Item 1. Business
OVERVIEW
Who We Are
IAC is a leading media and Internet company composed of widely known consumer brands, such as Match, Tinder, PlentyOfFish and OkCupid, which are part of Match Group’s online dating portfolio, and HomeAdvisor and Angie’s List, which are operated by ANGI Homeservices, as well as Vimeo, Dotdash, Dictionary.com, The Daily Beast and Investopedia.
For information regarding the results of operations of IAC’s segments, as well as their respective contributions to IAC’s consolidated results of operations, see “Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8-Consolidated Financial Statements and Supplementary Data.”
All references to “IAC,” the “Company,” “we,” “our” or “us” in this report are to IAC/InterActiveCorp.
Our History
IAC, initially a hybrid media/electronic retailing company, was incorporated in 1986 in Delaware under the name Silver King Broadcasting Company, Inc. After several name changes (first to HSN, Inc., then to USA Networks, Inc., USA Interactive and InterActiveCorp, and finally, to IAC/InterActiveCorp) and the completion of a number of significant corporate transactions over the years, the Company transformed itself into a leading media and Internet company.
From 1997 through 2002, the Company acquired a controlling interest in Ticketmaster Group, Hotel Reservations Network (later renamed Hotels.com) and Expedia, as well as acquired Match.com and other smaller e-commerce companies. In 2002, the Company contributed its entertainment assets to Vivendi Universal Entertainment LLLP, a joint venture, and sold its interests in that venture to NBC Universal in 2005.
In 2003, the Company continued to grow its portfolio of e-commerce companies by acquiring all of the shares of Expedia, Hotels.com and Ticketmaster that it did not previously own, together with a number of other e-commerce companies (including LendingTree and Hotwire).
In 2005, IAC acquired Ask Jeeves, Inc. and completed the separation of its travel and travel‑related businesses and investments into an independent public company called Expedia, Inc. In 2008, IAC separated into five independent, publicly traded companies: IAC, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster (now part of Live Nation, Inc.) and Tree.com, Inc.
In 2009, we sold the European operations of Match.com to Meetic, a leading European online dating company based in France, in exchange for a 27% interest in Meetic and a €5 million note. In 2010, we exchanged the stock of a wholly-owned subsidiary that held our Evite, Gifts.com and IAC Advertising Solutions businesses and approximately $218 million in cash for substantially all of Liberty Media Corporation’s equity stake in IAC.
In 2011, we increased our ownership stake in Meetic to 81%. In 2012, we acquired About.com (now known as Dotdash).
In 2014, we acquired the remaining publicly traded shares of Meetic, ValueClick’s “owned and operated” website businesses, including Investopedia and PriceRunner, and The Princeton Review.
In 2015, we acquired Plentyoffish Media Inc., a leading provider of subscription-based and ad-supported online personals servicing North America, Europe, Latin America and Australia, for $575 million in cash, and completed the initial public offering of Match Group, Inc.
In 2016, we acquired VHX, a platform for premium over-the-top (OTT) subscription video channels, as well as a controlling interest in MyHammer Holding AG, the leading home services marketplace in Germany, and sold PriceRunner, ASKfm and ShoeBuy.
In 2017, we acquired controlling interests in HomeStars Inc. and MyBuilder Limited, leading home services platforms in the United Kingdom and Canada, respectively, as well as sold The Princeton Review. We also completed the combination of the businesses in our former HomeAdvisor segment with those of Angie’s List, Inc. under a new publicly traded holding company that we control, ANGI Homeservices Inc. Lastly, through our Vimeo subsidiary, we acquired Livestream Inc., a leading live video solution.
EQUITY OWNERSHIP AND VOTE
IAC has outstanding shares of common stock, with one vote per share, and shares of Class B common stock, with ten votes per share and which are convertible into common stock on a share for share basis. As of the date of this report, Mr. Diller, his spouse, Diane von Furstenberg, and his stepson, Alexander von Furstenberg, collectively beneficially own 5,789,499 shares of IAC Class B common stock by virtue of their respective voting and/or investment power(s) over these securities, 4,530,075 of which are held in trusts for the benefit of Mr. Diller and certain members of his family and the remainder of which are held by Mr. Diller personally. Shares of IAC Class B common stock beneficially owned by Mr. Diller, his spouse and his stepson collectively represent 100% of IAC’s outstanding Class B common stock and, together with shares of IAC common stock held as of the date of this report by Mr. von Furstenberg (58,542), a trust for the benefit of certain members of Mr. Diller's family (136,711) and a family foundation (1,711), represent approximately 43.1% of the total outstanding voting power of IAC (based on the number of shares of IAC common stock outstanding on February 2, 2018). As of the date of this report, Mr. Diller also holds 800,000 vested options and 500,000 unvested options to purchase IAC common stock.
In addition, pursuant to an amended and restated governance agreement between IAC and Mr. Diller, for so long as Mr. Diller serves as IAC’s Chairman and Senior Executive and he beneficially owns (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) at least 5,000,000 shares of IAC Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficially owned by him directly and indirectly through trusts for the benefit of him and certain members of his family), he generally has the right to consent to limited matters in the event that IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over a continuous twelve-month period.
As a result of IAC securities beneficially owned by Mr. Diller and certain members of his family, Mr. Diller and these family members are, collectively, currently in a position to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcome of corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions.
DESCRIPTION OF IAC BUSINESSES
Match Group
Overview
Our Match Group segment consists of the businesses and operations of Match Group, Inc. (“Match Group”). Through Match Group, we operate a dating business that consists of a portfolio of brands, available in 42 languages across more than 190 countries. As of December 31, 2017, IAC’s ownership and voting interests in Match Group were 81.2% and 97.6%, respectively.
Services
Through the brands within our dating business, we are a leading provider of subscription dating products servicing North America, Western Europe, Asia and many other regions around the world through websites and applications that we own and operate.
All of our dating products enable users to establish a profile and review the profiles of other users without charge. Each product also offers additional features, some of which are free and some of which are paid, depending on the particular product. In general, access to premium features requires a subscription, which is typically offered in packages (primarily ranging from one month to six months), depending on the product and circumstance. Prices differ meaningfully within a given brand by the duration of subscription purchased, the bundle of paid features that a user chooses to access and whether or not a subscriber is taking advantage of any special offers. In addition to subscriptions, many of our dating products offer users certain features, such as the ability to promote themselves for a given period of time or to review certain profiles without any signaling to other users, and these features are offered on a pay‑per‑use (or à la carte) basis. The precise mix of paid and premium features is established over time on a brand‑by‑brand basis and is constantly subject to iteration and evolution.
Revenue
Match Group revenue is primarily derived directly from users in the form of recurring subscriptions. Revenue is also earned from online advertising, the purchase of à la carte features (where users pay a non-recurring fee for a specific action or event) and offline events.
Marketing
We attract the majority of users of our dating products through word-of-mouth and other free channels. In addition, many of our brands rely on paid user acquisition efforts for a significant percentage of their users. Our online marketing activities generally consist of purchasing social media advertising, banner and other display advertising, search engine marketing, e-mail campaigns, video advertising, business development or partnership deals and hiring influencers to promote our dating products. Our offline marketing activities generally consist of television advertising and related public relations efforts, as well as events.
Competition
The dating industry is competitive and has no single, dominant brand globally. We compete with a number of other companies that provide similar dating and matchmaking products. In addition to other online dating brands, we compete with social media platforms and offline dating services, such as in‑person matchmakers. Arguably, our biggest competition in the case of our dating business comes from the traditional ways that people meet each other and the choices some people make to not utilize dating products or services.
We believe that our ability to compete successfully in the case of our dating business will depend primarily upon the following factors:
our ability to continue to increase consumer acceptance and adoption of online dating products, including in emerging markets and other parts of the world where the stigma is only beginning to erode;
continued growth in Internet access and smart phone adoption in certain regions of the world, particularly emerging markets;
the continued strength of Match Group’s brands;
the breadth and depth of Match Group’s active user communities relative to those of its competitors;
our ability to evolve our dating products in response to competitor offerings, user requirements, social trends and the technological landscape;
our ability to efficiently acquire new users for our dating products;
our ability to continue to optimize our monetization strategies; and
the design and functionality of our dating products.
Lastly, we believe our broad portfolio of dating brands is a competitive advantage, given that a large portion of online dating customers use multiple dating products over a given period of time, either concurrently or sequentially.
ANGI Homeservices
Overview
Our ANGI Homeservices segment consists of the North America (United States and Canada) and European businesses and operations of ANGI Homeservices Inc. (“ANGI Homeservices”). ANGI Homeservices is a new publicly traded holding company that was formed to facilitate the combination of the businesses within our former HomeAdvisor segment with Angie’s List, Inc. ("Angie's List"), which transaction was completed on September 29, 2017 (the “Combination”).
