IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands, except par value amounts)
|
ASSETS
|
|
|
|
Cash and cash equivalents
|
$
|
3,915,548
|
|
|
$
|
3,476,188
|
|
|
|
|
|
Marketable debt securities
|
—
|
|
|
224,979
|
|
Accounts receivable, net
|
293,350
|
|
|
270,453
|
|
|
|
|
|
Other current assets
|
175,937
|
|
|
147,630
|
|
Total current assets
|
4,384,835
|
|
|
4,119,250
|
|
|
|
|
|
Building, capitalized software, leasehold improvements and equipment, net
|
279,501
|
|
|
278,251
|
|
Goodwill
|
1,853,513
|
|
|
1,879,438
|
|
Intangible assets, net
|
387,781
|
|
|
405,840
|
|
Investment in MGM Resorts International
|
2,242,698
|
|
|
1,860,158
|
|
Long-term investments
|
306,198
|
|
|
297,643
|
|
Other non-current assets
|
281,753
|
|
|
294,860
|
|
TOTAL ASSETS
|
$
|
9,736,279
|
|
|
$
|
9,135,440
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts payable, trade
|
$
|
93,377
|
|
|
$
|
92,173
|
|
Deferred revenue
|
297,580
|
|
|
275,093
|
|
Accrued expenses and other current liabilities
|
385,987
|
|
|
383,562
|
|
Total current liabilities
|
776,944
|
|
|
750,828
|
|
|
|
|
|
Long-term debt, net
|
705,987
|
|
|
712,277
|
|
Income taxes payable
|
6,590
|
|
|
6,444
|
|
Deferred income taxes
|
76,758
|
|
|
52,593
|
|
Other long-term liabilities
|
221,139
|
|
|
230,378
|
|
|
|
|
|
Redeemable noncontrolling interests
|
702,841
|
|
|
231,992
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY:
|
|
|
|
Common Stock, $0.001 par value; authorized 1,600,000 shares; 83,342 and 82,976 shares issued and outstanding, respectively
|
83
|
|
|
83
|
|
Class B common stock, $0.001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding
|
6
|
|
|
6
|
|
Additional paid-in-capital
|
5,660,730
|
|
|
5,909,614
|
|
Retained earnings
|
1,023,170
|
|
|
694,042
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
4,149
|
|
|
(6,170)
|
|
Total IAC shareholders' equity
|
6,688,138
|
|
|
6,597,575
|
|
Noncontrolling interests
|
557,882
|
|
|
553,353
|
|
Total shareholders' equity
|
7,246,020
|
|
|
7,150,928
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
9,736,279
|
|
|
$
|
9,135,440
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
(In thousands, except per share data)
|
Revenue
|
$
|
875,988
|
|
|
$
|
684,124
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation shown separately below)
|
245,681
|
|
|
179,327
|
|
|
|
|
Selling and marketing expense
|
344,266
|
|
|
308,207
|
|
|
|
|
General and administrative expense
|
177,431
|
|
|
173,741
|
|
|
|
|
Product development expense
|
82,410
|
|
|
61,963
|
|
|
|
|
Depreciation
|
19,301
|
|
|
15,492
|
|
|
|
|
Amortization of intangibles
|
18,726
|
|
|
45,759
|
|
|
|
|
Goodwill impairment
|
—
|
|
|
211,973
|
|
|
|
|
Total operating costs and expenses
|
887,815
|
|
|
996,462
|
|
|
|
|
Operating loss
|
(11,827)
|
|
|
(312,338)
|
|
|
|
|
Interest expense
|
(6,680)
|
|
|
(2,217)
|
|
|
|
|
Unrealized gain on investment in MGM Resorts International
|
382,540
|
|
|
—
|
|
|
|
|
Other income (expense), net
|
13,650
|
|
|
(57,448)
|
|
|
|
|
Earnings (loss) before income taxes
|
377,683
|
|
|
(372,003)
|
|
|
|
|
Income tax (provision) benefit
|
(48,782)
|
|
|
41,432
|
|
|
|
|
Net earnings (loss)
|
328,901
|
|
|
(330,571)
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
227
|
|
|
2,372
|
|
|
|
|
Net earnings (loss) attributable to IAC shareholders
|
$
|
329,128
|
|
|
$
|
(328,199)
|
|
|
|
|
|
|
|
|
|
|
|
Per share information attributable to IAC Common Stock and Class B common stock shareholders:
|
|
|
|
Basic earnings (loss) per share
|
$
|
3.70
|
|
|
$
|
(3.86)
|
|
|
|
|
Diluted earnings (loss) per share
|
$
|
3.46
|
|
|
$
|
(3.86)
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense by function:
|
|
|
|
|
|
|
Cost of revenue
|
$
|
32
|
|
|
$
|
18
|
|
|
|
|
Selling and marketing expense
|
1,538
|
|
|
1,276
|
|
|
|
|
General and administrative expense
|
18,068
|
|
|
33,646
|
|
|
|
|
Product development expense
|
3,064
|
|
|
2,241
|
|
|
|
|
Total stock-based compensation expense
|
$
|
22,702
|
|
|
$
|
37,181
|
|
|
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(In thousands)
|
Net earnings (loss)
|
$
|
328,901
|
|
|
$
|
(330,571)
|
|
|
|
|
|
Other comprehensive income (loss), net of income taxes:
|
|
|
|
|
|
|
|
Change in foreign currency translation adjustment
|
11,017
|
|
|
(6,630)
|
|
|
|
|
|
Change in unrealized gains and losses on available-for-sale marketable debt securities
|
(2)
|
|
|
(12)
|
|
|
|
|
|
Total other comprehensive income (loss), net of income taxes
|
11,015
|
|
|
(6,642)
|
|
|
|
|
|
Comprehensive income (loss), net of income taxes
|
339,916
|
|
|
(337,213)
|
|
|
|
|
|
Components of comprehensive (income) loss attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
227
|
|
|
2,372
|
|
|
|
|
|
Change in foreign currency translation adjustment attributable to noncontrolling interests
|
(691)
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to noncontrolling interests
|
(464)
|
|
|
3,351
|
|
|
|
|
|
Comprehensive income (loss) attributable to IAC shareholders
|
$
|
339,452
|
|
|
$
|
(333,862)
|
|
|
|
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three months ended March 31, 2021
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IAC Shareholders' Equity
|
|
|
|
|
|
Redeemable
Noncontrolling
Interests
|
|
|
Common Stock, $0.001 par value
|
|
Class B common stock, $0.001 par value
|
|
Additional Paid-in-Capital
|
|
|
|
Retained Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Total IAC
Shareholders' Equity
|
|
Noncontrolling
Interests
|
|
Total Shareholders' Equity
|
|
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2020
|
$
|
231,992
|
|
|
|
$
|
83
|
|
|
82,976
|
|
$
|
6
|
|
|
5,789
|
|
|
$
|
5,909,614
|
|
|
|
|
$
|
694,042
|
|
|
$
|
(6,170)
|
|
|
$
|
6,597,575
|
|
|
$
|
553,353
|
|
|
$
|
7,150,928
|
|
Net (loss) earnings
|
(673)
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
|
|
329,128
|
|
|
—
|
|
|
329,128
|
|
|
446
|
|
|
329,574
|
|
Other comprehensive income, net of income taxes
|
580
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
10,324
|
|
|
10,324
|
|
|
111
|
|
|
10,435
|
|
Stock-based compensation expense
|
—
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
20,668
|
|
|
|
|
—
|
|
|
—
|
|
|
20,668
|
|
|
2,542
|
|
|
23,210
|
|
Issuance of common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
—
|
|
|
366
|
|
—
|
|
—
|
|
|
(21,135)
|
|
|
|
|
—
|
|
|
—
|
|
|
(21,135)
|
|
|
—
|
|
|
(21,135)
|
|
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
(49,476)
|
|
|
|
|
—
|
|
|
(5)
|
|
|
(49,481)
|
|
|
1,430
|
|
|
(48,051)
|
|
Purchase of Angi Inc. treasury stock
|
—
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
(4,916)
|
|
|
|
|
—
|
|
|
—
|
|
|
(4,916)
|
|
|
—
|
|
|
(4,916)
|
|
Issuance of Vimeo common stock and creation of noncontrolling interest, net of fees
|
40,785
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
258,965
|
|
|
|
|
—
|
|
|
—
|
|
|
258,965
|
|
|
—
|
|
|
258,965
|
|
Purchase of noncontrolling interests
|
(22,938)
|
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjustment of noncontrolling interests to fair value
|
453,099
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(453,099)
|
|
|
|
|
—
|
|
|
—
|
|
|
(453,099)
|
|
|
—
|
|
|
(453,099)
|
|
Other
|
(4)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
109
|
|
Balance as of March 31, 2021
|
$
|
702,841
|
|
|
|
$
|
83
|
|
|
83,342
|
|
|
$
|
6
|
|
|
5,789
|
|
|
$
|
5,660,730
|
|
|
|
|
$
|
1,023,170
|
|
|
$
|
4,149
|
|
|
$
|
6,688,138
|
|
|
$
|
557,882
|
|
|
$
|
7,246,020
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
COMBINED STATEMENT OF PARENT'S EQUITY
Three Months Ended March 31, 2020
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old IAC Equity in
|
|
|
|
|
|
|
|
|
IAC/InterActiveCorp
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total Old IAC
Equity in IAC/InterActiveCorp
|
|
|
|
|
|
Redeemable
Noncontrolling
Interests
|
|
|
Invested Capital
|
|
|
Noncontrolling
Interests
|
|
Total
Parent's
Equity
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2019
|
$
|
43,818
|
|
|
|
$
|
2,547,251
|
|
|
$
|
(12,226)
|
|
|
$
|
2,535,025
|
|
|
$
|
470,121
|
|
|
$
|
3,005,146
|
|
Net loss
|
(1,032)
|
|
|
|
(328,199)
|
|
|
—
|
|
|
(328,199)
|
|
|
(1,340)
|
|
|
(329,539)
|
|
Other comprehensive income (loss), net of income taxes
|
99
|
|
|
|
—
|
|
|
(5,663)
|
|
|
(5,663)
|
|
|
(1,078)
|
|
|
(6,741)
|
|
Stock-based compensation expense
|
15
|
|
|
|
11,389
|
|
|
—
|
|
|
11,389
|
|
|
22,211
|
|
|
33,600
|
|
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 Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes
|
—
|
|
|
|
6,996
|
|
|
(37)
|
|
|
6,959
|
|
|
(10,302)
|
|
|
(3,343)
|
|
Purchase of Angi Inc. treasury stock
|
—
|
|
|
|
(38,971)
|
|
|
—
|
|
|
(38,971)
|
|
|
—
|
|
|
(38,971)
|
|
Net increase in Old IAC's investment in IAC Holdings, Inc.
