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Match Group(NASDAQ: MTCH)
Q2 2024 Earnings Call
Jul 31, 2024, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to the Match Group second quarter 2024 earnings conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tanny Shelburne, senior vice president of investor relations. Please go ahead.
Tanny Shelburne -- Senior Vice President, Investor Relations and ESG Reporting
Thank you, operator, and good morning, everyone. Today's call will be led by CEO, Bernard Kim; and president and CFO, 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 with the SEC. With that, I'd like to turn the call over to BK.
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Bernard Kim -- Chief Executive Officer
Thank you, Tanny. Good morning, and thank you all for joining today's call. Overall, we are pleased with our Q2 results and the progress we have made across our portfolio. Over my two years, it feels like currents are finally flowing with us, and we have key elements working in our favor across the company.
This is the beginning of a broader transformation as Tinder continues to show stabilization. Hinge is a rocket ship, expanding rapidly. Azar continues to perform strongly and marketing at Pairs has driven user strength, and we're executing on a number of great initiatives throughout the entire company. Over the last several quarters, Tinder has been working hard to improve the user experience, and we're now starting to see initial signs of progress.
User and payer trends are stabilizing, and we expect them to continue to improve from here. We expect strong sequential payer growth in Q3 and better year over year MAU trends in the second half of the year. As the largest dating app in the world, it's Tinder's job to deliver for its users, which in turn helps attract new users. Tinder is building on its fun legacy and its iconic swipe experience by continuing to increase authenticity and realness and by setting the industry standard for trust and safety.
We believe this will address some of the concerns that users have been vocal about more recently. Over the next 12 months, Tinder intends to integrate AI more deeply to make the dating journey simpler and more effective such that we expect daters to look at Tinder and see an exciting, innovative and fresh experience. Tinder is already making strides as it works to achieve this vision. They've been working tirelessly to clean up its ecosystem, enhanced tools are being tested to increase authenticity with more to come in Q3 and AI-driven tools like Photo Selector are being deployed to make the Tinder experience easier and more effective.
Next year, I expect an even bolder evolution of product to vastly improve its core matching experience. You've heard a constant theme of innovation from us and it's happening. But keep in mind, when you have a $2-plus billion revenue business and nearly 50 million MAU globally, all interacting in a connected and delicate ecosystem, innovation requires some pretty elite level of gymnastics. This effort requires a willingness to reimagine the core while building off of what already makes Tinder, Tinder.
It's what we began doing with a major ecosystem cleanup initiated mid last year. And while the results weren't entirely predictable and certainly not linear, we believe they are paying off. We expect Tinder's initiatives to be iterative and continue to build off one another and to be coupled with continued strong marketing. There is even more to come in the second half of this year and into 2025, and I'm excited to share further progress with you at our investor day.
Hinge continues to show remarkable performance, growing direct revenue nearly 50% year over year in Q2. It continues to rapidly grow its share of downloads in most of its markets. New product features like Your Turn Limits are driving higher quality conversations. It's AI-enabled Top Photo and Photo Finder are making the user journey meaningfully better and users are getting out on great dates even faster.
Hinge's new marketing campaigns are also resonating, driving new user growth and getting incredibly positive press coverage. We expect that over the coming quarters, Match Group will own both the leading dating app in the world with durable growth and the fastest-growing at-scale dating app intention daters, as well as a host of growing brands behind them. We're also nurturing other growth brands across the portfolio. Azar's user growth and financial momentum are strong, driven by cutting-edge AI product innovation and a successful expansion into Europe.
We also continue to add demographically focused emerging brands to our portfolio. We see clear opportunities to build new social experiences and leverage the latest in technology. Our unyielding commitment to trust and safety, along with our utilization of AI in a safe and responsible way will clearly benefit users across our entire portfolio. In other areas of our business, we're refocusing our efforts to play to our strengths.
We decided to exit live streaming services in our dating apps and sunset Hyperconnect's Hakuna app, which provides live streaming services, primarily in Korea and Japan. While live streaming services brought some benefits to our portfolio end users, a couple of things have changed since we undertook these businesses, which have made them less beneficial. Since the pandemic with people sitting on Zooms all day, the novelty of live streaming video has declined. Additionally, these businesses require significant further investment and our financial profiles are below what we'd ultimately like our brands to achieve.
We expect exiting live streaming along with other initiatives across the portfolio will result in a workforce reduction of approximately 6% globally, which we expect to result in incremental annual cost savings of approximately $13 million, which is in addition to our previously disclosed cost saving expectations from our tech replatforming efforts. It is important to reiterate the value that Hyperconnect has brought to Match Group, including a strongly growing -- Azar and world-class AI expertise. The Hyperconnect team has been integral in creating several of the AI inhibitors that have been introduced across our brands, including Tinder's Photo Selector and Hinge's Top Photo and Photo Finder. This is just one example of how we're leveraging common technologies across our portfolio, but tailoring them to each specific brand.
With this in mind, we plan to redeploy some of our retained Hyperconnect talent to Azar, Tinder and Hinge especially given the significant opportunity that we see to further embed AI-driven capabilities into our brands. We recognize that shareholders rightfully expect both near- and long-term results. We not only embrace that challenge, but we think it's exactly how innovation should occur. At Tinder, innovation in a large scale ecosystem makes it difficult to predict exactly which features will succeed and when.
