Item 1. Consolidated Financial Statements
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In thousands, except par value amounts)
|
ASSETS
|
|
|
|
Cash and cash equivalents
|
$
|
2,822,729
|
|
|
$
|
3,139,295
|
|
Short-term investments
|
20,000
|
|
|
—
|
|
Marketable securities
|
49,912
|
|
|
19,993
|
|
Accounts receivable, net of allowance and reserves of $28,669 and $24,726, respectively
|
375,854
|
|
|
298,334
|
|
Other current assets
|
267,814
|
|
|
249,367
|
|
Total current assets
|
3,536,309
|
|
|
3,706,989
|
|
|
|
|
|
Property, capitalized software and equipment, net of accumulated depreciation and amortization
|
373,561
|
|
|
371,353
|
|
Goodwill
|
3,042,139
|
|
|
2,854,462
|
|
Intangible assets, net of accumulated amortization
|
671,467
|
|
|
578,474
|
|
Long-term investments
|
301,592
|
|
|
353,052
|
|
Deferred income taxes
|
190,849
|
|
|
167,054
|
|
Other non-current assets
|
318,832
|
|
|
301,441
|
|
TOTAL ASSETS
|
$
|
8,434,749
|
|
|
$
|
8,332,825
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
LIABILITIES:
|
|
|
|
Current portion of long-term debt
|
$
|
13,750
|
|
|
$
|
13,750
|
|
Accounts payable, trade
|
102,367
|
|
|
94,356
|
|
Deferred revenue
|
433,728
|
|
|
397,490
|
|
Accrued expenses and other current liabilities
|
514,571
|
|
|
502,003
|
|
Total current liabilities
|
1,064,416
|
|
|
1,007,599
|
|
|
|
|
|
Long-term debt, net
|
3,625,008
|
|
|
3,121,572
|
|
Income taxes payable
|
18,398
|
|
|
36,489
|
|
Deferred income taxes
|
19,398
|
|
|
21,388
|
|
Other long-term liabilities
|
210,274
|
|
|
202,932
|
|
|
|
|
|
Redeemable noncontrolling interests
|
42,431
|
|
|
44,527
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY:
|
|
|
|
Common stock $.001 par value; authorized 1,600,000 shares; issued 263,502 and 263,230 shares, respectively, and outstanding 79,162 and 78,890 shares, respectively
|
264
|
|
|
263
|
|
Class B convertible common stock $.001 par value; authorized 400,000 shares; issued 16,157 shares and outstanding 5,789 shares
|
16
|
|
|
16
|
|
Additional paid-in capital
|
11,412,142
|
|
|
11,683,799
|
|
Retained earnings
|
1,478,885
|
|
|
1,689,925
|
|
Accumulated other comprehensive loss
|
(157,285
|
)
|
|
(136,349
|
)
|
Treasury stock 194,708 shares
|
(10,309,612
|
)
|
|
(10,309,612
|
)
|
Total IAC shareholders' equity
|
2,424,410
|
|
|
2,928,042
|
|
Noncontrolling interests
|
1,030,414
|
|
|
970,276
|
|
Total shareholders' equity
|
3,454,824
|
|
|
3,898,318
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
8,434,749
|
|
|
$
|
8,332,825
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands, except per share data)
|
Revenue
|
$
|
1,228,765
|
|
|
$
|
1,105,843
|
|
Operating costs and expenses:
|
|
|
|
Cost of revenue (exclusive of depreciation shown separately below)
|
323,221
|
|
|
260,071
|
|
Selling and marketing expense
|
432,697
|
|
|
421,860
|
|
General and administrative expense
|
256,021
|
|
|
213,616
|
|
Product development expense
|
105,733
|
|
|
88,700
|
|
Depreciation
|
24,738
|
|
|
18,971
|
|
Amortization of intangibles
|
52,162
|
|
|
22,752
|
|
Goodwill impairment
|
211,973
|
|
|
—
|
|
Total operating costs and expenses
|
1,406,545
|
|
|
1,025,970
|
|
Operating (loss) income
|
(177,780
|
)
|
|
79,873
|
|
Interest expense
|
(44,866
|
)
|
|
(31,143
|
)
|
Other (expense) income, net
|
(49,893
|
)
|
|
651
|
|
(Loss) earnings before income taxes
|
(272,539
|
)
|
|
49,381
|
|
Income tax benefit
|
89,896
|
|
|
63,604
|
|
Net (loss) earnings
|
(182,643
|
)
|
|
112,985
|
|
Net earnings attributable to noncontrolling interests
|
(28,397
|
)
|
|
(24,290
|
)
|
Net (loss) earnings attributable to IAC shareholders
|
$
|
(211,040
|
)
|
|
$
|
88,695
|
|
|
|
|
|
Per share information attributable to IAC shareholders:
|
|
|
Basic (loss) earnings per share
|
$
|
(2.49
|
)
|
|
$
|
1.06
|
|
Diluted (loss) earnings per share
|
$
|
(2.49
|
)
|
|
$
|
0.91
|
|
|
|
|
|
Stock-based compensation expense by function:
|
|
|
|
Cost of revenue
|
$
|
1,185
|
|
|
$
|
1,289
|
|
Selling and marketing expense
|
2,424
|
|
|
2,717
|
|
General and administrative expense
|
44,637
|
|
|
45,010
|
|
Product development expense
|
10,218
|
|
|
18,428
|
|
Total stock-based compensation expense
|
$
|
58,464
|
|
|
$
|
67,444
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Net (loss) earnings
|
$
|
(182,643
|
)
|
|
$
|
112,985
|
|
Other comprehensive (loss) income, net of income taxes:
|
|
|
|
Change in foreign currency translation adjustment
|
(26,093
|
)
|
|
1,309
|
|
Change in unrealized gains and losses on available-for-sale debt securities
|
(12
|
)
|
|
1
|
|
Total other comprehensive (loss) income, net of income taxes
|
(26,105
|
)
|
|
1,310
|
|
Comprehensive (loss) income, net of income taxes
|
(208,748
|
)
|
|
114,295
|
|
Components of comprehensive (income) loss attributable to noncontrolling interests:
|
|
|
|
Net income attributable to noncontrolling interests
|
(28,397
|
)
|
|
(24,290
|
)
|
Change in foreign currency translation adjustment attributable to noncontrolling interests
|
4,766
|
|
|
(316
|
)
|
Change in unrealized gains and losses of available-for-sale debt securities attributable to noncontrolling interests
|
—
|
|
|
1
|
|
Comprehensive income attributable to noncontrolling interests
|
(23,631
|
)
|
|
(24,605
|
)
|
Comprehensive (loss) income attributable to IAC shareholders
|
$
|
(232,379
|
)
|
|
$
|
89,690
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 2020 and 2019
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IAC Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B
Convertible
Common
Stock $.001
Par Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock $.001
Par Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
|
|
Total IAC
Shareholders'
Equity
|
|
|
|
|
|
Redeemable
Noncontrolling
Interests
|
|
|
Additional
Paid-in
Capital
|
|
Retained Earnings
|
|
Treasury
Stock
|
|
|
Noncontrolling
Interests
|
|
Total
Shareholders'
Equity
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2019
|
$
|
44,527
|
|
|
|
$
|
263
|
|
|
263,230
|
|
|
$
|
16
|
|
|
16,157
|
|
|
$
|
11,683,799
|
|
|
$
|
1,689,925
|
|
|
$
|
(136,349
|
)
|
|
$
|
(10,309,612
|
)
|
|
$
|
2,928,042
|
|
|
$
|
970,276
|
|
|
$
|
3,898,318
|
|
Net (loss) earnings
|
(1,462
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(211,040
|
)
|
|
—
|
|
|
—
|
|
|
(211,040
|
)
|
|
29,859
|
|
|
(181,181
|
)
|
Other comprehensive income (loss), net of income taxes
|
99
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,339
|
)
|
|
—
|
|
|
(21,339
|
)
|
|
(4,865
|
)
|
|
(26,204
|
)
|
Stock-based compensation expense
|
15
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,499
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,499
|
|
|
44,586
|
|
|
56,085
|
|
Issuance of common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
1
|
|
|
272
|
|
|
—
|
|
|
—
|
|
|
(20,516
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,515
|
)
|
|
—
|
|
|
(20,515
|
)
|
Purchase of redeemable noncontrolling interests
|
(3,165
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjustment of redeemable noncontrolling interests to fair value
|
2,418
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,418
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,418
|
)
|
|
—
|
|
|
(2,418
|
)
|
Issuance of Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(139,565
|
)
|
|
—
|
|
|
403
|
|
|
—
|
|
|
(139,162
|
)
|
|
(9,442
|
)
|
|
(148,604
|
)
|
Purchase of Match Group and ANGI Homeservices treasury stock
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(120,658
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(120,658
|
)
|
|
—
|
|
|
(120,658
|
)
|
Other
|
(1
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Balance as of March 31, 2020
|
$
|
42,431
|
|
|
|
$
|
264
|
|
|
263,502
|
|
|
$
|
16
|
|
|
16,157
|
|
|
$
|
11,412,142
|
|
|
$
|
1,478,885
|
|
|
$
|
(157,285
|
)
|
|
$
|
(10,309,612
|
)
|
|
$
|
2,424,410
|
|
|
$
|
1,030,414
|
|
|
$
|
3,454,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
$
|
65,687
|
|
|
|
$
|
262
|
|
|
262,303
|
|
|
$
|
16
|
|
|
16,157
|
|
|
$
|
12,022,387
|
|
|
$
|
1,258,794
|
|
|
$
|
(128,722
|
)
|
|
$
|
(10,309,612
|
)
|
|
$
|
2,843,125
|
|
|
$
|
708,676
|
|
|
$
|
3,551,801
|
|
Net (loss) earnings
|
(1,051
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88,695
|
|
|
—
|
|
|
—
|
|
|
88,695
|
|
|
25,341
|
|
|
114,036
|
|
Other comprehensive income, net of income taxes
|
186
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
995
|
|
|
—
|
|
|
995
|
|
|
129
|
|
|
1,124
|
|
Stock-based compensation expense
|
42
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,165
|
|
|
47,237
|
|
|
67,402
|
|
Issuance of common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
1
|
|
|
326
|
|
|
—
|
|
|
—
|
|
|
(4,911
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,910
|
)
|
|
—
|
|
|
(4,910
|
)
|
Purchase of redeemable noncontrolling interests
|
(3,182
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjustment of redeemable noncontrolling interests to fair value
|
10,242
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,242
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,242
|
)
|
|
—
|
|
|
(10,242
|
)
|
Issuance of Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(158,958
|
)
|
|
—
|
|
|
1,008
|
|
|
—
|
|
|
(157,950
|
)
|
|
10,092
|
|
|
(147,858
|
)
|
Other
|
(10
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(17
|
)
|
Balance as of March 31, 2019
|
$
|
71,914
|
|
|
|
$
|
263
|
|
|
262,629
|
|
|
$
|
16
|
|
|
16,157
|
|
|
$
|
11,868,424
|
|
|
$
|
1,347,489
|
|
|
$
|
(126,719
|
)
|
|
$
|
(10,309,612
|
)
|
|
$
|
2,779,861
|
|
|
$
|
791,475
|
|
|
$
|
3,571,336
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
Net (loss) earnings
|
$
|
(182,643
|
)
|
|
$
|
112,985
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
Stock-based compensation expense
|
58,464
|
|
|
67,444
|
|
Amortization of intangibles
|
52,162
|
|
|
22,752
|
|
Depreciation
|
24,738
|
|
|
18,971
|
|
Bad debt expense
|
19,931
|
|
|
15,005
|
|
Goodwill impairment
|
211,973
|
|
|
—
|
|
Deferred income taxes
|
(59,166
|
)
|
|
(65,107
|
)
|
Losses on equity securities, net
|
51,473
|
|
|
44
|
|
Other adjustments, net
|
20,690
|
|
|
18,697
|
|
