Krause Fund Research Spring 2020

Sector: Communication Services Industry: Interactive Media & Services Match Group, Inc.

Recommendation: BUY April 21, 2020

Research Analysts Current Price $80 Nicholas A. Faltz Target Price $145 - $196 [email protected] Joshua V. Nichols We are suggesting a BUY recommendation for Match Group, Inc. [email protected] (MTCH) considering their current position and the ability to capture a large amount of market share in a very young U.S. industry with tremendous growth potential. Match Group has positioned Company Description themselves as a strong player in the growing interactive media and services industry. Key Drivers: Match Group, Inc. (NASDAQ: MTCH) engages in the • Market Presence: Match Group controls over a third of provision of dating products worldwide. It operates a the online dating services market, while their closest portfolio of brands including Tinder, Match, Meetic, competitor occupies just over 12% OkCupid, Hinge, Pairs, PlentyOfFish, and OurTime, as well • Tinder Success: Tinder is the key driver of Match’s as various other brands. Match Group, Inc. offers its dating success, allowing them enough capital to acquire other products through mobile applications, and desktop and brands such as Hinge. Match Group’s aggressive approach mobile-web in approximately 40 languages. Through its has allowed them to develop a portfolio of brands, creating portfolio of brands, the company provides tailored products multiple streams of revenue and growth opportunities. to meet the varying demands of users. Match Group, Inc. was • Increasing Acceptance and Growth of Dating Products founded on February 12, 2009 and is headquartered in Dallas, Globally: As more interconnected singles utilize online dating products and the stigma around dating continues to Texas. Match Group, Inc. is a subsidiary of erode, Match can accelerate growth further through their IAC/InterActiveCorp. International channels Key Risks: Price Data • Government Regulation: The rapidly evolving 52 Week High $95.32 regulatory framework on privacy and data protection 52 Week Low $44.74 across jurisdictions is a primary issue for Match Group as regulatory practices change. Relative Valuation $79.59 • COVID-19: Coronavirus has already had a significant DCF/EP Intrinsic Value $171.85 impact on the economy and is leading the US into a Analyst Consensus 1yr TGT $82.88 recession. Bearish conditions could cause a significant decrease in growth and the number of subscriptions Key Statistics Market Capitalization (B) $22.62 Earnings Estimates (EPS)

Shares Outstanding (M) 279.8 2019 2020E 2021E 2022E 2023E 2024E Beta Value 0.48 $1.91 $1.83 $2.03 $2.30 $2.51 $2.74 EPS (TTM) $1.91 P/E (TTM) 44.25 Stock Price Performance vs. S&P 500 (YTD) Dividend Yield (%) N/A

Profitability Return on Assets (%) 22.06 Return on Equity (%) 167.03 Gross Margin (%) 74.30

Liquidity Current Ratio 1.62 Cash Ratio 1.12 Operating Cash Flow Ratio 1.58

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(Source: Yahoo Finance) government restrictions continue to suppress economic EXECUTIVE SUMMARY activity. The International Monetary Fund (IMF) expects U.S. GDP to contract by 5.9% for the full year. The IMF and similar reporting entities are giving revised estimates as a As of April 17th, 2020, we recommend a BUY rating for Match Group, Inc. (NASDAQ: MTCH) for the University of result of the COVID-19 outbreak.14 Deloitte Insights is Iowa Krause Fund portfolio. Match Group has experienced betting heavy on the possibility of a COVID-19 recession, significant growth in recent years as the stigma of online projecting an 8.3% decrease in GDP for 2020, with dating transitions to a social norm. Additionally, the aggressive monetary and fiscal policy kickstarting economic increasing number of mobile connections has allowed them recovery as disease cases diminish in late 2020 or early to attract and obtain users around the world. Our 2021.15 We expect revenue growth to decline as a result of recommendation stems from a variety of factors, specifically economic uncertainty and social distancing measures. Match Match Group’s ability to capture and maintain market share Group’s key business segments rely on human (social) within the dating services subsector. Match Group has had interaction, but we anticipate spurs of growth throughout the tremendous international success, as over half of their year as Match begins to capitalize on the video functions of revenue is accomplished outside of the United States. Within products. With limited travel and closing of nearly all non- the United States, they control over a third of the dating essential businesses, Match Group has the potential to offset services market, while their closest competitor occupies just losses in advertising and promotions through an increase in the number of subscribers. Social distancing limits many over 12%7. As the Communications sector continues to grow, we believe that Match Group’s market presence and ability aspects of life, and people may be more willing to try Match to tailor products prove that the company would be a Group’s dating products if traditional social settings are not profitable addition to the Krause Fund. Our forecasts an option. included in the report along with the provided model support our BUY rating. We believe that this rating is appropriate due United States Unemployment to Match Group’s strong position and ability to perform during a period of economic uncertainty. Unemployment is a key indicator of the overall labor market. The COVID-19 outbreak caused the U.S. unemployment rate to increase from 3.5% in February 2020 to 4.4% in March ECONOMIC OUTLOOK 2020.13 Due to its lagging nature, we anticipate unemployment continuing to rise in the short-term as many Real GDP Growth states have just recently shut down all non-essential businesses to further social distancing. Furthermore, over 22 The United States’ GDP is an indication of economic health, million Americans have already filed for unemployment aid measuring the value of all goods and services produced in the April 2020. These indications project a real within the U.S. each year on an inflation adjusted basis. Thus, unemployment rate of around 17%13. Due to the rising risk Real GDP is highly correlated with the performance of the 11 of unemployment in the U.S., we anticipate low levels of sectors within the S&P 500. An increase in GDP is significant consumer spending could lead to a significant decline in as it helps to signal a healthy economy and ample spending advertisement spending. on goods and services. Personal consumption expenditures accounts for 68 percent of total GDP, out of which services Consumer Confidence represent 45 percent and purchases of goods 23 percent.11 U.S. real GDP growth is a primary driver for Match Group as The Consumer Confidence Index (CCI) gauges the public’s their business units are heavily reliant on consumer spending. confidence regarding the health of the U.S. economy. The Consumer Confidence Index aims to reflect the public’s collective outlook on future economic conditions. In the most recent survey, the CCI decreased from 132.6 in February to 120.0 in March; this is due to the recent outbreak of COVID- 19 in the United States, the country responsible for large market volatility and the recent spike in unemployment claims.17 In the short-term, we anticipate a continuing decline in CCI due to the current emphasis on social distancing and “essential-only” businesses across the nation. The extension of the stay-at-home order is active in many states which can be detrimental to nearly all major industries in some shape or (Source: Bureau of Economic Analysis) form. It is highly probable that COVID-19 will have a negative impact on Match Group’s business portfolio. In The United States’ real GDP increased by 2.3% in 2019, a terms of ad-driven content, advertising makes up a small slight drop from 2018’s 2.9% increase.12 The coronavirus portion of Match Group’s revenue. We anticipate the outbreak has caused significant damage to the global company reducing advertisement expenses temporarily in economy, and the U.S. economy has the largest impact on response to the decline in consumer spending on goods and global growth. While containing the virus continues to be the services. However, we expect CCI will return to familiar primary goal in this pandemic, stay-at-home orders and 2 level once social distancing efforts begin to settle and non- unnecessary goods and services. However, it is possible for essential businesses reopen to the public. certain companies within the communications sector More specifically, we anticipate a slight decrease in the number of Government Regulation active subscribers as a result. Our long-term estimates of real GDP contracting by 7% are based on consumer confidence, The U.S. government continues to implement new policies rising unemployment claims, and the reality of a market and regulations that aim to resolve issues regarding privacy recession. This period of economic disparity decreases the and data collection of confidential user information. level of consumer spending, resulting in a decrease in overall This is an extremely pressing matter for Match Group as they discretionary spending. This paints an unfavorable outlook receive, process, store, and transmit a significant amount of for Match Group and the entire communications sector, and personal user and other confidential or sensitive information, it is possible that Match Group’s revenue streams will suffer including credit card information and member-to-member as a result of reduced discretionary spending. Despite the communications or message “threads”.2 The success of the signs of a recession in the United States, it is important to use company is heavily dependent on its ability to access, collect, a situational analysis due to the unforeseen events. While we and use personal data about users and subscribers. anticipate a bearish outlook, it is important to note that the communications sector outperforms the market. While our More recently, the state of California and the European Union assumptions remain the same, it is possible that companies (EU) enacted legislated that required internet companies to within the communications sector, especially Match Group, obtain user consent before the retrieval or processing of any could experience spurs of growth during this bleak period. data. The California Consumer Privacy Act requires Video steaming and interactive media services has surged as companies to develop methods that enable consumers to a result of social distancing efforts. To sustain or improve submit data requests and respond to them. This act grants future growth, Match Group must maintain its position in the consumers a limited right to use companies over data market and capitalize on the products that attract or maintain breaches when security obligations are not met.18 The act also consumers. imposes large fines in certain situations as companies in this arena handle extremely large amounts of user information COMPANY ANALYSIS and data. Following the California Consumer Privacy Act, states including Nevada, Maine and Illinois have initiated Match Group’s fiscal year end is February 1st and the similar laws. Many other states are considering similar company reports earnings based on the ‘Tinder’ segment and implementation plans in 2020 or the following year, and there the ‘Other Brands’ segment. The company’s revenue is are no signs of a regulatory slowdown. These federal further broken down into direct revenue (derived from a regulations pose a large threat for Match Group as they could subscription model and other a la cart payments) and indirect limit the company’s ability to profit off user data. On an revenue (derived primarily from online advertisements). international level, data and privacy regulation is also very Match Group operates their brands by employing a prominent. The EU’s General Data Protection Regulation ‘freemium’ model, encouraging new subscribers to join by requires companies to use full transparency when it comes to allowing consumers to try their products without having to using private information. In other words, companies must purchase anything, creating a profile is free. As mentioned in post clear notices to users and require their full consent before the Q4’19 earnings call1 a major adjustment in Match’s collecting consumer data for marketing purposes.18 business model is expected to take place in FY2020. Consumer preference is changing from the traditional subscription model to a “pay as you go”1 structure. CAPITAL MARKETS OUTLOOK Management hopes to drive revenue with this new business model by emphasizing their a la carte features available to Due to the COVID-19 outbreak, our market outlook has users. A revenue decomposition based on geographical changed significantly. Before the virus, the U.S. was leading location as well as segmented business units can be seen in the longest bull run in history. The U.S. is facing record low the below charts. numbers which can be attributed to the outbreak of COVID- 19. In the short term, we anticipate bearish market conditions Segment Revenue Decomposition as a % of for the communications sector. Our projection is based off our 6 month’s estimate of 3.5% real GDP contraction; the Total Revenue (2019) increasing rate of unemployment, lack of non-essential spending and reduced economic activity will continue to hold the market in bear territory for months to come. Each of these factors help to influence the sector as they have a direct 42.60% impact on consumer spending. Consumers are less willing to 57.40% spend their disposable income on unnecessary goods and services during a period of high uncertainty. This lack of economic activity poses a threat for Match Group’s short- term operations as their products are mainly considered to be discretionary goods. Therefore, we anticipate a negative Tinder Revenue Other Brands Revenue outlook in the near term as consumers avoid purchasing 3

(Source: Match Grroup 10-K)2 started to become commonplace, we are anticipating a modest 5% growth rate in the near term for this business Tinder Segment segment.