|
—
|
|
|
|
1,739,118
|
|
|
—
|
|
|
1,739,118
|
|
|
—
|
|
|
1,739,118
|
|
Other
|
(1)
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance as of March 31, 2020
|
$
|
42,152
|
|
|
|
$
|
3,935,166
|
|
|
$
|
(17,926)
|
|
|
$
|
3,917,240
|
|
|
$
|
479,612
|
|
|
$
|
4,396,852
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
Net earnings (loss)
|
$
|
328,901
|
|
|
$
|
(330,571)
|
|
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
|
|
|
|
Stock-based compensation expense
|
22,702
|
|
|
37,181
|
|
Amortization of intangibles
|
18,726
|
|
|
45,759
|
|
Depreciation
|
19,301
|
|
|
15,492
|
|
Provision for credit losses
|
19,391
|
|
|
19,929
|
|
Goodwill impairment
|
—
|
|
|
211,973
|
|
Deferred income taxes
|
47,196
|
|
|
(13,759)
|
|
Unrealized gain on investment in MGM Resorts International
|
(382,540)
|
|
|
—
|
|
(Gains) losses on long-term investments in equity securities, net
|
(1,457)
|
|
|
51,473
|
|
Other adjustments, net
|
(6,189)
|
|
|
10,354
|
|
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
Accounts receivable
|
(42,789)
|
|
|
(27,216)
|
|
Other assets
|
11,679
|
|
|
310
|
|
Accounts payable and other liabilities
|
(8,462)
|
|
|
(7,971)
|
|
Income taxes payable and receivable
|
(929)
|
|
|
1,564
|
|
Deferred revenue
|
28,342
|
|
|
24,653
|
|
Net cash provided by operating activities
|
53,872
|
|
|
39,171
|
|
Cash flows from investing activities:
|
|
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(532,857)
|
|
Capital expenditures
|
(20,352)
|
|
|
(14,810)
|
|
|
|
|
|
Proceeds from maturities of marketable debt securities
|
225,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Purchases of investments
|
(7,180)
|
|
|
—
|
|
Decrease in notes receivable—related party
|
—
|
|
|
27,691
|
|
Other, net
|
7,551
|
|
|
1,366
|
|
Net cash provided by (used in) investing activities
|
205,019
|
|
|
(518,610)
|
|
Cash flows from financing activities:
|
|
|
|
Principal payments on ANGI Group Term Loan
|
(6,875)
|
|
|
(3,438)
|
|
Proceeds from issuance of Vimeo common stock, net of fees
|
299,750
|
|
|
—
|
|
Debt issuance costs
|
(1,440)
|
|
|
—
|
|
Purchase of Angi Inc. treasury stock
|
(4,916)
|
|
|
(38,512)
|
|
Proceeds from the exercise of IAC stock options
|
1,471
|
|
|
—
|
|
|
|
|
|
Withholding taxes paid on behalf of IAC employees on net settled stock-based awards
|
(22,997)
|
|
|
—
|
|
Withholding taxes paid on behalf of Angi Inc. employees on net settled stock-based awards
|
(48,168)
|
|
|
(3,222)
|
|
Purchase of noncontrolling interests
|
(22,938)
|
|
|
(3,165)
|
|
|
|
|
|
Transfers from Old IAC for periods prior to the MTCH Separation
|
—
|
|
|
1,720,618
|
|
Other, net
|
526
|
|
|
(465)
|
|
Net cash provided by financing activities
|
194,413
|
|
|
1,671,816
|
|
Total cash provided
|
453,304
|
|
|
1,192,377
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
(93)
|
|
|
(2,897)
|
|
Net increase in cash and cash equivalents and restricted cash
|
453,211
|
|
|
1,189,480
|
|
Cash and cash equivalents and restricted cash at beginning of period
|
3,477,110
|
|
|
840,732
|
|
Cash and cash equivalents and restricted cash at end of period
|
$
|
3,930,321
|
|
|
$
|
2,030,212
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED & COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MTCH Separation:
On December 19, 2019, IAC/InterActiveCorp ("Old IAC") entered into a Transaction Agreement (as amended, the "Transaction Agreement") with Match Group, Inc. ("Old MTCH"), IAC Holdings, Inc. ("New IAC" or the "Company"), a direct wholly-owned subsidiary of Old IAC, and Valentine Merger Sub LLC, an indirect wholly-owned subsidiary of Old IAC. On June 30, 2020, the businesses of Old MTCH were separated from the remaining businesses of Old IAC through a series of transactions that resulted in the pre-transaction stockholders of Old IAC owning shares in two, separate public companies—(1) Old IAC, which was renamed Match Group, Inc. ("New Match") and which owns the businesses of Old MTCH and certain Old IAC financing subsidiaries, and (2) New IAC, which was renamed IAC/InterActiveCorp, and which owns Old IAC's other businesses—and the pre-transaction stockholders of Old MTCH (other than Old IAC) owning shares in New Match. This transaction is referred to as the "MTCH Separation."
Spin-off:
On December 22, 2020, IAC announced that its Board of Directors approved a plan to spin-off its full stake in Vimeo to IAC shareholders. IAC's Vimeo business will be separated from the remaining businesses of IAC through a series of transactions (which we refer to as the "Spin-off") that, if completed in their entirety, will result in the transfer of IAC's Vimeo business to Vimeo Holdings, Inc. ("SpinCo"), a wholly-owned subsidiary of IAC, with SpinCo becoming an independent, separately traded public company through a spin-off from IAC, and Vimeo, Inc., the IAC subsidiary that currently holds the Vimeo business, becoming a wholly-owned subsidiary of SpinCo. In connection with the foregoing, SpinCo will be renamed as Vimeo, Inc. and Vimeo will be renamed as Vimeo.com, Inc. The proposed transaction is subject to a number of conditions including final approval by IAC's Board of Directors, approval of the separation proposal by IAC stockholders, and other customary conditions and approvals and is expected to close pre-market on May 25, 2021.
Nature of Operations
The Company operates Vimeo, Dotdash and Care.com, among many others, and has majority ownership of Angi Inc. (formerly ANGI Homeservices Inc.), which includes HomeAdvisor, Angi (formerly Angie's List) and Handy.
Basis of Presentation
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).
The Company prepares its consolidated and combined financial statements (collectively referred to herein as "financial statements") in accordance with U.S. generally accepted accounting principles ("GAAP").
