I'm encouraged by the progress that Tinder has made both culturally and in terms of execution. In fact, in the second half of the year, Tinder saw a significant increase in the number of product features it delivered compared to the first half of 2022. I'm also very excited for the new marketing campaign which launches later in Q1. This will allow us to begin shifting and establishing Tinder's brand story. After Tinder, we looked at the rest of the organization. From every conversation I had with our brand leaders, it became evident that Match Group had historically operated in a very siloed way. I'm a big believer that by increasing transparency across the organization, you increase accountability, while at the same time adding a healthy dose of friendly competition to the company's culture.

That's why we announced last week that we revamped our leadership structure to create a more streamlined organization. With a focus on setting up the right team for the future, we restructured the management team around leaders with extensive knowledge and experience supplemented with new talent that brings a renewed focus on innovation and growth. Hinge remains a standout in our portfolio, guided by Justin McLeod's founder-led mentality and mission-focused vision for the brand. Hinge continued its highly successful international expansion efforts becoming one of the top 3 most downloaded dating apps across English speaking DACH and Nordic countries in December. It will also launch its new premium subscription tier HingeX to all users by the end of February.

I've been impressed with Hinge's ability to create a differentiated, powerful dating app that resonates with so many singles across generations, and now expand their monetization by offering two subscription tiers that give users more control over how they date. Hinge is still very early in its international expansion and monetization efforts, but I believe there is a lot of upside as we continue to invest in the brand. I'm excited about our opportunities within Asia and the strong focus we have now in the region. We needed a product focused leader on the ground in the market, who knows how to engage and inspire teams. So I promoted Malgosia Green from Plenty of Fish to a newly created role as CEO of Match Group Asia. Malgosia will be moving to Asia to work directly with Pairs and Hyperconnect to recapture growth and enhance profitability, as well as drive the go-to-market strategies for Hinge and Tinder across the region.

Finally, Evergreen & Emerging Brands which consist of Match, Meetic, Plenty of Fish, OkCupid and our emerging brands like BLK, Chispa, and The League will be managed together for the first time. Hesam Hosseini will be taking on a newly created role as CEO of Evergreen & Emerging Brands. Formerly, the CEO of Match and Affinity brands, Hesam brings an unmatched level of experience to this combined global team. Combining our evergreen brands under a shared direction will enable us to streamline operations and reduce duplicative work. It will also allow us to leverage our institutional knowledge to drive growth with attractive margins across our emerging brands, where we see significant untapped potential. Lastly, we're excited to welcome Will Wu as our new CTO, who will work directly with all our brands to build upon Match Group's history of transformative innovation by continuing to incubate, launch and grow entirely new experiences for our users.

Will and I have known each other for a long time, and he has had a highly influential impact on social media products, as we know them today. He has been able to build some of the most engaging user experiences for Millennials and Gen Z. And his passion and dedication will be a great fit for the culture at Match Group. I know the team here is going to welcome his expertise, creativity, work ethic and humility. And finally, through all of this, I would be remiss if I didn't take a moment to thank Gary. He has been instrumental in not only my onboarding, but has helped to lead with strength and clarity even amid a very challenging operating backdrop. As such, I'm pleased to appoint Gary as President and CFO of Match Group, a clear demonstration in the trust I have in him and the value we put in his ability to drive our shared vision forward.

As we begin a new year, I'm energized and ready to take on this next chapter in Match Group's history. We are navigating the current macroeconomic challenges, and we have a strong team and clear vision to execute upon. I look forward to sharing more on our efforts in future calls. With that, I'll hand the call over to Gary.

Gary Swidler: Thanks, BK. I feel great about my role and the other org changes we've made and think the hiring of Will Wu will be terrific. I'm very much looking forward to working with him and to continuing to see the company build its momentum. Now let me get into the numbers. As BK said, while not at the standards we hold ourselves to, our Q4 2022 total revenue was in line, and our adjusted operating income exceeded the expectations that we set forth in our last earnings call. Total revenue was $786 million, down 2% year-over-year. FX was a notable headwind once again. Our total revenue would have been $846 million, up 5% year-over-year on an FX-neutral basis. The FX headwind was less than we expected when we provided our outlook on our November earnings call, but that was offset by slightly more business weakness than we had forecasted primarily in Europe.