But the market opportunity is there, the vision is clear and the team is executing. Hinge's momentum is undeniable and is on its path to become a $1 billion revenue business. And we're being financially disciplined in undertaking all this product innovation, which we expect will result in sustained user growth. Moreover, where we don't see as clear a path to growth, we're cutting back on cost as is the case with our evergreen brands.
We understand that if we can't deliver a return to solid sustainable growth, other choices will need to be considered. We think that doomsday scenarios around dating apps are way overblown, and you can start to see that in our results this quarter. We have product work to do, but once we do that, we are confident that the growth potential for our business is significant. Dating apps are still the best way for people to meet and we intend to continue to capture that opportunity.
We welcome shareholder input, and we remain committed to the delivery of increased shareholder value. We expect demonstrable progress quarter over quarter in our innovation and product development efforts. We believe return of capital can be a nice component of shareholder return given the highly profitable and cash flow generative nature of our business. And we've been buying back our stock aggressively because we believe it represents a terrific long-term investment.
We look forward to sharing a deeper dive in our first ever investor day in December, where I'm excited to showcase the management team behind these incredible apps. With that, I will hand it over to Gary.
Gary Swidler -- President and Chief Financial Officer
Thanks, BK, and good morning, everyone. Thank you for joining us today. We exceeded our expectations in Q2 on both the top and bottom line despite some unexpected headwinds. Match Group's total revenue was $864 million, up 4% year over year, while our FX-neutral total revenue was $892 million, up 8% year over year.
We experienced $6 million more in FX headwind than we anticipated at the time of our last earnings call. In the quarter, revenue per payer grew 9%, while payers declined 5% year over year. Tinder delivered $480 million of direct revenue, up 1% year over year, up 4% FX neutral. Tinder payers climbed 8% year over year to approximately $9.6 million, an improvement from the 9% year-over-year decline last quarter and above our expectations.
Payers were down 78,000 sequentially. Tinder's Q2 RPP increased 10% year over year. While growth in subscription revenue at Tinder was solid at 7% year over year in Q2, Tinder continued to experience pressure on à la carte revenue, which was down 17% year over year in the quarter. Tinder is rolling out various initiatives to address the ALC weakness, including unbundling current features such as Passport and See Who Likes You into ALC to attract users who may not be as open to subscriptions.
Both are in test now. Additionally, the team will shortly be testing two new ALC features, one that contextualizes someone's likes and another that helps foster ongoing engagement after matching. As a result, we're optimistic that Q2 will be a trough for declines in year over year ALC revenue and that trends will gradually improve in the second half of the year. Hinge Direct revenue was $134 million, up 48% year over year in Q2.
Hinge payers were up 24% year over year to nearly 1.5 million while RPP of $30 was up 19% year over year. MG Asia's direct revenue declined 4% to $74 million, up 9% on an FX-neutral basis. Azar direct revenue declined 1% in the quarter, but was up 14% year over year FX neutral despite still not being able to access the Saudi market as its European expansion continued to contribute to results. Payers direct revenue fell 2% in the quarter, but was up 2% year over year FX-neutral.
Evergreen & Emerging Brands direct revenue was $161 million, a decline of 8% year over year driven by the Evergreen brands, which declined 13% year over year, while the Emerging Brands collectively grew direct revenue 17% year over year in Q2. Focusing on user trends, we saw sequential stability in Tinder's MAU, which were down 9% year over year in Q2, as was the case in Q1. MAU at Tinder have now been relatively stable since March. A large decline in MAU began in July of last year, driven in large part by changes we made to Tinder's trust and safety policies to remove people who are not truly on the app -- That has now begun to stabilize.
With much of this impact now behind us and given Tinder's various ongoing product and marketing initiatives, we're confident Tinder's year over year MAU declines should continue to moderate as this year passes. Hinge's user growth continues to be very strong across its key markets with 14% year over year download growth and 21% year over year MAU growth in Q2. The app gained significant share in Q2, ranking as the No. 2 dating app across its collective English-speaking markets in May and June, including No.
1 in the U.K., Australia, Ireland and Canada and No. 3 in the U.S. In its European expansion markets in aggregate, Hinge ranked No. 2 by downloads in June and jumped up the charts in most of the key countries/regions, including France and Germany.
Switching to profitability. Match Group Q2 AOI was $306 million, up 2% year over year for a margin of 35%. Operating income was $205 million in Q2, down 5% year over year for a margin of 24%. Q2 Match Group AOI and OI each benefited from the increase in revenue as a result of growth at Hinge and other brands and lower cost of revenue, partially offset by higher selling and marketing expenses, higher G&A expenses, which was primarily due to the new Canada digital services tax and higher product development costs which was primarily due to increased headcount in product at Tinder.
The increase in selling and marketing spend was primarily at Hinge, Tinder and certain Emerging Brands, partially offset by declines in marketing spend at other brands in our portfolio. Operating income was further impacted by increased SBC expense due to higher headcount and lower forfeitures of equity awards in 2024 than in 2023 and higher depreciation expense due to increases in internally developed software place in service, including at Tinder and Hyperconnect. In Q2, we repurchased 6.4 million of our shares at an average price of approximately $31 per share on a trade date basis for a total of $197 million. Year-to-date, we have deployed just slightly more than 100% of our free cash flow for repurchases, well above our latest commitment to deploy more than 75% of our free cash flow buybacks.