The Company's financial statements were prepared on a consolidated basis beginning June 30, 2020 and on a combined basis for periods prior thereto. The difference in presentation is due to the fact that the final steps of the legal reorganization, including the contribution to New IAC of all the entities that comprise the Company following the MTCH Separation, were not completed until June 30, 2020. The preparation of the financial statements on a combined basis for periods prior to June 30, 2020 allows for the financial statements to be presented on a consistent basis for all periods presented.
The historical combined financial statements of the Company have been derived from the historical accounting records of Old IAC. The combined financial statements reflect the historical financial position, results of operations and cash flows of the entities comprising the Company since their respective dates of acquisition by Old IAC and the allocation to the Company of certain Old IAC corporate expenses based on the historical accounting records of Old IAC through June 30, 2020. 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. For the purpose of the combined financial statements, income taxes have been computed as if the entities comprising the Company filed tax returns on a standalone, separate basis for periods prior to the MTCH Separation.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) the Company and (ii) Old IAC and its subsidiaries for periods prior to the MTCH Separation are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the statement of cash flows as a financing activity and in the statement of parent's equity as "Invested capital".
In management’s opinion, the assumptions underlying the historical financial statements of the Company, including the basis on which the expenses have been allocated from Old IAC, are reasonable. However, the allocations may not reflect the expenses that the Company would have incurred as an independent, stand-alone company for the periods presented.
The accompanying unaudited financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
COVID-19 Update and Impairments
The impact on the Company from the COVID-19 outbreak, which has been declared a "pandemic" by the World Health Organization, has been varied and volatile. 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 continuing spread of COVID-19, the development and implementation of effective preventative measures (including the global distribution of vaccines) and possible treatments, the scope of governmental and other restrictions on travel, discretionary 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 for certain of our businesses, 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.
When COVID-19 first impacted the businesses in IAC's Angi Inc. segment in March 2020, these businesses experienced a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). During the second quarter of 2020, these businesses experienced a rebound in service requests, exceeding pre-COVID-19 growth levels, driven by increased demand from homeowners who spent more time at home due to measures taken to reduce the spread of COVID-19. These businesses continued to experience strong demand for home services in the second half of 2020 and the first quarter of 2021. However, many service professionals' businesses have been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which has negatively impacted the ability of these businesses to monetize this increased level of service requests. Vimeo has seen strong revenue growth as the demand for communication via video has increased due to the pandemic. The Search segment has experienced an increase in revenue in the first quarter of 2021 compared to the prior year due, in part, to lower advertising rates in 2020 due to the impact of COVID-19. COVID-19 impacted our businesses in varied ways in the year ended December 31, 2020. Accordingly, the volatile nature of our operating results in 2020 will impact the comparability of our year-over-year results of operations.
There were no impairments identified during the quarter ended March 31, 2021.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In the quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its assets and identified the following impairments:
•a $212.0 million impairment related to the goodwill of the Desktop reporting unit (included in the Search segment);
•a $21.4 million impairment related to certain indefinite-lived intangible assets of the Desktop 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.
In addition, the United States, which represents 80% of the Company's revenue for the three months ended March 31, 2021 experienced another resurgence of the COVID-19 virus. Europe, which is the second largest market for the Company's products and services, has also seen a resurgence in COVID-19. This resurgence of COVID-19 and the measures designed to curb COVID-19's spread could materially and adversely affect our business, financial condition and results of operations.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its 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 assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates, judgments and assumptions, including those related to: the fair values of cash equivalents and marketable debt and equity securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses and the determination of revenue reserves; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the carrying value of right-of-use assets ("ROU assets"); the useful lives and recoverability of building, capitalized software, leasehold improvements and equipment and definite-lived intangible assets; 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, judgments and assumptions on historical experience, its forecasts and budgets and other factors that the Company considers relevant.
Accounting for Investments in Equity Securities
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, 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 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 during the three months ended March 31, 2020.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 balance sheet. At March 31, 2021 and December 31, 2020, the Company has one investment 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.
Deferred Revenue
Deferred revenue consists of 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 remaining term of the applicable subscription period or expected completion of its performance obligation is one year or less. The current and non-current deferred revenue balances are $275.1 million and $1.5 million, respectively, at December 31, 2020, and $178.6 million and $1.3 million, respectively, at December 31, 2019. During the three months ended March 31, 2021, the Company recognized $131.8 million of revenue that was included in the deferred revenue balance as of December 31, 2020. During the three months ended March 31, 2020, the Company recognized $90.9 million of revenue that was included in the deferred revenue balance as of December 31, 2019. The current and non-current deferred revenue balances are $297.6 million and $1.6 million, at March 31, 2021, respectively. Non-current deferred revenue is included in "Other long-term liabilities" in the accompanying 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 it has the right to invoice for services performed.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs and mobile app store fees, meet the requirements to be capitalized as a cost of obtaining a contract. Commissions paid to employees pursuant to certain sales incentive programs are amortized over the estimated customer relationship period. The Company calculates the estimated customer relationship period as the average customer life, which is based on historical data. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. 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 Company generally capitalizes and amortizes mobile app store fees over the term of the applicable subscription.
The current and non-current capitalized costs to obtain a contract with a customer are included in "Other current assets" and "Other non-current assets" in the accompanying balance sheet and are $61.6 million and $10.0 million, and $61.5 million and $9.3 million, at March 31, 2021 and December 31, 2020, respectively.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Certain Risks and Concentrations—Services Agreement with Google (the "Services Agreement")
A meaningful portion of the Company's revenue (and a substantial portion of IAC's net cash from operations that it can freely access) is attributable to 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, 2021 and 2020, total revenue earned from Google was $171.8 million and $138.9 million, respectively, representing 20% of the Company's revenue for both periods. The related accounts receivable totaled $66.2 million and $61.9 million at March 31, 2021 and December 31, 2020, respectively.
The total revenue earned from the Services Agreement for the three months ended March 31, 2021 and 2020 was $152.5 million and $126.6 million, respectively, representing 17% and 19%, respectively, of the Company's total revenue.
The revenue attributable to the Services Agreement is earned by the Desktop business and Ask Media Group, both within the Search segment. For the three months ended March 31, 2021 and 2020, revenue earned from the Services Agreement was $31.0 million and $46.1 million, respectively, within the Desktop business and $121.4 million and $80.5 million, respectively, within Ask Media Group.
The Services Agreement expires on March 31, 2023; provided that during each September, 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. Neither party gave notice to the other party to terminate the Services Agreement pursuant to this provision in September 2020. 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 have in the past and could in the future require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which have been and could be costly to address and have had or otherwise could have an adverse effect on our financial condition and results of operations. As described below, 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 it may do so in the future.
Certain industry-wide policy changes became effective on August 27, 2020. These industry-wide changes, combined with increased enforcement of policies under the Services Agreement, have had a negative impact on the results of operations of Desktop's business-to-consumer ("B2C") business. In addition, at multiple times during the fourth quarter of 2020, Google suspended services with respect to some of Desktop's B2C products and may do so in the future. As a result, the Desktop B2C business elected to modify certain marketing strategies in early January 2021. Subsequently, Google informed us of another policy change in the first quarter of 2021 that is scheduled to go into effect on May 10, 2021. This Google policy change may eliminate our ability to successfully introduce and market new products that would be profitable at scale. Therefore, the Desktop B2C business substantially reduced marketing in early March 2021 and effectively eliminated all marketing of its B2C products by the end of the first quarter of 2021. This reduction in marketing will positively impact profitability in 2021 but will substantially reduce revenue in 2021. Beyond 2021, the revenue from the installed base of products will decline precipitously. In response, we have undertaken cost reduction measures to maintain a very modest level of profitability.
The reduction in revenue and profitability during the three months ended March 31, 2020 due, in part, to Google policy changes implemented in the second half of 2019 was the primary factor in the goodwill and indefinite-lived intangible asset impairments related to the Desktop business recorded in the three months ended March 31, 2020 of $212.0 million and $21.4 million, respectively. The impact of COVID-19 was an additional factor.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that have not yet been adopted that are expected to have a material effect on the results of operations, financial condition or cash flows of the Company.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 2—INCOME TAXES
The Company was included within Old IAC’s tax group for purposes of federal and consolidated state income tax return filings through June 30, 2020, the date of the MTCH Separation. For periods prior thereto, the income tax benefit/provision were computed for the Company on an as if standalone, separate return basis and payments to and refunds from Old IAC for the Company’s share of Old IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying statement of cash flows.
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.
For the three months ended March 31, 2021, the Company recorded an income tax provision of $48.8 million, due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by state taxes. For the three months ended March 31, 2020, the Company recorded an income tax benefit of $41.4 million, due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by the non-deductible portion of the Desktop goodwill impairment.