Tinder is the star of Match Group’s portfolio of online dating North America & International Revenue brands, responsible for over 57% of the company’s total revenue in FY2019.2 Tinder’s ability to capture market share Historically, most of of Match Group’s revenue came from in the online dating services industry has been the key to their operations in North America. However, their Match Group’s growth since Tinder’s inception in 2012. International operations growth rates have outpaced their Since FY2015, Tinder’s direct revenue has grown at a CAGR North American counterparts in the past few years. North of 123% during the period to $1.152B in 2019.1 Tinder’s American revenue comes from the United States and Canada, growth to 5.89 million average subscribers has largely been International revenue comes from all other countries of contributed to to the millenial generation and their rapid operations. The following chart includes the geographical adoption of the online dating platform.1 A subscriber is break up of revenue for FY2019. defined as a user who purchased a subscription to one of Match Group’s products. Tinder’s average subscribers increased 19% year over year from Q4’18 to Q4’19, Geographical Revenue Decomposition as a % indicating high levels of growth in both revenue and of Total Revenue (2019) subscriber figures.1 2.15%

Given Tinder’s rapid growth into a billion dollar business 47.92% 49.93% unit, we are optimistic about the continued growth in the future. We are projecting a 15% growth in Tinder’s revenue for 2020E to $1.324B. The Tinder brand is the biggest driver for Match Group’s total revenue and company management North America Direct Revenue is heavily reinvesting into this business unit to ensure its International Direct Revenue Indirect Revenue success.1 Match Group management discussed during their Q4’19 earnings call a variety of new initiatives that the (Source:Factset3) company has undergone regarding the Tinder segment, such as: trust, safety, and product innovation iniatives. Tinder has During 2019 the North America segment earned 49.93% of been listening to their user base and applying the required revenue for Match Group a decrease from 2018’s of 52.16%.2 resources to retain current subscribers as well as adding new The International operations are becoming increasingly more ones by addressing their needs. These forward looking important for Match Group growing at 21.19% and 30.31% iniatives and an adjustment to Tinder’s business model are for 2019 and 2018, respectively.2 These results align with reasons we believe Tinder will sustain a high level of growth management’s goal of expanding internationally1, indicating in the future. that their growth initiatives are working. We are optimistic that the International operations can grow by 15% for 2020E Other Brands Segment while North American operations will grow by 8%.

Match Group’s portfolio of other brands takes advantage of Cost Structure the naturally segmented online dating services market. Consumer preference toward one’s dating life comes with a Match Group’s operating margin for 2019 was 31.62%.2 variety of demographic, geographic, and unique preferences Match does not carry any inventory on their balance sheet, that can be successfully served by allowing each brand a decreasing the variable cost portion of their operating niche market. For example: OurTime is “the largest expenses. As a result, Match has the ability to optimize their community of singles over 50 of any dating product in the margins by efficiencies of scale within their SG&A fixed US”.2 Match.com uses algorithmic formulas to match expenses. The operational functions of Match Group’s SBU’s subscribers and emphasizes a more meaningful connection are centralized, allowing for maximum efficiency and for those who are looking for a more serious relationship. By resource sharing across the platforms.2 We are forecasting focusing each brand towards a desired niche, cannibalization that Match Group achieves some efficiencies of scale can be minimized for desired company growth. regarding their SG&A expenses increasing their operating margin initially, then slightly adjusting over the forecasted Match is employing resources in their Other Brands segment period for an operating margin of 33.74% in 2029CV. The towards emerging markets in the online dating services graph below states Match Group’s historical and forecasted industry such as India and Eastern Europe. Management has operating margins. stated that this is an important investment towards their long- term growth strategies. The collection of these Other Brands are responsible for 42.6% of Match Group’s dierct revenue.2 Given the forward-looking horizon for several of Match Group’s Other Brands, especially those in the emerging Asian markets where the social stigma of online dating just 4

(Source: Factset Analysts4) Historical & Forecasted Operating Margins Our forecasted net income margin for 2020E is 23.13%, 37.00% 35.28% 35.08% 34.43% 34.66% 33.74% lower than the analyst consensus of 23.36%. Our estimates 35.00% 31.62% 35.39% for net income margin also fall below analyst consensus for 33.00% 34.76% 34.09% 35.18% the following two years. We believe this is due to our income 31.00% 34.15% 31.99% tax provision expense being forecasted at a much higher 29.00% 27.09% marginal tax rate. 27.00% Operating Operating Margin 25.00% We modeled revenue growth at a more modest, but similar rate as the Factset analysts’ consensus. As previously 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E mentioned, a key driver for revenue growth will depend on Year Match Group’s ability to develop their International operations. Analyst consensus agrees with our assumption as (Source: Factset3) Factset analysts have the International segment growing by a The initial increase of operating margins at the beginning of rate of 18.41%, compared to our 15%. This discrepancy in the forecast period can largely be attributed to valuing cost of the international direct revenue growth rate can be clarified revenue by its historical average of 23.47% compared to by the acceptance rate of online dating in our emerging 2019’s of 25.7%, thus decreasing expenses and increasing markets (Asia and Western Europe). The social stigma margins. This spike in the operating margin is offset by the around online dating in these areas is relatively higher than in forecasted value for income tax provision. Match paid taxes a more mature United States market and can result in in 2019 at an effective rate of 4%. Provision for income taxes uncertainties surrounding the international direct revenue during the forecast period is valued according to Match growth rate. Given the uncertainty of profitability in the Group’s 2019 marginal tax rate of 23.51%. Match Group’s emerging markets and the length of our forecast horizon, we growth is able to be sustained through their net income took a more conservative approach to estimating this growth margin. Their net income margin for 2019 was 26.07%. The rate. The chart below provides information regarding our chart below shows Match Group’s net income margin estimates for total sales revenue for the first three years into throughout the forecast period, yielding a 23.6% margin in the forecast horizon compared to analysts estimates on the CV year 2029E. Factset.

Historical and Forecasted Net Income Margin Sales, Forecasted vs Analyst Consensus 2,681 27.63% 2,437 4,000 2,216 28.00% 26.31% 26.07% 3,028 2,662 26.00% 24.39% 3,000 2,299 23.92% 24.11% 23.78% 2,051 23.31% 23.60% 1,730 24.00% 2,000 24.26% 24.1… 23.95% 22.00% 23.13% 1,000 20.00% 0 NetMargin Income Sales (Millions $) (Millions Sales Dec '18 Dec '19 Dec '20E Dec '21E Dec '22E

2017 2018 2019 (Actual) (Actual) 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Year Sales - Analyst Consensus Sales - Forecasted

(Source: Factset3) (Source: Factset Analysts4)

Comparison with Analyst Consensus Debt Maturity Structure On several fronts, we forecasted relatively modest growth Match Group carries no short-term debt on their balance rates in comparison with analyst consensus in the near term. sheet. As a growing company, it is important to reinvest The chart below shows our forecasted net income margin profits back into operations. Match Group’s most recent debt against the Factset analysts’ estimates. issuance on February 11th, 2020 of 4.125% senior notes carries an S&P bond rating of BB.5 Match Group’s after-tax cost of debt at a 23.51% marginal tax rate is 4.13%. We Net Income Margin, Forecasted vs Analyst believe that during this important growth stage for the Consensus 23.31% 23.92% company that all debt maturities will be refinanced in order 23.13% 50.00% 27.63% 26.07% 23.36% 25.33% 28.20% to keep working capital accounts positive.

0.00% Dec '18 Dec '19 Dec '20E Dec '21E Dec '22E (Actual) (Actual)

Net Income Margin - Analyst Consensus

NetMargin Income Net Income Margin - Forecasted

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(Source: Krause Fund Analysts) Group’s cost of revenue for 2019 was 25.70%, less than half of the industry standard 58.40%.2,7 Match is able to maintain Separation from IAC and Related Events a low cost of revenue, or purchases, because of their dominant presence within the industry and having the ability On December 19, 2019, Match Group and IAC entered into a definite agreement providing for the full separation of to do many operational activities of running their business in- Match Group from the remaining businesses of IAC.1 The house. These efficiencies of scale are realized by saving on transaction is expected to close in Q2 of 2020 which will fees such as server costs. Below is a chart from IBISWorld create two, separate public companies. Match Group has been that decomposes the average industry cost structure. operating independently, so separation from its parent company shouldn’t affect the businesses success. IAC has a long history of spinoffs, including Ticketmaster, Expedia and Online Dating Services Industry Average the Home Shopping Network. This is important to consider Rent, 2.10% Costs (2019) Utilities, as one might interpret this separation for reasons other than Marketing, 0.90%Other, 6.40% new opportunities. 1.20% Wages, 16.80% IAC plans to divest its stake in Match Group and create a Depreciation, 2.20% similar company with only one class of common stock instead of two.19 IAC would lose voting or economic stake in Profit, 12% Match, which could impose changes in Match Group’s board as a result. We anticipate Match Group continuing to grow Purchases, 58.40% year over year, as the daily operations of the company are not managed by IAC. As of June 30, 2019, IAC held 80.4% of (Source: IBISWorld7) Match’s ownership and 97.5% voting power. On January 31, 2020, IAC accepted a deal to receive two office building Peer Comparison locations in Los Angeles in exchange for 1.4 million shares of Match Group stock.2 Separation from IAC is extremely This industry was reclassified to include the big tech firms significant for Match Group, and we believe this gives them (AAPL, GOOGL, AMZN), because of these firms outlier the opportunity to execute their grow strategy with full independence. levels of operations we will broaden our peer group to include companies whose primary business relates to the act of INDUSTRY ANALYSIS connecting human beings with one another. Bumble and eHarmony are the most direct competitors to Match Group’s Match Group is in the GICS classified Industry of Interactive portfolio of brands, however since they are privately held companies we do not have consistent enough financial to Media and Services.6 This relatively new industry is unique because most of the products and services provided by firms directly include them in the peer analysis. information The within this industry are intangible goods. We will be following companies are excluded from the peer comparison conducting our industry analysis specifically on firms that analysis due to negative growth estimates: TWTR8, PINS9, operate online dating services in the United States. SNAP10.

