVID further behind them.

But it's going to take a little bit of time.

We're watching it, and we're optimistic, but I think it needs a little bit of time to play out.

And while Japan is the market in Asia that's the most significant impact for us, there's other markets in Asia that are also still affected mostly in East Asia, but you've got Singapore, Taiwan that are still affected as well by trends as a result of COVID.

So given the geographic footprint of our business, which does have a significant presence in Asia, we are still dealing with impact there.

And I would say if you look at kind of what's happened around the globe given our overall global exposure, the Americas has recovered well, especially the U.S. And Europe is a little bit behind, but making progress for us as well.

And then Asia is further behind.

So if you look at the trends that we've seen in the U.S., and think that over time, that's going to play through in these other markets.

It really is a question of timing more than anything else.

And so we'll see how that plays out.

Another market to just point to is India.

India was really impacted by COVID at the depths, and we saw a significant impact in our business.

We have seen a meaningful recovery in India as a result of improvement in the COVID situation there.

So it is very much market by market depending on what actions the government has taken and what the level of COVID issues is.

But we are seeing gradual kind of step-by-step recovery as we look at markets around the world.

Next question comes from Dan Salmon with BMO Capital Markets.

Great.

I'd just like to follow up a little bit on the change to your revenue outlook for Hyperconnect and perhaps just expand a little bit on the near-term trends you're seeing there across both of the apps.

I know there was a little bit of color in the letter, but anything else that you could add would be great.

And then just more broadly, any material change to your mid- to long-term outlook for the opportunity for that business?

All right.

Let me take a crack at that one, too, and Shar can certainly jump in.

But as I went through and Shar mentioned as well, there are really kind of 3 things that have led to the lower-than-expected revenue for Hyperconnect.

And it's really focused on the main revenue-generating app, Azar, which is a one-to-one video experience.

The first is COVID.

Hyperconnect and Azar have significant presence in Asia and the Middle East.

And as I just talked about, COVID continues to be an issue in many of those markets.

And you've got a lot of people living at home with their family, spending a lot of time at home.

And it has changed the interaction of the consumer with the one-to-one video chat app at Azar.

And so we're looking to evolve the app in ways that change the experience and make it more conducive in the current environment.

I think that's kind of the first piece of it.

The second piece of it is on the marketing front.

Azar, there's a lot of performance marketing as we've talked about in other context.

The marketing environment has become both more competitive and also more challenging as a result of changes that Apple has made around IDFA.

So that's the second piece of what's going on.

And then the third piece is they've had some product initiatives that have been delayed, and the take-up has not been as quick as we had hoped.

And so there's some product things that are happening there as well.

So all 3 of those things have impacted the Azar performance, the Hyperconnect performance.

I would tell you that we're not happy at all that we missed our expectations for Q3 and that we had to lower them for Q4.

As Shar mentioned, we sent a team over there finally and spent a couple of weeks with Hyperconnect working through product roadmaps, marketing roadmaps and adjusting things to reverse the trends.

We're confident that working closely with them, we're going to be able to return the business to growth.

But it's going to take some time.

I think the current trends are going to persist into the first part of 2022.

And we're expecting that there'll be some return to growth in the latter part of next year.

As Shar also said in her remarks, even with that short-term softness, we're still very optimistic about the long-term prospects for Hyperconnect.

It can contribute extremely significantly to the long-term growth of the overall Match Group.

There's many ways that we can do that.

We think that we can leverage video, audio, AI capabilities that they've got, things in moderation and safety.

So there's a number of things that we're working very hard at leveraging.

And so we're really trying to do both things at once, both adjust the product and marketing roadmaps around their existing apps and also leverage their capabilities across our portfolio.

And then you've got Single Town and some of the new metaverse elements and the experience that we're seeing in that beta test.

And that is something that potentially we can build into either a stand-alone app and/or potentially leverage that user experience into some of our apps in the portfolio.

So there are a lot of things going on in Hyperconnect.

We need to make progress in all 3 of those areas.

We're working extremely diligently on it.

The team there is working extremely diligently on it.

And so even though there's some short-term pressure on the business, our long-term thesis and excitement around it remains completely intact, if not even stronger than it was months ago when we first made the acquisition.

So we just got work to do, and we're working away at it.

Great.

If I could just follow up on one thing, Gary.

You mentioned the impact on performance marketing and ATT on that asset, but I don't think you mentioned it as being material to the rest of your business around the world.