As a result of the MTCH Separation, the Company's net deferred tax liability was adjusted via invested capital for tax attributes allocated to it from Old IAC's consolidated federal and state tax filings. The allocation of tax attributes that was recorded as of June 30, 2020 was preliminary. Any subsequent adjustment to allocated tax attributes will be recorded as an adjustment to deferred taxes and additional paid-in capital. This adjustment is expected to be made in the fourth quarter of 2021 following the filing of income tax returns for the year ended December 31, 2020.
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 as a result of previously filed separate company and consolidated tax returns with Old IAC and will be under audit for its tax returns filed on a standalone basis following the MTCH Separation. 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 Old IAC’s federal income tax returns for the years ended December 31, 2010 through 2017, which includes the operations of the Company. The statute of limitations for the years 2010 through 2012 and for the years 2013 through 2017 have been extended to May 31, 2021 and June 30, 2022, respectively. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from the 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.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At March 31, 2021 and December 31, 2020, unrecognized tax benefits, including interest and penalties, are $23.4 million and $22.1 million, respectively. Unrecognized tax benefits, including interest and penalties, at March 31, 2021 increased by $1.3 million due primarily to research credits. If unrecognized tax benefits at March 31, 2021 are subsequently recognized, $21.4 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2020 was $20.4 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $6.3 million by March 31, 2022, due to expirations of statutes of limitations or other settlements; $6.0 million of which would reduce the income tax provision.
NOTE 3—BUSINESS COMBINATION
On February 11, 2020, the Company acquired 100% of Care.com, the leading online destination for families to easily connect with caregivers, for a total purchase price of $626.9 million, which includes cash consideration of $587.0 million paid by the Company and the settlement of all outstanding vested employee equity awards for $40.0 million paid by Care.com prior to the completion of the acquisition. During the first quarter of 2021, the Company completed the purchase accounting for the Care.com acquisition, which resulted in a reduction in goodwill of $21.7 million. The primary adjustment was related to the completion of the assessment of acquired tax attributes.
The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
|
|
|
|
|
|
|
Care.com
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
57,702
|
|
Short-term investments
|
20,000
|
|
Accounts receivable
|
20,202
|
|
Other current assets
|
7,479
|
|
Property and equipment
|
2,894
|
|
Goodwill
|
382,587
|
|
Intangible assets
|
116,800
|
|
Deferred income taxes
|
28,394
|
|
Other non-current assets
|
30,444
|
|
Total assets
|
666,502
|
|
Deferred revenue
|
(13,422)
|
|
Other current liabilities
|
(39,894)
|
|
Other non-current liabilities
|
(26,212)
|
|
Net assets acquired
|
$
|
586,974
|
|
The Company acquired Care.com because it is complementary to other marketplace businesses of IAC. The purchase price was based on the expected financial performance of Care.com, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill.
The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Care.com
|
|
(In thousands)
|
|
Useful Life
(Years)
|
Indefinite-lived trade name and trademarks
|
$
|
59,300
|
|
|
Indefinite
|
Developed technology
|
21,200
|
|
|
2
|
Customer relationships
|
35,500
|
|
|
2 - 5
|
Provider relationships
|
800
|
|
|
4
|
Total identifiable intangible assets acquired
|
$
|
116,800
|
|
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Accounts receivable, other current assets, other non-current assets, other current liabilities, and other non-current liabilities of Care.com were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis. The fair values of the trade name and developed technology were determined using an income approach that utilized the relief from royalty methodology. The fair values of customer relationships and provider relationships were determined using an income approach that utilized the excess earnings methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
The financial results of Care.com are included in the Company's financial statements, within the Emerging & Other segment, beginning February 11, 2020. For the three months ended March 31, 2020, the Company included $18.5 million of revenue and $12.3 million of net loss in its statement of operations related to Care.com. The net loss of Care.com reflects a reduction in revenue of $8.7 million due to the write-off of deferred revenue due to purchase accounting fair value adjustments and $4.8 million in transaction-related costs, including severance.
Unaudited pro forma financial information
The unaudited pro forma financial information in the table below presents the results of the Company and Care.com as if this acquisition had occurred on January 1, 2019. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisition occurred on January 1, 2019. For the three months ended March 31, 2020, pro forma adjustments include a reduction in transaction related costs (including stock-based compensation expense related to the acceleration of vesting of outstanding employee equity awards) of $60.9 million because they are one-time in nature and will not have a continuing impact on operations and an increase in revenue of $8.7 million related to deferred revenue written off as a part of the acquisition.
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2020
|
|
(In thousands except per share data)
|
Revenue
|
$
|
718,763
|
|
Net loss attributable to IAC shareholders
|
$
|
(320,955)
|
|
Basic and diluted loss per share attributable to IAC shareholders
|
$
|
(3.77)
|
|
|
|
|
|
NOTE 4—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Debt Securities
The Company did not hold any marketable debt securities at March 31, 2021.
At December 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
|
$
|
224,976
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
224,979
|
|
Total available-for-sale marketable debt securities
|
$
|
224,976
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
224,979
|
|
The contractual maturities of debt securities classified as current available-for-sale at December 31, 2020 were within one year. There were no investments in available-for-sale marketable debt securities that had been in a continuous unrealized loss position for longer than twelve months as of December 31, 2020.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Investment in MGM Resorts International
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
Investment in MGM Resorts International ("MGM")
|
$
|
2,242,698
|
|
|
$
|
1,860,158
|
|
During the second and third quarters of 2020, the Company purchased a total of 59.0 million shares of MGM. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange on the last trading day in the reporting period and any unrealized gains or losses are included in the accompanying statement of operations. For the three months ended March 31, 2021, the Company recognized an unrealized gain of $382.5 million on its investment in MGM.
Long-term Investments
Long-term investments consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
|
|
|
|
Equity securities without readily determinable fair values
|
$
|
303,083
|
|
|
$
|
296,491
|
|
Equity method investment
|
3,115
|
|
|
1,152
|
|
Total long-term investments
|
$
|
306,198
|
|
|
$
|
297,643
|
|
Equity Securities without Readily Determinable Fair Values
The following table presents a summary of unrealized gains and losses recorded in "Other income (expense), net," as adjustments to the carrying value of equity securities without readily determinable fair values held as of March 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(In thousands)
|
Upward adjustments (gross unrealized gains)
|
|
$
|
1,376
|
|
|
$
|
—
|
|
|
|
|
|
Downward adjustments including impairments (gross unrealized losses)
|
|
—
|
|
|
(51,484)
|
|
|
|
|
|
Total
|
|
$
|
1,376
|
|
|
$
|
(51,484)
|
|
|
|
|
|
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 income (expense), net" in the accompanying statement of operations.
The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at March 31, 2021 were $21.1 million and $43.5 million, respectively.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Realized and unrealized gains and losses for the Company's investments without readily determinable fair values for the three months ended March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Realized gains net, for equity securities sold
|
$
|
81
|
|
|
$
|
12
|
|
Unrealized gains (losses), net, on equity securities held
|
1,376
|
|
|
(51,484)
|
|
Total gains (losses), net recognized
|
$
|
1,457
|
|
|
$
|
(51,472)
|
|
Equity Method Investment
During the fourth quarter of 2020 and first quarter of 2021, the Company acquired 0.3 million and 0.5 million common shares, respectively, of Turo Inc. ("Turo"), a peer-to-peer car sharing marketplace, for approximately $1.1 million and $2.0 million, respectively. This investment is accounted for under the equity method of accounting on a one quarter lag, given the Company's preexisting ownership interest of approximately 27.1% on a fully diluted basis in the form of preferred shares, which are not common stock equivalents.