Since we resumed buybacks in May 2022, we have repurchased 35 million shares or 12% of the then outstanding shares. This would be 28 million shares or 10%, net of newly issued shares for employee equity plans. With our net leverage below our three times target at 2.4 times and $844 million in cash and cash equivalence and short-term investments, we have ample financial flexibility to continue returning at least 75% of our free cash flow to shareholders for the remainder of the year, which remains our objective. For Q3 '24, we expect total revenue for Match Group of $895 million to $905 million, up 2% to 3% year over year, which would be 4% to 5% FX neutral.
This range reflects the lost revenue from our exit of live streaming, which we estimate will be about $8 million for the quarter, given we are exiting it mid-quarter. Note that FX headwinds for the second half have worsened by about one point since our last earnings call. For both Tinder and the whole company, we currently expect FX to be nearly a two-point year-over-year headwind in the back half of the year. We expect direct revenue at Tinder to be $505 million to $510 million in Q3, roughly flat year over year and up approximately 2.5% FX neutral.
This range reflects improving year over year MAU and payer trends and moderating year over year RPP gains. It also reflects the improvement in year over year ALC revenue trends I mentioned earlier due to new initiatives in this area. We expect -- payers to decline at around 5% year over year in Q3, a further improvement from Q2 year-over-year levels, leading to positive sequential payer additions in Q3 of approximately 250,000. We expect continued improvement in year-over-year Tinder payers in Q4, though we expect typical seasonality to impact Q4 sequential payer additions.
Across our other brands, we expect Q3 -- revenue of $375 million to $380 million, up 5% to 6% year over year, up 7% to 8% FX-neutral. Within our other brands, we expect Hinge to deliver approximately $145 million of direct revenue in Q3, year-over-year growth of 35%. And as Hinge strength continues, but it anniversaries the introduction of several impactful monetization initiatives in the back half of last year. We expect Match Group AOI of $335 million to $340 million in Q3, up slightly year over year and margin of 37.5% at the midpoints of the ranges which would be stronger than our margins in the first half of the year.
We expect overall Q3 marketing spend to be up about 6% year over year as we continue to roll out the latest Tinder marketing campaign to play marketing dollars to support our growth brands, including Hinge, Azar and some Emerging Brands, but reduce marketing spend at other brands. Our AOI range for the quarter reflects approximately $6 million in in-place severance and other charges relating to the exit of live streaming, as well as approximately $1 million for Canada's new digital services tax. We expect Q3 OI to be impacted by roughly $50 million of impairments of intangibles and other charges related to the exit of our live streaming services. After accounting for the exit of live streaming services and based on our latest FX expectations, which have worsened by about one point since our last earnings call, we expect Match Group to deliver year over year total revenue growth of approximately 5%, up about 7.5% year over year FX neutral and Tinder to deliver roughly 3% year over year direct revenue growth, up approximately 5.5% year over year FX neutral for full year '24.
We calculate that had we not elected to exit live streaming and FX headwinds not worsened, we would be on pace to deliver better than 6% total revenue growth for the year. We continue to expect to achieve our payer company AOI margin target of 36% despite growing approximately $6 million of severance and other charges related to the exit of our live streaming businesses and $9 million of full year cost related to the Canada digital services tax, none of which was included in our initial outlook for 2024. I know there is a significant focus on our longer-term consolidated AOI margins and free cash flow, so I want to make sure to outline the key considerations in this regard. As you heard BK talk about, we think the opportunity for our business remains significant and worth investing in, particularly at Tinder and Hinge.
Our goal is to return the company to sustained revenue growth, which requires us to invest in the product experience and in marketing. We are judicious in how we allocate capital and we'll continue to exercise sound discipline. We believe we're already in the process of making important efficiency moves at our E&E brands at Hyperconnect, which will result in margins more consistent with our consolidated levels. At Tinder and Hinge where we see significant global growth opportunities, we want to put the right building blocks in place around marketing, product and tech, particularly around AI, given how game-changing we think it can be.
We believe this will be critical in remaining the leader in helping people spark meaningful connections over the next decade. As we make those important investments, especially in AI talent for which competition is intense, we expect our AOI margins will continue to improve, but only modestly in the near term. Our expectation is that as revenue growth reaccelerates and we remain disciplined on cost, we will see additional expansion in our AOI margins even before any potential relief in app store fees. We fully recognize though that if the top line growth does not materialize as we expect, we'll need to consider all options, including reduced investment and other alternatives.
That said, we remain very confident that we're on the right track. Our expectations are to deliver nearly $1.1 billion of free cash flow in 2024. We expect our 2024 AOI to free cash flow conversion level to be elevated compared to prior and future years due to an expected additional app store payment this year and we expect our free cash flow conversion rate to return to more normalized levels in 2025. As I mentioned, we expect to utilize at least 75% of our free cash flow for capital return via buybacks for the remainder of the year.