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
Accounts receivable
|
(79,799
|
)
|
|
(88,367
|
)
|
Other assets
|
10,172
|
|
|
6,730
|
|
Accounts payable and other liabilities
|
(24,720
|
)
|
|
(26,829
|
)
|
Income taxes payable and receivable
|
(47,787
|
)
|
|
(6,154
|
)
|
Deferred revenue
|
25,487
|
|
|
26,770
|
|
Net cash provided by operating activities
|
80,975
|
|
|
102,941
|
|
Cash flows from investing activities:
|
|
|
|
Acquisitions, net of cash acquired
|
(532,857
|
)
|
|
(21,555
|
)
|
Capital expenditures
|
(24,591
|
)
|
|
(25,855
|
)
|
Proceeds from maturities of marketable debt securities
|
20,000
|
|
|
123,500
|
|
Purchases of marketable debt securities
|
(49,806
|
)
|
|
(39,740
|
)
|
Net proceeds from the sale of businesses and investments
|
1,476
|
|
|
20,472
|
|
Purchases of investments
|
(25
|
)
|
|
—
|
|
Other, net
|
(203
|
)
|
|
(1,215
|
)
|
Net cash (used in) provided by investing activities
|
(586,006
|
)
|
|
55,607
|
|
Cash flows from financing activities:
|
|
|
|
Proceeds from issuance of Match Group debt
|
500,000
|
|
|
350,000
|
|
Borrowings under Match Group Credit Facility
|
—
|
|
|
40,000
|
|
Principal payments on Match Group Credit Facility
|
—
|
|
|
(300,000
|
)
|
Principal payments on ANGI Homeservices Term Loan
|
(3,438
|
)
|
|
(3,438
|
)
|
Debt issuance costs
|
(8,977
|
)
|
|
(5,542
|
)
|
Purchase of Match Group and ANGI Homeservices treasury stock
|
(120,198
|
)
|
|
(24,186
|
)
|
Proceeds from the exercise of IAC stock options
|
412
|
|
|
9,298
|
|
Proceeds from the exercise of Match Group and ANGI Homeservices stock options
|
—
|
|
|
573
|
|
Withholding taxes paid on behalf of IAC employees on net settled stock-based awards
|
(20,927
|
)
|
|
(14,062
|
)
|
Withholding taxes paid on behalf of Match Group and ANGI Homeservices employees on net settled stock-based awards
|
(148,580
|
)
|
|
(123,148
|
)
|
Purchase of noncontrolling interests
|
(3,165
|
)
|
|
(3,182
|
)
|
Other, net
|
(464
|
)
|
|
27
|
|
Net cash provided by (used in) financing activities
|
194,663
|
|
|
(73,660
|
)
|
Total cash (used) provided
|
(310,368
|
)
|
|
84,888
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
(5,996
|
)
|
|
815
|
|
Net (decrease) increase in cash and cash equivalents and restricted cash
|
(316,364
|
)
|
|
85,703
|
|
Cash and cash equivalents and restricted cash at beginning of period
|
3,140,358
|
|
|
2,133,685
|
|
Cash and cash equivalents and restricted cash at end of period
|
$
|
2,823,994
|
|
|
$
|
2,219,388
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
IAC operates Vimeo, Dotdash and Care.com, among many other online businesses, and has majority ownership of both Match Group, which includes Tinder, Match, PlentyOfFish, OkCupid and Hinge, and ANGI Homeservices, which includes HomeAdvisor, Angie’s List and Handy.
Separation
On December 19, 2019, IAC/InterActiveCorp ("IAC") entered into a Transaction Agreement (as amended as of April 28, 2020, the "Transaction Agreement") with Match Group, Inc. ("MTCH"), IAC Holdings, Inc., a direct wholly owned subsidiary of IAC ("New IAC"), and Valentine Merger Sub LLC, an indirect wholly owned subsidiary of IAC. Subject to the terms and conditions set forth in the Transaction Agreement, the businesses of MTCH will be separated from the remaining businesses of IAC through a series of transactions that will result in the pre-transaction stockholders of IAC owning shares in two, separate public companies—(1) IAC, which will be renamed Match Group, Inc. ("New Match") and which will own the businesses of MTCH and certain IAC financing subsidiaries, and (2) New IAC, which will be renamed IAC/InterActiveCorp and which will own IAC's other businesses—and the pre-transaction stockholders of MTCH (other than IAC) owning shares in New Match. Completion of the separation, which is expected to occur in the second quarter of 2020, is subject to a number of conditions, including approval by a majority of the disinterested shareholders of MTCH, approval of IAC’s shareholders and other customary conditions and approvals. This transaction is referred to as the "Separation".
As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer to IAC/InterActiveCorp and its subsidiaries (unless the context requires otherwise).
As of March 31, 2020, IAC’s economic interest and voting interest in:
|
|
•
|
Match Group were 80.4%, and 97.4%, respectively. All references to "Match Group" or "MTCH" in this report are to Match Group, Inc.
|
|
|
•
|
ANGI Homeservices were 84.9%, and 98.3%, respectively. All reference to "ANGI Homeservices" or "ANGI" in this report are to ANGI Homeservices Inc.
|
COVID-19 Update
The Company's business could be materially and adversely affected by the outbreak of COVID-19, which has been declared a "pandemic" by the World Health Organization.
To date, the Company's ANGI Homeservices business has experienced a decline in demand for home services requests, driven primarily by decreases in demand in certain categories of jobs (particularly non-essential projects) and decreases in demand in regions most affected by the COVID-19 outbreak, which the Company attributes both to the unwillingness of consumers to interact with service professionals face-to-face or have service professionals in their homes, and to lower levels of consumer confidence and discretionary income generally. In addition, with respect to the Company's ad-supported businesses, the Company has experienced a meaningful decrease in advertising rates across the Company's various properties (as much as 30% year over year). And while the Company's Match Group business has experienced improved user and engagement metrics, it has also experienced a decline in new users and paying subscribers during the pandemic.
In connection with the first quarter close of its books, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its assets. The Company determined, as of March 31, 2020, the fair value for those assets for which COVID-19 was deemed to be an indicator of possible impairment and identified the following impairments:
|
|
•
|
a $212.0 million impairment related to the goodwill of the Desktop reporting unit;
|
|
|
•
|
a $21.4 million impairment related to certain indefinite-lived intangible assets of the Desktop reporting unit;
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
•
|
a $4.6 million impairment related to certain indefinite-lived intangible assets of the Match Group reporting unit;
|
|
|
•
|
a $51.5 million impairment of certain equity securities without readily determinable fair values; and
|
|
|
•
|
a $7.5 million impairment of a note receivable and a warrant related to certain investees.
|
The extent to which developments related to the COVID-19 outbreak and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel, non-essential services and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to the COVID-19 outbreak. The longer the global outbreak and measures designed to curb the spread of the virus continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for the Company’s various products and services), the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations and the more limited will be the Company’s ability to try and make up for delayed or lost revenues.
Basis of Presentation and Consolidation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").
The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated.
In management's opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company's consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates, judgments and assumptions impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates and judgments, including those related to: the fair values of cash equivalents and marketable debt securities; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts; the determination of revenue reserves; the carrying value of right-of-use assets ("ROU assets"); the useful lives and recoverability of definite-lived intangible assets and property, capitalized software and equipment; the recoverability of goodwill and indefinite-lived intangible assets; the fair value of equity securities without readily determinable fair values; contingencies; the fair value of acquisition-related contingent consideration arrangements; unrecognized tax benefits; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets and other factors that the Company considers relevant.
Accounting for Investments in Equity Securities
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Investments in equity securities, other than those of the Company's consolidated subsidiaries and those accounted for under the equity method, if applicable, are accounted for at fair value or under the measurement alternative of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, following its adoption on January 1, 2018, with any changes to fair value recognized within other income (expense), net each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer; value is generally determined based on a market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors the Company considers in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of the its investments in equity securities, which require judgment and the use of estimates. When the Company's assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge within other income (expense), net. See "Note 4—Financial Instruments and Fair Value Measurements" for additional information on the impairments of certain equity securities without readily determinable fair values recorded in the quarter ended March 31, 2020.
In the event the Company has investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee, but does not have a controlling financial interest, are accounted for using the equity method and are included in "Long-term investments" in the accompanying consolidated balance sheet. At March 31, 2020 and December 31, 2019, the Company did not have any investments accounted for using the equity method.
General Revenue Recognition
Revenue is recognized when control of the promised services or goods is transferred to the Company's customers and in the amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.