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 AND COMBINED 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, 2021
|
|
Quoted Market
Prices for
Identical Assets in Active
Markets
(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
|
$
|
3,233,953
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,233,953
|
|
Treasury discount notes
|
—
|
|
|
274,999
|
|
|
—
|
|
|
274,999
|
|
Time deposits
|
—
|
|
|
1,723
|
|
|
—
|
|
|
1,723
|
|
|
|
|
|
|
|
|
|
Investment in MGM
|
2,242,698
|
|
|
—
|
|
|
—
|
|
|
2,242,698
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
Warrant
|
—
|
|
|
—
|
|
|
18,051
|
|
|
18,051
|
|
Total
|
$
|
5,476,651
|
|
|
$
|
276,722
|
|
|
$
|
18,051
|
|
|
$
|
5,771,424
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Contingent consideration arrangement
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Quoted Market
Prices for
Identical Assets in Active Markets
(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
|
$
|
1,874,091
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,874,091
|
|
Treasury discount notes
|
—
|
|
|
1,224,966
|
|
|
—
|
|
|
1,224,966
|
|
Time deposits
|
—
|
|
|
3,265
|
|
|
—
|
|
|
3,265
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
Treasury discount notes
|
—
|
|
|
224,979
|
|
|
—
|
|
|
224,979
|
|
Investment in MGM
|
1,860,158
|
|
|
—
|
|
|
—
|
|
|
1,860,158
|
|
Other non-current assets:
|
|
|
|
|
|
|
|
Warrant
|
—
|
|
|
—
|
|
|
5,276
|
|
|
5,276
|
|
Total
|
$
|
3,734,249
|
|
|
$
|
1,453,210
|
|
|
$
|
5,276
|
|
|
$
|
5,192,735
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Contingent consideration arrangement
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
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,
|
|
2021
|
|
2020
|
|
Warrant
|
|
|
|
Warrant
|
|
Contingent
Consideration
Arrangements
|
|
(In thousands)
|
Balance at January 1
|
$
|
5,276
|
|
|
|
|
$
|
8,495
|
|
|
$
|
(6,918)
|
|
Fair value at date of acquisition
|
—
|
|
|
|
|
—
|
|
|
(1,000)
|
|
Total net gains (losses):
|
|
|
|
|
|
|
|
Included in earnings:
|
|
|
|
|
|
|
|
Fair value adjustments
|
12,775
|
|
|
|
|
(2,006)
|
|
|
6,282
|
|
Settlements
|
—
|
|
|
|
|
—
|
|
|
1,000
|
|
Balance at March 31
|
$
|
18,051
|
|
|
|
|
$
|
6,489
|
|
|
$
|
(636)
|
|
Warrant
As part of the Company's investment in Turo preferred shares, 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 income (expense), net" in the accompanying 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 balance sheet.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Contingent Consideration Arrangement
At March 31, 2021, the Company has one outstanding contingent consideration arrangement related to a business acquisition. The maximum contingent payments related to this arrangement for periods subsequent to December 31, 2020, which is the end of the most recent measurement period, is $15.0 million. At March 31, 2021, the Company does not expect to make any payments related to this contingent consideration arrangement. 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 and settled during the first quarter of 2020.
Generally, our 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 financial statements.
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 statement of operations. At both March 31, 2021 and December 31, 2020, there is no contingent consideration liability outstanding.
Assets measured at fair value on a nonrecurring basis
The Company's non-financial assets, such as goodwill, intangible assets, ROU assets and building, capitalized software, leasehold improvements 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.
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, 2021
|
|
December 31, 2020
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
|
(In thousands)
|
Long-term debt, net(a)
|
$
|
(705,987)
|
|
|
$
|
(710,692)
|
|
|
$
|
(712,277)
|
|
|
$
|
(725,700)
|
|
_____________________
(a) At March 31, 2021 and December 31, 2020, the carrying value of long-term debt, net includes unamortized debt issuance costs of $7.1 million and $7.7 million, respectively.
At March 31, 2021 and December 31, 2020, 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 AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5—LONG-TERM DEBT
Long-term debt consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
3.875% ANGI Group Senior Notes due August 15, 2028 ("ANGI Group Senior Notes"); interest payable each February 15 and August 15, commencing February 15, 2021
|
$
|
500,000
|
|
|
$
|
500,000
|
|
ANGI Group Term Loan due November 5, 2023 ("ANGI Group Term Loan")
|
213,125
|
|
|
220,000
|
|
Total long-term debt
|
713,125
|
|
|
720,000
|
|
|
|
|
|
Less: unamortized debt issuance costs
|
7,138
|
|
|
7,723
|
|
Total long-term debt, net
|
$
|
705,987
|
|
|
$
|
712,277
|
|
ANGI Group Senior Notes
The ANGI Group Senior Notes were issued on August 20, 2020. At any time prior to August 15, 2023, 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. Thereafter, these notes may be redeemed at the redemption prices set forth in the indenture governing the notes, plus accrued and unpaid interest thereon, if any, to the applicable redemption date.
The indenture governing the ANGI Group Senior Notes contains a covenant that would limit ANGI Group’s ability to incur liens for borrowed money in the event a default has occurred or the ANGI Group’s secured leverage ratio (as defined in the indenture) exceeds 3.75 to 1.0. At March 31, 2021 there were no limitations pursuant thereto.
ANGI Group Term Loan and ANGI Group Revolving Facility
The outstanding balance of the ANGI Group Term Loan was $213.1 million and $220.0 million at March 31, 2021 and December 31, 2020, respectively. During the three months ended March 31, 2021, ANGI Group prepaid $6.9 million that was otherwise due in the first quarter of 2022 and, as of May 6, 2021, the outstanding balance was repaid in its entirety. The ANGI Group Term Loan bore interest at LIBOR plus 2.00%, or 2.10% and 2.16%, at March 31, 2021 and December 31, 2020, respectively.
The ANGI Group Credit Agreement requires ANGI Group 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. The ANGI Group Credit Agreement also contains covenants that would limit ANGI Group's ability to pay dividends or make distributions in the event a default has occurred or ANGI Group's consolidated net leverage ratio exceeds 4.25 to 1.0. At March 31, 2021, there were no limitations pursuant thereto.
The $250 million ANGI Group Revolving Facility expires on November 5, 2023. At March 31, 2021 and December 31, 2020, there were no outstanding borrowings under the ANGI Group Revolving Facility. The commitment fee, which is based on ANGI Group's consolidated net leverage ratio most recently reported and the average daily dollar amount of the available revolving commitments, was 35 basis points at both March 31, 2021 and December 31, 2020. Any future borrowings under the ANGI Group Revolving Facility would bear interest, at ANGI Group's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is based on ANGI Group's consolidated net leverage ratio. The financial and other covenants are the same as those for the ANGI Group Term Loan.
The ANGI Group Senior Notes and the ANGI Group Credit Agreement are guaranteed by certain of ANGI Group's wholly-owned material domestic subsidiaries and ANGI Group’s obligations under the ANGI Group Credit Agreement are secured by substantially all assets of ANGI Group and the guarantors, subject to certain exceptions. Outstanding borrowings under the ANGI Group Revolving Facility have priority over the ANGI Group Senior Notes to the extent of the value of the assets securing the borrowings under the ANGI Group Credit Agreement.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Vimeo Credit Facility
On February 12, 2021, Vimeo entered into a $100 million revolving credit facility (the "Vimeo Credit Facility"), which expires on February 12, 2026. Any borrowings under the Vimeo Credit Facility are guaranteed by Vimeo's wholly-owned material domestic subsidiaries, if any, and are secured by substantially all assets of Vimeo and any guarantors, subject to certain exceptions. The commitment fee, which is based on the consolidated net leverage ratio most recently reported and the average daily dollar amount of the available revolving commitment, was 20 basis points at March 31, 2021. Any borrowings under the Vimeo Credit Facility would bear interest, at Vimeo's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on Vimeo’s consolidated net leverage ratio. The financial covenants require Vimeo to maintain a minimum liquidity of not less than $50.0 million until December 31, 2022, and, thereafter, at the end of each quarterly test period, a consolidated net leverage ratio (as defined in the agreement) of not more than 5.5 to 1.0. The Vimeo Credit Facility also contains customary affirmative and negative covenants, including covenants that would limit Vimeo’s ability to pay dividends or make distributions on or repurchase certain equity interests in the event a default has occurred or Vimeo’s consolidated net leverage ratio exceeds 4.0 to 1.0. At March 31, 2021, there were no outstanding borrowings under the Vimeo Credit Facility.
Long-term Debt Maturities
Long-term debt maturities as of March 31, 2021 are summarized in the table below:
|
|
|
|
|
|
Years Ending December 31,
|
(In thousands)
|
|
|
|
|
2022
|
$
|
20,625
|
|
2023
|
192,500
|
|
2028
|
500,000
|
|
Total
|
713,125
|
|
|
|
Less: unamortized debt issuance costs
|
7,138
|
|
Total long-term debt, net
|
$
|
705,987
|
|
NOTE 6—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the components of accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gains (Losses) On Available-For-Sale Marketable Debt Securities
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Losses On Available-For-Sale Marketable Debt Securities
|
|
Accumulated Other Comprehensive Loss
|
|
(In thousands)
|
Balance at of January 1
|
$
|
(6,172)
|
|
|
$
|
2
|
|
|
$
|
(6,170)
|
|
|
$
|
(12,226)
|
|
|
$
|
—
|
|
|
$
|
(12,226)
|
|
Other comprehensive income (loss) before reclassifications
|
294
|
|
|
(2)
|
|
|
292
|
|
|
(5,651)
|
|
|
(12)
|
|
|
(5,663)
|
|
Amounts reclassified to earnings
|
10,032
|
|
|
—
|
|
|
10,032
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net current period other comprehensive income (loss)
|
10,326
|
|
|
(2)
|
|
|
10,324
|
|
|
(5,651)
|
|
|
(12)
|
|
|
(5,663)
|
|
Accumulated other comprehensive income allocated to noncontrolling interests during the period
|
(5)
|
|
|
—
|
|
|
(5)
|
|
|
(37)
|
|
|
—
|
|
|
(37)
|
|
Balance at of March 31
|
$
|
4,149
|
|
|
$
|
—
|
|
|
$
|
4,149
|
|
|
$
|
(17,914)
|
|
|
$
|
(12)
|
|
|
$
|
(17,926)
|
|
The amount reclassified out of foreign currency translation adjustment into earnings for the three months ended March 31, 2021 relate to the substantial liquidation of certain international subsidiaries.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At both March 31, 2021 and 2020, there was no income tax benefit or provision on the accumulated other comprehensive income (loss).