Market Share Concentration The peer analysis includes the following companies: FB, MOMO, MEET, MSFT, YY, SINA. We selected this peer group to value Match Group against several companies The online dating services industry has a ‘medium’ market within our similar industry. The peer group average forward share concentration, with most of it belonging to major P/E20 ratio is 18.99.4 The chart below shows Match Group’s players Match Group and privately held eHarmony.7 For industry high forward P/E of 44.5 against the peer group. these big players to maintain their market share within the industry they undergo M&A activities. Notable acquisitions 1 Year Forward P/E of Peer Group that Match Group has done in the past include their brands 60.00 Tinder, Plenty of Fish, and most recently Hinge.7 Match Group has a 33.4% market share within the industry.7 40.00 Match’s largest competitor for market share is eHarmony Inc. 20.00 44.4 at 12.1%.7 31.90 20.39 10.09 22.07 15.1 14.4 18.99 - Industry Cost Structure FB MOMO MEET MSFT YY SINA Average MTCH

(Source: Factset Analysts4) Match Group has a low cost competitive advantage compared to industry averages for online dating services. Match

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Match Group’s relatively high forward P/E can be looked at Selling and Marketing Expense: as a risk, especially in negatively growing economy, but Efficiencies of scale are an advantage for Match Group further analyzing P/E to include the company’s growth compared to smaller companies in their industry. We element normalizes Match Group’s P/E relative to growth. forecasted selling and marketing expense for 2020E at Looking at the peer group’s 2020E PEG ratio, the industry 20.84% of revenue, the same rate as FY2019. Over the average is 2.35 compared to Match Group’s 2.4.4 Match has forecast period the cost ratio decreases as a percentage of a much smaller market cap than both Facebook and Microsoft revenue, this is the efficiency of scale at work, until so we are forecasting that the high levels of growth in eventually increasing in the CV year 2029E to 22.05%. Match’s revenue will be able to be sustained throughout the forecasted period. The chart below shows the forecasted General and Administrative Expense: PEG’20 ratio across the peer group. We forecasted for 2020E and throughout the entire forecast period a constant 3 year trailing average for general and administrative expense to revenue ratio. For 2020E we are Peer Analysis 1 Year Forward PEG'20 Ratio forecasting a 12.12% general and administrative expense ratio throughout the CV year 2029E.

Product Development Expense: We forecasted product development expense using a 3 year 7.83 trailing average of product development expense to total 1.42 0.55 0.79 2.25 1.27 2.35 2.4 revenue ratio. For 2020E throughout the forecast period to CV year 2029E we are using a 7.55% expense ratio.

Dividends: Per the most recent 2019 10-K Match Group does not foresee paying any dividends in the near future, thus the company’s payout policy is 0. (Source: Factset Analysts4) Normal Cash for Invested Capital: VALUATION DISCUSSION Normal cash used in the invested capital equation is 15% of revenue. Forecasting Assumptions The forecasted accounts discussed in the following section Accounts Receivable: may have some material differences from historical figures Accounts receivables is forecasted using a historical 3 year so we believe it is important to discuss our reasons for average rate of accounts receivable to total revenue ratio. The growing these accounts as we did. growth rate for A/R in 2020E through the CV year 2029E is 6.73%. Cost of Revenue: We valued Match’s cost of revenue, exclusion of depreciation Prepaid Expenses and Other Current Assets: based on the results from their last three fiscal years dating Prepaid expenses is forecasted using the 3 year historical back to 2017. We averaged this expense ratio from the last prepaid expenses to revenue ratio from the years 2017-2019. three years to reach the cost of revenue we used throughout In 2020E we are forecasting a slight decrease in Match’s our forecast period, a constant 23.47%. prepaid expenses from a 2.71% expense ratio in 2019 to 2.5% in 2020E and through the CV year 2029E. We valued the Income Tax Provision: other current assets account using the same 2.5% as a growth We valued Match Group’s income tax provision for 2019 rate. using the three year trailing average marginal tax rate of 23.51%. This assumption increases our forecasted income tax Right of Use Assets: provision for 2020E to $157.50 million, a material increase We forecasted right of use assets using 2019’s ROU assets to from FY2019 balance of $20.36 million. Net PP&E ratio of 65.65% in 2020E and through the forecast period to CV year 2029E. Depreciation and Amortization: Both depreciation and amortization expenses were forecasted Valuation Models by using a five year trailing average of the Discussion of our valuation models can be seen in the depreciation/amortization rate, calculated by dividing following sections. Given our high revenue growth estimates depreciation expense by the previous year’s net PP&E for Match Group, our forecasted value drivers are optimistic figure. For forecasted 2020E and throughout the forecast yet consistent with historical performance. horizon the depreciation rate is 57.27% and the amortization rate is 1.64% Return on Invested Capital: Match Group’s ROIC as a percentage of NOPLAT divided by the previous years invested capital for FY2019 is 147.61%. We are forecasting for 2020E that ROIC will

7 decrease to 134.41%, driven by a higher historical invested capital figure.

Free Cash Flow: Match Group’s free cash flow for 2019 is $561.34 million. Due to our cash ‘plug’ account used while forecasting the balance sheet, an increase in the cash account will increase FCF in our forecast horizon. In 2020E Match’s free cash flow will increase by about 10% to $620.14.

Economic Profit: Match Group’s economic profit for 2019 is 573.56, computed by multiplying the previous year’s invested capital by the spread between return on invested capital and the weighted average cost of capital. For 2020E we are forecasting a slightly lower EP figure of 556.35, driven by a lower forecasted ROIC.

Discounted Cash Flow (DCF) Model: We valued Match Group in our DCF analysis using a CV Growth of NOPLAT of 2%, a CV Year ROIC of 219.97%, a WACC of 3.73%, and a Cost of Equity of 3.7%.The value of operating assets for year 2020E is forecasted at $50,292.50 million. Adjusting for non-operating assets and non- operating liabilities we reach Match’s value of equity of $47,719.90 million. Divided by 280.2 million shares outstanding we reached an intrinsic value at FY2019 end of $170.32, or an implied price as of today $171.64.

Match Group’s stock price is trading around $80. We believe that our modest expectations of capital expenditures for the company in the forecast period may be the reason for this inflated stock price.

Economic Profit Model: We are forecasting Match Group’s EP to be 536.4 million in year 2020E. However, the total present value of the forecast period’s EP is 49,866.80 million,. After discounting it by a 3.73% WACC. After adding in the previous year’s invested capital and making the proper non-operating asset and liability adjustments made in the DCF model above, we reach the same implied price as of today at $171.64.

Dividend Discount Model (DDM): Match Group has only paid one special dividend to shareholders of record in 2018 and management has since indicated that they will not be paying out dividends in the near future. Thus we do not feel as if our valuation using the DDM approach is an accurate depiction of Match Group.

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Resources 17/u-s-is-expected-to-lead-a-contraction-in-global-gdp- this-year 1. Match Group. (2020, February 4). Q4 2019 Investor 15. Bachman, D. (2020). United States Economic Forecast. Presentation [Press release]. Retrieved April 21, 2020, Retrieved April 21, 2020, from from https://www2.deloitte.com/us/en/insights/economy/us- https://my.apps.factset.com/viewer/?_doc_id=12012392 economic-forecast/united-states-outlook-analysis.html 51_slides&_doc_date=20200205&_doc_product=NEW 16. Dmitrieva, K. (2020, April 16). US Jobless Claims Top S_FCIS&_doc_docfn=U2FsdGVkX18jZw0qqqISMz7x 5.2 Million. Retrieved April 21, 2020, from h9kDCGDZvo0DiVNnIvsWTXIteJ75MtN%2Bibdpdb https://www.bloomberg.com/news/articles/2020-04- RVEY6ICOMhbwqFtwON7zPu%2F7tXyCzs%2FsXc4 16/u-s-jobless-claims-total-5-25-million-in-week-four- p2JH5AGEpE%3D&_doc_title=Match%20Group,%20 of-lockdown Inc.%20Slide%201%3A%20Q4%202019%20Earnings 17. Consumer Confidence Index®: The Conference Board. %20Call&_app_id=CSINews&_appSesGUID=fa7458d (2020, March 31). Retrieved April 21, 2020, from 8208f-59c7-875a-d6df-a3b51581707701257 https://www.conference- 2. Match Group Fiscal 2019 Annual Report board.org/data/consumerconfidence.cfm 3. Match Group Income Statement Factset. (2020). 18. Laura, M. (2019, December 19). California Joins Retrieved April 21, 2020, from Europe in Fight for Online Privacy. Retrieved April 21, https://my.apps.factset.com/navigator/company- 2020, from security/income-statement/MTCH-US https://www.bloomberg.com/news/articles/2019-12- 4. Factset Analyst Estimates. (2020). Retrieved April 21, 20/california-joins-europe-in-fight-for-online-privacy- 2020, from quicktake https://my.apps.factset.com/navigator/company- 19. Bensaid, A. (2020). Bloomberg Intelligence Match security/all-estimates/MTCH-US Group Research [PDF]. Bloomberg Intelligence. 5. Match Group Debt Capitalization. (2020). Retrieved April 21, 2020, from https://my.apps.factset.com/navigator/company- security/dcs-detail/MTCH-US 6. CFRA Match Group Report [PDf]. (2020, February 11). CFRA. 7. Madigan, J. (n.d.). Dating Services in the US (Rep. No. 81299A). IBISWorld. 8. Twitter, Inc. (TWTR) Analyst Ratings, Estimates & Forecasts. (2020, April 21). Retrieved April 21, 2020, from https://finance.yahoo.com/quote/TWTR/analysis?p=T WTR 9. Pinterest, Inc. (PINS) Analyst Ratings, Estimates & Forecasts. (2020, April 21). Retrieved April 21, 2020, from https://finance.yahoo.com/quote/PINS/analysis?p=PIN S 10. Snap Inc. (SNAP) Analyst Ratings, Estimates & Forecasts. (2020, April 21). Retrieved April 21, 2020, from https://finance.yahoo.com/quote/SNAP/analysis?p=SN AP 11. United States GDP Growth Rate1947-2019 Data: 2020- 2022 Forecast: Calendar. (2020). Retrieved April 21, 2020, from https://tradingeconomics.com/united- states/gdp-growth 12. News Release. (2020). Retrieved April 21, 2020, from https://www.bea.gov/news/2020/gross-domestic- product-fourth-quarter-and-year-2019-third-estimate- corporate-profits 13. Real Gross Domestic Product. (2020, January 30). Retrieved April 21, 2020, from https://fred.stlouisfed.org/series/A191RL1Q225SBEA 14. Tanzi, A., & Lu, W. (2020, April 17). U.S. Is Expected to Lead a Contraction in Global GDP This Year. Retrieved April 21, 2020, from https://www.bloomberg.com/news/articles/2020-04- 9