We believe that our current our -- our shares remain the best investment we can make with our capital. Given the opportunities we see in front of us and the current price of our stock, we believe repurchases will be highly accretive and represent a terrific long-term investment. We'll have much more to say on the growth, margin and free cash flow expectations at our investor day later this year. With that, I'll ask the operator to open the line for questions.
Questions & Answers:
Operator
[Operator instructions] And our first question will come from Nathan Feather of Morgan Stanley. Please go ahead.
Nathan Feather -- Morgan Stanley -- Analyst
Hey, everyone. Congrats on the stabilization and Tinder user growth in the quarter. Is there anything outsized that led to that stabilization or more so stacking of a variety of individual improvements? And can you help us contextualize how much of that is due to new user trends versus retention? Thank you.
Bernard Kim -- Chief Executive Officer
Thanks, Nathan, for that question. I really like how you pointed around stacking Tinder product improvements. Our work is really a combination of product initiatives building on each other over time. And this is reinforced with really strong marketing that's helping drive stabilization and start contributing to improvements on the back half of this year.
The trust and safety moves we made last year are one of -- is a great example of stack initiatives, which we know were the right decisions. And the good news is we've worked through a lot of those -- a lot of that noise and has led to better user outcomes and say that the user base has stabilized, retention is improving and growing and we're making strides in top of funnel again. It's a really exciting time period for Tinder.
Operator
The next question comes from Jason Helfstein of Oppenheimer. Please go ahead.
Jason Helfstein -- Analyst
Thanks. Just one question. So has Tinder returned to normal payer seasonality in 3Q now that MAU has stabilized? And how should we be looking at more normal seasonality? Or should we be looking at more normal seasonality in the first half of next year? Thank you.
Gary Swidler -- President and Chief Financial Officer
Thanks for the question, Jason. Let me jump in and try to address it. So just a few things to point out. I mean, if you look historically, I think what you'll see is that we commonly see sequential improvement in payers Q3 over Q2, and it's really because of two reasons which are actually related to one another.
The first is that Q3 tends to be strong seasonally because it includes the summer vacation season, which is active season for dating. And it also includes the back-to-school period where college students return to campus and also start to date actively. And we actually take advantage of the fact that people are focused on dating in that Q3 period by rolling out a lot of new features and initiatives in that period. And we often even reinforce that with marketing spend to call attention to the app to the new features.
So Q3 does tend to be very seasonally strong for us. When you look at Q4 by contrast, it tends to be a weaker period than Q3, and that's because people tend to start focusing on the holiday period and thinking about the holidays, whether it's Thanksgiving in the U.S., Christmas, across – etc., and they focus less on dating. And so, we lose a lot of the fourth quarter as people think about other activities besides dating. And of course, we tend not to roll out as many product initiatives in that fourth quarter, and we generally tend to pull back on marketing, both because the audience isn't as focused and also because, of course, Q4 tends to be a much more expensive period to market against holiday marketing and so we tend to reduce our marketing spend in that quarter.
And so, you're right that when you look at kind of typically what happens Q3 to Q4 from a user and a payer perspective, we do tend to see some level of sequential weakness in Q4 over Q3 after the strength we've seen Q3 over Q2. I would say that this year, we plan to follow a similar pattern from the marketing perspective. We've got the new global marketing campaign going at Tinder, which is seeing great success and I would expect us to invest into marketing in Q3. But then given the holiday period, I would expect us to pull back on a year-over-year basis and, frankly, sequentially in Q4 as well on the marketing side.
So those are just some of the factors to consider as you think about the seasonal trends. And I think you're also right that as we think about 2025 and it's early, and so we'll provide more of an outlook on 2025 as we get a little bit later into this year as we typically do. But I think that with the stabilized now base at Tinder, we expect a return to more seasonal trends in 2025 as we've seen historically. So I think you're right for both the rest of '24 and '25 from a seasonality perspective.
I hope that answers your question.
Jason Helfstein -- Analyst
Thanks.
Operator
The next question comes from Youssef Squali of Truist. Please go ahead.
Youssef Squali -- Analyst
Great. Thank you very much. Maybe a two-parter. One, BK, can you talk a little bit more about kind of practical green shoots you're seeing from some of the changes you've made and from increased product velocity in Tinder.
And maybe, Gary, do you believe -- I know you're not guiding quite a bit -- quite yet for '25, but believe that the improvement you're seeing in Tinder, if they sustain themselves into next year are enough to get the overall business back to maybe high single digit, low double-digit growth in 2025? Or do you need to see other drivers maybe to get you there?
Bernard Kim -- Chief Executive Officer
Great. Let me take a stab at describing the progress that we're making in Tinder. The turnaround is in progress, and we're seeing great momentum. The team is super nimble when it comes to making decisions as some changes work and some changes don't, but the product velocity continues to be strong.
We're making high -- improvements like recommendation changes and that's increasing user engagement and doing really positive things with driving better user outcomes. At the same time, the marketing velocity continues to be strong. Like Gary mentioned, we continue to market and we're solidifying Tinder's brand position in the marketplace. We're investing in product marketing where it matters most.
If I were to describe the green shoots that you were looking for, the things that get me really excited is when product and marketing really come together. A good example of that is what's happening right now with the Olympics. We're actually seeing a 25% increase in swipe activity in France and a 105% increase in Tinder Passport mode and that activity that's happening in Paris. We actually purposefully unbundled Tinder Passport.