NOTE 7—EARNINGS (LOSS) PER SHARE
The Company treats its common stock and Class B common stock as one class of stock for earnings per share ("EPS") purposes as both classes of stock participate in earnings, dividends and other distributions on the same basis. The restricted stock award granted to our Chief Executive Officer ("CEO") on November 5, 2020 is a participating security and the Company calculates EPS using the two-class method since those shares are unvested and have a non-forfeitable dividend right in the event the Company declares a cash dividend to common shareholders and participates in all other distributions of the Company in the same manner as all other IAC common shareholders.
Undistributed earnings allocated to the participating security is subtracted from net income in determining net income attributable to IAC common stock and Class B common stock shareholders for basic EPS. Basic EPS is computed by dividing net income attributable to IAC common stock and Class B common stock shareholders by the weighted-average number of shares of common stock and Class B common stock outstanding during the period.
For the calculation of diluted EPS, net income attributable to IAC common stock and Class B common stock shareholders is adjusted for the impact from public subsidiaries’ dilutive securities, if applicable, and the reallocation of undistributed earnings allocated to the participating security by the weighted-average number of common stock and Class B common stock outstanding plus dilutive securities during the period.
The numerator and denominator of basic and diluted EPS computations for the Company’s common stock and Class B common stock are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands, except per share data)
|
Basic EPS:
|
|
|
|
Numerator:
|
|
|
|
Net earnings (loss) attributable to IAC shareholders
|
$
|
329,128
|
|
|
$
|
(328,199)
|
|
Net earnings attributed to unvested participating security (a)
|
(11,107)
|
|
|
—
|
|
Net earnings (loss) attributable to IAC common stock and Class B common stock shareholders
|
$
|
318,021
|
|
|
$
|
(328,199)
|
|
|
|
|
|
Denominator:
|
|
|
|
Weighted average basic IAC common stock and Class B common stock shares outstanding(a)(b)
|
85,899
|
|
|
85,132
|
|
|
|
|
|
Basic EPS
|
$
|
3.70
|
|
|
$
|
(3.86)
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands, except per share data)
|
Diluted EPS:
|
|
|
|
Numerator:
|
|
|
|
Net earnings (loss) attributable to IAC common stock and Class B common stock shareholders
|
$
|
318,021
|
|
|
$
|
(328,199)
|
|
Net earnings attributed to unvested participating security (a)
|
11,107
|
|
|
—
|
|
Impact from public subsidiary dilutive securities(c)
|
(18)
|
|
|
—
|
|
Reallocation of net earnings attributable to unvested participating security
|
(10,378)
|
|
|
—
|
|
Net earnings (loss) attributable to IAC common stock and Class B common stock shareholders for diluted EPS computation
|
$
|
318,732
|
|
|
$
|
(328,199)
|
|
|
|
|
|
Denominator:
|
|
|
|
Weighted average basic IAC common stock and Class B common stock shares outstanding used for basic EPS computation(a)(b)
|
85,899
|
|
|
85,132
|
|
Dilutive securities(c)(d)
|
6,239
|
|
|
—
|
|
Number of shares used for diluted EPS computation(b)
|
92,138
|
|
|
85,132
|
|
|
|
|
|
Diluted EPS
|
$
|
3.46
|
|
|
$
|
(3.86)
|
|
_____________________
(a) On November 5, 2020, IAC's CEO was granted a stock-based award in the form of 3.0 million shares of restricted common stock. The number of shares that ultimately vest is subject to the satisfaction of growth targets in IAC's stock price over the 10-year service condition of the award. These restricted shares have a non-forfeitable dividend right in the event the Company declares a cash dividend to common shareholders and participates in all other distributions of the Company in the same manner as all other IAC common shareholders. Accordingly, the two-class method of calculating earnings per share is used. While the restricted shares are presented as outstanding shares in the consolidated balance sheet, these shares are excluded from the weighted average shares outstanding in calculating basic earnings per share and the allocable portion of net earnings are also excluded. Fully diluted earnings per share reflects the impact on earnings and fully diluted shares in the manner that is most dilutive.
(b) The Company computed basic and diluted earnings per share for periods prior to the MTCH Separation using the shares issued on June 30, 2020 in connection with the MTCH Separation.
(c) IAC has the option to settle certain Angi Inc. stock-based awards in its shares. For the three months ended March 31, 2021, it is more dilutive for IAC to settle these Angi Inc. equity awards. The impact on earnings relates to the settlement of Angi Inc.'s dilutive securities in IAC common shares.
(d) 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 and subsidiary denominated equity, vesting of restricted common stock, restricted stock units ("RSUs") and market-based awards ("MSUs"). For the three months ended March 31, 2021, 3.0 million potentially dilutive securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
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. In addition, we consider 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, which is the case for the Desktop and Ask Media Group operating segments in the Search reportable segment, 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:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Revenue
|
|
|
|
Angi Inc.
|
$
|
387,029
|
|
|
$
|
343,650
|
|
Vimeo
|
89,422
|
|
|
56,968
|
|
Dotdash
|
65,421
|
|
|
44,120
|
|
Search
|
181,034
|
|
|
154,419
|
|
Emerging & Other
|
153,156
|
|
|
85,042
|
|
Inter-segment eliminations
|
(74)
|
|
|
(75)
|
|
Total
|
$
|
875,988
|
|
|
$
|
684,124
|
|
The following table presents the revenue of the Company's segments disaggregated by type of service:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Angi Inc.
|
|
|
|
Marketplace:
|
|
|
|
Consumer connection revenue(a)
|
$
|
272,353
|
|
|
$
|
239,830
|
|
Service professional membership subscription revenue
|
11,952
|
|
|
13,777
|
|
Other revenue
|
6,745
|
|
|
5,169
|
|
Total Marketplace revenue
|
291,050
|
|
|
258,776
|
|
Advertising and other revenue(b)
|
69,991
|
|
|
65,356
|
|
Total North America revenue
|
361,041
|
|
|
324,132
|
|
Consumer connection revenue(c)
|
22,351
|
|
|
15,689
|
|
Service professional membership subscription revenue
|
3,328
|
|
|
3,299
|
|
Advertising and other revenue
|
309
|
|
|
530
|
|
Total Europe revenue
|
25,988
|
|
|
19,518
|
|
Total Angi Inc. revenue
|
$
|
387,029
|
|
|
$
|
343,650
|
|
|
|
|
|
(a) Includes fees paid by service professionals for consumer matches and revenue from Angi Services sourced through marketplace platforms.
|
(b) Includes Angi revenue from service professionals under contract for advertising and Angi membership subscription fees from consumers, as well as revenue from HomeStars.
|
(c) Includes fees paid by service professionals for consumer matches.
