In the middle of last week, Match Group (NASDAQ:MTCH) reported its fourth-quarter and full-year 2020 earnings and released its shareholder letter. The online dating conglomerate grew sales and users, and maintained high levels of profitability, driving the stock to finish at an all-time high to close out the week. Here's how Match Group did during the year of the COVID-19 pandemic.

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Earnings highlights

Match Group had an all-around solid report, growing its sales and profitability in tandem. Full-year revenue was up 17% and hit $2.4 billion with $746 million in operating income. This means that in 2020, Match was able to grow double digits while maintaining a 32% operating margin, an impressive feat when you consider this was the year of the COVID-19 pandemic.

The two ways Match Group grows its financials are by growing paying subscribers and growing its average revenue per user (ARPU). In the fourth quarter, average subscribers grew 12% to 10.9 million, while ARPU grew 5% to $0.62. The growth of these numbers, which encompass subscribers from all of Match Group's brands, is the key indicator for how the business is doing financially.

COVID headwinds should turn into tailwinds

Even though Match Group put up impressive results in 2020, the company is currently operating in a secular headwind due to the COVID-19 pandemic. With most in-person interactions closed and/or restricted worldwide, the actual "dating" part of these apps has been put on pause. Match Group management discussed this in its shareholder letter, stating that the winter wave of COVID cases slowed subscriber growth in many markets. However, in markets such as India that have recovered strongly from the pandemic, management indicated that an increase in subscriber growth was correlated to a decline in daily case counts.

Once economies fully open this spring/summer, in-person dating will normalize. This should help Match Group not only accelerate subscriber growth, but also help it further monetize its users (i.e., continue to grow ARPU). With dating apps more of an ephemeral tool during the lockdown, the incentive for users to pay for services isn't really there. There is pent-up demand for dates, and Match Group is increasingly the source people have to go through in order to get them.

It's not just Tinder

A lot of people think of Match Group as an investment solely in Tinder. And while 58% of the company's sales in 2020 came from Tinder, non-Tinder brands look like the company's future growth engine. For example, in Q4 other brands grew sales by 28%, which was faster than the overall sales of the company. This was led by Hinge, which grew sales threefold in 2020, and should start to meaningfully affect the business in 2021. More niche/ethnicity-focused products like Hawaya, a Muslim-focused app, and Chispa, a Latin-focused app, will help Match grow its reach across the globe.

While Match Group continues to chug along and put up consistent, high-teens sales growth, don't be fooled into thinking the company is operating in an optimal dating environment. COVID-19 lockdowns pose a significant headwind for its portfolio of brands. Once the global economy returns to normal, look for Match Group to accelerate its subscriber growth and continue to grow its non-Tinder portfolio.

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