Following the completion of the Combination, we own and operate the HomeAdvisor business, which includes the Marketplace (described below) in the United States and the various entities operating its international businesses, plus Angie's List, mHelpDesk, CraftJack and Felix.
ANGI Homeservices is the world’s largest digital marketplace for home services, connecting millions of homeowners across the globe with home service professionals. ANGI Homeservices operates leading brands in eight countries, including HomeAdvisor® and Angie's List® (United States), HomeStars (Canada), Travaux.com (France), MyHammer (Germany and Austria), MyBuilder (UK), Werkspot (Netherlands) and Instapro (Italy).
As of December 31, 2017, IAC’s economic and voting interests in ANGI Homeservices were 86.9% and 98.5%, respectively.
Services
Overview. We own and operate the HomeAdvisor digital marketplace service in the United States (formerly known as our HomeAdvisor domestic business, the “Marketplace”), which matches consumers with service professionals nationwide for home repair, maintenance and improvement projects. The Marketplace provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals, as well as instantly book appointments with those professionals online. The Marketplace also matches consumers with service professionals instantly by telephone, as well as offers several home services-related resources, such as cost guides for different types of home services projects. We provide all Marketplace services and tools to consumers free of charge.
As of December 31, 2017, the Marketplace had a network of approximately 181,000 service professionals, each of whom had an active network membership and/or paid for consumer matches in December 2017. These service professionals provided services in more than 500 categories and 400 discrete markets in the United States, ranging from simple home repairs to larger home remodeling projects. The Marketplace generated approximately 18.1 million fully completed and submitted customer service requests during the year ended December 31, 2017.
We also own and operate Angie’s List, which connects consumers with service professionals for local services through a nationwide online directory of service professionals in over 700 service categories nationwide. Angie’s List also provides consumers with valuable tools, services and content, including more than ten million verified reviews of local service professionals, to help them research, shop and hire for local services. We provide consumers with access to the Angie's List nationwide directory and related basic tools and services free of charge.
Marketplace Consumer Services. Consumers can submit a service request for a service professional through HomeAdvisor platforms (website and mobile application), as well as through certain paths on the Angie’s List website and various third-party affiliate platforms. Whena consumer submits a request for a service professional, we generally match that consumer (through our proprietary algorithms) with up to four service professionals from our network based on several factors, including the type of services desired, location and the number of service professionals available to fulfill the request. When a consumer submits a service request through an Angie’s List platform, we generally match that consumer (through our proprietary algorithms) with a combination of Marketplace service professionals and selected certified service professionals (described below) from the Angie’s List nationwide online directory (as and if available for the given service request).
Service professionals may contact consumers with whom they have been matched through the Marketplace directly and consumers can review profiles, ratings and reviews of presented service professionals and select the service professional whom they believe best meets their specific needs. In all cases, consumers are under no obligation to work with any service professional(s) referred by or found through the Marketplace (including any from the Angie’s List nationwide online directory).
Wealso provide several on-demand services, including Instant Booking and Instant Connect (patent-pending). Through our Instant Booking offering, consumers can schedule appointments for select home services with a Marketplace service professional instantly across HomeAdvisor platforms (website or mobile application). Through our Instant Connect offering, consumers can connect with a Marketplace service professional instantly by phone, as well as access the service through digital voice assistant platforms. In certain markets, we also provide Same Say Service and Next Day Service for certain home services.
In addition to matching and on-demand services, consumers can access the online HomeAdvisor True Cost Guide, which provides project cost information for more than 400 project types nationwide, as well as an online library of home services-related resources, which consists primarily of articles about home improvement, repair and maintenance, tools to assist consumers with the research, planning and management of their projects and general advice for working with service professionals.
Marketplace Service Professional Services. We primarily offer and sell Marketplace memberships and related products and services to service professionals through our sales force (described below). Our basic annual membership package includes membership in our network of service professionals, as well as access to consumer connections through the Marketplace and a listing in the HomeAdvisor online directory and certain other affiliate directories, among other benefits. In addition to the membership subscription fee, Marketplace service professionals pay fees for consumer matches. We also offer certain other subscription products to Marketplace service professionals through mHelpDesk, a provider of cloud based field service software for small to mid-size service professionals, as well as custom website development and hosting services.
Angie's List Consumer Services. When consumers visit an Angie’s List platform (website or mobile application), they can choose to register in order to search for a service professional in the Angie’s List nationwide online directory or be matched with a service professional through the Marketplace.
We provide consumers who register with access to ratings and reviews and the ability to search for service professionals through the Angie’s List nationwide online directory, as well as the Angie’s List digital magazine and access to certain promotions. For a fee, we offer two premium membership packages, which include varying degrees of online and phone support, access to exclusive promotions and features and the award-winning Angie’s Listprint magazine. Consumers who choose the Marketplace option will be matched with a combination of Marketplace service professionals and selected certified service professionals (described below) from the Angie’s List nationwide online directory (as and if available for the given service request).
Angie's List Service Professional Services. We provide service professionals with a variety of services and tools through Angie’s List. Generally, service professionals who do not have an overall member grade below a “B” are eligible for certification. Service professionals must satisfy certain criteria for certification, including retaining the requisite member grade, passing certain criminal background checks and attesting to proper licensure requirements.
Once eligibility criteria are satisfied, service professionals must purchase term-based advertising from us to obtain certification. As of December 31, 2017, we had approximately 45,000 certified service professionals under contract for advertising. If a certified service professional fails to meet any eligibility criteria during the term of his or her contract, refuses to participate in our complaint resolution process or engages in what we determine to be prohibited behavior through any of our service channels, we suspend any existing advertising and exclusive promotions and the related advertising contract is subject to termination.
Certified service professionals rotate among the first service professionals listed in directory search results for an applicable category (together with their company name, overall rating, number of reviews, certification badge and basic profile information), with non-certified service professionals appearing below certified service professionals in directory search results. Certified service professionals can also provide exclusive promotions to members. When consumers choose the Marketplace option, our proprietary algorithms will determine where a given service professional appears within search results.
Revenue
Our revenue is primarily derived from consumer connection revenue, which are fees paid by Marketplace service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service), and membership subscription fees paid by service professionals. Fees paid by Marketplace service professionals for consumer matches vary based upon several factors, including the service requested, type of match (such as Instant Booking, Instant Connect, Same Day Service or Next Day Service) and geographic location of service. Our consumer connection revenue is generated and recognized when a consumer match is delivered to a Marketplace service professional. Membership subscription revenue is generated through subscription sales to Marketplace service professionals and is deferred and recognized over the term (primarily one year) of the applicable membership.
Revenue is also derived from the sale of time-based advertising to certified service professionals listed in the Angie’s List nationwide directory and membership subscription fees from consumers for premium membership packages. Service professionals generally pay for advertisements in advance on a monthly or annual basis, at their option, with the average advertising contract term being approximately one year. Advertising contracts generally include an early termination penalty. Revenue from the sale of website, mobile and call center advertising is recognized ratably over the time period in which the advertisements run. Revenue from the sale of advertising in the Angie’s List Magazine is recognized in the period in which the publication, containing the advertisement is published and distributed. Angie's List prepaid membership subscription fees are recognized as revenue ratably over the term of the associated subscription, which is typically one year.
Marketing
We market our various products and services to consumers primarily through digital marketing (primarily paid search engine marketing, display advertising and third party affiliate agreements) and traditional offline marketing (national television and radio campaigns), as well as through email. Pursuant to third party affiliate agreements, third parties agree to advertise and promote Marketplace products and services and those of Marketplace service professionals on their platforms. In exchange for these efforts, we agree to pay these third parties a fixed fee when visitors from their platforms click through to one of our platforms and submit a valid service request through the Marketplace, or when visitors submit a valid service request on the affiliate platform and the affiliate transmits the service request to the Marketplace. We also market our products and services to consumers through partnerships with other contextually related websites and, to a lesser extent, through relationships with certain retailers and direct mail.
We market subscription packages and related products and services to service professionals primarily through our Golden, Colorado based sales force, as well as through sales forces in Denver and Colorado Springs, Colorado, Lenexa, Kansas, New York, New York and Indianapolis, Indiana. We also market these products and services through search engine marketing, digital media advertising and direct relationships with trade associations and manufacturers. We market term-based advertising and related products to service professionals primarily through our Indianapolis based sales force.
Competition
The home services industry is highly competitive and fragmented, and in many important respects, local in nature. We compete with, among others: (i) search engines and online directories, (ii) home and/or local services-related lead generation platforms, (iii) providers of consumer ratings, reviews and referrals and (iv) various forms of traditional offline advertising (primarily local in nature), including radio, direct marketing campaigns, yellow pages, newspapers and other offline directories. We also compete with local and national retailers of home improvement products that offer or promote installation services. We believe our biggest competition comes from the traditional methods most people currently use to find service professionals, which is by word-of-mouth and through referrals.