|
|
|
|
|
Vimeo
|
|
|
|
Platform revenue
|
$
|
89,422
|
|
|
$
|
56,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dotdash
|
|
|
|
Display advertising revenue
|
$
|
37,171
|
|
|
$
|
29,889
|
|
Performance marketing revenue
|
28,250
|
|
|
14,231
|
|
Total Dotdash revenue
|
$
|
65,421
|
|
|
$
|
44,120
|
|
|
|
|
|
Search
|
|
|
|
Advertising revenue
|
|
|
|
Google advertising revenue:
|
$
|
155,418
|
|
|
$
|
126,797
|
|
Non-Google advertising revenue
|
21,534
|
|
|
23,376
|
|
Total advertising revenue
|
176,952
|
|
|
150,173
|
|
Other revenue
|
4,082
|
|
|
4,246
|
|
Total Search revenue
|
$
|
181,034
|
|
|
$
|
154,419
|
|
|
|
|
|
Emerging & Other
|
|
|
|
Subscription revenue
|
$
|
83,566
|
|
|
$
|
60,671
|
|
Marketplace revenue
|
56,271
|
|
|
17,696
|
|
Media production and distribution revenue
|
7,788
|
|
|
1,386
|
|
Advertising revenue:
|
|
|
|
Non-Google advertising revenue
|
3,393
|
|
|
3,713
|
|
Google advertising revenue
|
571
|
|
|
834
|
|
Total advertising revenue
|
3,964
|
|
|
4,547
|
|
Service and other revenue
|
1,567
|
|
|
742
|
|
Total Emerging & Other revenue
|
$
|
153,156
|
|
|
$
|
85,042
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Revenue:
|
|
|
|
United States
|
$
|
703,172
|
|
|
$
|
537,343
|
|
All other countries
|
172,816
|
|
|
146,781
|
|
Total
|
$
|
875,988
|
|
|
$
|
684,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
(In thousands)
|
Long-lived assets (excluding goodwill, intangible assets and ROU assets):
|
|
|
|
United States
|
$
|
268,216
|
|
|
$
|
266,169
|
|
All other countries
|
11,285
|
|
|
12,082
|
|
Total
|
$
|
279,501
|
|
|
$
|
278,251
|
|
The following tables present operating income (loss) and Adjusted EBITDA by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Operating income (loss):
|
|
|
|
Angi Inc.
|
$
|
109
|
|
|
$
|
(16,296)
|
|
Vimeo
|
(206)
|
|
|
(14,589)
|
|
Dotdash
|
18,127
|
|
|
2,411
|
|
Search
|
18,386
|
|
|
(220,563)
|
|
Emerging & Other
|
994
|
|
|
(17,870)
|
|
Corporate
|
(49,237)
|
|
|
(45,431)
|
|
Total
|
$
|
(11,827)
|
|
|
$
|
(312,338)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Adjusted EBITDA(d):
|
|
|
|
Angi Inc.
|
$
|
23,186
|
|
|
$
|
34,397
|
|
Vimeo
|
$
|
1,796
|
|
|
$
|
(11,408)
|
|
Dotdash
|
$
|
19,922
|
|
|
$
|
7,011
|
|
Search
|
$
|
18,386
|
|
|
$
|
13,130
|
|
Emerging & Other
|
$
|
11,964
|
|
|
$
|
(19,959)
|
|
Corporate
|
$
|
(26,352)
|
|
|
$
|
(31,386)
|
|
_____________________
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(d) 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.
The following tables reconcile operating income (loss) for the Company's reportable segments and net earnings (loss) attributable to IAC shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
|
|
Operating
Income (Loss)
|
|
Stock-based
Compensation
Expense
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
(In thousands)
|
|
|
Angi Inc.
|
$
|
109
|
|
|
$
|
2,034
|
|
|
$
|
15,969
|
|
|
$
|
5,074
|
|
|
|
|
|
|
$
|
23,186
|
|
|
|
Vimeo
|
(206)
|
|
|
$
|
—
|
|
|
$
|
115
|
|
|
$
|
1,887
|
|
|
|
|
|
|
$
|
1,796
|
|
|
|
Dotdash
|
18,127
|
|
|
$
|
—
|
|
|
$
|
549
|
|
|
$
|
1,246
|
|
|
|
|
|
|
$
|
19,922
|
|
|
|
Search
|
18,386
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
18,386
|
|
|
|
Emerging & Other
|
994
|
|
|
$
|
25
|
|
|
$
|
426
|
|
|
$
|
10,519
|
|
|
|
|
|
|
$
|
11,964
|
|
|
|
Corporate
|
(49,237)
|
|
|
$
|
20,643
|
|
|
$
|
2,242
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
(26,352)
|
|
|
|
Total
|
(11,827)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(6,680)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on investment in MGM Resorts International
|
382,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
13,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
377,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
(48,782)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
328,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to IAC shareholders
|
$
|
329,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
Operating
(Loss) Income
|
|
Stock-based
Compensation
Expense
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
Acquisition-related Contingent Consideration Fair Value Arrangements
|
|
Goodwill Impairment
|
|
Adjusted
EBITDA
|
|
(In thousands)
|
Angi Inc.
|
$
|
(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
|
|
Search
|
(220,563)
|
|
|
$
|
—
|
|
|
$
|
320
|
|
|
$
|
21,400
|
|
|
$
|
—
|
|
|
$
|
211,973
|
|
|
$
|
13,130
|
|
Emerging & Other
|
(17,870)
|
|
|
$
|
25
|
|
|
$
|
302
|
|
|
$
|
3,866
|
|
|
$
|
(6,282)
|
|
|
$
|
—
|
|
|
$
|
(19,959)
|
|
Corporate
|
(45,431)
|
|
|
$
|
11,581
|
|
|
$
|
2,464
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(31,386)
|
|
Total
|
(312,338)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(2,217)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
(57,448)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
(372,003)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
41,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(330,571)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
2,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to IAC shareholders
|
$
|
(328,199)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 9—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 accompanying balance sheet to the total amounts shown in the accompanying statement of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
3,915,548
|
|
|
$
|
3,476,188
|
|
|
$
|
2,029,071
|
|
|
$
|
839,796
|
|
Restricted cash included in other current assets
|
14,340
|
|
|
473
|
|
|
743
|
|
|
527
|
|
Restricted cash included in other non-current assets
|
433
|
|
|
449
|
|
|
398
|
|
|
409
|
|
Total cash and cash equivalents and restricted cash as shown on the statement of cash flows
|
$
|
3,930,321
|
|
|
$
|
3,477,110
|
|
|
$
|
2,030,212
|
|
|
$
|
840,732
|
|
Restricted cash included in other current assets at March 31, 2021 primarily consists of cash received from customers at Care.com’s payment solutions business, representing funds collected for payroll and related taxes, which were not remitted as of the period end.
Restricted cash included in other current assets at December 31, 2020 primarily consists of cash received from customers at Angi Inc. through their Handy platform, representing funds collected for payments to service providers, which were not settled as of the period end.
Restricted cash included in other current assets at March 31, 2020 and December 31, 2019 primarily consists of a deposit related to corporate credit cards.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Restricted cash included in other non-current assets for all periods presented consists of deposits related to leases.
Credit Losses and Revenue Reserve
The following tables present the changes in the allowance for credit losses for the three months ended March 31, 2021 and 2020, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
(In thousands)
|
Balance at January 1
|
$
|
27,654
|
|
|
$
|
20,257
|
|
Current period provision for credit losses
|
19,550
|
|
|
19,929
|
|
Write-offs charged against the allowance
|
(20,981)
|
|
|
(17,264)
|
|
Recoveries collected
|
758
|
|
|
736
|
|
Balance at March 31
|
$
|
26,981
|
|
|
$
|
23,658
|
|
The revenue reserve was $3.8 million and $2.1 million at March 31, 2021 and December 31, 2020, respectively. The total allowance for credit losses and revenue reserve was $30.8 million and $29.7 million as of March 31, 2021 and December 31, 2020, respectively.
Accumulated Amortization and Depreciation
The following table provides the accumulated amortization and depreciation within the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category
|
March 31, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
Right-of-use assets included in other non-current assets
|
$
|
87,942
|
|
|
$
|
78,226
|
|
Building, capitalized software, leasehold improvements and equipment
|
$
|
193,120
|
|
|
$
|
208,112
|
|
Intangible assets
|
$
|
277,639
|
|
|
$
|
278,639
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2021
|
|
2020
|
|
(In thousands)
|
Unrealized increase in the estimated fair value of a warrant
|
$
|
12,775
|
|
|
$
|
—
|
|
Realized gain related to Vimeo's retained interest in its former hardware business
|
10,217
|
|
|
—
|
|
Foreign exchange losses, net (a)
|
(11,782)
|
|
|
(1,725)
|
|
Impairments related to impact of COVID-19 (b)
|
—
|
|
|
(59,001)
|
|
Interest income
|
456
|
|
|
4,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
1,984
|
|
|
(1,192)
|
|
Other income (expense), net
|
$
|
13,650
|
|
|
$
|
(57,448)
|
|
_____________________
(a) Includes $10.0 million in foreign exchange losses primarily related to the substantial liquidation of certain foreign subsidiaries in the three months ended March 31, 2021.
(b) Includes $51.5 million in impairments 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 in the three months ended March 31, 2020.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED 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 MTCH
In August 2018, ten then-current and former employees of Match Group’s Tinder business 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 two investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their stock options, and (ii) then wrongfully merged Tinder into Match Group, thereby depriving the plaintiffs of their contractual right to later valuations of Tinder on a stand‑alone basis. The complaint asserts inter alia claims for breach of contract and interference with contractual relations and prospective economic advantage and seeks compensatory damages in the amount of at least $2 billion, as well as punitive damages. Shortly after filing suit, 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.