Prior to January 1, 2020, ANGI's Handy business recorded revenue on a net basis. Effective January 1, 2020, the Company modified the Handy terms and conditions so that Handy, rather than the service professional, has the contractual relationship with the consumer to deliver the service and Handy, rather than the consumer, has the contractual relationship with the service professional. Consumers request services and pay for such services directly through the Handy platform and then Handy fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. This change in contractual terms requires gross revenue accounting treatment effective January 1, 2020. Also, in the case of certain tasks, HomeAdvisor provides a pre-priced product offering, pursuant to which consumers can request services through a HomeAdvisor platform and pay HomeAdvisor for the services directly. HomeAdvisor then fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. Revenue from HomeAdvisor’s pre-priced product offering is also recorded on a gross basis effective January 1, 2020. In addition to changing the presentation of revenue to gross from net, the timing of revenue recognition will change for pre-priced jobs and will be later than the timing of existing consumer connection revenue for HomeAdvisor because the Company will not be able to record revenue, generally, until the service professional completes the job on the Company's behalf. The change to gross revenue reporting for Handy and HomeAdvisor’s pre-priced product offering, effective January 1, 2020, resulted in an increase in revenue of $15.2 million during the three months ended March 31, 2020.
Deferred Revenue
Deferred revenue consists of advance payments that are received or are contractually due in advance of the Company's performance. The Company’s deferred revenue is reported on a contract by contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of the Company's performance obligation is one year or less. The current and non-current deferred revenue balances at December 31, 2019 are $397.5 million and $1.3 million, respectively. During the three months ended March 31, 2020, the
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Company recognized $258.2 million of revenue that was included in the deferred revenue balance as of December 31, 2019. During the three months ended March 31, 2019, the Company recognized $234.8 million of revenue that was included in the deferred revenue balance as of December 31, 2018. The current and non-current deferred revenue balances at March 31, 2020 are $433.7 million and $1.3 million, respectively. Non-current deferred revenue is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.
Practical Expedients and Exemptions
As permitted under the practical expedient available under ASU No. 2014-09, Revenue from Contracts with Customers, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which the Company has the right to invoice for services performed.
For sales incentive programs where the customer relationship period is one year or less, the Company has elected the practical expedient to expense the costs as incurred. The amount of capitalized sales commissions where the customer relationship period is greater than one year is $47.5 million and $42.4 million at March 31, 2020 and December 31, 2019, respectively.
Certain Risks and Concentrations—Services Agreement with Google
A meaningful portion of the Company's revenue is attributable to a services agreement with Google (the "Services Agreement"). In addition, the Company earns certain other advertising revenue from Google that is not attributable to the Services Agreement. For the three months ended March 31, 2020 and 2019, consolidated revenue earned from Google was $138.9 million and $195.8 million, representing 11% and 18%, respectively, of the Company's consolidated revenue. Accounts receivable related to revenue earned from Google totaled $48.7 million and $53.0 million at March 31, 2020 and December 31, 2019, respectively.
Revenue attributable to the Services Agreement is earned by the Desktop business within the Applications segment and Ask Media Group within the Emerging & Other segment. For the three months ended March 31, 2020 and 2019, revenue earned from the Services Agreement was $46.1 million and $88.1 million, respectively, within the Applications segment and $80.5 million and $94.8 million, respectively, within the Emerging & Other segment.
The Services Agreement was scheduled to expire on March 31, 2020. On February 11, 2019, the Company and Google amended the Services Agreement, effective as of April 1, 2020. The amendment extends the expiration date of the agreement to March 31, 2023; provided that during September 2020 and during each September thereafter, either party may, after discussion with the other party, terminate the Services Agreement, effective on September 30 of the year following the year such notice is given. The Company believes that the amended agreement, taken as a whole, is comparable to the pre-amendment agreement with Google. The Services Agreement requires that the Company comply with certain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice. These updates may be specific to the Services Agreement or could be more general and thereby impact the Company as well as other companies. These policy and guideline updates could in turn require modifications to, or prohibit and/or render obsolete certain of the Company's products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on the Company's consolidated financial condition and results of operations, particularly the Desktop business and Ask Media Group. From time to time, Google has made changes to the policies under the Services Agreement and has also made industry-wide changes that have negatively impacted the Desktop business and may do so in the future.
Adoption of ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
The Company adopted ASU No. 2019-12 effective January 1, 2020, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within ASU No. 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted ASU No. 2019-12 on January 1, 2020 using the modified retrospective basis for those amendments that are not applied on a
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
prospective basis. The adoption of ASU No. 2019-12 did not have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—INCOME TAXES
At the end of each interim period, the Company estimates the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the Company's tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. Based on the Company's preliminary analysis of the CARES Act, IAC expects to avail itself of the following:
|
|
•
|
a refund of federal income taxes due to a five-year carryback of net operating loss incurred in 2019;
|
|
|
•
|
accelerated depreciation deductions;
|
|
|
•
|
a relaxation of interest expense deduction limitations for income tax purposes; and
|
|
|
•
|
a deferral of 2020 employer social security payroll taxes.
|
The Company continues to review and consider worldwide government programs related to the COVID-19 pandemic; however, the Company does not expect the impact of these programs to be material.
For the three months ended March 31, 2020, the Company recorded an income tax benefit of $89.9 million due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards and a revaluation of net operating loss deferred taxes due to the CARES Act, partially offset by the non-deductible portion of the Desktop goodwill impairment charge and unbenefited losses related to other investment impairments. For the three months ended March 31, 2019, the Company recorded an income tax benefit, despite pre-tax income, of $63.6 million, due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals for interest and penalties are not material.
The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service ("IRS") has substantially completed its audit of the Company’s federal income tax returns for the years ended December 31, 2010 through 2016, resulting in reductions to the manufacturing tax deduction and research credits claimed. The IRS is expected to begin an audit of the year ended December 31, 2017 in the second quarter. The statute of limitations for the years 2010 through 2012 has been extended to November 30, 2020 and the statute of limitations for the years 2013 through 2016 has been extended to March 31, 2021. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include unrecognized tax
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
benefits considered sufficient to pay assessments that may result from examination of prior year tax returns. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
At March 31, 2020 and December 31, 2019, unrecognized tax benefits, including interest and penalties, are $56.2 million and $74.4 million, respectively. Unrecognized tax benefits, including interest and penalties, at March 31, 2020 decreased by $18.2 million due primarily to the effective settlement of certain prior year tax positions with the IRS relating to the manufacturing tax deduction and research credits. If unrecognized tax benefits at March 31, 2020 are subsequently recognized, $51.1 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2019 was $69.2 million. The Company believes it is reasonably possible that its unrecognized tax benefits could decrease by $9.9 million by March 31, 2021, due primarily to expirations of statutes of limitations and other settlements, $9.7 million of which would reduce the income tax provision.
NOTE 3—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net are as follows:
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Goodwill
|
$
|
3,042,139
|
|
|
$
|
2,854,462
|
|
Intangible assets with indefinite lives
|
473,208
|
|
|
446,495
|
|
Intangible assets with definite lives, net of accumulated amortization
|
198,259
|
|
|
131,979
|
|
Total goodwill and intangible assets, net
|
$
|
3,713,606
|
|
|
$
|
3,432,936
|
|
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2019
|
|
Additions
|
|
(Deductions)
|
|
Impairment
|
|
Foreign
Exchange
Translation
|
|
Balance at
March 31, 2020
|
|
(In thousands)
|
Match Group
|
$
|
1,239,840
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(12,108
|
)
|
|
$
|
1,227,732
|
|
ANGI Homeservices
|
882,051
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,867
|
)
|
|
877,184
|
|
Vimeo
|
219,374
|
|
|
—
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
219,336
|
|
Applications:
|
|
|
|
|
|
|
|
|
|
|
|
Desktop
|
265,146
|
|
|
—
|
|
|
—
|
|
|
(211,973
|
)
|
|
—
|
|
|
53,173
|
|
Mosaic Group
|
239,602
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(134
|
)
|
|
239,468
|
|
Total Applications
|
504,748
|
|
|
—
|
|
|
—
|
|
|
(211,973
|
)
|
|
(134
|
)
|
|
292,641
|
|
Emerging & Other
|
8,449
|
|
|
416,797
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
425,246
|
|
Total
|
$
|
2,854,462
|
|
|
$
|
416,797
|
|
|
$
|
(38
|
)
|
|
$
|
(211,973
|
)
|
|
$
|
(17,109
|
)
|
|
$
|
3,042,139
|
|
Additions are related to the acquisition of Care.com (included in Emerging & Other Segment).
In connection with the first quarter close of its books, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its reporting units and indefinite-lived intangible assets. The Company
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
determined the fair value of these reporting units and indefinite-lived intangible assets as of March 31, 2020 and identified the following impairments:
|
|
•
|
a $212.0 million impairment related to the goodwill of the Desktop reporting unit;
|
|
|
•
|
a $21.4 million impairment related to certain indefinite-lived intangible assets of the Desktop reporting unit; and
|
|
|
•
|
a $4.6 million impairment related to certain indefinite-lived intangible assets of the Match Group reporting unit.
|
In addition, the updated valuation of the Mosaic Group reporting unit indicates that the fair value of this reporting unit approximates its carrying value. The goodwill of the Desktop and Mosaic Group reporting units is $53.2 million and $239.5 million, respectively, as of March 31, 2020. To the extent there is a decline in the fair value of these reporting units, a goodwill impairment would be recorded to the extent the carrying value exceeds the fair value.
The fair value of the Desktop and Mosaic Group reporting units was determined using both an income approach based on discounted cash flows ("DCF") and a market approach. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses were based on the most recent forecasts for Desktop and Mosaic Group for 2020 and each of the years in the forecast period, which were updated in light of COVID-19. For years beyond the forecast period, Desktop and Mosaic Group estimates were based, in part, on forecasted growth rates. The discount rates used in the DCF analyses were intended to reflect the risks inherent in the expected future cash flows of the Desktop and Mosaic Group reporting units. The discount rate used for determining the fair value of both the Desktop and Mosaic Group reporting units was 15.0%. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of the Desktop and Mosaic Group reporting units. To determine a peer group of companies for Desktop and Mosaic Group, the Company considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. The aggregate carrying value of goodwill for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately $709.4 million.