Is that a function of you relying -- that business relying a little bit more on performance advertising, app install ads, that type of thing to drive new users, whereas maybe Tinder, Hinge and the others tend to be a bit more viral in nature?

Yes.

I mean it varies by our business depending on what the marketing approach is.

So as you rightly said, Hyperconnect is feeling it because their marketing approach is impacted by the elimination of IDFA.

We're feeling it in other parts of our business, too.

We're feeling it at Match and Meetic, which are significant marketers as well and reliance on marketing.

We found good, creative ways to work around it to some extent and offset some of the impact.

But there is still impact in businesses that rely heavily on marketing.

So all that baked into our numbers and our performance that you're seeing for this year and our outlook for Q4 and into next year, we've included all that.

It's not very significant to us, but there is some impact.

And we're not able to outrun it completely, but through creativity and some good solves and adjusting channels and so forth, we're able to offset some of the impacts.

So all of our numbers include the impact, but it is a new fact of life that we are dealing with across our business.

And our marketing teams are doing a great job finding a way to offset it wherever they can.

The next question comes from Brent Thill with Jefferies.

On Hinge, great, great growth.

I'm curious kind of if you could describe the next chapter of the rollout for Hinge in -- I think everyone's enjoying the deleted commercials you've got going.

Thanks, Brent.

Yes, we've been super excited about Hinge, and it's been a great growth driver for us.

But it's still, as I said before, only exists in select English-speaking markets.

And much of that growth has been user growth in those markets and some really good work they've done this year on monetization.

They still have ways to go in these markets as well as on monetization.

But one of our key strategies for next year is for Hinge to enter non-English-speaking markets.

We're planning to build translation and localization capabilities.

We're going to start the international expansion for Hinge next year.

It will likely begin in some markets in Europe and then a more broader global rollout over time.

As you mentioned, their marketing campaigns and particularly, the 'Designed to be Deleted' tagline has really resonated with consumers.

And the Hinge team continues to differentiate themselves on the product.

And we do think that product experience Hinge is building is very well-suited for international markets.

So next year is going to be exciting for Hinge.

The next question comes from John Blackledge with Cowen.

Great.

Just one question.

What are the puts and takes for top line growth to be above kind of the initial guide of around 20% year-over-year growth?

So John, I would say there's probably two key things to think about that could drive 2022 top line higher than what we've discussed so far.

The first thing is we have some really bold and big initiatives planned for Tinder next year, especially around virtual goods and some other areas as well.

And the outlook that we've given doesn't assume a meaningful step function impact, a home run or really meaningful impact from any of those initiatives.

So we're waiting to see as we roll these initiatives out how they evolve, how they perform, and then we can adjust accordingly depending on that.

But the way we approach our outlook is to not factor in something that's kind of off the charts unexpected that we haven't seen previously or have -- or don't have reasons to expect.

So we'll see how it goes, and we obviously always update as we see improving trends in the business.

And the second thing is around COVID, and I'm sure we're all tired of talking about it and hearing about it and everything else.

But the reality is the dating category as a whole remains impacted by the fact that people's socializing behaviors, how much they're going out, how much they're meeting other people, how much risk there was to take in going out with people has not returned to pre-COVID levels.

I'm sure you and everyone else on the phone knows this from their own experiences.

You're going out more than you were, but not as much as you used to.

You are traveling more, but not as much as you used to.

And so we're waiting to see how the behavior has evolved and where we get to versus the pre-COVID levels, and it varies by country.

I talked about Japan and the U.S. and certain parts of the U.S., certainly, it is stronger than in other parts.

Some people would take more risk and are more comfortable than other people.

So we want to see where the world kind of normalizes back to if you can use that term, and that will affect our outlook for 2022 and our performance for 2022.

Right now, the way we have forecasted really assumes that current behaviors don't change that much, but the levels of socializing that are going on now kind of stay this way through the course of next year.

Maybe they improved slightly depending on markets.

But in general, we're not assuming a massive change versus current behaviors.

That could prove to be too conservative.

But right now, we don't see a full bounce back occurring at the moment.

And so we're not assuming a change in that for 2022.

So we'll see how this evolves.

It's something that we're watching very closely.

But that's another place where we could see some improvement versus our current outlook depending on how people's behaviors start to adjust.

The next question comes from Youssef Squali with Truist.

Two, please.

Actually, just to double-click on that last question, Gary.

I was wondering if you can maybe expand on what's baked into your mid-to-high teens growth, particularly around Payers and RPP for Tinder and non-Tinder brands?