Important Disclaimer

This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

10

Match Group, Inc Revenue Decomposition *Amounts in thousands, excpet for ARPU *ARPU on a monthly per-person basis Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E CV2029E Geographical Breakdown Direct Revenue: North America 741.33 902.48 1024.161 1177.79 1354.45 1557.62 1791.26 2059.95 2368.95 2724.29 3132.93 3602.87 4143.30 NA Growth Rates 17.86% 11.88% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% International 539.92 774.69 983.013 1228.77 1535.96 1919.95 2399.93 2999.92 3749.90 4687.37 5859.21 7324.02 9155.02 INT Growth Rates 30.31% 21.19% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% Total Direct Revenue 1281.25 1677.17 2007.17 2406.55 2890.41 3477.57 4191.20 5059.87 6118.84 7411.66 8992.15 10926.89 13298.32 Direct Revenue Growth Rate 23.61% 16.44% 19.90% 20.11% 20.31% 20.52% 20.73% 20.93% 21.13% 21.32% 21.52% 21.70% Indirect Revenue 49.41 52.68 44.084 45.41 46.77 48.17 49.62 51.11 52.64 54.22 55.84 57.52 59.25 Indirect Revenue Growth Rate 6.20% -19.50% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Total Revenue 1330.66 1730.09 2051.42 2215.54 2437.09 2680.80 2895.26 3126.88 3314.50 3513.37 3724.17 3947.62 4184.48 Revenue Growth Rate 23.09% 15.66% 8.00% 10.00% 10.00% 8.00% 8.00% 6.00% 6.00% 6.00% 6.00% 6.00%

Tinder Segment 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Tinder Revenue 403.22 805.32 1152.045 1324.85 1589.82 1907.79 2289.34 2518.28 2770.11 3047.12 3351.83 3687.01 4055.71 Growth rate 58.21% 49.93% 30.10% 15.00% 20.00% 20.00% 20.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% Other Brands 878.03 871.86 855.13 897.89 942.78 989.92 1,039.41 1,091.39 1,145.95 1,203.25 1,263.41 1,326.59 1,392.92 Growth rate -2.32% -0.70% -1.92% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76%

Average Subscribers Growth 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E North America 3.57 4.16 4.55 4.78 5.12 5.47 5.86 6.27 6.58 6.91 7.26 7.62 8.00 NA Growth Rates 14.23% 8.63% 4.76% 6.54% 6.54% 6.54% 6.54% 4.76% 4.76% 4.76% 4.76% 4.76% International 2.84 3.71 4.73 4.97 5.46 6.01 6.61 7.27 7.78 8.32 8.91 9.53 10.20 INT Growth Rates 23.52% 21.51% 4.76% 9.09% 9.09% 9.09% 9.09% 6.54% 6.54% 6.54% 6.54% 6.54% Total 6.41 7.87 9.28 10.21 11.23 12.36 13.59 14.54 15.56 16.65 17.82 19.06 20.40

APRU (Monthly) 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E North America $ 0.56 $ 0.59 0.661 0.68 0.70 0.72 0.74 0.77 0.79 0.81 0.84 0.86 0.89 NA Growth Rates 5.08% 10.74% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% 2.91% International $ 0.51 $ 0.56 0.56 0.59 0.62 0.65 0.68 0.71 0.75 0.79 0.83 0.87 0.91 INT Growth Rates 8.93% 0.00% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% 4.76% Total $ 0.54 $ 0.57 $ 0.58 $ 0.60 $ 0.63 $ 0.65 $ 0.68 $ 0.71 $ 0.73 $ 0.76 $ 0.79 $ 0.83 $ 0.86 Match Group, Inc Income Statement

Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E CV2029E Revenue 1,330.70 1,729.80 2,051.26 2215.54 2437.09 2680.80 2895.26 3126.88 3314.50 3513.37 3724.17 3947.62 4184.48 Operating Costs and Expenses: Cost of revenue exclusive of depreciation -279.50 -410.00 -527.18 -519.96 -571.96 -629.15 -679.49 -733.84 -777.88 -824.55 -874.02 -926.46 -982.05 Selling and marketing expense -375.60 -420.00 -427.44 -461.64 -498.57 -538.45 -581.53 -628.05 -678.29 -732.56 -791.16 -854.45 -922.81 General and administrative expense -179.80 -180.30 -255.00 -268.57 -295.42 -324.97 -350.96 -379.04 -401.78 -425.89 -451.44 -478.53 -507.24 Product development expense -101.20 -132.00 -151.96 -167.23 -183.95 -202.35 -218.54 -236.02 -250.18 -265.19 -281.10 -297.97 -315.85 Depreciation -32.60 -33.00 -32.45 -37.76 -38.33 -38.57 -38.68 -38.72 -38.74 -38.75 -38.75 -38.75 -38.75 Amortization of intangibles -1.50 -1.30 -8.73 -3.87 -4.07 -4.27 -4.48 -4.71 -4.94 -5.19 -5.45 -5.72 -6.01 Total operating costs and expenses -970.10 -1,176.60 -1,402.73 -1459.03 -1592.30 -1737.76 -1873.67 -2020.38 -2151.81 -2292.12 -2441.93 -2601.89 -2772.71 Operating income 360.50 553.30 648.53 756.51 844.79 943.04 1,021.59 1,106.50 1,162.68 1,221.24 1,282.24 1,345.73 1,411.77 Interest expense -77.60 -73.40 -91.72 -86.60 -102.17 -104.72 -106.92 -109.26 -111.49 -113.86 -116.05 -118.36 -120.79 Other income / expense, net -30.80 7.80 -2.03 ------Earnings from continuing operations before income taxes 252.10 487.60 554.79 669.91 742.62 838.32 914.67 997.24 1051.19 1107.39 1166.19 1227.37 1290.97 Income tax (provision) benefit 103.85 -14.70 -20.36 -157.50 -174.59 -197.09 -215.04 -234.45 -247.14 -260.35 -274.17 -288.56 -303.51 Net earnings from continuing operations 356.00 473.00 534.43 512.41 568.03 641.23 699.63 762.79 804.05 847.04 892.01 938.81 987.46 Loss from discontinued operations, net of tax -5.70 -0.40 0.00 ------Net earnings 350.30 472.60 534.43 512.41 568.03 641.23 699.63 762.79 804.05 847.04 892.01 938.81 987.46 Net loss (earnings) attributable to noncontrolling interests -0.20 5.30 0.31 ------Net earnings attributable to Match Group, Inc. shareholders 350.10 477.90 534.73 512.41 568.03 641.23 699.63 762.79 804.05 847.04 892.01 938.81 987.46

Per share Basic EPS $ 1.33 $ 1.73 $ 1.91 1.83 2.03 2.29 2.50 2.73 2.88 3.03 3.19 3.35 3.52 Dividends per Share $ 2.00 ------

Basic Weighted Average Shares Outstanding 264 277 280.5 280 280 280 280 280 280 280 280 280 280 All figures in millions of U.S. Dollar except per share items. Match Group, Inc Balance Sheet

Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Assets Cash 199.61 259.47 307.69 1008.93 1491.38 2046.60 2655.33 3327.17 4031.87 4776.83 5569.35 6411.31 7304.72 Cash Equivalents Money Market Funds 71.20 72.55 150.87 151.36 151.86 152.36 152.87 153.37 153.88 154.38 154.89 155.41 155.92 Excess Cash 1.82 -145.07 7.12 7.17 7.22 7.27 7.32 7.36 7.41 7.46 7.51 7.56 7.61 Accounts Receivables, Gross 117.58 99.78 117.04 149.97 164.97 181.47 195.99 211.66 224.36 237.83 252.10 267.22 283.25 Allowance for Doubtful Accounts 0.78 0.72 0.58 0.93 1.03 1.13 1.22 1.32 1.40 1.48 1.57 1.67 1.77 Accounts Receivables, Net of allowance 116.80 99.052 116.46 149.04 163.94 180.34 194.76 210.35 222.97 236.34 250.52 265.56 281.49 Other Current Assets 55.40 57.766 94.20 94.89 101.42 108.53 114.92 121.78 127.56 133.65 140.06 146.82 153.95 Prepaid Expenses 16.37 19.476 55.68 55.39 60.93 67.02 72.38 78.17 82.86 87.83 93.10 98.69 104.61 Other 39.00 38.29 38.54 39.51 40.49 41.51 42.54 43.61 44.70 45.81 46.96 48.13 49.34 Total Current Assets 444.70 343.765 676.34 1411.40 1915.82 2495.09 3125.21 3820.03 4543.68 5308.68 6122.34 6986.66 7903.70 Right of Use Assets - - 43.29 44.28 44.71 44.89 44.96 45.00 45.01 45.02 45.02 45.02 45.02 Gross Property, Plant & Equipment 170.48 171.38 188.50 227.26 266.01 304.76 343.52 382.27 421.03 459.78 498.53 537.29 576.04 Accumulated Depreciation -108.86 -113.03 -122.56 -160.32 -198.65 -237.22 -275.90 -314.62 -353.36 -392.11 -430.86 -469.61 -508.37 Net Property, Plant & Equipment 61.62 58.35 65.94 66.93 67.36 67.54 67.62 67.65 67.66 67.67 67.67 67.67 67.67 Goodwill 1247.60 1,244.76 1239.58 1239.58 1239.58 1239.58 1239.58 1239.58 1239.58 1239.58 1239.58 1239.58 1239.58 Intangible Assets, Net 230.30 237.64 228.32 235.80 247.59 259.97 272.97 286.62 300.95 316.00 331.80 348.39 365.81 Deferred Income Taxes 123.20 134.35 140.73 147.76 155.15 162.91 171.05 179.61 188.59 198.02 207.92 218.31 229.23 LT Investments 11.10 9.08 5.08 6.08 7.09 8.10 9.10 10.11 11.12 12.13 13.13 14.14 15.15 Other non-current assets 11.50 25.124 24.44 25.91 28.50 31.35 33.86 36.56 38.76 41.08 43.55 46.16 48.93 Total Assets 2130.10 2,053.06 2423.71 3177.75 3705.80 4309.43 4964.35 5685.16 6435.35 7228.17 8071.01 8965.94 9915.09 Liabilities & Shareholders' Equity Liabilities Accounts Payable 10.10 9.528 20.19 16.94 18.64 20.50 22.14 23.91 25.35 26.87 28.48 30.19 32.00 Deferred Revenue 198.10 209.935 218.84 221.55 243.71 268.08 289.53 312.69 331.45 351.34 372.42 394.76 418.45 Accrued expenses and other current liabilities 110.60 135.971 178.58 183.72 202.10 222.31 240.09 259.30 274.86 291.35 308.83 327.36 347.00 Total Current Liabilities 318.80 355.434 417.61 422.22 464.44 510.89 551.76 595.90 631.65 669.55 709.73 752.31 797.45 Long-Term Debt, Net 1252.70 1,515.91 1603.48 1891.74 1938.94 1979.71 2022.98 2064.28 2108.06 2148.74 2191.51 2236.51 2283.86 Income Taxes Payable 8.40 13.92 12.60 123.28 136.66 154.27 168.32 183.52 193.45 203.79 214.61 225.87 237.57 Deferred Income Taxes 28.50 20.174 18.29 18.56 18.84 19.12 19.41 19.70 19.99 20.29 20.60 20.91 21.22 Other long-term liabilities 14.50 21.76 51.07 36.26 39.89 43.88 47.39 51.18 54.25 57.50 60.95 64.61 68.49

Redeemable noncontrolling interests 6.10 - 0.71 ------

Commitments and contingencies ------Total Liabilities 1629.00 1927.197 2103.75 2492.06 2598.77 2707.87 2809.86 2914.57 3007.40 3099.87 3197.40 3300.20 3408.58 Shareholders' Equity Common Equity: 81.60 -57.1 -171.30 -143.09 -114.88 -86.66 -58.45 -30.24 -2.03 26.18 54.39 82.61 110.82 Common Stock 0.50 0.50 0.50 28.71 56.92 85.14 113.35 141.56 169.77 197.98 226.19 254.41 282.62 Additional Paid-In Capital 81.10 -57.575 -171.77 Retained Earnings 532.20 453.778 988.51 1500.9 2068.9 2710.2 3409.8 4172.6 4976.6 5823.7 6715.7 7654.5 8642.0 Accumulated other comprehensive loss -112.30 -137.166 -147.44 -147.44 -147.44 -147.44 -147.44 -147.44 -147.44 -147.44 -147.44 -147.44 -147.44 Treasury Stock 0.00 -135.455 -349.80 -524.7 -699.6 -874.5 -1049.4 -1224.3 -1399.2 -1574.1 -1749.0 -1923.9 -2098.8 Total Shareholders' Equity 501.20 125.864 319.96 685.69 1107.02 1601.56 2154.49 2770.59 3427.95 4128.29 4873.61 5665.73 6506.50 Total Liabilities & Shareholders' Equity 2130.10 2,053.06 2423.71 3177.75 3705.79 4309.42 4964.35 5685.16 6435.35 7228.17 8071.01 8965.93 9915.08 Match Group, Inc Historical Cash Flow Statement

Fiscal Years Ending Feb.1 2015 2016 2017 2018 2019 Net earnings from continuing operations 120.49 172.01 355.98 472.97 534.42 Adjustments to reconcile earnings to net cash provided by operating activities Stock-based compensation expense 50.08 52.99 69.09 66.03 89.72 Depreciation 25.98 31.23 32.61 32.97 32.45 Amortization of intangibles 20.10 23.03 1.47 1.32 8.73 Excess tax benefits from stock-based awards -38.38 -29.68 - - - Deferred income taxes -22.53 -8.20 -118.25 -19.64 -7.47 Acquisition-related contingent consideration fair value adjustments -11.06 -9.20 5.25 0.32 0.00 Other adjustments, net -0.88 -4.80 22.14 0.23 8.54 Changes in assets and liabilities, net of effects of acquisitions 65.28 6.72 -47.20 49.26 -7.99 Accounts receivable -29.34 -6.64 -51.59 17.27 -17.86 Other assets -11.28 -2.39 -10.56 -14.61 -24.30 Accounts payable and accrued expenses and other current liabilities 31.72 -24.86 -16.80 20.77 29.08 Income taxes payable (receivable) 36.38 24.00 -1.00 12.77 -4.38 Deferred revenue 37.81 16.62 32.75 13.06 9.48 Net cash provided by operating activities 209.08 234.11 321.09 603.46 658.40 Net cash aquired (used) in business combinations -611.32 -2.53 -0.28 1.14 -3.76 Capital expenditures -29.16 -48.90 -28.83 -30.95 -38.75 Proceeds from the sale of a business, net - - 96.14 0.00 - Proceeds from the sale of long-term investment - - 60.16 0.00 - Proceeds from sale of marketable securities - 11.72 0.00 0.00 - Purchases of long-term investments 0.00 -0.50 -9.08 -3.80 0.00 Other, net -8.38 8.87 0.07 -4.14 1.06 Net cash (used in) provided by investing activities -648.86 -31.35 118.19 -37.76 -41.45 Borrowings under the Credit Facility - - - 260.00 40.00 Term Loan Borrowings 788.00 0.00 75.00 0.00 - Proceeds from bond offering - 400.00 450.00 0.00 350.00 Principal payments on senior notes - - -445.17 0.00 - Principal payments on term loan - -450.00 0.00 0.00 - Principal payments on credit facility - - - - -300.00 Debt issuance costs -17.17 -7.81 -12.29 -1.28 -5.59 Purchase of treasury stock - - - -133.46 -216.35 Dividends - - - -556.37 0.00 Proceeds from issuance of common stock pursuant to stock-based awards - 39.38 59.44 0.01 0.00 Withholding taxes paid on behalf of employees on net settled stock-based awards - -29.83 -254.21 -207.72 -203.12 Purchase of noncontrolling interests -2.86 -1.13 -0.44 -9.98 -1.65 Repurchase of stock-based awards -23.43 0.00 -272.46 0.00 - Acquisition-related contingent consideration payments -5.51 0.00 -23.43 -0.19 0.00 Other, net 0.00 -11.80 -0.17 -0.57 -0.07 Net cash used in / provided by financing activities 408.22 -31.51 -423.71 -649.55 -336.85 Match Group, Inc Forecasted Cash Flow Statement

Fiscal Years Ending Feb.1 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Net earnings from continuing operations 512.41 568.03 641.23 699.63 762.79 804.05 847.04 892.01 938.81 987.46 + Adjustments for Non-Cash Operating Expenses Depreciation Expense 37.76 38.33 38.57 38.68 38.72 38.74 38.75 38.75 38.75 38.75 Amortization Expense 3.87 4.07 4.27 4.48 4.71 4.94 5.19 5.45 5.72 6.01 Change in Allowance for Doubtful Accounts 0.36 0.09 0.10 0.09 0.10 0.08 0.08 0.09 0.09 0.10 Change in Deferred Taxes (6.76) (7.11) (7.47) (7.86) (8.26) (8.68) (9.13) (9.60) (10.09) (10.60) + Changes in Working Capital Accounts Accounts Receivable, Gross (32.94) (15.00) (16.50) (14.52) (15.68) (12.70) (13.46) (14.27) (15.13) (16.03) Prepaid Expenses 0.29 (5.54) (6.09) (5.36) (5.79) (4.69) (4.97) (5.27) (5.59) (5.92) Other Current Assets (0.96) (0.99) (1.01) (1.04) (1.06) (1.09) (1.12) (1.15) (1.17) (1.20) Accounts Payable (3.25) 1.69 1.86 1.64 1.77 1.43 1.52 1.61 1.71 1.81 Deferred Revenue 2.71 22.16 24.37 21.45 23.16 18.76 19.89 21.08 22.35 23.69 Accrued expenses and other current liabilities 5.15 18.37 20.21 17.78 19.21 15.56 16.49 17.48 18.53 19.64 Right of Use Asset (0.99) (0.42) (0.18) (0.08) (0.03) (0.01) (0.01) (0.00) (0.00) (0.00) Income Taxes Payable 110.68 13.38 17.61 14.05 15.20 9.93 10.34 10.82 11.26 11.71 Net Cash Provided by Operating Activities 628.32 637.06 716.97 768.94 834.82 866.32 910.61 957.01 1,005.24 1,055.40