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2018
|
|
Additions
|
|
(Deductions)
|
|
Impairment
|
|
Foreign
Exchange
Translation
|
|
Balance at
December 31, 2019
|
|
(In thousands)
|
Match Group
|
$
|
1,245,013
|
|
|
$
|
3,553
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(8,726
|
)
|
|
$
|
1,239,840
|
|
ANGI Homeservices
|
892,800
|
|
|
18,326
|
|
|
(29,267
|
)
|
|
—
|
|
|
192
|
|
|
882,051
|
|
Vimeo
|
77,152
|
|
|
142,222
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
219,374
|
|
Applications:
|
|
|
|
|
|
|
|
|
|
|
|
Desktop
|
265,146
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
265,146
|
|
Mosaic Group
|
239,746
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(144
|
)
|
|
239,602
|
|
Total Applications
|
504,892
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(144
|
)
|
|
504,748
|
|
Emerging & Other
|
7,002
|
|
|
4,765
|
|
|
—
|
|
|
(3,318
|
)
|
|
—
|
|
|
8,449
|
|
Total
|
$
|
2,726,859
|
|
|
$
|
168,866
|
|
|
$
|
(29,267
|
)
|
|
$
|
(3,318
|
)
|
|
$
|
(8,678
|
)
|
|
$
|
2,854,462
|
|
Additions primarily relate to the acquisitions of Magisto (included in the Vimeo segment) and Fixd Repair (included in the ANGI Homeservices segment). Deductions primarily relate to tax benefits of acquired attributes related to the acquisition of Handy (included in the ANGI Homeservices segment). During the fourth quarter of 2019, the Company recorded an impairment charge of $3.3 million related to the goodwill of the College Humor Media business (included in the Emerging & Other Segment).
The March 31, 2020 and December 31, 2019 goodwill balances reflect accumulated impairment losses of $741.1 million and $529.1 million, respectively, at Applications. The March 31, 2020 and December 31, 2019 goodwill balances also reflect accumulated impairment losses of $399.7 million, $198.3 million, and $14.9 million at the businesses previously included in
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
the IAC Publishing segment (excluding Dotdash, included in the Emerging & Other segment), Dotdash and College Humor Media (included in the Emerging & Other segment), respectively.
As described above, since the effects of COVID-19 were an indicator of impairment, the Company updated its calculations of the fair value of its indefinite-lived intangible assets as of March 31, 2020. The Company recorded impairment charges of $21.4 million and $4.6 million at Desktop and MTCH, respectively, related to indefinite-lived trade names. The impairment of indefinite-lived intangible assets is included in “Amortization of intangibles” in the accompanying consolidated statement of operations. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses were intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses were based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. The discount rates used to value the trade names, including those that were impaired, in the first quarter of 2020 ranged from 10.5% to 15.0% and the royalty rates used ranged from 1.0% to 6.0%. The aggregate carrying value of indefinite-lived intangible assets for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately $162.5 million.
At March 31, 2020 and December 31, 2019, intangible assets with definite lives are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Weighted-Average
Useful Life
(Years)
|
|
(In thousands)
|
|
|
Technology
|
$
|
203,737
|
|
|
$
|
(87,442
|
)
|
|
$
|
116,295
|
|
|
4.7
|
Service professional relationships
|
99,850
|
|
|
(83,560
|
)
|
|
16,290
|
|
|
3.0
|
Customer lists and user base
|
79,768
|
|
|
(26,804
|
)
|
|
52,964
|
|
|
4.0
|
Trade names
|
21,868
|
|
|
(15,544
|
)
|
|
6,324
|
|
|
2.7
|
Memberships
|
15,900
|
|
|
(13,264
|
)
|
|
2,636
|
|
|
3.0
|
Other
|
14,703
|
|
|
(10,953
|
)
|
|
3,750
|
|
|
3.7
|
Total
|
$
|
435,826
|
|
|
$
|
(237,567
|
)
|
|
$
|
198,259
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Weighted-Average
Useful Life
(Years)
|
|
(In thousands)
|
|
|
Technology
|
$
|
154,052
|
|
|
$
|
(79,358
|
)
|
|
$
|
74,694
|
|
|
4.6
|
Service professional relationships
|
99,651
|
|
|
(76,445
|
)
|
|
23,206
|
|
|
2.9
|
Customer lists and user base
|
44,548
|
|
|
(24,488
|
)
|
|
20,060
|
|
|
3.3
|
Trade names
|
19,074
|
|
|
(13,068
|
)
|
|
6,006
|
|
|
3.2
|
Memberships
|
15,900
|
|
|
(11,940
|
)
|
|
3,960
|
|
|
3.0
|
Other
|
13,952
|
|
|
(9,899
|
)
|
|
4,053
|
|
|
3.7
|
Total
|
$
|
347,177
|
|
|
$
|
(215,198
|
)
|
|
$
|
131,979
|
|
|
3.8
|
At March 31, 2020, amortization of intangible assets with definite lives is estimated to be as follows:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
(In thousands)
|
Remainder of 2020
|
$
|
60,498
|
|
2021
|
45,014
|
|
2022
|
39,859
|
|
2023
|
30,119
|
|
2024
|
15,841
|
|
Thereafter
|
6,928
|
|
Total
|
$
|
198,259
|
|
NOTE 4—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Securities
At March 31, 2020 and December 31, 2019, the fair value of marketable securities are as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
Available-for-sale marketable debt securities
|
$
|
49,912
|
|
|
$
|
19,993
|
|
Total marketable securities
|
$
|
49,912
|
|
|
$
|
19,993
|
|
At March 31, 2020, current available-for-sale marketable debt securities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
(In thousands)
|
Treasury discount notes
|
$
|
49,924
|
|
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
$
|
49,912
|
|
Total available-for-sale marketable debt securities
|
$
|
49,924
|
|
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
$
|
49,912
|
|
The contractual maturities of debt securities classified as current available-for-sale at March 31, 2020 are within one year. There are no investments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of March 31, 2020 and December 31, 2019.
At December 31, 2019, current available-for-sale marketable debt securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
(In thousands)
|
Commercial paper
|
19,993
|
|
|
—
|
|
|
—
|
|
|
19,993
|
|
Total available-for-sale marketable debt securities
|
$
|
19,993
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,993
|
|
Equity Securities Without Readily Determinable Fair Values
At March 31, 2020 and December 31, 2019, the carrying values of the Company's investments in equity securities without readily determinable fair values totaled $301.6 million and $353.1 million, respectively, and are included in "Long-term investments" in the accompanying consolidated balance sheet. During the first quarter of 2020, the Company recorded unrealized impairments of $51.5 million related to certain equity securities without readily determinable fair values due to the impact of COVID-19. All gains and losses on equity securities without readily determinable fair values, realized and unrealized, are recognized in "Other (expense) income, net" in the accompanying consolidated statement of operations.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents a summary of unrealized gains and losses recorded in "Other (expense) income, net," as adjustments to the carrying value of equity securities without readily determinable fair values held as of March 31, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Upward adjustments (gross unrealized gains)
|
$
|
—
|
|
|
$
|
—
|
|
Downward adjustments including impairment (gross unrealized losses)
|
(51,484
|
)
|
|
(150
|
)
|
Total
|
$
|
(51,484
|
)
|
|
$
|
(150
|
)
|
The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at March 31, 2020 were $19.9 million and $58.1 million, respectively.
Realized and unrealized gains and losses for the Company's marketable equity securities and investments without readily determinable fair values for the three months ended March 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Realized gains, net, for equity securities sold
|
$
|
12
|
|
|
$
|
78
|
|
Unrealized losses, net, on equity securities held
|
(51,484
|
)
|
|
(122
|
)
|
Total losses, net recognized in other (expense) income, net
|
$
|
(51,472
|
)
|
|
$
|
(44
|
)
|
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
|
|
•
|
Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
|
|
|
•
|
Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
|
|
|
•
|
Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
Fair Value
Measurements
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
2,007,519
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,007,519
|
|
Treasury discount notes
|
—
|
|
|
99,882
|
|
|
—
|
|
|
99,882
|
|
Time deposits
|
—
|
|
|
72,809
|
|
|
—
|
|
|
72,809
|
|
Short-term investments
|
—
|
|
|
20,000
|
|
|
—
|
|
|
20,000
|
|
Marketable securities:
|
|
|
|
|
|
|
|
Treasury discount notes
|
—
|
|
|
49,912
|
|
|
—
|
|
|
49,912
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
Warrant
|
—
|
|
|
—
|
|
|
6,489
|
|
|
6,489
|
|
Total
|
$
|
2,007,519
|
|
|
$
|
242,603
|
|
|
$
|
6,489
|
|
|
$
|
2,256,611
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Contingent consideration arrangement
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(636
|
)
|
|
$
|
(636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
Fair Value
Measurements
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
2,164,576
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,164,576
|
|
Treasury discount notes
|
—
|
|
|
199,896
|
|
|
—
|
|
|
199,896
|
|
Time deposits
|
—
|
|
|
128,075
|
|
|
—
|
|
|
128,075
|
|
Commercial paper
|
—
|
|
|
29,960
|
|
|
—
|
|
|
29,960
|
|
Marketable securities:
|
|
|
|
|
|
|
|
Commercial paper
|
—
|
|
|
19,993
|
|
|
—
|
|
|
19,993
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
Warrant
|
—
|
|
|
—
|
|
|
8,495
|
|
|
8,495
|
|
Total
|
$
|
2,164,576
|
|
|
$
|
377,924
|
|
|
$
|
8,495
|
|
|
$
|
2,550,995
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Contingent consideration arrangement
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(6,918
|
)
|
|
$
|
(6,918
|
)
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
Warrant
|
|
Contingent
Consideration
Arrangements
|
|
Contingent
Consideration
Arrangement
|
|
(In thousands)
|
Balance at January 1
|
$
|
8,495
|
|
|
$
|
(6,918
|
)
|
|
$
|
(28,631
|
)
|
Total net (losses) gains:
|
|
|
|
|
|
Included in earnings:
|
|
|
|
|
|
Fair value adjustments
|
(2,006
|
)
|
|
6,282
|
|
|
(1,529
|
)
|
Included in other comprehensive loss
|
—
|
|
|
—
|
|
|
(14
|
)
|
Fair value at date of acquisition
|
—
|
|
|
(1,000
|
)
|
|
—
|
|
Settlements
|
—
|
|
|
1,000
|
|
|
1,988
|
|
Balance at March 31
|
$
|
6,489
|
|
|
$
|
(636
|
)
|
|
$
|
(28,186
|
)
|
Warrant
As part of the Company’s investment in Turo, a peer-to-peer car sharing marketplace, the Company received a warrant that is net settleable at the Company's option and is recorded at fair value each reporting period with any change included in "Other (expense) income, net" in the accompanying consolidated statement of operations. The warrant is measured using significant unobservable inputs and is classified in the fair value hierarchy table as Level 3. The warrant is included in "Other non-current assets" in the accompanying consolidated balance sheet.