So anyone around the world can teleport into Paris and interact with real athletes. And that's with integrated marketing at the same time, something that I'm really proud of. Our Olympics content that our marketing team has been working on has seen over 15 million impressions and over 10 million views. It's super exciting.
Now, we have a clear vision for Tinder's future, and I can't wait to share more around that in our upcoming investor day.
Gary Swidler -- President and Chief Financial Officer
On your question about 2025, I'm going to resist the temptation to provide our outlook now and wait as we typically do until the fall period to do that. But I would say the following, which is we've been pretty clear that 2024 needed to be a year of progress, first, stabilizing things and then starting to show improvement. And I think if you look at the outlook we're providing, and as BK mentioned in his remarks, that's exactly what's happening in the business. We've reached a point of stabilizing users.
We think it will get better on a year-over-year basis as we get into the back half of this year. And you can also see the same thing following through in payer trends, as you would expect, stabilization and an expectation for improvement. And so, we're checking the boxes here that we expected to check in that regard. And obviously, we don't consider that to be enough.
We need to get back to improving now and improving payers on a year-over-year basis. And so, we're going to continue to take those steps. We think that it will continue to improve through this year and into next. And it's incumbent on Tinder to continue to drive its product and marketing efforts to accomplish that, to drive better users, as we said earlier, to have products out there that people are excited about, that they tell their friends about that they return to Tinder for.
And as that happens, user growth will increase and ultimately, payer growth will increase. That is really the key that has to happen. I think we're seeing the green shoots as BK said, the first signs of that. It's still very early and which is why I'm resisting the temptation to go further in our outlook.
But we feel good about where we are right now, and we feel like we'll continue to make the progress we need to make to position ourselves for a better 2025.
Youssef Squali -- Analyst
Thank you both.
Operator
The next question comes from Dan Salmon of New Street Research. Please go ahead.
Daniel Salmon -- Analyst
OK. Great. Good morning, everyone. So it's a little bit of an exceptional period here, obviously, as you guided to sequential growth for Tinder payers for several quarters now.
I think that guidance for a 250,000 sequential increase, that's likely even a little stronger than most expectations. So just considering the -- of the time maybe BK or Gary, could you give us a little bit of a view in the Tinder payers trends so far in the third quarter through July and what gives you confidence in the trends that you're seeing right now?
Gary Swidler -- President and Chief Financial Officer
Sure, Dan. I'm happy to try to do that. I would say that the momentum on Tinder payers has really been strengthening over the last several months. And when you look at Q2 as a whole on payers, the period was down sequentially by 78,000.
But if we look kind of on a month-over-month basis inside that quarter, we've actually seen very solid sequential payer growth from April to May and May to June. And to your question, giving you a little sneak peek into Q3, we've actually seen continued payer strength from June into July. So I believe the sequential payer trends are very positive, and that's what's giving us confidence that we're going to be able to have a strong period of sequential net adds for Tinder in Q3. Now, it's only one month into the quarter.
So I'll caution you, we still got work to do to get through August and September. So we're not done yet. But I believe that we're positioned to deliver on the 250,000 sequential net adds that we provided in our outlook, which would be an improvement in the year-over-year growth rate, which is really what I'm focused on, getting from negative 8% in Q2, which we just reported to something closer to negative 5% in Q3.
Daniel Salmon -- Analyst
Very helpful. Thanks, Gary.
Gary Swidler -- President and Chief Financial Officer
You're welcome.
Operator
The next question comes from Ken Gawrelski of Wells Fargo. Please go ahead.
Ken Gawrelski -- Wells Fargo Securities -- Analyst
Thanks. Good morning, everyone. I appreciate the question. You noted -- maybe I'm going to draw you out just try to dry a little bit more on 4Q because I know it's on a lot of investor minds.
You noted that Tinder payer growth would continue to improve in 4Q from the minus 5% year over year in 3Q, but it would also be seasonally -- than the 3Q plus 250,000 guide quarter over quarter. Do you expect Tinder payers to grow sequentially in 4Q based on where you sit today? Thank you.
Gary Swidler -- President and Chief Financial Officer
So again, I'm going to try to return the thinking back to the year-over-year growth and the progress we're trying to make on payers in that regard and again, trying to get from negative 8% in Q2 to negative 5% in Q3. And even though we're not really at the point of providing Q4 outlook, saying that, as I said in the answer to the earlier question, we want to make more progress. We're expecting there to be more progress on a year-over-year basis in Q4. And so, we think we'll do something better than negative 5% year over year in Q4.
And I think if you do the math, you have to get -- we have to get to something better than negative 1% in Q4 on a year-over-year basis to have sequential payer growth in the quarter. And I think that's a fairly tall order. I think that it's not off the table. I'm not going to take it off the table, but I think it's a fairly tall order.
And frankly, the outlook that we've provided for the full year doesn't assume that we're going to do better than that in Q4 and so that would exceed our current expectations. And again, there's a significant amount of seasonality. If you look back on Tinder's performance over the years on payers, Q4 over Q3, even if you look at Hinge's performance on payers, Q4 over Q3 last year, if you remember, it was a weaker period than it has historically been because it is typical to see a seasonal pattern for the reasons that I explained in Jason's question. And so, I just don't think that's the right way to look at it.