Photo by Damir Kopezhanov on Unsplash

Our direct revenue was down 2% year-over-year. It grew 2% year-over-year in the Americas with growth at Tinder, Hinge, BLK and Chispa but declines at the Evergreen Brands, which include Match, Plenty of Fish and OkCupid. Direct revenue declined 4% year-over-year in Europe but was up 8% on an FX-neutral basis driven by Tinder and Hinge with weakness at Meetic. Direct revenue declined 9% year-over-year in APAC and Other, but was up 9% on an FX-neutral basis driven by Tinder. Total payers were 16.1 million, a decrease of 1% year-over-year. Payers were down 2% year-over-year in the Americas, down 4% in Europe and up 6% in APAC and Other. Tinder payers globally were up 3% year-over-year, while All Other Brands were down 8% in aggregate. Q4 RPP was down 1% year-over-year at $16.

RPP was up 4% in the Americas driven primarily by higher average prices paid for subscriptions at Tinder and Hinge. RPP was up 1% year-over-year in Europe, where contributions from Tinder and Hinge were offset by the strength of the U.S. dollar compared to the euro and the British pound. RPP was down 14% year-over-year in APAC and Other due to the strength of the dollar relative to the yen and the Turkish lira. On an FX-neutral basis, Q4 RPP was up 7% year-over-year company-wide, up 14% in Europe and up 3% in APAC and Other. Tinder overall performed in line with our expectations in the quarter, delivering direct revenue of $444 million, flat year-over-year, up 8% on an FX-neutral basis. Tinder added just under 300,000 payers to just over 10.8 million.

Tinder saw a 3% RPP decline year-over-year in the quarter, which again highlights the impact of FX. Tinder RPP was up 5% year-over-year on an FX-neutral basis. All Other Brands' direct revenue was down 5% year-over-year in Q4 driven by an 8% payer decline, partially offset by 3% RPP growth. Hinge, BLK and Chispa continue to drive growth with Hinge up nearly 30% year-over-year. Our Evergreen & Emerging Brands declined 9% year-over-year in terms of direct revenue, and our Asian brands saw direct revenue declined 16% year-over-year, in large part due to FX. We saw stability in Pairs and Hyperconnect direct revenue on a local currency basis, but we have yet to see a rebound in the Japanese market despite improvement in the COVID situation there.

Indirect revenue was $15 million in the quarter, down 18% year-over-year, but similar in dollar terms to the other quarters of 2022. Q4 2021 was particularly strong for indirect revenue. Operating income was $107 million in Q4, a 54% year-over-year decrease for a margin of 14%. Operating income was impacted by $102 million in impairment charges on intangibles primarily related to our Meetic and Hyperconnect businesses. The charges stem from declining financial performance at Meetic as well as the use of higher discount rates on Hyperconnect's long-range forecasts due to the higher interest rate environment and higher market volatility overall. Our Hyperconnect business outlook did not change meaningfully during the quarter. Adjusted operating income was $286 million, down 2% year-over-year, representing a margin of 36%.

Q4 AOI and margin strength reflected our nimbleness on costs, as we reduced marketing spend and rationalized some bonus and overhead costs. Excluding the impact of the $102 million of impairment charges, overall expenses, including SBC expense, were essentially flat year-over-year in Q4. Cost of revenue grew 1% year-over-year and represented 30% of total revenue, up 1 point year-over-year driven by App Store fees and hosting costs. Selling and marketing spend decreased $12 million or 9% year-over-year, the third consecutive quarter where we've seen a year-over-year reduction as we continue to reduce marketing spend at our lower-growth brands and to exercise ROI discipline overall. Selling and marketing spend was down 1 point year-over-year as a percentage of total revenue to 16%.

G&A expense was flat year-over-year and steady at 14% of revenue, reflecting lower legal fees but higher compensation expense. Product development costs grew 21% year-over-year and were 10% of revenue primarily reflecting increased engineering headcount at Tinder and Hinge. Our gross leverage was 3.4x trailing adjusted operating income, and net leverage was 2.9x at the end of Q4. We ended the quarter with $581 million of cash, cash equivalents and short-term investments on hand. We did not repurchase any shares in the quarter as we decide to allow our cash balance to build slightly. And we are concerned by the high volatility and weakness in the equity markets generally in Q4, which drove ours and many other stock prices down throughout the quarter.