We believe that our ability to compete successfully will depend primarily upon the following factors:
the size, quality, diversity and stability of our network of Marketplace service professionals and the breadth of our online directory listings;
the functionality of our websites and mobile applications and the attractiveness of their features and our products and services generally to consumers and service professionals, as well as our continued ability to introduce new products and services that resonate with consumers and service professionals generally;
our ability to continue to build and maintain awareness of, and trust in and loyalty to, our various brands, particularly our Angie’s List and HomeAdvisor brands;
our ability to consistently generate service requests through the Marketplace and leads through our online directories that convert into revenue for our service professionals in a cost-effective manner; and
the quality and consistency of our service professional pre-screening processes and ongoing quality control efforts, as well as the reliability, depth and timeliness of customer ratings and reviews.
Video
Overview
Our Video segment consists primarily of Vimeo, Electus, IAC Films and Daily Burn.
Vimeo
Services. Vimeo operates a global video sharing platform for creators and their audiences. Through Vimeo, we provide creators with professional tools to host, manage, review, distribute and monetize videos online, as well as provide audiences with a high quality, ad-free viewing experience across devices.
We offer basic video hosting and sharing services free of charge. For certain fees, we offer premium capabilities for creators, including: additional video storage space, advanced video privacy controls, video player customization options, team collaboration and management, review and workflow tools, lead generation, premium support and the ability to sell videos (on a subscription or transactional basis) directly to consumers in a customized viewing experience. As of December 31, 2017, there were approximately 873,000 subscribers to Vimeo's SaaS video tools, and for the quarter ended December 31, 2017, Vimeo reached over 260 million unique users worldwide.
We also provide creators with professional live streaming capabilities directly through Vimeo, as well as through Livestream, a leading live video solution that we acquired in October 2017. Through Livestream, we also provide creators with production hardware, tools and services for capturing, broadcasting and editing live events, including: (i) our Mevo® camera, a pocket-sized live event camera that allows creators to edit video live as their events unfold, as well as stream their events live to multiple destinations, including other live streaming and social media platforms, (ii) live editing software for desktop, laptops and certain other devices that provides creators with live production control room-like features and (iii) professional services to assist creators with the planning, set up, production and management of live events.
Marketing. We market Vimeo’s services primarily through online marketing efforts, including search engine marketing, social media, e-mail campaigns, display advertising and affiliate marketing, as well as through our owned and operated website and mobile applications.
Revenue. Vimeo revenue is derived primarily from annual and monthly subscription fees paid by creators for premium capabilities and, to a lesser extent, sales of live streaming hardware, software and professional services.
Competition. Vimeo competes with a variety of online video providers, from general purpose video sharing sites for consumers and creators to niche workflow and distribution solutions for professionals and enterprises. We believe that Vimeo differentiates itself from its competitors by offering a customizable, high definition video player, proprietary uploading and encoding infrastructure, a high quality, ad-free viewing experience and a turnkey solution for the production, distribution and monetization of video content.
We believe that our ability to compete successfully will depend primarily on:
the quality of our technology platform, premium offerings, live streaming tools and services and user (creator and viewer) experience;
whether our premium offerings and live streaming tools and services resonate with creators;
the ability of creators to distribute Vimeo-hosted content across third party platforms and the prominence and visibility of such content within search engine results and social media platforms;
the recognition and strength of the Vimeo brand relative to those of our competitors; and
our ability to drive new subscribers to our platform through various forms of direct marketing.
Electus
Services. Through Electus, we provide production and producer services for both unscripted and scripted television and digital content, primarily for initial sale and distribution in the United States. Our content is distributed on a wide range of
platforms, including broadcast television, premium and basic cable television, subscription-based and ad-supported video-on-demand services and other outlets. We also sell and distribute Electus programming and other content, together with programming and other content developed by third parties, outside of the United States through Electus International, as well as work with various brands to integrate their products into, as well as sponsor, Electus content through our Content Marketing team.
In addition, we operate Electus Digital, which consists of the following websites and properties: CollegeHumor.com, Dorkly.com and Drawfee.com; YouTube channels WatchLOUD, Nuevon and Hungry; and Big Breakfast (a production company). The various brands and businesses within Electus Digital specialize in creating and distributing content for digital and television platforms across a variety of genres, as well as provide branded and third party creative production services. Through Electus, we also operate Notional.
Revenue. Electus revenue is derived primarily from media production and distribution and display advertising.
Marketing. We do not engage in any formal marketing efforts in the case of our production and producer services, instead relying on referrals and the quality of our services and projects. For content distribution, we rely on our sales force, referrals and the quality of our services and projects, and for international distribution only, attendance at industry trade shows. In addition, the platforms to which we license our content for distribution market our content through their own independent marketing efforts. Electus Digital attracts users and audience primarily through social media, search engine marketing and affiliate agreements.
Competition. We compete with entertainment studios, production companies, distribution companies, creative agencies and content websites. We believe that our ability to compete successfully will depend primarily upon the following factors:
the quality and diversity of our content relative to that of our competitors and the third parties to whom we license our content, as well as the quality of the services provided by licensees of our content;
our continued ability to create new content that resonates with licensees and viewers; and
our ability to sell integration and sponsorship opportunities for our content.
IAC Films
Services. IAC Films provides production and producer services for feature films (primarily for initial sale and distribution in the United States and internationally). Our content is distributed through theatrical releases and video-on-demand services.
Revenue. IAC Films revenue is derived primarily from media production and distribution.
Marketing. We pay third parties to market our films to consumers through traditional offline marketing (national television and radio campaigns), trailers in theaters and digital marketing (primarily paid marketing through search engine and social media platforms), and to a lesser extent through viral marketing and paid advertisement in print media.
Competition. We compete with major studios, independent motion picture companies, distribution companies and digital media platforms. We believe that our ability to compete successfully will depend primarily upon the following factors:
the quality and diversity of our films relative to those of our competitors;
our continued ability to retain the services of quality actors, directors, producers and other creative and technical personnel, as well as production financing; and
our continued ability to create new films that resonate with viewers and distribute them to a broad viewing audience through theaters and video-on-demand channels.
Daily Burn
Services. Daily Burn is a health and fitness property that provides streaming fitness and workout videos across a variety of platforms, including iOS, Android, Roku and other Internet-enabled television platforms, as well as audio workouts downloadable to iOS and Android devices for workouts on the go.
Revenue. Daily Burn’s revenue consists primarily of subscription fees.
Marketing. We market our streaming fitness and workout videos primarily through television advertising, advertising on ad-supported video-on-demand services and content platforms and search engine marketing.
Competition. The fitness and workout market is highly competitive and barriers to entry, particularly in the case of online platforms, are minimal. We compete primarily with other streaming fitness and workout platforms and, to a lesser extent, fitness and workout DVDs.
Applications
Overview
Our Applications segment consists of:
Consumer, which develops and distributes downloadable desktop and mobile applications and includes Apalon, which houses our mobile applications, and SlimWare; and
Partnerships, which includes our business-to-business partnership operations.
Consumer
Through our Consumer business, we develop, market and distribute a variety of applications, primarily browser extensions, which consist of a browser tab page and related technology that together enable users to run search queries directly from their new tab page and web browsers. Many of our browser extensions are coupled with other applications that we have developed that provide users with access to various forms of content and software capabilities. These applications include: FromDoctoPDF, through which users can convert documents from one format into various others and share them across multiple platforms; MapsGalaxy, through which users can access accurate street maps, local traffic conditions and aerial and satellite street views; and WeatherBlink, through which users can access local weather conditions and satellite radar maps directly from their web browsers. Other applications target users with a special or passionate interest in select vertical categories (such as recipes, entertainment and astrology, among others) or provide users with particular reference information or access to specific capabilities (such as internet speed, online forms and package tracking, among others). We distribute these applications directly to consumers free of charge.
The Consumer business also includes: (i) Apalon, a mobile development company with one of the largest and most popular portfolios of mobile applications worldwide and (ii) SlimWare, a provider of community-powered software and services that clean, repair, update, secure and optimize computers, mobile phones and digital devices.
Partnerships
Through our Partnerships business, we work closely with partners in the software, media and other industries to design and develop customized browser-based search applications to be bundled and distributed with these partners’ products and services.
Revenue
Substantially all of the Applications segment's revenue consists of advertising revenue generated principally through the display of paid listings in response to search queries. Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites. Paid listings are generally displayed based on keywords selected by advertisers. The substantial majority of the paid listings displayed by our Applications businesses are supplied to us by Google Inc. ("Google") in the manner provided by and pursuant to a services agreement with Google, which expires on March 31, 2020. The Company may choose to terminate this agreement effective March 31, 2019.