You have to expect seasonal pressure Q4 over Q3 -- feel focus on the holidays but I do expect to see continued improvement on a year-over-year basis. And I think it's important because that's what's going to position us for better performance going into Q1 on a year-over-year basis, payers revenue and position us for a stronger '25 than what we've had in 2024. And I think those are the important things to keep in mind.
Ken Gawrelski -- Wells Fargo Securities -- Analyst
Thank you for the color.
Operator
The next question comes from Chris Kuntarich of UBS. Please go ahead.
Chris Kuntarich -- UBS -- Analyst
Great. Thanks for taking the question. Maybe one around the new swipe gestures in Tinder and the refreshed explorer experience. Could you just frame how big of a product update this is for the product refresh at the end of last year? And maybe the second part of the question would be, are you assuming any revenue aside from these product efforts in your '24 revenue guide? Thanks.
Bernard Kim -- Chief Executive Officer
Vertical swiping in Tinder is something that I'm super passionate about. I really believe it can lead to a more fulsome experience and deeper profile discovery. But when it comes to big changes in Tinder, these things do not happen overnight and they really need to be tested properly. For example, for swipe up, they're super valuable real estate given it currently has ALC connected to it.
And then, swipe down -- explore, we have an opportunity to really revamp the entire Explorer experience to make it more social, more alive and more fun. These iterative changes require deep testing. We have the right team that's on it and they're tireless around innovation, also making sure we understand the full impact to the ecosystem. I do think in '24, we did take a moment in time to evaluate the entire user experience.
And I believe, as well as the team believes that it can be a more elegant experience, and that's super important to our teams. Currently, right now, our central innovation team is working together with the Tinder team and leaning in on that user experience. And the things that I'm seeing from them are really exciting, and I think it will lead to an overall better and more elegant experience.
Gary Swidler -- President and Chief Financial Officer
Maybe just on the part about revenue. I would say we have a lot of features planned to be tested at Tinder in the fourth quarter. They're not really expected to be revenue generators in Q4 for 2024. They're really being tested and positioned for 2025.
So our revenue outlook for the year really doesn't depend on these features contributing in any meaningful way to 2024.
Chris Kuntarich -- UBS -- Analyst
Got it. Thanks for the color.
Gary Swidler -- President and Chief Financial Officer
You're welcome.
Operator
The next question comes from Justin Patterson of KeyBanc. Please go ahead.
Justin Patterson -- Analyst
Great. Thank you. Good morning. BK, I was hoping you can touch on the Tinder ecosystem some more.
Which inning are you in on improving trust, safety and user outcomes? And how have user perceptions changed over the past year?
Bernard Kim -- Chief Executive Officer
Our ongoing effort with trust and safety are critical to the success of the long-term ecosystem at Tinder. When it comes to your question on what inning we're in, there literally is no end game. We're continually looking at improving user experiences. We have the best when it comes to trust and safety and platform and talent that are working on it.
And we're making the right decisions every single day with a focus on better user outcomes. But this is not a linear journey and the work literally never ends. For example, we're continually thinking about big bold features like mandated face photos, which we are going to test and then also new technologies around authenticating users. As for perception improvement, it's something that we're really zeroed in on.
And like we said in the letter, and I'm going to try to do my best with regards to showcasing this impressive stat. But for women in the U.S. aged 18 to 30, brand perception for Tinder is a place where I can find meaningful connections is up nearly 50%. And at the same time, Tinder's hookup stigma has fallen by 20%.
This is tremendous progress with the demographic that our marketing teams are speaking directly to. So I'm really proud of these efforts.
Operator
The next question comes from Cory Carpenter of J.P. Morgan. Please go ahead.
Cory Carpenter -- JPMorgan Chase and Company -- Analyst
Thank you. Could you expand on the rationale and some of the math behind the exit of the live streaming business?
Gary Swidler -- President and Chief Financial Officer
Sure, Cory. Why don't I take that one. I know there's a lot of moving pieces to this, and it's a little bit complicated. So let me try to step through it.
Just to clarify, first of all, we really have two pieces where we have live streaming. We've got a stand-alone app, Hakuna, in Asia, which focuses on providing live streaming in Japan and Korea. And then, we provide live streaming services alongside some of our dating business in Plenty of Fish primarily in a couple of the other U.S.-based apps. And those are the businesses that we're planning to exit here in the third quarter.
And what I would say on live streaming is they basically have the same types of expenses as we see in our other dating businesses. But there's one significant difference, which is we need to provide a revenue share to the live streamers. And that can be 20% or even more of the revenue. And so, that's an extra expense that we really don't see in our dating business.
And as a result of that, the margins in live streaming are probably in the 20s percent range for a business at that scale versus our dating business, which, as you know, can be 30% or higher from a margin perspective. So there's a significant difference in the economics of the live streaming business versus the dating business. In addition to them having lower margins, it's become much more challenging to grow live streaming in our apps over the last few years because there's been significant competition from very well-funded players including most of the big social media platforms and I, of course, point at TikTok as the most significant dominant player in the space. And so, when we entered into live streaming a few years ago and the world was different, it was pre-COVID and everything else, but live streaming at that point, we thought provided an attractive kind of adjacent additional source of revenue for us.