Cash Flows From Investing Activities Cap Ex (Change in Gross PP&E) (38.75) (38.75) (38.75) (38.75) (38.75) (38.75) (38.75) (38.75) (38.75) (38.75) Capitalization of Intangible Assets (11.35) (15.86) (16.65) (17.48) (18.35) (19.27) (20.24) (21.25) (22.31) (23.43) Other non current assets (1.47) (2.59) (2.85) (2.51) (2.71) (2.19) (2.33) (2.47) (2.61) (2.77) Marketable Securities (0.50) (0.50) (0.50) (0.50) (0.50) (0.51) (0.51) (0.51) (0.51) (0.51) Excess Cash (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) (0.05) Redeemable Non-controlling interests (0.71) ------Long-term Investments (1.01) (1.01) (1.01) (1.01) (1.01) (1.01) (1.01) (1.01) (1.01) (1.01) Net Cash used for in Investing Activities (53.84) (58.75) (59.81) (60.30) (61.38) (61.78) (62.88) (64.03) (65.25) (66.52)

Cash Flows from Financing Activities Purchase of Treasury stock (174.90) (174.90) (174.90) (174.90) (174.90) (174.90) (174.90) (174.90) (174.90) (174.90) AOCL ------Increase in Long-Term Debt 288.26 47.20 40.77 43.27 41.30 43.78 40.67 42.77 45.00 47.35 Other Long-term Liabilities (14.81) 3.63 3.99 3.51 3.79 3.07 3.25 3.45 3.66 3.88 Change in Common Equity 28.21 28.21 28.21 28.21 28.21 28.21 28.21 28.21 28.21 28.21 Net Cash Provided by Financing Acitvities 126.76 (95.87) (101.93) (99.91) (101.61) (99.84) (102.76) (100.47) (98.04) (95.47)

Net Change in Cash Flow 701.24 482.44 555.22 608.74 671.84 704.69 744.97 792.51 841.96 893.42 Beginning Cash 307.69 1,008.93 1,491.38 2,046.60 2,655.33 3,327.17 4,031.87 4,776.83 5,569.35 6,411.31 End of Year Cash 1,008.93 1,491.38 2,046.60 2,655.33 3,327.17 4,031.87 4,776.83 5,569.35 6,411.31 7,304.72 Match Group, Inc Common Size Income Statement

Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Operating Costs and Expenses: Cost of revenue exclusive of depreciation 21.00% 23.70% 25.70% 23.47% 23.47% 23.47% 23.47% 23.47% 23.47% 23.47% 23.47% 23.47% 23.47% Selling and marketing expense 28.23% 24.28% 20.84% 20.84% 20.46% 20.09% 20.09% 20.09% 20.46% 20.85% 21.24% 21.64% 22.05% General and administrative expense 13.51% 10.42% 12.43% 12.12% 12.12% 12.12% 12.12% 12.12% 12.12% 12.12% 12.12% 12.12% 12.12% Product development expense 7.61% 7.63% 7.41% 7.55% 7.55% 7.55% 7.55% 7.55% 7.55% 7.55% 7.55% 7.55% 7.55% Depreciation 2.45% 1.91% 1.58% 1.70% 1.57% 1.44% 1.34% 1.24% 1.17% 1.10% 1.04% 0.98% 0.93% Amortization of intangibles 0.11% 0.08% 0.43% 0.17% 0.17% 0.16% 0.15% 0.15% 0.15% 0.15% 0.15% 0.14% 0.14% Total operating costs and expenses 72.90% 68.02% 68.38% 65.85% 65.34% 64.82% 64.72% 64.61% 64.92% 65.24% 65.57% 65.91% 66.26% Operating income 27.09% 31.99% 31.62% 34.15% 34.66% 35.18% 35.28% 35.39% 35.08% 34.76% 34.43% 34.09% 33.74% Interest expense 5.83% 4.24% 4.47% 3.91% 4.19% 3.91% 3.69% 3.49% 3.36% 3.24% 3.12% 3.00% 2.89% Interest expense-third party 5.83% Interest expense-related party 0.00% Other income / expense, net 2.31% 0.45% 0.10% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Earnings from continuing operations before income taxes 18.94% 28.19% 27.05% 30.24% 30.47% 31.27% 31.59% 31.89% 31.71% 31.52% 31.31% 31.09% 30.85% Income tax (provision) benefit 7.81% 0.85% 0.99% 7.11% 7.16% 7.35% 7.43% 7.50% 7.46% 7.41% 7.36% 7.31% 7.25% Net earnings from continuing operations 26.75% 27.34% 26.05% 23.13% 23.31% 23.92% 24.16% 24.39% 24.26% 24.11% 23.95% 23.78% 23.60% Loss from discontinued operations, net of tax 0.43% 0.02% 0.00% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Net earnings 26.32% 27.32% 26.05% 23.13% 23.31% 23.92% 24.16% 24.39% 24.26% 24.11% 23.95% 23.78% 23.60% Net loss (earnings) attributable to noncontrolling interests 0.02% 0.31% 0.01% Net earnings attributable to Match Group, Inc. shareholders 26.31% 27.63% 26.07% 23.13% 23.31% 23.92% 24.16% 24.39% 24.26% 24.11% 23.95% 23.78% 23.60% Match Group, Inc Common Size Balance Sheet

Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Assets Cash & Short-Term Investments 20.49% 10.81% 22.70% 52.69% 67.72% 82.30% 97.25% 111.55% 126.51% 140.57% 153.91% 166.54% 178.48% Accounts Receivables, Net of allowance 8.78% 5.73% 5.68% 6.73% 6.73% 6.73% 6.73% 6.73% 6.73% 6.73% 6.73% 6.73% 6.73% Other Current Assets 4.16% 3.34% 4.59% 4.28% 4.16% 4.05% 3.97% 3.89% 3.85% 3.80% 3.76% 3.72% 3.68% Total Current Assets 33.42% 19.87% 32.97% 63.70% 78.61% 93.07% 107.94% 122.17% 137.09% 151.10% 164.39% 176.98% 188.88% Net Property, Plant & Equipment 4.63% 3.37% 3.21% 3.02% 2.76% 2.52% 2.34% 2.16% 2.04% 1.93% 1.82% 1.71% 1.62% Goodwill 93.76% 71.96% 60.43% 55.95% 50.86% 46.24% 42.81% 39.64% 37.40% 35.28% 33.28% 31.40% 29.62% Intangible Assets, Net 17.31% 13.74% 11.13% 10.64% 10.16% 9.70% 9.43% 9.17% 9.08% 8.99% 8.91% 8.83% 8.74% Deferred Income Taxes 9.26% 7.77% 6.86% 6.67% 6.37% 6.08% 5.91% 5.74% 5.69% 5.64% 5.58% 5.53% 5.48% LT Investments 0.83% 0.52% 0.25% 0.27% 0.29% 0.30% 0.31% 0.32% 0.34% 0.35% 0.35% 0.36% 0.36% Other non-current assets 0.86% 1.45% 1.19% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% 1.17% Total Assets 160.07% 118.69% 118.16% 143.43% 152.06% 160.75% 171.46% 181.82% 194.16% 205.73% 216.72% 227.12% 236.95% Liabilities & Shareholders' Equity Liabilities Accounts Payable 0.76% 0.55% 0.98% 0.76% 0.76% 0.76% 0.76% 0.76% 0.76% 0.76% 0.76% 0.76% 0.76% Deferred Revenue 14.89% 12.14% 10.67% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% Accrued expenses and other current liabilities 8.31% 7.86% 8.71% 8.29% 8.29% 8.29% 8.29% 8.29% 8.29% 8.29% 8.29% 8.29% 8.29% Total Current Liabilities 23.96% 20.55% 20.36% 19.06% 19.06% 19.06% 19.06% 19.06% 19.06% 19.06% 19.06% 19.06% 19.06% Long-Term Debt, Net 94.14% 87.64% 78.17% 85.39% 79.56% 73.85% 69.87% 66.02% 63.60% 61.16% 58.85% 56.65% 54.58% Income Taxes Payable 0.63% 0.80% 0.61% 5.56% 5.61% 5.75% 5.81% 5.87% 5.84% 5.80% 5.76% 5.72% 5.68% Deferred Income Taxes 2.14% 1.17% 0.89% 0.84% 0.77% 0.71% 0.67% 0.63% 0.60% 0.58% 0.55% 0.53% 0.51% Other long-term liabilities 1.09% 1.26% 2.49% 1.64% 1.64% 1.64% 1.64% 1.64% 1.64% 1.64% 1.64% 1.64% 1.64%

Redeemable noncontrolling interests 0.46% - 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Commitments and contingencies 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Total Liabilities 122.42% 111.41% 102.56% 112.48% 106.63% 101.01% 97.05% 93.21% 90.73% 88.23% 85.86% 83.60% 81.46% Shareholders' Equity Common Equity 6.13% -3.30% -8.35% -6.46% -4.71% -3.23% -2.02% -0.97% -0.06% 0.75% 1.46% 2.09% 2.65% Retained Earnings 39.99% 26.23% 48.19% 67.75% 84.89% 101.10% 117.77% 133.44% 150.15% 165.76% 180.33% 193.90% 206.52% Accumulated other comprehensive loss -8.44% -7.93% -7.19% -6.65% -6.05% -5.50% -5.09% -4.72% -4.45% -4.20% -3.96% -3.73% -3.52% Treasury Stock 0.00% -7.83% -17.05% -23.68% -28.71% -32.62% -36.25% -39.15% -42.22% -44.80% -46.96% -48.74% -50.16% Total Shareholders' Equity 37.66% 7.28% 15.60% 30.95% 45.42% 59.74% 74.41% 88.61% 103.42% 117.50% 130.86% 143.52% 155.49% Total Liabilities & Shareholders' Equity 160.07% 118.69% 118.16% 143.43% 152.06% 160.75% 171.46% 181.82% 194.16% 205.73% 216.72% 227.12% 236.95% Match Group, Inc Weighted Average Cost of Capital (WACC) Estimation

Cost of Equity: Risk-Free Rate 0.74% Beta 0.48 Equity Risk Premium 6.16% Cost of Equity 3.70%

Cost of Debt: Risk-Free Rate 0.74% Implied Default Premium 4.66% Pre-Tax Cost of Debt 5.40% Marginal Tax Rate 23.51% After-Tax Cost of Debt 4.13%