Pursuant to this agreement, those of our Applications businesses that provide search services transmit search queries to Google, which in turn transmits a set of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of, but concurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayed separately from algorithmic search results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per click basis and when a user submits a search query through one of our Applications businesses and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. We recognize paid listing revenue from Google when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third party distributor, we recognize the amount due from Google as revenue and record a revenue share or other payment obligation to the third party distributor as traffic acquisition costs. See “Item 1A-Risk Factors-We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition and results of operations.”
To a significantly lesser extent, the Applications segment's revenue also consists of fees related to subscription downloadable applications and services, fees related to paid mobile downloadable applications and display advertisements.
Competition
We compete with a wide variety of parties in connection with our efforts to develop, market and distribute applications and related technology directly and through third parties. Competitors of our Applications businesses include Google, Yahoo!, Bing and other third party browser extension, convenience search and desktop and mobile applications providers, as well as other search technology and convenience service providers.
Moreover, some of the current and potential competitors of our Applications businesses have longer operating histories, greater brand recognition, larger customer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products and services relative to those offered by us.
We believe that the ability of our Applications businesses to compete successfully will depend primarily upon our continued ability to:
create browser extensions and other applications that resonate with consumers (which requires that we continue to bundle attractive features, content and services, some of which may be owned by third parties, with quality search services);
maintain industry-leading monetization solutions for our applications;
differentiate our browser extensions and other applications from those of our competitors (primarily through providing customized browser tab pages and access to multiple search and other services through our browser extensions);
secure cost-effective distribution arrangements with third parties; and
market and distribute our browser extensions and other applications directly to consumers in a cost-effective manner.
Publishing
Overview
Our Publishing segment consists of:
our Premium Brands business, which includes Dotdash (formerly About.com), Dictionary.com, Investopedia and The Daily Beast; and
our Ask & Other business, which primarily includes Ask Media Group, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.
Our Publishing businesses publish digital content and/or provide search services to users. Those of our Publishing businesses that publish digital content (our Premium Brands) generate such content through various sources, including, for example, through a combination of internal and independent freelance subject matter "experts" in the case of Dotdash and internal editorial staff in the case of The Daily Beast, and/or acquire such content (or the rights to publish such content) from third parties. Those of our Publishing businesses that provide search services generally generate and display of a set of algorithmic search results, or hyperlinks to websites deemed relevant to search queries entered by users. In addition to these algorithmic search results, paid listings are also generally displayed in response to search queries. The paid listings displayed by our Publishing businesses are supplied to us by Google in the manner provided by and pursuant to our services agreement with Google, which is described above.
Premium Brands
Our Premium Brands business primarily consists of the following businesses:
Dotdash, which operates a network of digital brands that provide reliable information and inspiration in select vertical categories, including The Spruce (Home), The Balance (Money), Verywell (Health), Lifewire (Tech), TripSavvy (Travel) and ThoughtCo (Lifelong Learning);
Dictionary.com, which primarily provides online and mobile dictionary, thesaurus and reference services;
Investopedia, a resource for investment and personal finance education and information, as well as online courses through Investopedia Academy for a fee; and
The Daily Beast, a website dedicated to news, commentary, culture and entertainment that curates and publishes existing and original online content from its own roster of contributors in the United States.
Ask & Other
Our Ask & Other business consists primarily of:
Ask Media Group, a collection of websites (including Ask.com) that provide general search services and information; and
CityGrid, an advertising network that integrates local content and advertising for distribution to affiliated and third party publishers across web and mobile platforms.
Revenue
The Publishing segment's revenue consists principally of advertising revenue, which is generated primarily through the display of paid listings in response to search queries, display advertisements (sold directly and through programmatic ad sales) and fees related to paid mobile downloadable applications. The substantial majority of the paid listings that our Publishing businesses display are supplied to us by Google in the manner provided by and pursuant to our services agreement with Google, which is described above.
Competition
We compete with a wide variety of parties in connection with our efforts to attract and retain users and advertisers to our Publishing businesses.
In terms of publishing digital content, our competitors include destination websites that primarily acquire traffic through paid and algorithmic search results in relevant vertical categories and social channels. In terms of providing search services, generally our competitors include Google, Yahoo!, Bing and other destination search websites and search-centric portals (some of which provide a broad range of content and services and/or link to various desktop applications).
Moreover, some of the current and potential competitors of our Publishing businesses have longer operating histories, greater brand recognition, larger customer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products and services relative to those offered by us.
We believe that the ability of our Publishing businesses to compete successfully will depend primarily upon:
the quality of the content and features on our various Publishing platforms (websites and mobile applications), and the attractiveness of the services provided by these platforms generally, relative to those of our competitors;
our ability to successfully generate and acquire content (or the rights thereto) in a cost-effective manner;
the relevance and authority of the content and search results featured on our various Publishing platforms; and
our ability to successfully market the content and search services offered by our Publishing businesses in a cost-effective manner.
Other
Our Other segment consisted of The Princeton Review, which provided a variety of educational test preparation, academic tutoring and college counseling services, ShoeBuy, an Internet retailer of footwear and related apparel and accessories, and PriceRunner, a shopping comparison website. The Princeton Review, ShoeBuy and PriceRunner were sold in March 2017, December 2016 and March 2016, respectively.
Employees
As of December 31, 2017, IAC and its subsidiaries employed approximately 7,000 employees. We believe that we generally have good relationships with our employees.
Additional Information
Company Website and Public Filings. The Company maintains a website at www.iac.com. Neither the information on the Company’s website, nor the information on the website of any IAC business, is incorporated by reference into this annual report, or into any other filings with, or into any other information furnished or submitted to, the SEC.
The Company makes available, free of charge through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (including related amendments) as soon as reasonably practicable after they have been electronically filed with (or furnished to) the SEC.
Code of Ethics. The Company’s code of ethics applies to all employees (including IAC’s principal executive officers, principal financial officer and principal accounting officer) and directors and is posted on the Investor Relations section of the Company's website at www.iac.com/Investors under the "Code of Ethics" tab. This code of ethics complies with Item 406 of SEC Regulation S-K and the rules of The Nasdaq Stock Market LLC. Any changes to the code of ethics that affect the provisions required by Item 406 of Regulation S-K, and any waivers of such provisions of the code of ethics for IAC’s executive officers, senior financial officers or directors, will also be disclosed on IAC’s website.
Item 1A. Risk Factors
Cautionary Statement Regarding Forward-Looking Information
This annual report on Form 10-K contains “forward‑looking“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: IAC’sMatch Group’s future financial performance, IAC’sMatch Group’s business prospects and strategy, anticipated trends and prospects in the industries in which IAC’sMatch Group’s businesses operate and other similar matters. These forward-looking statements are based on IAC management'sMatch Group management’s current expectations and assumptions about future events as of the date of this annual report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in these forward‑lookingforward-looking statements for a variety of reasons, including, among others,others: the risk factors set forth below.in “Item 1A—Risk Factors.” Other unknown or unpredictable factors that could also adversely affect IAC’sMatch Group’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward‑lookingthese forward-looking statements discussed in this annual report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of IACMatch Group management as of the date of this annual report. IACMatch Group does not undertake to update these forward‑lookingforward-looking statements.
Risk Factors
PART I
Item 1. Business
Who we are
Match Group, Inc., through its portfolio companies, is a leading provider of digital technologies designed to help people make meaningful connections. Our global portfolio of brands includes Tinder®, Hinge®, Match®, Meetic®, OkCupid®, Pairs™, Plenty Of Fish®, Azar®, BLK®, and more, each built to increase our users’ likelihood of connecting with others. Through our trusted brands, we provide tailored services to meet the varying preferences of our users. Our services are available in over 40 languages to our users all over the world.
As used herein, “Match Group,” the “Company,” “we,” “our,” “us,” and similar terms refer to Match Group, Inc. and its subsidiaries, unless the context indicates otherwise.
The business of creating meaningful connections
Our goal is to spark meaningful connections for users around the world. Consumers’ preferences vary significantly, influenced in part by demographics, geography, cultural norms, religion, and intent (for example, seeking friendship, casual dating, or more serious relationships). As a result, the market for social connection apps is fragmented, and no single service has been able to effectively serve all of those seeking social connections.
Prior to the proliferation of the internet and mobile devices, human connections traditionally were limited by social circles, geography, and time. People met through work colleagues, friends and family, in school, at church, at social gatherings, in bars and restaurants, or in other social settings. Today, the adoption of mobile technology and the internet has significantly expanded the ways in which people can create new interactions, and develop meaningful connections and relationships. Additionally, the ongoing adoption of technology into more aspects of daily life continues to further erode biases and stigmas across the world that previously served as barriers to individuals using technology to help find and develop those connections.