In October 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 time-barred under applicable law. In June 2019, the court issued a decision and order granting the motion in part but leaving the plaintiffs’ principal claims intact. The defendants appealed from the partial denial of their motion to dismiss, and in October 2019, the Appellate Division, First Department, affirmed the lower court’s decision. After additional appellate motion practice, in May 2020, the Appellate Division reaffirmed the lower court’s decision on different grounds. In June 2020, the defendants filed a motion for leave to appeal that decision to the Court of Appeals; the Appellate Division denied the motion in July 2020.
In June 2019, the defendants filed a second motion to dismiss or for other relief based upon certain provisions of the plaintiffs’ agreement with a litigation funding firm; the parties are currently supplementing their briefing on that motion, which remains pending. From July to November 2019, the defendants filed counterclaims against former Tinder CEO Sean Rad for breach of contract and unjust enrichment based upon his alleged misappropriation and unauthorized destruction of confidential company information, unauthorized recording of conversations with company employees, and breach of his non-solicitation obligations. In January 2020, the parties participated in a mediation that did not result in the resolution of the matter. Fact discovery in the case is substantially complete, and expert discovery is under way.
In July 2020, the four individuals who earlier had discontinued their claims in the lawsuit commenced arbitration proceedings against IAC and Match Group before the American Arbitration Association in California, asserting the same claims and seeking the same relief as the six remaining plaintiffs in the lawsuit. In September 2020, the defendants filed a motion to stay the trial in the New York lawsuit in favor of the California arbitration; in November 2020, the court denied the motion. In December 2020, the claimants in the California arbitration filed a motion to stay those proceedings in favor of the New York action, in which a trial has been provisionally scheduled for November 2021; in January 2021, the arbitrator denied the motion and provisionally scheduled a hearing on the merits for February 2022. In April 2021, the respondents in the California arbitration filed a motion for summary judgment dismissing the claimants' merger-related claims.
IAC believes that the allegations against it in the New York lawsuit and the California arbitration are without merit and will continue to defend vigorously against them.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Pursuant to the Transaction Agreement (as defined in Note 1—The Company and Summary of Significant Accounting Policies-MTCH Separation ), Match Group has agreed to indemnify the Company for matters relating to any business of Match Group, including indemnifying the Company for costs related to the matter described above.
NOTE 11—RELATED PARTY TRANSACTIONS
Relationship with Old IAC prior to the MTCH Separation
The Company’s statement of operations includes allocations of costs, including stock-based compensation expense, related to Old IAC’s accounting, treasury, legal, tax, corporate support and internal audit functions prior to the MTCH Separation for the three months ended March 31, 2020. Old IAC historically allocated costs related to its accounting, treasury, legal, tax, corporate support and internal audit functions that were incurred at the Old IAC legal entity level to its publicly traded subsidiaries, Old MTCH and Angi Inc. for any services provided under the applicable services agreements. The remaining unallocated expenses of Old IAC related to its accounting, treasury, legal, tax, corporate support and internal audit functions were allocated to the Company. Old IAC allocated costs to the Company, inclusive of stock-based compensation expense, which totaled $24.0 million for the three months ended March 31, 2020. It is not practicable to determine the actual expenses that would have been incurred for these services had the Company operated as a standalone entity during the periods presented. Management considers the allocation method to be reasonable.
The portion of interest income reflected in the statement of operations that is related party in nature was less than $0.1 million for the three months ended March 31, 2020 and is included in "Interest income, net" in the table below.
The following table summarizes the components of the net increase in Old IAC’s investment in the Company for the three months ended March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
(In thousands)
|
Cash transfers from Old IAC related to its centrally managed U.S. treasury management function, acquisitions and cash expenses paid by Old IAC on behalf of the Company, net
|
|
|
$
|
(1,786,559)
|
|
Contribution of buildings to Match Group
|
|
|
34,973
|
|
Taxes
|
|
|
25,048
|
|
Allocation of costs from Old IAC
|
|
|
(12,652)
|
|
Interest income, net
|
|
|
72
|
|
Net increase in Old IAC's investment in the Company
|
|
|
$
|
(1,739,118)
|
|
Notes Receivable—Related Party
During 2019, the Company, through two subsidiaries, entered into loan agreements with Old IAC for cash transfers to Old IAC under its centrally managed U.S. treasury function. During the first quarter of 2020, the outstanding balance, which was $55.3 million at December 31, 2019, was repaid.
On February 11, 2020, the Company, through a subsidiary, entered into a loan agreement with Old IAC for cash transfers to Old IAC under its centrally managed U.S. treasury function. During the second quarter of 2020, the outstanding balance, which was $27.2 million at March 31, 2020, was repaid.
IAC and Angi Inc.
Old IAC and Angi Inc., in connection with the transaction resulting in formation of Angi Inc., entered into a contribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement. Upon the MTCH Separation, Old IAC assigned these agreements to the Company.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
For the three months ended March 31, 2021 and 2020, 0.1 million and 0.2 million shares, respectively, of Angi Inc. Class B common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for shares of IAC common stock, issued for periods after the MTCH Separation, and Old IAC common stock, issued for periods prior to the MTCH Separation, in connection with the exercise and vesting of IAC and Old IAC equity awards held by Angi Inc. employees. For the three months ended March 31, 2021, 2.6 million shares of Angi Inc. Class A common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for IAC common stock, issued in connection with the exercise and settlement of certain Angi Inc. stock appreciation rights. There were no shares of Angi Inc. Class A common stock issued to IAC during the three months ended March 31, 2020.
For the three months ended March 31, 2021 and 2020, Angi Inc. was charged $1.1 million and $1.2 million, respectively, by IAC and Old IAC, respectively, for services rendered pursuant to the services agreement. At March 31, 2021, Angi Inc. had outstanding payables of less than $0.1 million due to the Company, pursuant to the services agreement. There were no outstanding receivables or payables pursuant to the services agreement as of December 31, 2020.
At both March 31, 2021 and December 31, 2020, Angi Inc. had outstanding payables of $0.9 million due to the Company pursuant to the tax sharing agreement. There were no payments to or refunds from Angi Inc. pursuant to this agreement during the three months ended March 31, 2021 and 2020.
Additionally, the Company subleases office space from Angi Inc. and was charged $0.4 million of rent for both the three months ended March 31, 2021 and 2020. At March 31, 2021 there were no outstanding payables due to Angi Inc. pursuant to the sublease agreements. At December 31, 2020, there was an outstanding payable of less than $0.1 million due to Angi Inc. pursuant to sublease agreements, which was subsequently paid in full in the first quarter of 2021.
IAC and Old MTCH
Prior to the MTCH Separation, for the three months ended March 31, 2020, Old MTCH incurred rent expense of $0.8 million for leasing office space for certain of its businesses at properties owned by the Company. The amount was paid in full by Old MTCH at March 31, 2020. After June 30, 2020, the date of the MTCH Separation, Match Group is no longer a related party.
On January 31, 2020, Old IAC contributed two office buildings in Los Angeles to Old MTCH, which are primarily occupied and were previously leased from the Company by Tinder. In connection with this contribution, the Company entered into a lease with Old MTCH for office space, which the Company currently occupies, in one of the buildings and for the three months ended March 31, 2020, the Company paid Old MTCH less than $0.1 million under the lease. Old MTCH issued 1.4 million shares of Old MTCH common stock to Old IAC for the buildings.
IAC and Expedia
The Company and Expedia each have a 50% ownership interest in two aircraft that may be used by both companies. In 2019, the Company and Expedia entered into an agreement to jointly acquire a new corporate aircraft for a total expected cost of $72.7 million (including purchase price and related costs), with each company to bear 50% of such expected cost. The Company paid approximately $23 million in 2019 in connection with the purchase agreement, and the respective share of the balance is due upon delivery of the new aircraft, which is expected to occur in the third quarter of 2021. Members of the aircraft flight crews are employed by an entity in which the Company and Expedia each have a 50% ownership interest. The Company and Expedia have agreed to share costs relating to flight crew compensation and benefits pro-rata according to each company’s respective usage of the aircraft, for which they are separately billed by the entity described above. The Company and Expedia are related parties because Mr. Diller serves as Chairman and Senior Executive of both IAC and Expedia. For the three months ended March 31, 2021 and 2020, total payments made to this entity by the Company were not material.
NOTE 12—SUBSEQUENT EVENTS
As of May 6, 2021, the outstanding balance of the ANGI Group Term Loan of $213.1 million was repaid in its entirety.