Contingent Consideration Arrangements
At March 31, 2020, the Company has one outstanding contingent consideration arrangement related to a business acquisition. The arrangement has a remaining total maximum contingent payment of $30.0 million. At March 31, 2020, the gross fair value of this arrangement, before unamortized discount, is $1.3 million. In connection with the Care.com acquisition on February 11, 2020, the Company assumed a contingent consideration arrangement liability of $1.0 million, which was subsequently paid during the first quarter of 2020. During the first quarter of 2019, the Company paid $2.0 million to settle a contingent consideration arrangement that was outstanding at December 31, 2018.
Generally, the Company's contingent consideration arrangements are based upon financial performance and/or operating metric targets and the Company generally determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangements are initially long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligations to determine the net amount reflected in the consolidated financial statements. The fair values of the contingent consideration arrangement at March 31, 2020 and December 31, 2019 reflect a discount rate of 25%.
The fair value of contingent consideration arrangements is sensitive to changes in the expected achievement of the applicable targets and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, including the accretion of the discount, if applicable, and changes are recognized in "General and administrative expense" in the accompanying consolidated statement of operations. The contingent consideration arrangement liability at March 31, 2020 and December 31, 2019 includes a non-current portion of $0.6 million and $6.9 million, respectively. The non-current portion of the contingent consideration liability is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Assets measured at fair value on a nonrecurring basis
The Company's non-financial assets, such as goodwill, intangible assets, ROU assets and property, capitalized software and equipment, are adjusted to fair value only when an impairment is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs. See "Note 3—Goodwill and Intangible Assets" for a detailed description of the Desktop goodwill and indefinite-lived intangible asset impairments recorded in the quarter ended March 31, 2020.
Financial instruments measured at fair value only for disclosure purposes
The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
|
(In thousands)
|
Current portion of long-term debt
|
$
|
(13,750
|
)
|
|
$
|
(13,750
|
)
|
|
$
|
(13,750
|
)
|
|
$
|
(13,681
|
)
|
Long-term debt, net(a)
|
(3,625,008
|
)
|
|
(4,017,844
|
)
|
|
(3,121,572
|
)
|
|
(4,136,988
|
)
|
_____________________
|
|
(a)
|
At March 31, 2020 and December 31, 2019, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $397.8 million and $404.7 million, respectively.
|
At March 31, 2020 and December 31, 2019, the fair value of long-term debt is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5—LONG-TERM DEBT
Long-term debt consists of:
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
MTCH debt:
|
|
|
|
MTCH Term Loan due February 13, 2027
|
$
|
425,000
|
|
|
$
|
425,000
|
|
6.375% Senior Notes due June 1, 2024 (the "6.375% MTCH Senior Notes"); interest payable each June 1 and December 1
|
400,000
|
|
|
400,000
|
|
5.00% Senior Notes due December 15, 2027 (the "5.00% MTCH Senior Notes"); interest payable each June 15 and December 15
|
450,000
|
|
|
450,000
|
|
5.625% Senior Notes due February 15, 2029 (the "5.625% MTCH Senior Notes"); interest payable each February 15 and August 15
|
350,000
|
|
|
350,000
|
|
4.125% Senior Notes due August 1, 2030 (the "4.125% MTCH Senior Notes"); interest payable each February 1 and August 1; commencing August 1, 2020
|
500,000
|
|
|
—
|
|
Total MTCH long-term debt
|
2,125,000
|
|
|
1,625,000
|
|
Less: unamortized original issue discount
|
6,618
|
|
|
6,282
|
|
Less: unamortized debt issuance costs
|
20,428
|
|
|
15,235
|
|
Total MTCH debt, net
|
2,097,954
|
|
|
1,603,483
|
|
|
|
|
|
ANGI debt:
|
|
|
|
ANGI Term Loan due November 5, 2023
|
244,063
|
|
|
247,500
|
|
Less: current portion of ANGI Term Loan
|
13,750
|
|
|
13,750
|
|
Less: unamortized debt issuance costs
|
1,670
|
|
|
1,804
|
|
Total ANGI debt, net
|
228,643
|
|
|
231,946
|
|
|
|
|
|
IAC debt:
|
|
|
|
0.875% Exchangeable Senior Notes due October 1, 2022 (the "2022 Exchangeable Notes"); interest payable each April 1 and October 1
|
517,500
|
|
|
517,500
|
|
0.875% Exchangeable Senior Notes due June 15, 2026 (the "2026 Exchangeable Notes"); interest payable each June 15 and December 15
|
575,000
|
|
|
575,000
|
|
2.00% Exchangeable Senior Notes due January 15, 2030 (the "2030 Exchangeable Notes"); interest payable each January 15 and July 15
|
575,000
|
|
|
575,000
|
|
Total IAC long-term debt
|
1,667,500
|
|
|
1,667,500
|
|
Less: unamortized original issue discount
|
340,688
|
|
|
351,605
|
|
Less: unamortized debt issuance costs
|
28,401
|
|
|
29,752
|
|
Total IAC debt, net
|
1,298,411
|
|
|
1,286,143
|
|
|
|
|
|
Total long-term debt, net
|
$
|
3,625,008
|
|
|
$
|
3,121,572
|
|
MTCH Senior Notes
The 6.375% MTCH Senior Notes were issued on June 1, 2016 and are currently redeemable. These notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The 5.00% MTCH Senior Notes were issued on December 4, 2017. At any time prior to December 15, 2022, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
The 5.625% MTCH Senior Notes were issued on February 15, 2019. The proceeds were used to repay outstanding borrowings under the MTCH Credit Facility, to pay expenses associated with the offering, and for general corporate purposes. At any time prior to February 15, 2024, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
The 4.125% MTCH Senior Notes were issued on February 11, 2020. The proceeds from the offering will be used to fund a portion of the cash consideration of $3.00 per MTCH common share that will be payable in connection with the Separation. If the Separation is not consummated, the proceeds will be used by MTCH for general corporate purposes. At any time prior to May 1, 2025, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
The indentures governing the 6.375% and 5.00% MTCH Senior Notes contain covenants that would limit MTCH's ability to pay dividends, make distributions or repurchase MTCH stock in the event a default has occurred or MTCH's consolidated leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0. At March 31, 2020, there were no limitations pursuant thereto. There are additional covenants in these indentures that limit MTCH's ability and the ability of its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MTCH is not in compliance with certain ratios set forth in the indentures, and (ii) incur liens, enter into agreements restricting MTCH subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets. The indentures governing the 5.625% and 4.125% MTCH Senior Notes are less restrictive than the indentures governing the 6.375% and 5.00% MTCH Senior Notes and generally only limits MTCH's ability and the ability of its subsidiaries to, among other things, create liens on assets and limits MTCH's ability to consolidate, merge, sell or otherwise dispose of all or substantially all of its assets.
MTCH's Senior Notes are ranked equally with each other.
MTCH Term Loan and MTCH Credit Facility
At both March 31, 2020 and December 31, 2019, the outstanding balance on the MTCH Term Loan was $425 million. On February 13, 2020, the MTCH Term Loan was amended to reprice the outstanding balance to LIBOR plus 1.75% and extend its maturity to February 13, 2027. Prior to the amendment, the MTCH Term Loan bore interest at LIBOR plus 2.50%. The interest rate was 3.46% and 4.44% at March 31, 2020 and December 31, 2019, respectively. The MTCH Term Loan provides for annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio contained in the credit agreement. Interest payments are due at least quarterly through the term of the loan.
At March 31, 2020, MTCH has a $750 million revolving credit facility (the "MTCH Credit Facility"). On February 13, 2020, the MTCH Credit Facility was amended to increase the available borrowing capacity from $500 million to $750 million, reduce interest rate margins by 0.125%, and extend its maturity from December 7, 2023 to February 13, 2025. At March 31, 2020 and December 31, 2019, there were no outstanding borrowings under the MTCH Credit Facility. The annual commitment fee on undrawn funds is based on the current consolidated net leverage ratio and was 30 basis points and 25 basis points at March 31, 2020 and December 31, 2019, respectively. Borrowings under the MTCH Credit Facility bear interest, at MTCH's option, at a base rate or LIBOR, in each case plus an applicable margin, which is based on MTCH's consolidated net leverage ratio. The terms of the MTCH Credit Facility require MTCH to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The MTCH Term Loan and MTCH Credit Facility contain covenants that would limit MTCH’s ability to pay dividends, make distributions or repurchase MTCH stock in the event MTCH’s secured net leverage ratio exceeds 2.0 to 1.0, while the MTCH Term Loan remains outstanding and, thereafter, if the consolidated net leverage ratio exceeds 4.0 to 1.0, or in the event a default has occurred. At March 31, 2020, there were no limitations pursuant thereto. There are additional covenants under these MTCH debt agreements that limit the ability of MTCH and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. Obligations under the MTCH Credit Facility and MTCH Term Loan are unconditionally guaranteed by certain MTCH wholly-owned domestic subsidiaries and are also secured by the stock of certain MTCH domestic and foreign subsidiaries. The MTCH Term Loan and outstanding borrowings, if any, under the MTCH Credit Facility rank equally with each other, and have priority over the MTCH Senior Notes to the extent of the value of the assets securing the borrowings under the MTCH credit agreement.