And right now, this year, we expected roughly a $60 million revenue contribution from live streaming. But growing that revenue base has become much, much more challenging in the face of the competition and changed landscape and dynamics that we're facing. And not only that, but to reach the scale that we need to reach, to achieve even reasonable margins from our perspective, was going to take a significant amount of investment for a significant number of years, even in the best case scenario. And so, when you boil it down, we felt that these businesses are not strategic to what we do.
It's not likely -- that they're not likely to be revenue growth enhancing, and they're likely to be margin dilutive for a long period of time. It makes more sense in our minds to add those businesses now. And in fact, what we can do is we can redeploy some of the great talent we have in these businesses into other businesses of ours where we have a much stronger position. And so, we made that decision, and we're foregoing the $60 million of revenue which for next year probably will create a 1one- to two-point revenue growth headwind for us but these were AOI drags this year.
And so, when we look at the margin impact for next year, I think we can expect at least a 50 basis points improvement in the margins as a result of exiting these businesses. So we'll factor all that into everything else we're thinking about for next year, but the move to exit now should create a 50 basis point tailwind for us on the margin side. And the only other thing I wanted to make sure people are clear on, and BK alluded to it in his remarks, as a result of our decision to exit live streaming and some other things that we're doing around the portfolio, we're expecting to reduce our workforce by 6%, net of people that were moving into other businesses and that we're retaining. And so, that should lead to $13 million of savings, which is on top of the savings that we've already talked about and that we're planning to achieve by full year 2026 from the replatforming at the E&E businesses.
So I just want to make sure people understand all the moving pieces around the efficiencies because there are quite a few of them. So I hope that helps answer your question, and I appreciate the question.
Operator
The next question comes from Ygal Arounian of Citigroup. Please go ahead.
Ygal Arounian -- Citi -- Analyst
Thanks. Good morning, guys. I wanted to shift to Hinge. We got a lot of questions from investors on Hinge's strengths and how to think about the difference there or the better than industry-level strength that we've seen consistently.
I think we're seeing acceleration here again this quarter. Can you -- I know you touched on it on the call a little bit, but can we expand on that a little bit. How much of what you're seeing is kind of simple market expansion and monetization expansion versus product initiatives and factors? What do you think the biggest product factors have been and what you're seeing there in the strength? And how does that inform the product road map that you're laying out for Hinge? Thanks.
Bernard Kim -- Chief Executive Officer
Hinge is an absolute rocket ship for Match Group, and it's on track to become a $1 billion-plus revenue business. We're super pleased with its current performance and the continual investment in product, as well as in marketing and global expansion. But the team is not resting on its laurels. We're continually building out new features and improving user experiences.
Examples of that are things that are in test and fully rolled out like Top Photo and Photo Finder, which utilize best-in-class AI. I'm really impressed by the team's vision of incorporating AI into the full user experience and in every touch point of the Hinge user experience. Our future road map will utilize AI to really fulfill that Hinge's North Star around getting people on great dates even faster. So there's continued momentum, and we're continuing to invest in Hinge's growth.
Operator
The next question comes from Shweta Khajuria of Wolfe Research. Please go ahead.
Shweta Khajuria -- Wolfe Research -- Analyst
Thank you. Two please. BK, could you please talk about your conversations with Starboard intra-quarter? There was a release. To the extent that you can share, any commentary on that would very much appreciate it.
And then, Gary, when we think about the third net adds for Tinder, could you please provide specific examples that give you confidence in this number in terms of is it the à la carte that -- the improvement in à la carte that's going to be helping? Is it unbundling -- à la carte? Is it the product updates that you've made so far that will just be compounding? Could you help us parse that out in terms of what is contributing to the third quarter net adds?
Bernard Kim -- Chief Executive Officer
I can take the Starboard section, but we've had some initial interactions with Starboard, which were typical with interactions that we've had with other potential investors. Then as you all know, on July 15, they shared that they were a large shareholder and published a letter. Now, we believe that the topics raised by Starboard are already key areas of focus for our teams and are things that we have actually heard from other significant shareholders as well. These three areas are returning Tinder to growth, improving margins and returning more capital to shareholders.
We've been taking significant steps in all three of these areas, including investing in Tinder product and marketing to drive growth, reducing headcount, undertaking tech replatforming to drive margins and then redeploying 75% of our free cash flow to buy back shares. We continue to look forward to engaging with all of our shareholders and then getting their input on how we can continue to drive shareholder value.
Gary Swidler -- President and Chief Financial Officer
I think on the second part of the question, Shweta, you really have to think of kind of the trajectory of Tinder, as BK said earlier, of being driven by a series of things, not just one particular thing. And it's really on product and on marketing. And so, we've cleaned up the ecosystem. That has helped.
It's led to a stabilization now in users. That is helping the physics of the business in terms of payer trends, etc. The marketing is really resonating. I think that the sense of Tinder is a place where people can meet people is really improving.
The perception of the app continues to improve. All that marketing spend that we've done on the brand over the last year plus has really started to pay benefits. And so, all of that is contributing, as well as a series of product initiatives, things that we're doing, whether those are optimizations which we continue to do or whether those are other feature changes as well. And so, it's really a bunch of things starting to work at Tinder, which frankly has been the plan all along that it was going to be a multifaceted approach that wasn't going to be one silver bullet but rather be a series of initiatives, product and marketing working together to drive improvement at Tinder.