We believe that technologies that bring people together serve as a natural extension of the traditional means of meeting people and provide a number of benefits for users, including:
•Expanded options: Social connection apps provide users access to a large pool of people they otherwise would not have a chance to meet.
•Efficiency: The search and recommending features, as well as the profile information available on social connection apps, allow users to filter a large number of individuals in a short period of time, increasing the likelihood that users will make a connection with someone.
•More comfort and control: Compared to the traditional ways that people meet, social connection apps provide an environment that reduces the awkwardness around identifying and reaching out to new people who are interested in connecting. This leads to many people who would otherwise be passive participants taking a more active role.
•Safely meet new people: Social connection apps can offer a safer way to contact new people for the first-time by allowing people to limit the amount of personal information exchanged and providing an opportunity to vet a new connection before meeting in person, including via video communication.
•Convenience: The nature of the internet and the proliferation of mobile devices allow users to connect with new people at any time, regardless of where they are.
Depending on a person’s circumstances at any given time, social connection apps can act as a supplement to, or substitute for, traditional means of meeting people. When selecting a social connection app, we believe that users consider the following attributes:
•Brand recognition and scale: Brand is very important. Users generally associate strong brands with a higher likelihood of success depends, in substantial part,and more tools to help the user connect safely and securely. Generally, successful brands depend on large, active communities of users, strong algorithmic filtering technology, and awareness of successful usage among similar users.
•Successful experiences: Demonstrated success of other users attracts new users through word-of-mouth recommendations. Successful experiences also drive repeat usage.
•Community identification: Users typically look for social connection apps that offer a community or communities to which the user can relate. By selecting a social connection app that is focused on a particular demographic, religion, geography, or intent, users can increase the likelihood that they will make a connection with someone with whom they identify.
•Service features and user experience: Users tend to gravitate towards social connection apps that offer features and user experiences that resonate with them, such as question-based matching algorithms, location-based features, or search capabilities. User experience is also driven by the type of user interface (for example, using our continuedpatented Swipe® technology versus scrolling), a particular mix of free and paid features, ease of use, privacy, and security. Users expect every interaction with a social connection app to be seamless and intuitive.
Given varying consumer preferences, we have adopted a brand portfolio approach, through which we attempt to offer social connection apps that collectively appeal to the broadest spectrum of consumers. We believe that this approach maximizes our ability to market,attract additional users.
Our portfolio
Tinder
Tinder® was launched in 2012 and has since risen to scale and popularity faster than any other service in the online dating category, growing to over 10.0 million payers as of the fourth quarter of 2023. Tinder’s patented Swipe® technology has led to significant adoption, particularly among 18 to 30 year-old users, who were historically underserved by the online dating category. Tinder employs a freemium model, through which users are allowed to enjoy many of the core features of Tinder for free, including limited use of the Swipe Right® feature with unlimited communication with other users. However, to enjoy premium features, such as unlimited use of the Swipe Right feature, a Tinder user must subscribe to one of several subscription offerings: Tinder Plus®, Tinder Gold®, or Tinder Platinum®. Tinder users and subscribers may also pay for certain premium features, such as Super Likes™ and Boosts, on a pay-per-use basis. Tinder Explore is an additional feature available for users to interact with others in ways that are non-traditional to Tinder.
Hinge
Hinge® launched in 2012 and has grown to be a popular app for relationship-minded individuals, particularly among the millennial and younger generations, in English speaking countries and several other European markets. Hinge is a mobile-only experience and employs a freemium model. Hinge is Designed to be Deleted® and focuses on users with a higher level of intent to enter into a relationship and its services are designed to reinforce that purpose. Hinge has Video Prompts, Voice Prompts, and Voice Notes, which allows users to better showcase who they are through text, photos, video, and voice at different points in their dating journey. Hinge offers two premium subscription offerings: Hinge+ and HingeX.
Match Group Asia (“MG Asia”)
The focus of the MG Asia brands has primarily been to serve various Asian and Middle Eastern markets. Plans to grow revenue include further expansion by certain brands into the European and U.S. markets. The following brands are included in MG Asia:
Pairs. The Pairs™ app was launched in 2012 and is a leading provider of online dating services in Japan, with a presence in Taiwan and South Korea. Pairs is a dating platform that was specifically designed to address social barriers generally associated with the use of dating services in Japan.
Azar. Azar® was launched in 2014 and acquired in 2021 through our acquisition of Hyperconnect. Azar is a one-to-one video chat service powered by real-time language translations that allow users to meet and interact with a variety of people across the globe in their native language. Azar also has a live streaming option. Azar is currently focused in the APAC and Other region, with growth in Western Europe and plans to expand to the U.S.
Evergreen & Emerging (“E&E”)
Our collections of brands within E&E include well-known pioneers in online relationships (which we refer to as Evergreen brands) and newer bets which target specific demographics (which we refer to as Emerging brands). The following brands are included in E&E:
Match. The Match® platform was launched in 1995 and helped create the online dating category with the ability to search profiles and receive algorithmic recommendations, and it now also offers a one-to-one real-time video feature. Match is a brand that focuses on users with a higher level of intent to enter into a serious relationship and its services and marketing are designed to reinforce that purpose.
Meetic. Meetic®, a leading European online dating brand based in France, was launched in 2001. Meetic is the most recognized dating app for singles over age 35 in Europe. Meetic is a brand that focuses on users with a higher level of intent to enter into a serious relationship and its service and marketing are designed to reinforce that purpose. Meetic also has online audio and video chat rooms available for users.
OkCupid. The OkCupid® service was launched in 2004 and has attracted users through a Q&A approach to the dating category. OkCupid relies on a freemium model and has a loyal, culturally progressive user base predominately located in larger metropolitan areas in English-speaking markets.
Plenty Of Fish. The Plenty Of Fish® dating service launched in 2003. Among its distinguishing features is the ability to both search profiles and receive algorithmic recommendations. Plenty Of Fish has grown in popularity over the years and relies on a freemium model. Plenty Of Fish has broad appeal in the United States, Canada, the United Kingdom, and a number of other international markets. POF Live™, a one-to-many live streaming video feature, allows users to engage with other users at Plenty Of Fish in a different format from traditional dating profiles.
BLK. BLK® brings the Swipe® feature made popular by Tinder to the Black community.
Our Portfolio Strategy
We strive to empower individual brand leaders with the authority and incentives to grow their respective brands. Our brands compete with each other and with third-party businesses on brand characteristics, service features, and business model, however we also work to apply a centralized discipline and share best practices across our brands in order to quickly introduce new services and features, optimize marketing, increase growth, reduce costs, improve user safety, and maximize profitability. Additionally, we centralize certain other administrative functions, such as legal, accounting, finance, treasury, real estate and facilities, and tax. We attempt to centrally facilitate excellence and efficiency across the entire portfolio by:
•centralizing operational functions across certain brands where we have strength in personnel and sufficient commonality of business interest (for example, ad sales, online marketing, and business technology are centralized across some, but not all, brands);
•developing talent across the portfolio to allow for development of specific proficiencies and promoting career advancement while maintaining the ability to deploy the best talent in the most critical positions across the company at any given time; and
•sharing analytics to leverage services and marketing successes across our businesses rapidly for competitive advantage.
Staying competitive
The industry for social connection apps is competitive and has no single, dominant brand globally. We compete with a number of other companies that provide similar technologies for people to meet each other, including other online dating platforms; other social media platforms and social-discovery apps; offline dating services, such as in-person matchmakers; and other traditional means of meeting people.
We believe that our ability to attract new users to our brands will depend primarily upon the following factors:
•our ability to continue to increase consumer acceptance and adoption of technologies to meet other people, particularly in emerging markets and parts of the world where the associated stigma has not yet fully eroded;
•continued growth in internet access and smart phone adoption in certain regions of the world, particularly emerging markets;
•the continued strength of our well-known brands and the growth of our emerging brands;
•the breadth and depth of our active communities of users;
•our brands’ reputations for trust and safety;
•our ability to evolve our services and introduce new services to keep up with user requirements, social trends, and the ever-evolving technological landscape;
•our brands’ ability to keep up with the constantly changing regulatory landscape, in particular, as it relates to the regulation of consumer digital media platforms;
•our ability to efficiently acquire new users for our services;
•our ability to continue to optimize our monetization strategies;
•the design and functionality of our services; and
•macroeconomic and geopolitical conditions.
A large portion of customers use multiple services over a given period of time, either concurrently or sequentially, making our broad portfolio of brands a competitive advantage.
Where we earn our revenue
Many of our brands enable users to establish a profile and review other users’ profiles without charge. Each brand also offers additional features, some of which are free, and some of which require payment depending on the particular service. In general, access to premium features requires a subscription, which is typically offered in packages (generally ranging from one week to six months), depending on the service and circumstance. Prices can differ meaningfully within a given brand depending on the duration of a subscription, the bundle of paid features that a user chooses to access, and whether or not a user is taking advantage of any special offers. In addition to subscriptions, many of our brands offer users certain features, such as the ability to promote themselves for a given period of time, or highlight themselves to a specific user, and these features are offered on a pay-per-use, or à la carte, basis. The precise mix of paid and premium features is established over time on a brand-by-brand basis and is subject to constant iteration and evolution.