ANGI Term Loan and ANGI Credit Facility
The outstanding balance of the ANGI Term Loan was $244.1 million and $247.5 million at March 31, 2020 and December 31, 2019, respectively. There are quarterly principal payments of $3.4 million through December 31, 2021, $6.9 million for the one-year period ending December 31, 2022 and $10.3 million through maturity of the loan when the final amount of $161.6 million is due. Additionally, interest payments are due at least quarterly through the term of the loan. At both March 31, 2020 and December 31, 2019, the ANGI Term Loan bore interest at LIBOR plus 1.50%, or 2.28% and 3.25%, respectively. The spread over LIBOR is subject to change in future periods based on ANGI's consolidated net leverage ratio.
The terms of the ANGI Term Loan require ANGI to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0 (in each case as defined in the credit agreement). The ANGI Term Loan also contains covenants that would limit ANGI’s ability to pay dividends, make distributions or repurchase ANGI stock in the event a default has occurred or ANGI’s consolidated net leverage ratio exceeds 4.25 to 1.0. At March 31, 2020, there were no limitations pursuant thereto. There are additional covenants under the ANGI Term Loan that limit the ability of ANGI and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions.
The $250 million revolving credit facility (the "ANGI Credit Facility") expires on November 5, 2023. At March 31, 2020 and December 31, 2019, there were no outstanding borrowings under the ANGI Credit Facility. The annual commitment fee on undrawn funds is based on ANGI's consolidated net leverage ratio most recently reported and was 25 basis points at both March 31, 2020 and December 31, 2019. Borrowings under the ANGI Credit Facility bear interest, at ANGI's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is based on ANGI's consolidated net leverage ratio. The financial and other covenants are the same as those for the ANGI Term Loan.
The ANGI Term Loan and ANGI Credit Facility are guaranteed by ANGI's wholly-owned material domestic subsidiaries and are secured by substantially all assets of ANGI and the guarantors, subject to certain exceptions.
IAC Exchangeable Notes
On October 2, 2017, IAC FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company issued $517.5 million aggregate principal amount of its 2022 Exchangeable Notes. During 2019, IAC FinanceCo 2, Inc. and IAC FinanceCo 3, Inc., direct, wholly-owned subsidiaries of the Company, issued $575.0 million aggregate principal amount of its 2026 Exchangeable Notes and $575.0 million aggregate principal amount of its 2030 Exchangeable Notes, respectively.
The 2022, 2026 and 2030 Exchangeable Notes (collectively the "Exchangeable Notes") are guaranteed by the Company.
The following table presents detail of the exchangeable feature:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares of the Company's Common Stock into which each $1,000 of Principal of the Exchangeable Notes is Exchangeable*
|
|
Approximate Equivalent Exchange Price per Share*
|
|
Exchangeable Date
|
2022 Exchangeable Notes
|
|
6.5713
|
|
$
|
152.18
|
|
|
July 1, 2022
|
2026 Exchangeable Notes
|
|
3.3028
|
|
$
|
302.77
|
|
|
March 15, 2026
|
2030 Exchangeable Notes
|
|
3.4323
|
|
$
|
291.35
|
|
|
October 15, 2029
|
_____________________
* Subject to adjustment upon the occurrence of specified events.
The Exchangeable Notes are exchangeable under the following circumstances:
(1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days during the period of 30 consecutive trading days during the immediately preceding calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day;
(2) during the five-business day period after any five-consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the exchange rate on each such trading day;
(3) if the issuer calls the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
(4) upon the occurrence of specified corporate events as further described under the indentures governing the respective Exchangeable Notes.
On or after the respective exchangeable dates noted in the table above, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may exchange all or any portion of their Exchangeable Notes regardless of the foregoing conditions. Upon exchange, the Company, in its sole discretion, has the option to settle the Exchangeable Notes with any of the three following alternatives: (1) shares of the Company's common stock, (2) cash or (3) a combination of cash and shares of the Company's common stock. It is the Company's intention to settle the Exchangeable Notes with cash equal to the face amount of the notes upon exchange; any shares issued would be offset by shares received upon exercise of the Exchangeable Note Hedges (described below).
The Company’s 2022 Exchangeable Notes are currently exchangeable; during the three months ended March 31, 2020, no notes were exchanged. The if-converted value of the 2022 Exchangeable Notes exceeded its principal amount of $517.5 million by $92.0 million and $329.6 million based on the Company's stock price on March 31, 2020 and December 31, 2019, respectively. Any dilution arising from the 2022 Exchangeable Notes would be mitigated by the 2022 Exchangeable Notes Hedge.
Additionally, each of IAC FinanceCo 2, Inc. and IAC FinanceCo 3, Inc. may redeem for cash all or any portion of its applicable notes, at its option, on or after June 20, 2023 and July 20, 2026, respectively, if the last reported sale price of the common stock underlying the respective notes has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the notice of redemption is provided, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the applicable issuer provides notice of redemption, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The Company separately accounts for the debt and equity components of the Exchangeable Notes, and therefore, the Company recorded an original issue discount and corresponding increase to additional paid-in capital, which is the fair value attributed to the exchange feature of each series of debt at issuance. The Company is amortizing the original issue discount and debt issuance costs utilizing the effective interest method over the life of the Exchangeable Notes. The effective interest rates for the 2022, 2026 and 2030 Exchangeable Notes are 4.73%, 5.35% and 6.59%, respectively.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table sets forth the components of the Exchangeable Notes as of March 31, 2020 and December 31, 2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
Liability component:
|
|
|
|
|
|
|
Principal
|
|
$
|
517,500
|
|
|
$
|
575,000
|
|
|
$
|
575,000
|
|
Less: unamortized original issue discount
|
|
37,314
|
|
|
124,820
|
|
|
178,554
|
|
Net carrying value of the liability component
|
|
$
|
480,186
|
|
|
$
|
450,180
|
|
|
$
|
396,446
|
|
|
|
|
|
|
|
|
Equity component
|
|
$
|
70,363
|
|
|
$
|
138,796
|
|
|
$
|
189,213
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
Liability component:
|
|
|
|
|
|
|
Principal
|
|
$
|
517,500
|
|
|
$
|
575,000
|
|
|
$
|
575,000
|
|
Less: unamortized original issue discount
|
|
40,768
|
|
|
129,037
|
|
|
181,800
|
|
Net carrying value of the liability component
|
|
$
|
476,732
|
|
|
$
|
445,963
|
|
|
$
|
393,200
|
|
|
|
|
|
|
|
|
Equity component
|
|
$
|
70,363
|
|
|
$
|
138,796
|
|
|
$
|
189,213
|
|
The following table sets forth interest expense recognized related to the Exchangeable Notes (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
Contractual interest expense
|
|
$
|
1,132
|
|
|
$
|
1,258
|
|
|
$
|
2,875
|
|
Amortization of original issue discount
|
|
3,454
|
|
|
4,217
|
|
|
3,246
|
|
Amortization of debt issuance costs
|
|
855
|
|
|
319
|
|
|
176
|
|
Total interest expense recognized
|
|
$
|
5,441
|
|
|
$
|
5,794
|
|
|
$
|
6,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
|
|
|
|
|
2022 Exchangeable Notes
|
|
|
|
|
Contractual interest expense
|
|
$
|
1,132
|
|
|
|
|
|
Amortization of original issue discount
|
|
3,363
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
871
|
|
|
|
|
|
Total interest expense recognized
|
|
$
|
5,366
|
|
|
|
|
|
Exchangeable Notes Hedge and Warrants
In connection with the Exchangeable Notes offerings, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon the occurrence of specified events) the same number of shares that would be issuable upon the exchange of the applicable Exchangeable Notes at the price per share set forth below (the "Exchangeable
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Notes Hedge"), and sold warrants allowing the counterparty to purchase (subject to adjustment upon the occurrence of specified events) shares at the per share price set forth below (the "Exchangeable Notes Warrants").
The Exchangeable Notes Hedges are expected to reduce the potential dilutive effect on the Company's common stock upon any exchange of notes and/or offset any cash payment IAC FinanceCo, Inc., IAC FinanceCo 2, Inc. or IAC FinanceCo 3, Inc. is required to make in excess of the principal amount of the exchanged notes. The Exchangeable Notes Warrants have a dilutive effect on the Company's common stock to the extent that the market price per share of the Company common stock exceeds their respective strike prices.
The following tables presents details of the Exchangeable Notes Hedges and Warrants (shares in millions):
|
|
|
|
|
|
|
|
|
Number of Shares*
|
|
Approximate Equivalent Exchange Price per Share*
|
2022 Exchangeable Notes Hedge
|
3.4
|
|
|
$
|
152.18
|
|
2026 Exchangeable Notes Hedge
|
1.9
|
|
|
$
|
302.77
|
|
2030 Exchangeable Notes Hedge
|
2.0
|
|
|
$
|
291.35
|
|
|
|
|
|
|
|
|
|
|
Number of Shares*
|
|
Strike Price per Share*
|
2022 Exchangeable Notes Warrants
|
3.4
|
|
|
$
|
229.70
|
|
2026 Exchangeable Notes Warrants
|
1.9
|
|
|
$
|
457.02
|
|
2030 Exchangeable Notes Warrants
|
2.0
|
|
|
$
|
457.02
|
|
_____________________
* Subject to adjustment upon the occurrence of specified events.