And I think that's what you're really starting to see the fruits of here as we expect the third quarter to shape up.
Shweta Khajuria -- Wolfe Research -- Analyst
OK. Thanks, BK. Thanks, Gary.
Gary Swidler -- President and Chief Financial Officer
You're welcome.
Operator
The next question comes from Benjamin Black of Deutsche Bank. Please go ahead.
Benjamin Black -- Analyst
Great. Thank you for taking my question. Just one on capital allocation. So you've given a target of at least 75% of capital returns, but for the last two quarters, you returned more than 100%.
So how are you thinking about the right amount here? And then, would you potentially also consider a dividend?
Gary Swidler -- President and Chief Financial Officer
Thanks, Ben. Let me jump in and take that. Look, I think that 75% plus return is the right level for the company to commit to and that remains our stated commitment. But the board evaluates the right amount for us to be deploying for buybacks on an ongoing basis.
They are very involved in this aspect of the business. They look at our share price. They look at our business outlook. They look at a variety of factors, and we try to make a determination of what the right level to buy back is.
And as you rightly pointed out, we bought back just over 100% through the first half of the year. So we've been more aggressive. And obviously, that was in part because our share price in our mind was very low relative to the opportunity we see for the company over the coming years. So it's not an immediate one quarter thing, but we think over the long term, we're going to feel good about having bought a lot of stock back at these levels.
And so, we factor all of that in, and we'll continue to do so as we move forward. As far as the dividend goes, it's an interesting question. As you're probably aware, some very successful large growth companies have implemented dividends over the last little while. And we think it's a logical thing to do as a component of the capital return.
So dividends working alongside buybacks to drive return for shareholders. It's something that we have thought about and continue to think about but we don't think that now is the time to do it, and we're steadfastly focused on buybacks at this point in time. So that is unchanging at the moment. But if there's updates in our thinking, we'll certainly convey it to you all.
Benjamin Black -- Analyst
Very helpful. Thank you very much.
Gary Swidler -- President and Chief Financial Officer
I think we have time maybe for one more question after Ben. So why don't we just try to get that in here quickly?
Operator
The next question comes from Curtis Nagle of Bank of America. Please go ahead.
Curtis Nagle -- Analyst
Great. Thanks so much for squeezing me in. So just returning back to Hinge. How do we think about the gross prospects and timing and I guess, probability in that $1 billion plus in revenue? How formed in 2Q, 3Q guide ahead? In the letter, I think you said you're now targeting to be the No.
2 brand that's new. To me, I think it suggests you're more confident in growth. So is that fair? Just how should we think through all that?
Gary Swidler -- President and Chief Financial Officer
Yes. Thanks for the question. Look, I think that that's right what you say that our confidence in the Hinge platform has been increasing over the last little while. And I think most of that is really driven as we look at the user trends and the fact that Hinge continues to move up in the rankings in various countries and regions from a download perspective, which is telling us that the product really continues to resonate.
It's a differentiated product. People really like using that product and continue to see it as a go-to product. And that's really had an effect on the overall dating landscape, as well as improving our confidence in the prospects for Hinge. So when you look at the ability for Hinge to be a $1 billion business in a few years, we absolutely think it's there, and we're driving toward that.
And something that I would just point out, which I'm not sure people fully appreciate is at Hinge, which is on track to deliver well over $500 million of revenue this year, derives less than 10% of its revenue from its European expansion market. So we've been spending a lot of money in those markets to drive awareness, and that is clearly working, but the revenue has really just started to trickle in. And so, it shows sort of the opportunity for us to have a much bigger business at Hinge in these European markets. And it also shows the nature of our business, which is we made these investments initially and plant the seed, so to speak, and then we're going to harvest them down the road.
And that's what's happening in Hinge, which obviously, over time will be accretive to margins as well. So that is kind of the business that we're in planting the seeds for future harvesting. Hinge is a great example. We're about to start doing that at Azar as well, and we'll continue to do that where we see opportunities.
And that's what drives the future revenue growth. So I'm going to leave it there just because we are out of time, but hopefully, that mostly at least addresses your question. And I'll just thank everyone for having joined us this morning. We appreciate everybody's time.
Enjoy the rest of your summer, and we'll talk to you all soon.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Tanny Shelburne -- Senior Vice President, Investor Relations and ESG Reporting
Bernard Kim -- Chief Executive Officer
Gary Swidler -- President and Chief Financial Officer
Nathan Feather -- Morgan Stanley -- Analyst
Jason Helfstein -- Analyst
Youssef Squali -- Analyst
Daniel Salmon -- Analyst
Dan Salmon -- Analyst
Ken Gawrelski -- Wells Fargo Securities -- Analyst
Chris Kuntarich -- UBS -- Analyst
Justin Patterson -- Analyst
Cory Carpenter -- JPMorgan Chase and Company -- Analyst
Ygal Arounian -- Citi -- Analyst
Shweta Khajuria -- Wolfe Research -- Analyst
Benjamin Black -- Analyst
Curtis Nagle -- Analyst
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