Market Value of Common Equity: MV Weights Total Shares Outstanding 280,757,611.000 single shares Current Stock Price $ 81.35 MV of Equity 22,839.63 (in Millions) 93.263%

Market Value of Debt: Short-Term Debt - No ST Debt Current Portion of LTD - No CP of LT Debt Long-Term Debt $ 1,603.48 PV of Operating Leases $ 46.48 MV of Total Debt 1,649.96 (in Millions) 6.74%

Market Value of the Firm 24,489.59 (in Millions) 100.00%

Estimated WACC 3.73% Match Group, Inc Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Feb.1 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

EPS $ 1.83 $ 2.03 $ 2.29 $ 2.50 $ 2.73 $ 2.88 $ 3.03 $ 3.19 $ 3.35 $ 3.52

Key Assumptions CV growth of EPS 3.00% CV Year ROE 15.18% Cost of Equity 3.70%

Future Cash Flows P/E Multiple (CV Year) 115.14 EPS (CV Year) $ 3.52 Future Stock Price $ 405.48 Dividends Per Share ------Discounted Cash Flows 0 0 0 0 0 0 0 0 0 $ 291.73

Intrinsic Value as of Last FYE $ 170.32 Implied Price as of Today $ 171.64 Match Group, Inc Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth of NOPLAT 2.00% CV Year ROIC 219.97% WACC 3.73% Cost of Equity 3.70%

Fiscal Years Ending Feb.1 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029CV

DCF Model: Free Cash Flow (FCF) 620.1 629.6 707.3 764.6 828.8 868.3 911.8 957.1 1004.1 1053.0 Continuing Value (CV) 61553.3 PV of FCF 597.9 585.1 633.8 660.5 690.3 697.2 705.8 714.2 722.4 44285.4

Value of Operating Assets: 50292.5 Non-Operating Adjustments Non-Operating Assets Excess Cash 7.1 Money Market Funds 150.9 LT Investments 5.1 Non-Operating Liabilities ESOP 799.7 LT Debt (includes Current Maturities) 1891.7 PV Op Leases 44.3 Value of Equity 47719.9 Shares Outstanding (Millions) 280.2 Intrinsic Value of Last FYE $ 170.32 Implied Price as of Today $ 171.64

EP Model: Economic Profit (EP) 556.4 627.2 701.6 761.0 825.1 867.8 911.6 957.2 1004.7 1054.0 Continuing Value (CV) 61065.9 PV of EP 536.4 582.9 628.6 657.4 687.2 696.8 705.7 714.4 722.8 43934.7

Total PV of EP 49866.8 Invested Capital (last FYE) 425.7 Value of Operating Assets: 50292.5 Non-Operating Adjustments Non-Operating Assets Excess Cash 7.1 Money Market Funds 150.9 LT Investments 5.1 Non-Operating Liabilities ESOP 799.7 LT Debt (includes Current Maturities) 1891.7 PV Op Leases 44.3 Value of Equity 47719.9 Shares Outstanding (Millions) 280.2 Intrinsic Value of Last FYE $ 170.32 Implied Price as of Today $ 171.64 Match Group, Inc Relative Valuation Models

EPS EPS Est. 5yr Ticker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21 FB Facebook $168.83 $8.28 $10.28 20.39 16.42 14.3 1.42 1.15 MOMO Momo Inc $22.51 $2.23 $2.84 10.09 7.93 18.2 0.55 0.44 MEET Meet Group Inc $5.96 $0.27 $0.34 22.07 17.53 28.0 0.79 0.63 MSFT Microsoft Corporation $178.60 $5.61 $6.19 31.90 28.90 14.2 2.25 2.04 YY JOYY Inc $61.91 $4.09 $6.34 15.10 9.80 11.9 1.27 0.82 SINA SINA Corp $33.91 $2.36 $3.16 14.40 10.70 1.8 7.83 5.82 Average 18.99 15.21 2.35 1.81

MTCH Match Group, Inc $81.35 $ 1.83 $ 2.03 44.5 40.1 18.50 2.4 2.2

Implied Relative Value: P/E (EPS20) $ 34.74 P/E (EPS21) $ 30.87 PEG (EPS20) $ 79.59 PEG (EPS21) $ 68.12 P/Tangible BV $ 82.21 Match Group, Inc Effects of ESOP Exercise and Share Repurchases on Common Stock Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 11.776 Average Time to Maturity (years): 6.44 Expected Annual Number of Options Exercised: 2

Current Average Strike Price: $ 15.44 Cost of Equity: 3.70% Current Stock Price: $81.35

Fiscal Years Ending Feb.1 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Increase in Shares Outstanding: 2 2 2 2 2 2 2 2 2 2 Average Strike Price: $ 15.44 $ 15.44 $ 15.44 $ 15.44 $ 15.44 $ 15.44 $ 15.44 $ 15.44 $ 15.44 $ 15.44 Increase in Common Stock Account: 28 28 28 28 28 28 28 28 28 28

Change in Treasury Stock 175 175 175 175 175 175 175 175 175 175 Expected Price of Repurchased Shares: $81.35 $ 84.36 $ 87.48 $ 90.71 $ 94.06 $ 97.54 $ 101.15 $ 104.89 $ 108.76 $ 112.78 Number of Shares Repurchased: 2 2 2 2 2 2 2 2 2 2

Shares Outstanding (beginning of the year) 281 280 280 280 280 280 280 280 280 280 Plus: Shares Issued Through ESOP 2 2 2 2 2 2 2 2 2 2 Less: Shares Repurchased in Treasury 2 2 2 2 2 2 2 2 2 2 Shares Outstanding (end of the year) 280.177 280 280 280 280 280 280 280 280 280 Match Group, Inc Present Value of Operating Lease Obligations

Fiscal Years Ending Feb.1 2017 2018 2019 Year 1 8.3 11.6 16.0 Year 2 8.1 13.5 15.1 Year 3 7.3 12.1 8.9 Year 4 5.3 6.8 3.4 Year 5 3.8 6.0 2.9 Thereafter 10.3 17.5 5.7 Total Minimum Payments 43.1 67.4 52.0 Less: Cumulative Interest 7.3 11.7 6.6 PV of Minimum Payments 35.8 55.7 45.4

Implied Interest in Year 1 Payment 74.5 1.9 3.0

Pre-Tax Cost of Debt 5.40% 5.40% 5.40% Years Implied by Year 6 Payment 2.7 2.9 2.0 Expected Obligation in Year 6 & Beyond 3.77 6.021 2.905

Present Value of Lease Payments PV of Year 1 7.9 11.0 15.1 PV of Year 2 7.3 12.1 13.6 PV of Year 3 6.2 10.3 7.6 PV of Year 4 4.3 5.5 2.8 PV of Year 5 2.9 4.6 2.2 PV of 6 & beyond 7.2 12.1 4.1 Capitalized PV of Payments 35.8 55.7 45.4 Match Group, Inc Key Management Ratios

Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E CV2029E Ratio Definitions Liquidity Ratios: Current Ratio Current Assets / Current Liabilities 1.39 0.97 1.62 3.34 4.12 4.88 5.66 6.41 7.19 7.93 8.63 9.29 9.91 Cash Ratio Cash & Cash Equivalents / Current Liabilities 0.86 0.53 1.12 2.77 3.55 4.32 5.10 5.85 6.64 7.38 8.08 8.74 9.37 Operating Cash Flow Ratio CFO / Current Liabilities 1.01 1.70 1.58 1.49 1.37 1.40 1.39 1.40 1.37 1.36 1.35 1.34 1.32

Asset-Management Ratios: Receivables Turnover Revenues / Average Accounts Receivable 14.73 16.02 19.03 16.69 15.57 15.57 15.44 15.44 15.30 15.30 15.30 15.30 15.30 Asset Turnover Revenues / Average Total Assets 0.64 0.83 0.92 0.79 0.71 0.67 0.62 0.59 0.55 0.51 0.49 0.46 0.44 Capital Turnover Revenues / Working Capital 10.57 -148.24 7.93 2.24 1.68 1.35 1.13 0.97 0.85 0.76 0.69 0.63 0.59

Financial Leverage Ratios: LT Debt to Total Equity Ratio (%) LT Debt / Total Shareholders' Equity 2.50 12.04 5.01 2.76 1.75 1.24 0.94 0.75 0.61 0.52 0.45 0.39 0.35 LT Debt to Total Asset Ratio (%) LT Debt / Total Assets 0.59 0.74 0.66 0.60 0.52 0.46 0.41 0.36 0.33 0.30 0.27 0.25 0.23 Debt to Equity Ratio (%) Total Liabilities / Total Shareholders' Equity 3.25 15.31 6.58 3.63 2.35 1.69 1.30 1.05 0.88 0.75 0.66 0.58 0.52

Profitability Ratios: Return on Assets Net Income / Total Assets 16.44% 23.28% 22.06% 16.12% 15.33% 14.88% 14.09% 13.42% 12.49% 11.72% 11.05% 10.47% 9.96% Return on Equity Net Income / Total Shareholders' Equity 69.89% 375.48% 167.03% 74.73% 51.31% 40.04% 32.47% 27.53% 23.46% 20.52% 18.30% 16.57% 15.18% Gross Profit Margin (Revenues - COGS) / Revenues 79.00% 76.30% 74.30% 76.53% 76.53% 76.53% 76.53% 76.53% 76.53% 76.53% 76.53% 76.53% 76.53% Payout Policy Ratios: Total Payout Ratio Dividend Payments / (NI + Share Repurchases) 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Match Group, Inc Sensitivity Tables

Beta 171.85 0.18 0.28 0.38 0.48 0.58 0.68 0.78 6.61% 3,186.10 436.80 229.16 152.84 113.21 88.95 72.59 6.46% 4,251.86 462.75 239.19 158.72 117.30 92.06 75.08 6.31% 6,382.64 491.89 250.08 165.05 121.67 95.37 77.73 6.16% 12,769.12 524.84 261.96 171.85 126.34 98.90 80.55 ERP 6.01% 9,279,409.97 562.39 274.97 179.21 131.35 102.66 83.55 5.86% (12,829.75) 605.58 289.28 187.17 136.74 106.69 86.76 5.71% (6,416.79) 655.79 305.08 195.83 142.55 111.02 90.18