IAC Credit Facility
At March 31, 2020, IAC had a $250 million revolving credit facility (the "IAC Credit Facility"), under which IAC Group, LLC, a subsidiary of the Company, is the borrower ("Borrower"), that expires on November 5, 2023. At March 31, 2020 and December 31, 2019, there were no outstanding borrowings under the IAC Credit Facility. The annual commitment fee on undrawn funds is based on the consolidated net leverage ratio (as defined in the agreement) most recently reported and was 20 basis points at both March 31, 2020 and December 31, 2019. Borrowings under the IAC Credit Facility bear interest, at the Borrower's option, at a base rate or LIBOR, in each case, plus an applicable margin, which is based on the Borrower's consolidated net leverage ratio. The terms of the IAC Credit Facility require that the Borrower maintains a consolidated net leverage ratio of not more than 3.25 to 1.0 before the date on which the Borrower no longer holds majority of the outstanding voting stock of each of ANGI and MTCH ("Trigger Date") and no greater than 2.75 to 1.0 on or after the Trigger Date. The terms of the IAC Credit Facility also restrict the Company's ability to incur additional indebtedness. Borrowings under the IAC Credit Facility are unconditionally guaranteed by certain of the Company's wholly-owned domestic subsidiaries and are also secured by the stock of certain of its domestic and foreign subsidiaries, including the shares of MTCH and ANGI owned by the Borrower.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Long-term Debt Maturities
Long-term debt maturities as of March 31, 2020 are summarized in the table below:
|
|
|
|
|
|
(In thousands)
|
Remainder of 2020
|
$
|
10,313
|
|
2021
|
13,750
|
|
2022
|
545,000
|
|
2023
|
192,500
|
|
2024
|
400,000
|
|
Thereafter
|
2,875,000
|
|
Total
|
4,036,563
|
|
Less: current portion of long-term debt
|
13,750
|
|
Less: unamortized original issue discount
|
347,306
|
|
Less: unamortized debt issuance costs
|
50,499
|
|
Total long-term debt, net
|
$
|
3,625,008
|
|
NOTE 6—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated other comprehensive loss into earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Losses On Available-For-Sale Debt Securities
|
|
Accumulated Other Comprehensive Loss
|
|
(In thousands)
|
Balance as of January 1
|
$
|
(136,349
|
)
|
|
$
|
—
|
|
|
$
|
(136,349
|
)
|
Other comprehensive loss before reclassifications
|
(21,307
|
)
|
|
(12
|
)
|
|
(21,319
|
)
|
Amounts reclassified to earnings
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
Net current period other comprehensive loss
|
(21,327
|
)
|
|
(12
|
)
|
|
(21,339
|
)
|
Allocation of accumulated other comprehensive loss related to noncontrolling interests
|
403
|
|
|
—
|
|
|
403
|
|
Balance as of March 31
|
$
|
(157,273
|
)
|
|
$
|
(12
|
)
|
|
$
|
(157,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gains On Available-For-Sale Debt Securities
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
(In thousands)
|
Balance as of January 1
|
$
|
(128,726
|
)
|
|
$
|
4
|
|
|
$
|
(128,722
|
)
|
Other comprehensive income
|
993
|
|
|
2
|
|
|
995
|
|
Net current period other comprehensive income
|
993
|
|
|
2
|
|
|
995
|
|
Allocation of accumulated other comprehensive income related to noncontrolling interests
|
1,008
|
|
|
—
|
|
|
1,008
|
|
Balance as of March 31
|
$
|
(126,725
|
)
|
|
$
|
6
|
|
|
$
|
(126,719
|
)
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At both March 31, 2020 and 2019, there was no tax benefit or provision on the accumulated other comprehensive loss.
NOTE 7—(LOSS) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted (loss) earnings per share attributable to IAC shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
(In thousands, except per share data)
|
Numerator:
|
|
|
|
|
|
|
|
Net (loss) earnings
|
$
|
(182,643
|
)
|
|
$
|
(182,643
|
)
|
|
$
|
112,985
|
|
|
$
|
112,985
|
|
Net earnings attributable to noncontrolling interests
|
(28,397
|
)
|
|
(28,397
|
)
|
|
(24,290
|
)
|
|
(24,290
|
)
|
Impact from public subsidiaries' dilutive securities (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,696
|
)
|
Net (loss) earnings attributable to IAC shareholders
|
$
|
(211,040
|
)
|
|
$
|
(211,040
|
)
|
|
$
|
88,695
|
|
|
$
|
81,999
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding
|
84,839
|
|
|
84,839
|
|
|
83,905
|
|
|
83,905
|
|
Dilutive securities(a) (b) (c) (d) (e)
|
—
|
|
|
—
|
|
|
—
|
|
|
6,435
|
|
Denominator for earnings per share—weighted average shares (a) (b) (c) (d) (e)
|
84,839
|
|
|
84,839
|
|
|
83,905
|
|
|
90,340
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share attributable to IAC shareholders:
|
(Loss) earnings per share
|
$
|
(2.49
|
)
|
|
$
|
(2.49
|
)
|
|
$
|
1.06
|
|
|
$
|
0.91
|
|
_____________________
|
|
(a)
|
For the three months ended March 31, 2020, the Company had a loss from operations and as a result, approximately 19.7 million potentially dilutive securities were excluded from computing dilutive earnings per share because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute all earnings per share amounts.
|
|
|
(b)
|
IAC has the option to settle certain MTCH and ANGI stock-based awards in its shares. For the three months ended March 31, 2020, the Company had a loss from operations, therefore, the impact on earnings related to MTCH and ANGI's dilutive securities under the if-converted method are excluded as the impact is anti-dilutive. For the three months ended March 31, 2019, it is more dilutive for IAC to settle these ANGI equity awards and MTCH to settle these MTCH equity awards.
|
|
|
(c)
|
If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options, warrants and subsidiary denominated equity, exchange of the Company's Exchangeable Notes and vesting of restricted stock units ("RSUs"). For the three months ended March 31, 2019, 3.4 million potentially dilutive securities are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
|
|
|
(d)
|
Market-based awards and performance-based stock units ("PSUs") are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods. For the three months ended March 31, 2019, 0.3 million shares underlying market-based awards and PSUs were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met.
|
|
|
(e)
|
It is the Company's intention to settle the Exchangeable Notes through a combination of cash, equal to the face amount of the notes, and shares; therefore, the Exchangeable Notes are only dilutive for periods during which the average price of IAC common stock exceeds the approximate $152.18, $302.77 and $291.35 per share exchange price per $1,000 principal amount of the 2022 Exchangeable Notes, the 2026 Exchangeable Notes and the 2030 Exchangeable Notes, respectively. The average price of IAC common stock was $207.01 for the three months ended March 31, 2019 and the dilutive impact of the 2022 Exchangeable Notes, which was the only series of Exchangeable Notes that was outstanding for the period, was 0.9 million shares.
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 8—SEGMENT INFORMATION
The overall concept that the Company employs in determining its operating segments is to present the financial information in a manner consistent with: how the chief operating decision maker views the businesses; how the businesses are organized as to segment management; and the focus of the businesses with regards to the types of services or products offered or the target market. Operating segments are combined for reporting purposes if they meet certain aggregation criteria, which principally relate to the similarity of their economic characteristics or, in the case of the Emerging & Other reportable segment, do not meet the quantitative thresholds that require presentation as separate reportable segments.
The following table presents revenue by reportable segment:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Revenue:
|
|
|
|
Match Group
|
$
|
544,642
|
|
|
$
|
464,625
|
|
ANGI Homeservices
|
343,650
|
|
|
303,443
|
|
Vimeo
|
56,968
|
|
|
43,581
|
|
Dotdash
|
44,120
|
|
|
33,961
|
|
Applications
|
104,148
|
|
|
143,549
|
|
Emerging & Other
|
135,305
|
|
|
116,748
|
|
Inter-segment eliminations
|
(68
|
)
|
|
(64
|
)
|
Total
|
$
|
1,228,765
|
|
|
$
|
1,105,843
|
|
The following table presents the revenue of the Company's segments disaggregated by type of service:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Match Group
|
|
|
|
Direct revenue:
|
|
|
|
North America
|
$
|
263,347
|
|
|
$
|
237,773
|
|
International
|
271,477
|
|
|
216,189
|
|
Total Direct revenue
|
534,824
|
|
|
453,962
|
|
Indirect revenue (principally advertising revenue)
|
9,818
|
|
|
10,663
|
|
Total Match Group revenue
|
$
|
544,642
|
|
|
$
|
464,625
|
|
|
|
|
|
ANGI Homeservices
|
|
|
|
Marketplace:
|
|
|
|
Consumer connection revenue
|
$
|
239,830
|
|
|
$
|
201,582
|
|
Service professional membership subscription revenue
|
14,115
|
|
|
16,517
|
|
Other revenue
|
4,831
|
|
|
2,401
|
|
Total Marketplace revenue
|
258,776
|
|
|
220,500
|
|
Advertising and other revenue
|
65,356
|
|
|
61,494
|
|
Total North America revenue
|
324,132
|
|
|
281,994
|
|
Consumer connection revenue
|
15,689
|
|
|
17,123
|
|
Service professional membership subscription revenue
|
3,299
|
|
|
3,742
|
|
Advertising and other revenue
|
530
|
|
|
584
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Total Europe revenue
|
19,518
|
|
|
21,449
|
|
Total ANGI Homeservices revenue
|
$
|
343,650
|
|
|
$
|
303,443
|
|
|
|
|
|
Vimeo
|
|
|
|
Platform revenue
|
$
|
56,968
|
|
|
$
|
41,302
|
|
Hardware revenue
|
—
|
|
|
2,279
|
|
Total Vimeo revenue
|
$
|
56,968
|
|
|
$
|
43,581
|
|
|
|
|
|
Dotdash
|
|
|
|
Display advertising revenue
|
$
|
29,889
|
|
|
$
|
26,008
|
|
Performance marketing revenue
|
14,231
|
|
|
7,953
|
|
Total Dotdash revenue
|
$
|
44,120
|
|
|
$
|
33,961
|
|
|
|
|
|
Applications
|
|
|
|
Desktop:
|
|
|
|
Advertising revenue:
|
|
|
|
Google advertising revenue
|
$
|
46,091
|
|
|
$
|
88,050
|
|
Non-Google advertising revenue
|
3,223
|
|
|
3,348
|
|
Total advertising revenue
|
49,314
|
|
|
91,398
|
|
Subscription and other revenue
|
4,157
|
|
|
4,588
|
|
Total Desktop revenue
|
53,471
|
|
|
95,986
|
|
Mosaic Group:
|
|
|
|
Subscription and other revenue
|
49,071
|
|
|
45,148
|
|
Advertising revenue
|
1,606
|
|
|
2,415
|
|
Total Mosaic Group revenue
|
50,677
|
|
|
47,563
|
|
Total Applications revenue
|
$
|
104,148
|
|
|
$
|
143,549
|
|
|
|
|
|
Emerging & Other
|
|
|
|
Advertising revenue:
|
|
|
|
Google advertising revenue
|
$
|
81,968
|
|
|
$
|
96,273
|
|
Non-Google advertising revenue
|
22,261
|
|
|
7,176
|
|
Total advertising revenue
|
104,229
|
|
|
103,449
|
|
Other revenue
|
31,076
|
|
|
13,299
|
|
Total Emerging & Other revenue
|
$
|
135,305
|
|
|
$
|
116,748
|
|
Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Revenue:
|
|
|
|
United States
|
$
|
787,340
|
|
|
$
|
712,381
|