And then have your labor cost increases had any -- or has labor cost, not yours, but just labor cost increases had any material impacts on your operations so far?

I think you called out in the letter that you may choose to invest further in attracting and retaining talent next year.

Any more color there would be super helpful.

Yes.

I mean, on the second question around labor costs.

We, like many companies, are seeing a very competitive job market, especially for tech talent, especially for engineers.

It varies by market, but there certainly are markets where we're seeing a significant amount of pressure.

And we're having to react to that and want to protect our franchise.

We want to retain our key talent and then hiring new talent, either to grow the business or as a replacement for people who may leave has become much more competitive, and costs are going up.

So we've seen that occur throughout 2021.

And right now, we don't see any significant shift in that trend as we head into 2022.

So you never know what the future holds, but sitting here today, as we've put together our initial outlook for 2022, we're assuming that those trends are going to persist.

And we're going to need to continue to invest in our talent to continue to build the business we want to build.

And we're prepared to do that because that is long term critical to our business and its success.

So that is something that we are dealing with as many companies are, and we'll continue to be thoughtful around it.

As far as your first question, the mid-to-high-teens growth.

I described a little bit about something that could drive to the upside.

And look, our expectation is for Tinder to continue to perform very, very well.

For Hinge, as it both expands into international markets, non-English-speaking markets.

But also, there's significant opportunity for it in its current markets.

So we think both businesses should drive significant levels of growth next year.

We've talked about the more Established Brands growing a modest amount.

That is still our goal for next year as well.

We've also talked about some pressures we're facing, for example, in the Japanese market and how that's going to evolve.

That's important to our Pairs business and the performance of Pairs for next year, and a little bit remains to be seen how the Japanese consumer evolves and how they emerge out of COVID.

So that's another factor in our business.

We also have talked a little bit about rolling out live streaming at a number of our businesses and how that takes place in OkCupid and BLK and other business where we plan to roll out live streaming.

So there's a number of things that we've made some assumptions around.

We've tried to make the most realistic assumptions we can.

But general trends like COVID or recovering markets like Japan are certainly open for interpretation as are the success of our initiatives, whether they're at Tinder or whether they're some of our new initiatives like live streaming and a couple of our brands.

So we're going to see how that all plays out, which is why we always give this initial outlook here on our Q3 call, sort of tell you what we think we're going to see next year.

But we'll give you a much more precise view of things when we get to February after we've seen some of these initiatives start to roll out and once we have 3 more months of performance and COVID recovery and everything else.

So it's the best we can do now.

It's our best set of assumptions sitting here today, but subject to refinement as there are many, many moving parts.

And that's before you can get to the EBITDA side with App Stores and everything else that's happening that we've talked about extensively.

So we try to give our best outlook, and that's what we've done today.

But we will refine it as we get closer to the beginning of next year.

The next question comes from Justin Patterson with KeyBanc.

Great.

I wanted to go back to virtual currency and the virtual goods ecosystem.

How should we envision the pace of just that rolling out over time?

And then when you look at the trading mechanics and just more virtual goods as a whole.

What are the fundamental elements you need to get right to scale that and just create an efficient economy?

And then the final point about that, how should we think about sizing that opportunity, the incrementality of the business over time?

I can take that, Gary.

Okay.

So the virtual currency or the coins is something we think of as an infrastructure thing that's going to be necessary eventually for virtual goods.

And that particular component is currently testing, and we should have it sorted out in the next few months.

Now virtual goods, the team is working on a very Tinder-specific version of virtual goods that will help users with both self-expression as well as the ability to stand out, particularly in a one-to-many surface area that Explore experiences will enable.

And so the way we envision virtual goods is it is something that users will be able to collect as well as give and gift to others.

And so there's a lot of -- in addition to this virtual currency, which is going to be a big component of what enables virtual goods, we do have to get the categorization of the goods and the design of it right.

We have to create a value structure and a currency for these goods.

And most importantly, to build the right experience that allows users to showcase them on the app in the right way.

And so all of that is the plan for 2022, and the plan is we build all of this out, test it out, learn it, refine it, work out the kinks in a couple of markets.

And then if we get this right, I do think this could be a multiyear revenue vector for Tinder, which doesn't exist today.

And so a lot of work done, but we're very optimistic that this is going to be a really fun thing on Tinder.

I think that was the last call for us.

Thank you all very much.

Have a wonderful holiday season, and thanks again for joining us today.

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