With our cash balance now strong, we will reconsider repurchases once the window reopens. We currently have 5.3 million shares remaining under our buyback authorization. When we look at our history as a public company, 2022 stands out as a year we did not hit our growth targets, delivering 7% top line and 6% AOI growth, respectively. Some of the miss was due to macro factors, including consumer weakness and particularly FX. On an FX-neutral basis, our top line growth was 14% in 2022. But our business overall and Tinder, in particular, decelerated as the year went on. And product execution was not where we expected to be, especially in the first half of the year. For the full year 2022, Tinder direct revenue was approximately $1.8 billion. Hinge delivered $284 million in direct revenue, slightly below our $300 million expectation due primarily to our decision to delay the rollout of HingeX.

Evergreen & Emerging had $730 million in direct revenue, and our Asia brands delivered $322 million in direct revenue. Fortunately, we made critical corrective changes in the middle of the year, which have begun delivering results. It's still very early, and it will require some patience through 2023 to see the momentum build, but we're increasingly confident we're on course to deliver results consistent with our standards. For Q1 '23, we expect total revenue for Match Group of $790 million to $800 million, roughly flat year-over-year. For Tinder, we expect direct revenue to increase slightly year-over-year. We expect Hinge to deliver Q1 year-over-year direct revenue growth of over 25% driven by continued strong performance in its core English-speaking markets, the introduction of the two new pricing tiers and continued European expansion.

The early testing of the new Hinge tiers is going well with take rate consistent with our expectations, higher conversion impact than we expected and no notable cannibalization of à la carte revenue. We expect the tiers to be globally rolled out by the end of February. We expect our Evergreen & Emerging Brands' direct revenue to be down under 10% year-over-year in aggregate, and our Asian brands to decline just under 15% driven in large part by FX. We expect Q1 indirect revenue to be down close to 10% year-over-year, given ad budgets broadly are being slashed due to macroeconomic concerns. We expect adjusted operating income of $250 million to $255 million in Q1, representing margin of about 32% at the midpoint of the ranges. IAP fees continue to be a headwind and will also now include an $8 million payment into the Google litigation escrow, which was a cost we didn't incur last Q1.

We expect marketing spend to be up year-over-year at Tinder and Hinge with reductions elsewhere in the portfolio. We expect to incur $3 million to $5 million of severance and similar costs in Q1 related to our personnel reductions and cost savings initiatives. Macroeconomic factors are impacting our business, consistent with our expectations thus far in early 2023. That, coupled with improved product execution at our Tinder brand, gives us increasing confidence that Match Group can deliver 5% to 10% year-over-year revenue growth in 2023. We believe Tinder is positioned to deliver a similar range of growth. We also remain confident that Hinge's momentum will lead it to delivering nearly $400 million of direct revenue in 2023, approximately $100 million more than in 2022.

We expect the company overall as well as Tinder to have accelerating year-over-year revenue growth as we move through 2023 driven by improved product execution leading to improved revenue momentum at Tinder. In terms of AOI, we expect improving year-over-year margins in the back half of the year as the benefits of our cost savings initiatives take hold and Tinder top line growth accelerates. Our cost savings initiatives are focused on rightsizing headcount and reducing overhead costs, including office expenses and professional fees. We expect to reduce our global workforce by approximately 8% in aggregate. We've already reduced roles in the U.S. In other countries, this process is ongoing. We expect to incur $6 million of severance and similar costs related to our cost savings initiatives in 2023.

We're also reallocating marketing spend from lower-growth businesses to higher-growth ones in 2023 to keep overall spend close to flat. Our financial outlook reflects no change to current App Store policies, though we believe that the stores are moving to comply with aspects of the Digital Markets Act that is now in effect in Europe. The stores are also facing continued legal setbacks and restrictions in other markets globally such as India. We continue to expect changes in the App Store ecosystem, but the timing and shape of the changes is challenging to predict. We expect to be a U.S. Federal cash taxpayer in 2023. The precise amount we will pay depends in part on our stock price, which affects the compensation expense deductions we can take.

We currently expect to convert low 70s percent of our AOI into free cash flow in 2023. We expect 2023 SBC expense of $230 million to $250 million, with the year-over-year increase driven by previous hiring as well as our desire to remain competitive on compensation. We've made a lot of critical changes since BK arrived mid last year, including revamping the Tinder team, streamlining our organizational structure, implementing cost savings initiatives and hiring critical new talent. These changes are just beginning to pay dividends. We expect it to take a little time in the first half of 2023 to build momentum but are confident that improved product momentum and our financial discipline position us for much stronger growth and profitability in the back half of the year as well as longer term.

We look forward to delivering a combination of strong growth, profitability and cash flow generation for our shareholders. With that, I'll ask the operator to open the line for questions.

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