|
All other countries
|
441,425
|
|
|
393,462
|
|
Total
|
$
|
1,228,765
|
|
|
$
|
1,105,843
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
|
(In thousands)
|
Long-lived assets (excluding goodwill, intangible assets and ROU assets):
|
|
|
|
United States
|
$
|
348,146
|
|
|
$
|
345,937
|
|
All other countries
|
25,415
|
|
|
25,416
|
|
Total
|
$
|
373,561
|
|
|
$
|
371,353
|
|
The following tables present operating income (loss) and Adjusted EBTIDA by reportable segment:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Operating income (loss):
|
|
|
|
Match Group
|
$
|
134,681
|
|
|
$
|
118,828
|
|
ANGI Homeservices
|
(16,296
|
)
|
|
(3,641
|
)
|
Vimeo
|
(14,589
|
)
|
|
(17,784
|
)
|
Dotdash
|
2,411
|
|
|
3,047
|
|
Applications
|
(218,588
|
)
|
|
25,356
|
|
Emerging & Other
|
(19,845
|
)
|
|
(2,520
|
)
|
Corporate
|
(45,554
|
)
|
|
(43,413
|
)
|
Total
|
$
|
(177,780
|
)
|
|
$
|
79,873
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Adjusted EBITDA (a):
|
|
|
|
Match Group
|
$
|
171,502
|
|
|
$
|
155,067
|
|
ANGI Homeservices
|
$
|
34,397
|
|
|
$
|
37,179
|
|
Vimeo
|
$
|
(11,408
|
)
|
|
$
|
(16,200
|
)
|
Dotdash
|
$
|
7,011
|
|
|
$
|
7,150
|
|
Applications
|
$
|
10,151
|
|
|
$
|
29,688
|
|
Emerging & Other
|
$
|
(16,980
|
)
|
|
$
|
(2,095
|
)
|
Corporate
|
$
|
(31,398
|
)
|
|
$
|
(20,220
|
)
|
_____________________
|
|
(a)
|
The Company's primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between the Company's performance and that of its competitors. The above items are excluded from the Company's Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables reconcile operating income (loss) for the Company's reportable segments and net (loss) earnings attributable to IAC shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Operating
Income
(Loss)
|
|
Stock-Based
Compensation
Expense
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
Acquisition-related Contingent Consideration Fair Value Adjustments
|
|
Goodwill
Impairment
|
|
Adjusted
EBITDA
|
|
(In thousands)
|
Match Group
|
$
|
134,681
|
|
|
$
|
21,172
|
|
|
$
|
9,246
|
|
|
$
|
6,403
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
171,502
|
|
ANGI Homeservices
|
(16,296
|
)
|
|
$
|
25,575
|
|
|
$
|
12,138
|
|
|
$
|
12,980
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34,397
|
|
Vimeo
|
(14,589
|
)
|
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
3,123
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(11,408
|
)
|
Dotdash
|
2,411
|
|
|
$
|
—
|
|
|
$
|
210
|
|
|
$
|
4,390
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,011
|
|
Applications
|
(218,588
|
)
|
|
$
|
—
|
|
|
$
|
237
|
|
|
$
|
22,811
|
|
|
$
|
(6,282
|
)
|
|
$
|
211,973
|
|
|
$
|
10,151
|
|
Emerging & Other
|
(19,845
|
)
|
|
$
|
25
|
|
|
$
|
385
|
|
|
$
|
2,455
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(16,980
|
)
|
Corporate
|
(45,554
|
)
|
|
$
|
11,692
|
|
|
$
|
2,464
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(31,398
|
)
|
Total
|
(177,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(44,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
(49,893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
(272,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
89,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(182,643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to noncontrolling interests
|
(28,397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to IAC shareholders
|
$
|
(211,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Operating
Income
(Loss)
|
|
Stock-Based
Compensation
Expense
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
Acquisition-related Contingent Consideration Fair Value Adjustments
|
|
Adjusted
EBITDA
|
|
(In thousands)
|
Match Group
|
$
|
118,828
|
|
|
$
|
27,997
|
|
|
$
|
7,831
|
|
|
$
|
411
|
|
|
$
|
—
|
|
|
$
|
155,067
|
|
ANGI Homeservices
|
(3,641
|
)
|
|
$
|
19,282
|
|
|
$
|
6,999
|
|
|
$
|
14,539
|
|
|
$
|
—
|
|
|
$
|
37,179
|
|
Vimeo
|
(17,784
|
)
|
|
$
|
—
|
|
|
$
|
193
|
|
|
$
|
1,391
|
|
|
$
|
—
|
|
|
$
|
(16,200
|
)
|
Dotdash
|
3,047
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
3,877
|
|
|
$
|
—
|
|
|
$
|
7,150
|
|
Applications
|
25,356
|
|
|
$
|
—
|
|
|
$
|
419
|
|
|
$
|
2,384
|
|
|
$
|
1,529
|
|
|
$
|
29,688
|
|
Emerging & Other
|
(2,520
|
)
|
|
$
|
—
|
|
|
$
|
275
|
|
|
$
|
150
|
|
|
$
|
—
|
|
|
$
|
(2,095
|
)
|
Corporate
|
(43,413
|
)
|
|
$
|
20,165
|
|
|
$
|
3,028
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(20,220
|
)
|
Total
|
79,873
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(31,143
|
)
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
651
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
49,381
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
63,604
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
112,985
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to noncontrolling interests
|
(24,290
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to IAC shareholders
|
$
|
88,695
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 9—CONSOLIDATED FINANCIAL STATEMENT DETAILS
Cash and Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheet to the total amounts shown in the consolidated statement of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
March 31, 2019
|
|
December 31, 2018
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
2,822,729
|
|
|
$
|
3,139,295
|
|
|
$
|
2,217,337
|
|
|
$
|
2,131,632
|
|
Restricted cash included in other current assets
|
867
|
|
|
654
|
|
|
1,635
|
|
|
1,633
|
|
Restricted cash included in other assets
|
398
|
|
|
409
|
|
|
416
|
|
|
420
|
|
Total cash and cash equivalents and restricted cash as shown on the consolidated statement of cash flows
|
$
|
2,823,994
|
|
|
$
|
3,140,358
|
|
|
$
|
2,219,388
|
|
|
$
|
2,133,685
|
|
Restricted cash at March 31, 2020 and December 31, 2019 primarily consists of a deposit related to corporate credit cards.
Restricted cash at March 31, 2019 and December 31, 2018 primarily consists of a cash collateralized letter of credit and a deposit related to corporate credit cards.
Accumulated Amortization and Depreciation
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table provides the accumulated amortization and depreciation within the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
Asset Category
|
March 31, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
Right-of-use assets (included in "other non-current assets")
|
$
|
59,237
|
|
|
$
|
47,815
|
|
Property, capitalized software and equipment
|
$
|
335,766
|
|
|
$
|
324,359
|
|
Intangible assets
|
$
|
237,567
|
|
|
$
|
215,198
|
|
Other (expense) income, net
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
|
(In thousands)
|
Other (expense) income, net
|
$
|
(49,893
|
)
|
|
$
|
651
|
|
Other expense, net in 2020 includes: $51.5 million in impairments (downward adjustments) related to investments in equity securities without readily determinable fair values and $7.5 million in impairments of a note receivable and a warrant related to certain investees due to the impact of COVID-19; and $10.1 million of interest income.
Other income, net in 2019 includes: $12.4 million of interest income; $8.1 million loss related to the sale of a business; and $1.9 million in net foreign currency exchange losses due primarily to the weakening of the U.S. dollar and the Euro relative to the British Pound during the three months ended March 31, 2019.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 10—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where the Company believes an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company. See "Note 2—Income Taxes" for additional information related to income tax contingencies.
Tinder Optionholder Litigation against IAC and Match Group
On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. ("Tinder"), an operating business of Match Group, filed a lawsuit in New York state court against IAC and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018 (Supreme Court, New York County). The complaint alleges that in 2017, the defendants: (i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Match Group, thereby depriving certain of the plaintiffs of their contractual right to later valuations of Tinder on a stand-alone basis. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Match Group only), and interference with prospective economic advantage, and seeks compensatory damages in the amount of at least $2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employed by Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs.
On October 9, 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expert determination any challenge to which is both time-barred under applicable law and available only on narrow substantive grounds that the plaintiffs have not pleaded in their complaint; the plaintiffs opposed the motion. On June 13, 2019, the court issued a decision and order (i) granting the motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment, (ii) granting the motion to dismiss the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and (iii) otherwise denying the motion to dismiss. On June 21, 2019, the defendants filed a notice of appeal from the trial court’s partial denial of their motion to dismiss, and the parties thereafter briefed the appeal. On October 29, 2019, the Appellate Division, First Department, issued an order affirming the lower court’s decision. On November 22, 2019, the defendants filed a motion for reargument or, in the alternative, leave to appeal the Appellate Division's order to the New York Court of Appeals; the plaintiffs opposed the motion, which remains pending.
On June 3, 2019, the defendants filed a second motion to dismiss based upon certain provisions of the plaintiffs' agreement with a litigation funding firm; the plaintiffs opposed the motion, which remains pending. Document discovery in the case is substantially complete; deposition discovery has begun but is currently in hiatus in light of the COVID-19 pandemic. On January 30, 2020, the parties participated in a mediation that did not result in resolution of the matter. IAC and Match Group believe that the allegations in this lawsuit are without merit and will continue to defend vigorously against it.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 11—SUBSEQUENT EVENT
On May 6, 2020, IAC filed a registration statement on Form S-3 for an offering to sell from time to time up to $1.5 billion worth of shares of IAC Class M common stock (or New Match common stock). The net proceeds New Match receives pursuant to such sales, if any, will be transferred to New IAC following the closing of the offering (which closing would occur contemporaneously with the consummation of the Separation) and the number of shares of New Match to be received by IAC stockholders will be reduced to reflect the number of New Match shares sold in this offering.