Our direct revenue is primarily derived from users in the form of recurring subscriptions, which typically provide unlimited access to a bundle of features for a specified period of time, and to a lesser extent from à la carte features, where users pay a non-recurring fee for a specific consumable benefit or feature. Each of our brands offers a combination of free and paid features targeted to its unique community. In addition to direct revenue from our users, we generate indirect revenue from advertising, which comprises a much smaller percentage of our overall revenue as compared to direct revenue.
Dependencies on services provided by others
App Stores
We rely on the Apple App Store and the Google Play Store to distribute and monetize our mobile applications and related in-app services. While our mobile applications are free to download from these stores, we offer our users the opportunity to purchase subscriptions and certain à la carte features through these applications. We determine the prices at which these subscriptions and features are sold; however, purchases of these subscriptions and features are required in most cases to be processed through the in-app payment systems provided by Apple and Google, although some of our applications are currently able to use their own
payment systems for in-app purchases made on Android devices. We pay Apple and Google a meaningful share of the revenue we receive from transactions occurring both on and off their operating systems. For additional information, see “Item 1A Risk factors—Risks relating to our business—As the distribution of our services through app stores increases, in order to maintain our profit margins, we have taken steps to, and in the future may need to further, offset increasing app store fees by decreasing traditional marketing expenditures, increasing user volume or monetization per user, consolidating back-office and technical functions, or by engaging in other efforts to increase revenue or decrease costs generally.”
Additionally, when our users and subscribers access and pay through the app stores, Apple and Google may receive personal data about our users and subscribers that we would otherwise receive if we transacted with our users and subscribers directly. Apple and Google have restricted our access to much of that data.
Both Apple and Google have broad discretion to change their respective terms and conditions applicable to the distribution of our applications, including the amount of, and requirement to pay, certain fees associated with purchases required to be facilitated by Apple and Google through their payment systems, and to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute our applications through their stores, the features we provide, the manner in which we market our in-app services, and our ability to access information about our users and subscribers that they collect. Apple or Google could also make changes to their operating systems or payment services that could negatively impact our business, including by unilaterally raising the prices for those services. For additional information, see “Item 1A Risk factors—Risks relating to our business—Distribution and marketing of, and access to, our services relies, in significant part, on a variety of third-party platforms, in particular, mobile app stores. If these third parties limit, prohibit, or otherwise interfere with features or services or change their policies in any material way, it could adversely affect our business, financial condition, and results of operations.”
The manner in which Apple and Google operate these services is being reviewed by legislative and regulatory bodies globally. Notably, the European Union (the “EU”) has, under the Digital Markets Act, designated Apple and Google as “gatekeepers.” As such, we expect Apple and Google to be restricted from (i) imposing fees or other requirements that are not fair, reasonable and non-discriminatory to all application developers and (ii) prohibiting application developers from informing users about alternative payment options, offering their own in-app payment systems and making their applications available through alternate app stores on iOS and Android devices. In addition, the Republic of Korea has adopted legislation that prohibits Apple and Google from requiring that developers exclusively use Apple and Google to process payments. Further, courts and regulators in several jurisdictions, including France, India, and the Netherlands have all found that certain app store commissions or requirements that application developers exclusively use in-app payment systems violates laws in those jurisdictions. Multiple other jurisdictions, including the United Kingdom, Japan, Mexico, Brazil, Indonesia, Chile, and Australia, are investigating, considering regulatory action or considering legislation to restrict or prohibit these practices. The United States Congress, as well as a number of state legislatures, are also considering legislation that would regulate certain terms of the relationships between developers and Apple and Google and prohibit Apple and Google from requiring in-app payment processing.
Cloud and Other Services
We rely on third parties, primarily data centers and cloud-based, hosted web service providers, such as Amazon Web Services, as well as third party computer systems, broadband and other communications systems and service providers, in connection with the provision of our applications generally, as well as to facilitate and process certain transactions with our users. We have no control over any of these third parties or their operations.
Problems experienced by third-party data center and cloud-based, hosted web service providers upon which our brands including Tinder, Hinge, and Pairs rely, the telecommunications network providers with which we or they contract, or with the systems through which telecommunications providers allocate capacity among their customers could also adversely affect us. Any changes in service levels at our data centers or hosted web service providers or any interruptions, outages or delays in our systems or those of our third-party providers, or deterioration in the performance of such systems, could impair our ability to provide our services or process transactions with our users, which would adversely impact our business, financial condition and results of operations.
Sales and marketing
All of our brands rely on word-of-mouth, or free, user acquisition and also paid user acquisition, both to varying degrees. Our online marketing activities generally consist of purchasing social media advertising, advertising on streaming services, banner, and other display advertising, search engine marketing, email campaigns, video advertising, business development or partnership arrangements, creating content, and partnering with influencers, among other means to promote our services. Our offline marketing activities generally consist of television advertising, out-of-home advertising, and public relations efforts.
Intellectual property
We regard our intellectual property rights, including trademarks, domain names, and other intellectual property, as critical to our success.
For example, we rely heavily upon the use of trademarks (primarily Tinder®, Hinge®, Match®, Plenty Of Fish®, OkCupid®, Meetic®, Pairs™, Swipe®, Azar®, and BLK®, and associated domain names, taglines and logos) to market our services and applications and build and maintain brand loyalty and recognition. We maintain an ongoing trademark and service mark registration program, pursuant to which we register our brand names, service names, taglines and logos and renew existing trademark and service mark registrations in the United States and other jurisdictions to the extent we determine it to be necessary or otherwise appropriate and cost-effective. In addition, we have a trademark and service mark monitoring policy pursuant to which we monitor applications filed by third parties to register trademarks and service marks that may be confusingly similar to ours, as well as potential unauthorized use of our material trademarks and service marks. Our enforcement of this policy affords us valuable protection under current laws, rules, and regulations. We also reserve and register (to the extent available) and renew existing registrations for domain names that we believe are material to our business.
We also rely upon a combination of in-licensed third-party and proprietary trade secrets, including proprietary algorithms, and upon patented and patent-pending technologies, processes, and features relating to our recommendation process systems or features and services with expiration dates from 2024 to 2041. We have an ongoing invention recognition program pursuant to which we apply for patents to the extent we determine it to be core to our service or businesses or otherwise appropriate and cost-effective.
We rely on a combination of internal and external controls, including applicable laws, rules, and regulations, and contractual restrictions with employees, contractors, customers, suppliers, affiliates, and others, to establish, protect, and otherwise control access to our various intellectual property rights.
Government regulation
We are subject to a variety of laws and regulations in the United States and abroad that involve matters that are important to or may otherwise impact our business, including, among others, antitrust and competition issues, broadband internet access, online commerce, advertising, user privacy, data protection, intermediary liability, protection of minors, consumer protection, general safety, sex-trafficking, taxation, money laundering, artificial intelligence, and securities law compliance. As a result, we have and could again in the future be subject to actions based on negligence, regulatory compliance, various torts, and trademark and copyright infringement, among other actions. See “Item 1A Risk factors—Risks relating to our business—Our business is subject to complex and evolving U.S. and international laws and regulations, including with respect to data privacy and platform liability. These laws and regulations are subject to change and uncertain interpretation, and could result in changes to our business practices, increased cost of operations, declines in user growth or engagement, claims, monetary penalties, or other harm to our business” and “—Risks relating to our business—We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.”
Because we receive, store, and use a substantial amount of information received from or generated by our users, we are particularly impacted by laws and regulations governing privacy; the storage, sharing, use, processing, disclosure, transfer, and protection of personal data; and data breaches, in many of the countries in which we operate. For example, in the EU we are subject to the General Data Protection Act (“GDPR”), which applies to companies established in the EU or otherwise providing services or monitoring the behavior of people located in the EU and provides for significant penalties in case of non-compliance as well as a private right of action for individual claimants. GDPR will continue to be interpreted by EU data protection regulators, which
have and may in the future require that we make changes to our business practices, and could generate additional costs, risks, and liabilities. See “Item 3 Legal Proceedings—Irish Data Protection Commission Inquiry Regarding Tinder’s Practices.” The EU is also considering an update to its Privacy and Electronic Communications (so-called “e-Privacy”) Directive, notably to amend rules on the use of cookies, direct marketing and processing of private communications and related metadata, which may also require that we make changes to our business practices and could generate additional costs, risks and liabilities. In 2020, the Court of Justice of the EU declared transfers of personal data on the basis of the European Commission’s Privacy Shield Decision illegal and stipulated stricter requirements for the transfer of personal data based on standard contract clauses to non-EU countries. In 2023, the EU-U.S. Data Privacy Framework was adopted and extended to certain other European countries to provide U.S. organizations with reliable mechanisms for personal data transfers to the United States from the EU as well as certain other European countries, while ensuring data protection that is consistent with applicable law. Compliance with the various EU data transfer requirements, and the resulting interpretations, decisions, and guidelines from EU supervisory authorities, may require changes to our business practices and generate additional costs, risks, and liabilities.
