MTCH – Traded CDS 245bps, Base Case iCDS 128bps, Negative Case iCDS 208bps, 2027 5.000% Bond YTW of 6.496%, iYTW of 4.356%, Ba2 Rating from Moody’s, IG3 (equivalent to A2) Rating from Valens, Low Refinancing Need
- Cash bond markets are materially overstating credit risk with a cash bond YTW of 6.496% relative to an Intrinsic YTW of 4.356%, while CDS markets are overstating credit risk with a CDS of 245bps relative to an Intrinsic CDS of 128bps. Furthermore, Moody’s is materially overstating the firm’s fundamental credit risk, with its Ba2 credit rating six notches lower than Valens’ IG3 (A2) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Specifically, MTCH’s compensation metrics incentivizes management to focus on all three value drivers: asset efficiency, margins, and revenue growth, which should lead to Uniform ROA expansion and increased cash flows available to service obligations. Additionally, management members are material owners of MTCH equity relative to their average annual compensation, indicating they are well-aligned with shareholders for long-term value creation.
- Earnings Call Forensics™ of the firm’s Q1 2022 earnings call (5/3) highlights that management is confident customers are choosing to use their payment system instead of Google Play billing. Also, management is confident their hard paywall business has payer penetration of 40% and that they could be met with spending opportunities as other marketers’ advertising budgets are cut.