Risk-Free Rate 171.85 0.44% 0.54% 0.64% 0.74% 0.84% 0.94% 1.04% 2.30% 257.01 237.08 219.90 204.94 191.80 180.16 169.77 2.20% 237.65 220.53 205.60 192.47 180.84 170.46 161.14 2.10% 221.16 206.26 193.16 181.53 171.15 161.83 153.41 2.00% 206.94 193.85 182.23 171.85 162.53 154.10 146.45 1.90% 194.54 182.94 172.56 163.23 154.80 147.14 140.16 1.80% 183.65 173.28 163.95 155.51 147.84 140.84 134.43 1.70% 174.00 164.66 156.22 148.54 141.53 135.11 129.20 CV Growth of NOPLAT of Growth CV 1.60% 165.39 156.94 149.25 142.23 135.79 129.87 124.40

CV ROIC 171.85 174.97% 189.97% 204.97% 219.97% 233.97% 248.97% 263.97% 4.18% 133.47 133.58 133.67 133.75 133.82 133.88 133.94 4.03% 144.27 144.39 144.49 144.58 144.66 144.72 144.79 3.88% 156.80 156.94 157.05 157.15 157.22 157.30 157.37 3.73% 171.51 171.66 171.78 171.89 171.98 172.06 172.13

WACC 3.58% 189.02 189.18 189.32 189.44 189.53 189.62 189.71 3.43% 210.20 210.38 210.54 210.67 210.78 210.88 210.97 3.28% 236.36 236.56 236.73 236.88 237.01 237.12 237.23 3.15% 264.54 264.77 264.97 265.14 265.28 265.41 265.52

Cost of Equity 171.85 3.40% 3.50% 3.60% 3.70% 3.80% 3.90% 4.00% 4.43% 203.06 190.42 179.18 169.12 160.07 151.87 144.43 4.33% 204.20 191.42 180.07 169.92 160.79 152.53 145.03 4.23% 205.34 192.44 180.98 170.73 161.52 153.19 145.63 4.13% 206.50 193.46 181.89 171.55 162.26 153.86 146.24 4.03% 207.67 194.49 182.81 172.38 163.00 154.54 146.85

Cost of Debt of Cost 3.93% 208.85 195.54 183.74 173.21 163.75 155.22 147.47 3.83% 210.04 196.59 184.68 174.05 164.51 155.90 148.09 3.73% 211.25 197.66 185.62 174.90 165.27 156.59 148.72 Match Group, Inc Valuation of Options Granted under ESOP

Current Stock Price $81.35 Risk Free Rate 0.74% Current Dividend Yield 0.00% Annualized St. Dev. of Stock Returns 43.79%

Average Average B-S Value Range of Number Exercise Remaining Option of Options Outstanding Options of Shares Price Life (yrs) Price Granted $0.01 to $10.00 2.50 8.85 6.30 $ 73.09 $ 183 $10.1 to $20.00 6.82 14.31 6.00 $ 68.31 $ 466 $20.01 to $30.00 2.10 23.98 7.80 $ 62.27 $ 131 $30.01 to $40.00 0.36 33.10 8.00 $ 57.18 $ 20 Total 11.776 $ 15.44 6.44 $ 67.55 $ 800 Match Group, Inc Value Driver Estimation

Fiscal Years Ending Feb.1 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E CV2029E NOPLAT: Revenue 1,330.70 1,729.80 2,051.26 2,215.54 2,437.09 2,680.80 2,895.26 3,126.88 3,314.50 3,513.37 3,724.17 3,947.62 4,184.48 - Cost of Revenue (279.5) (410.0) (527.2) (520.0) (572.0) (629.2) (679.5) (733.8) (777.9) (824.5) (874.0) (926.5) (982.0) - Selling and marketing expense (375.6) (420.0) (427.4) (461.6) (498.6) (538.5) (581.5) (628.0) (678.3) (732.6) (791.2) (854.5) (922.8) - General and administrative expense (179.8) (180.3) (255.0) (268.6) (295.4) (325.0) (351.0) (379.0) (401.8) (425.9) (451.4) (478.5) (507.2) - Produce development expense (101.2) (132.0) (152.0) (167.2) (184.0) (202.3) (218.5) (236.0) (250.2) (265.2) (281.1) (298.0) (315.8) - Depreciation (32.6) (33.0) (32.5) (37.8) (38.3) (38.6) (38.7) (38.7) (38.7) (38.7) (38.8) (38.8) (38.8) - Amortization of intangibles (1.5) (1.3) (8.7) (3.9) (4.1) (4.3) (4.5) (4.7) (4.9) (5.2) (5.4) (5.7) (6.0) + Implied interest on operating leases 1.94 3.01 2.34 2.39 2.41 2.42 2.43 2.43 2.43 2.43 2.43 2.43 2.43 EBITA 362.44 556.21 650.84 758.90 847.21 945.46 1,024.02 1,108.93 1,165.11 1,223.68 1,284.67 1,348.16 1,414.20 Marginal Tax Rate 30.03% 25.28% 23.51% 23.51% 23.51% 23.51% 23.51% 23.51% 23.51% 23.51% 23.51% 23.51% 23.51% Less Adjusted Taxes Income Tax Provision (Benefit) (103.85) 14.67 20.361 157.50 174.59 197.09 215.04 234.45 247.14 260.35 274.17 288.56 303.51 + Tax shield on interest expense 23.30 18.56 21.56 20.36 24.02 24.62 25.14 25.69 26.21 26.77 27.28 27.83 28.40 + Tax shield on operating lease interest 0.58 0.76 0.55 0.56 0.57 0.57 0.57 0.57 - Tax on other income 1.97 + Tax shield on other expense 9.25 0.48 ------Adjusted Taxes (70.72) 32.02 42.95 178.42 199.18 222.28 240.75 260.71 273.35 287.12 301.46 316.38 331.91 Plus Change in Deferred Taxes Deferred Tax Liability 25.30 28.50 20.17 18.29 18.56 18.84 19.12 19.41 19.70 19.99 20.29 20.60 20.91 Deferred Tax Asset 5.30 123.20 134.35 140.73 147.76 155.15 162.91 171.05 179.61 188.59 198.02 207.92 218.31 Change in Deferred Taxes (14.90) (114.70) (19.47) (8.27) (6.76) (7.11) (7.47) (7.86) (8.26) (8.68) (9.13) (9.60) (10.09) NOPLAT: 418.26 409.49 588.42 572.21 641.27 716.07 775.79 840.36 883.50 927.87 974.08 1,022.18 1,072.20

Invested Capital (IC): Net operating working capital Normal Cash 199.61 259.47 307.69 332.33 365.56 402.12 434.29 469.03 497.17 527.00 558.63 592.14 627.67 + Accounts Receivable 116.80 99.05 116.46 149.04 163.94 180.34 194.76 210.35 222.97 236.34 250.52 265.56 281.49 + Prepaid Expenses 16.37 19.48 55.68 55.39 60.93 67.02 72.38 78.17 82.86 87.83 93.10 98.69 104.61 + Other current operating assets 39.00 38.29 38.54 39.51 40.49 41.51 42.54 43.61 44.70 45.81 46.96 48.13 49.34 - Accounts Payable 10.10 9.53 20.19 16.94 18.64 20.50 22.14 23.91 25.35 26.87 28.48 30.19 32.00 - Deferred Revenue 198.10 209.94 218.84 221.55 243.71 268.08 289.53 312.69 331.45 351.34 372.42 394.76 418.45 - Accrued Expenses and other current liabilities 110.60 135.97 178.58 183.72 202.10 222.31 240.09 259.30 274.86 291.35 308.83 327.36 347.00 - Income Taxes Payable 8.40 13.92 12.60 123.28 136.66 154.27 168.32 183.52 193.45 203.79 214.61 225.87 237.57 Net Operating Working Capital 44.57 46.94 88.16 30.76 29.82 25.82 23.90 21.74 22.60 23.66 24.88 26.35 28.09 + PP&E, net 61.62 58.35 65.94 66.93 67.36 67.54 67.62 67.65 67.66 67.67 67.67 67.67 67.67 + Intangible assets, net 230.30 237.64 228.32 235.80 247.59 259.97 272.97 286.62 300.95 316.00 331.80 348.39 365.81 + Capitalized PV of Operating Leases 35.83 55.70 43.29 44.28 44.71 44.89 44.96 45.00 45.01 45.02 45.02 45.02 45.02 Invested Capital (IC): 372.32 398.63 425.71 377.78 389.48 398.22 409.45 421.01 436.23 452.35 469.37 487.43 506.60

Free Cash Flow (FCF): NOPLAT 418.26 409.49 588.42 572.21 641.27 716.07 775.79 840.36 883.50 927.87 974.08 1022.18 1072.20 Change in IC 26.31 27.08 -47.93 11.70 8.74 11.23 11.56 15.22 16.12 17.03 18.06 19.16 Free Cash Flow (FCF): 418.26 383.18 561.34 620.14 629.57 707.33 764.57 828.80 868.28 911.76 957.06 1004.12 1053.04 10.48% 1.52% 12.35% 8.09% 8.40% 4.76% 5.01% 4.97% 4.92% 4.87% Return on Invested Capital (ROIC): NOPLAT 418.26 409.49 588.42 572.21 641.27 716.07 775.79 840.36 883.50 927.87 974.08 1022.18 1072.20 Beginning IC 372.32 398.63 425.71 377.78 389.48 398.22 409.45 421.01 436.23 452.35 469.37 487.43 ROIC 109.98% 147.61% 134.41% 169.75% 183.85% 194.81% 205.24% 209.85% 212.70% 215.34% 217.78% 219.97%

Economic Profit (EP): Beginning IC 0.00 372.32 398.63 425.71 377.78 389.48 398.22 409.45 421.01 436.23 452.35 469.37 487.43 x (ROIC - WACC) -3.73% 106.26% 143.88% 130.69% 166.02% 180.13% 191.09% 201.51% 206.13% 208.98% 211.61% 214.05% 216.24% Economic Profit (EP): 0.00 395.62 573.56 556.35 627.19 701.56 760.96 825.10 867.82 911.62 957.23 1004.69 1054.04