At the same time, many countries in which we do business have already adopted or are also currently considering adopting privacy and data protection laws and regulations. For instance, multiple legislative proposals concerning privacy and the protection of user information have been introduced in the U.S. Congress. Various U.S. state legislatures are also considering privacy legislation in 2024 and beyond. Some U.S. state legislatures have already passed and enacted privacy legislation, most prominently the California Consumer Privacy Act of 2018, which came into effect in 2020. Also the California Privacy Rights Act of 2020 (the “CPRA”) was enacted, which expanded the state’s consumer privacy laws and created a new government organization, the California Privacy Protection Agency, to enforce the law. The majority of the CPRA’s provisions entered into force on January 1, 2023, with a lookback to January 2022. In addition to California, comprehensive privacy laws were passed in Virginia, Colorado, Connecticut, and Utah, which came into force in 2023. Additionally, the Federal Trade Commission has increased its focus on privacy and data security practices at digital companies, as evidenced by its levying of several large fines against digital companies for privacy violations in recent years. Finally, talks of a U.S. federal privacy law are ongoing in Congress, with multiple proposals being considered, and may lead to the passing of a new law in the coming years.
Concerns about harms and the use of dating services and social networking platforms for illegal conduct, such as romance scams, promotion of false or inaccurate information, financial fraud, and sex-trafficking, have produced and could continue to produce future legislation or other governmental action. For example, the EU recently adopted the Digital Services Act (the “DSA”), which goes into effect in 2024 and imposes additional requirements on technology companies around moderation, transparency, and the overall safety of their platforms. In addition, the UK passed into law the Online Safety Bill, which imposes similar requirements to those provided in the DSA. Of note, this law places new requirements on social media companies, including online dating companies, to protect children from being exposed to inappropriate material. Most of the provisions of this law are scheduled to go into effect in 2025.
In the United States, government authorities, elected officials, and political candidates have called for amendments to Section 230 of the Communications Decency Act (the “CDA”) that would purport to limit or remove protections afforded to technology companies. If these proposed laws are passed, or if future legislation or governmental action is proposed or taken to address concerns regarding such harms, changes could be required to our services that could restrict or impose additional costs upon the conduct of our business generally or otherwise expose us to additional liability. There are also a number of pending legal challenges to the CDA, including multiple lawsuits in United States federal courts. Any weakening of the CDA could result in increased litigation costs, as well as a potentially increased chance of liability. See “Item 1A Risk factors—Risks relating to our business—Inappropriate actions by certain of our users could be attributed to us and damage our brands’ reputations, which in turn could adversely affect our business.”
Our global businesses are subject to a variety of complex and continuously evolving income and other tax frameworks. For example, sweeping international tax reform known as Pillar Two is set to go into effect in certain jurisdictions starting in 2024. The work is being undertaken by the Organization for Economic Cooperation and Development’s (“OECD”) Inclusive Framework (a wide-reaching network of more than 140 countries) and organized by the OECD’s Centre for Tax Policy and Administration. Pillar Two has been agreed to by 138 countries thus far reportedly representing 90% of global economic activity. The reform aims to level the
playing field between countries by discouraging them from reducing their corporate income taxes to attract foreign business investment. Pillar Two’s remedy is to compel multinational enterprises with €750 million or more in annual revenue to pay a global minimum tax of 15% on income received in each country in which they operate. Multinational enterprises will need to conform to the various rules in every Pillar Two country in which they operate. We are continuing to monitor these developments and any potential impact on our results of operations.
As a provider of subscription services, we are also subject to laws and regulations in certain U.S. states and other countries that apply to our automatically-renewing subscription payment models. For example, the EU’s Payment Services Directive (PSD2), which became effective in 2018, has impacted our ability to process auto-renewal payments and offer promotional or differentiated pricing for users in the EU. Also, new legislation in Germany and France has imposed additional obligations on providers of subscription services regarding the automatic renewal and cancellation of online subscriptions. Similar legislation or regulation, or changes to existing laws or regulations governing subscription payments, have been adopted or are being considered in many U.S. states and in the UK.
The EU, the U.S. Congress, and many U.S. states are considering legislation or regulations that would impact the use of generative artificial intelligence (“AI”) by companies. For example, several states are considering exactly how generative AI can be used or what permissions must be granted before it can be used. In addition, the Federal Trade Commission has approved authorizing using a compulsory process in nonpublic investigations involving products and services that use or claim to be produced using generative AI or claim to detect its use. Further, draft EU legislation aims at updating liability rules, providing for specific liability related to generative AI or extending product liability to software and digital services. As we seek to further integrate AI technologies into our services, compliance with existing, new, and changing laws, regulations, and industry standards relating to AI may limit some uses of AI and may impose significant operational costs.
Finally, certain U.S. states and certain countries in the Middle East and Asia have laws that specifically govern dating services. At the same time, a number of U.S. states, the U.S. Congress, and some other countries such as Brazil are considering legislation that would directly regulate online dating services.
Human capital
Our people are critical to Match Group’s continued success and we work hard to attract, retain and motivate qualified talent. As of December 31, 2023, we had approximately 2,600 full-time and approximately 20 part-time employees, which represents a 4% year-over-year decrease in employee headcount. We expect our overall headcount to grow modestly in 2024 as we expect to continue to focus on recruiting employees in technical functions such as software and other engineers at growing brands and where critical needs arise, as well as to hire a number of employees and contractors to support our innovation initiatives.
As of December 31, 2023, approximately 66%, 13%, and 21% of our employees reside in the Americas, Europe, and APAC and Other regions, respectively, spanning 22 countries and reflecting various cultures, backgrounds, ages, sexes, gender identities, sexual orientations, and ethnicities. Our global workforce is highly educated, with the majority of our employees working in engineering or technical roles that are central to the technological and service innovations that drive our business. While the market for qualified talent has softened somewhat recently, competition for software engineers and other technical staff has historically been intense and we expect will remain so for the foreseeable future.
We believe that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better, more innovative services, and is crucial to our efforts to attract and retain key talent. We work to support our goals of diversifying our workforce through search engines,recruiting, retention, and people development. Our goal is to continue to cultivate a culture where sought after talent from all backgrounds can contribute, grow, and thrive.
Our compensation and benefits programs are designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals, and create long-term value for our stockholders. In addition to salaries, these programs (which vary by country/region) include annual bonuses, stock-based awards, an employee stock purchase plan, retirement benefits, healthcare and insurance benefits, paid time off, family leave, flexible work schedules, mental health and wellness programs, and employee assistance programs. We are committed to providing competitive and
equitable pay. We base our compensation on market data and conduct evaluations of our compensation practices at all levels on a regular basis to determine the competitiveness and fairness of our packages.
We are committed to empowering our people with career advancement and learning opportunities. Our talent development programs provide employees with resources to help achieve their career goals, build management skills, and contribute to and, where applicable, lead their organizations.
We regularly conduct anonymous surveys to seek feedback from our employees on a variety of topics, including but not limited to, confidence in company leadership, competitiveness of our compensation and benefits, career growth opportunities, and ways to improve our company’s position as an employer of choice. The results are shared with our employees and reviewed by senior leadership, who analyze areas of progress or opportunity and prioritize actions and activities in response to this feedback to drive meaningful improvements in employee engagement.
We believe that our approach to talent has been instrumental in our growth, and has made Match Group a desirable destination for current and future employees.
Additional information
Company website and public filings. Investors and others should note that we announce material financial and operational information to our investors using our investor relations website at https://ir.mtch.com, our newsroom website at https://mtch.com/news, Tinder’s newsroom website at www.tinderpressroom.com, Hinge’s newsroom website at https://hinge.co/press, Securities and Exchange Commission (“SEC”) filings, press releases, and public conference calls. We use these channels as well as social media platformsto communicate with our users and digital app stores.the public about our company, our services, and other issues. It is possible that the information we post on social media could be deemed to be material information. Accordingly, investors, the media, and others interested in our company should monitor the websites listed above and the social media channels listed on our investor relations website in addition to following our SEC filings, press releases, and public conference calls. Neither the information on our website, nor the information on the website of any Match Group business, is incorporated by reference into this report, or into any other filings with, or into any other information furnished or submitted to, the SEC.
The marketing, distributionCompany makes available, free of charge through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and monetizationCurrent Reports on Form 8-K (including related exhibits and amendments) as soon as reasonably practicable after they have been electronically filed with (or furnished to) the SEC.
Code of ethics. The Company’s code of ethics applies to all employees (including Match Group’s principal executive officer, principal financial officer, and principal accounting officer) and directors and is posted on the Company’s website at https://ir.mtch.com under the heading of “Corporate Governance.” This code of ethics complies with Item 406 of SEC Regulation S-K and the rules of The Nasdaq Stock Market LLC. Any changes to the code of ethics that affect the provisions required by Item 406 of Regulation S-K, and any waivers of such provisions of the code of ethics for Match Group’s executive officers, senior financial officers, or directors, will also be disclosed on Match Group’s website.
Item 1A. Risk Factors
Risks relating to our business
If we fail to retain existing users or add new users, our revenue, financial results, and business may be significantly harmed.
Our financial performance has been and will continue to be significantly determined by our success in adding and retaining users of our services. In the past we have experienced, and expect to continue to experience, fluctuations in the size of our user base in one or more markets from time to time, particularly in markets where we have achieved higher penetration rates. The size of our user base is also impacted by a number of other factors, including competitive products and services dependsand global and regional business, macroeconomic, and geopolitical conditions. For example, wars in the Middle East and Ukraine have led to reduced supply as well as the decision to suspend our services in Russia.
Further, if people do not perceive our services to be useful, we may not be able to attract or retain users. In recent years, some users, particularly younger generations, have shown a decreased appetite for our services and those of our competitors due potentially to a number of factors. With each new generation of users, expectations of our services change and user behaviors and priorities shift. As a result, we may need to further leverage our existing capabilities or advances in technologies like artificial intelligence (“AI”), or adopt new technologies, to improve our existing services or introduce new services in order to better satisfy existing users and to expand our penetration of what continues to be a large available new user market. However, there can be no assurances that further implementation of technologies like AI will enhance our services or be beneficial to our business and the introduction of new features or services to our existing services may have unintended consequences on our ecosystem, which could lead to fluctuations in the size of our user base. Additionally, in 2023 we began consolidating some of our legacy brands’ platforms in order to decrease operating costs, which may result in changes to the user experience for some of our brands that some existing users may perceive negatively.
If we are unable to maintain or increase the size of our user base, our revenue and other financial results may be adversely affected. Further, as the size of our user base fluctuates in one or more markets from time to time, we may become increasingly dependent on our ability to cultivatemaintain or increase levels of monetization in order to grow revenue. Any significant decrease in user retention or growth could render our services less attractive to users, which is likely to have a material and maintain cost-effectiveadverse impact on our business, financial condition, and otherwise satisfactory relationshipsresults of operations.
The industry for social connection apps is competitive, with search engines,low switching costs and a consistent stream of new services and entrants, and innovation by our competitors may disrupt our business.
The industry for social connection apps is competitive, with a consistent stream of new services and entrants. Some of our competitors may enjoy better competitive positions in certain geographical regions, user demographics, or other key areas that we currently serve or may serve in the future. These advantages could enable these competitors to offer services that are more appealing to users and potential users than our services or to respond more quickly and/or cost-effectively than us to new or changing opportunities.
In addition, within the industry for social connection apps generally, costs for consumers to switch between services are low, and consumers have a propensity to try new approaches to connecting with people and to use multiple services at the same time. As a result, new services, entrants, and business models are likely to continue to emerge. It is possible that a new service could gain rapid scale at the expense of existing brands through harnessing a new technology, such as generative AI, or a new or existing distribution channel, creating a new or different approach to connecting people, or some other means. We may need to respond by introducing new services or features, which we may not do successfully. If we do not sufficiently innovate to provide new, or improve upon existing, services that our users or prospective users find appealing, we may be unable to continue to attract new users or continue to appeal to existing users in a sufficient manner.
Potential competitors include larger companies that could devote greater resources to the promotion or marketing of their services, take advantage of acquisition or other opportunities more readily, or develop and expand their services more quickly than we do. Potential competitors also include established social media platformscompanies that may develop features or services that may compete with ours or operators of mobile operating
systems and digital app stores,stores. For example, Facebook offers a dating feature on its platform, which it rolled out globally several years ago and has grown dramatically in particular, those operatedsize supported by Google, FacebookFacebook’s massive worldwide user footprint. These social media and Apple. These platformsmobile platform competitors could decide not to market and distribute someuse strong or all of our products and services, change their terms and conditions of use at any time (and without notice), favor their own products and services over ours and/or significantly increase their fees. While we expect to maintain cost-effective and otherwise satisfactory relationships with these platforms, no assurances can be provided that we will be able to do so and our inability to do sodominant positions in the case of one or more markets, coupled with ready access to existing large pools of these platformspotential users and personal information regarding those users, to gain competitive advantages over us, including by offering different features or services that users may prefer or offering their services to users at no charge, which may enable them to acquire and engage users at the expense of our user growth or engagement.
If we are not able to compete effectively against current or future competitors as well as other services that may emerge, or if our decisions regarding where to focus our investments are not successful long-term, the size and level of engagement of our user base may decrease, which could have a materialan adverse effect on our business, financial condition, and results of operations.
The risk factors below discuss these risks in the case of certainlimited operating history of our businesses in greater detail.
Our success depends, in part, upon the continued migration of certain markets and industries online and the continued growth and acceptance of online productsnewer brands and services as effective alternatives to traditional offline products and services.
Through our various businesses, we provide a variety of online products and services that continue to compete with their traditional offline counterparts. We believe that the continued growth and acceptance of online products and services generally will depend, to a large extent, on the continued growth in commercial use of the Internet (particularly abroad) and the continued migration of traditional offline markets and industries online.
For example, the success of the businesses within our Match Group segment depends, in substantial part, on the continued migration of the dating market online. We believe this migration will be driven, in substantial part, by the continued proliferation of mobile devices worldwide, which continues to expand the ways in which people can interact and build relationships, and increasing social acceptance and adoption of online dating products generally. The success of these businesses will also depend, in part, on our ability to continue to provide dating products that users find more efficient, effective, comfortable and convenient relative to traditional means of meeting people. The failure of a meaningful number of users to embrace our dating products and/or the return of a meaningful number of users to offline dating products and services could adversely affect the businesses within our Match Group segment, and in turn, our business, financial condition and results of operations.
Similarly, the success of the businesses within our ANGI Homeservices segment depends, in substantial part, on the continued migration of the home services market online. We believe that the digital penetration of the home services market remains low, with the vast majority of consumers continuing to search for, select and hire service professionals offline. While many consumer demographics have historically been (and remain) averse to finding service professionals online, others have demonstrated a greater willingness to embrace the online shift (for example, millennials). Service professionals must also embrace the online shift, which will depend, in substantial part, on whether online products and services help them to better connect and engage with consumers relative to traditional offline efforts. The speed and ultimate outcome of the shift of the home services market online for consumers and service professionals is uncertain and may not occur as quickly as we expect or at all. The failure or delay of a meaningful number of consumers and/or service professionals to migrate online and/or the return of a meaningful number of existing participants in the online home services market to offline markets could adversely
affect the businesses within our ANGI Homeservices segment, and in turn, our business, financial condition and results of operations.
Lastly, our success also depends, in part, on our ability to compete for a share of available advertising expenditures as more traditional offline and emerging media companies continue to enter the online advertising market, as well as the continued growth and acceptance of online advertising generally. In addition to the factors discussed above in the case of online products and services generally, we believe that the continued growth and acceptance of online advertising generally will depend, in large part, on its perceived effectiveness and the acceptance of related advertising models (particularly in the case of mobile advertising), the extent to which web browsers, software programs and/or other applications that limit or prevent advertising from being displayed become commonplace and the extent to which the industry is able to effectively manage the continuing and increasing problem of click fraud. Any lack of growth in the market for online advertising (particularly for paid listings) and/or any decrease in the effectiveness and value of online advertising (whether due to changes in laws, changes in industry practices, the emergence of technologies that can block the display of advertisements across platforms or other developments) could adversely affect our business, financial condition and results of operations.
Our success depends, in part, on our continued ability to introduce new and enhanced products and services that resonate with consumers.
We may not be able to convert traffic to our various platforms into repeat users, nor increase user engagement levels, unless we continue to introduce new and enhanced products and services in response to evolving trends and technologies in the various markets in which we operate, as well as provide quality products and services that otherwise resonate with consumers.
Online products and services and related systems, technology and infrastructure, as well as the manner in which consumers access online products and services generally, have historically been, and are expected to continue to be, subject to rapid change and continuing evolution. We may not be able to adapt quickly enough or at all to online trends generally and/or trends in the various markets and industries in which we operate (including changes in the preferences and needs of our users and consumers generally), appropriately time the introduction of new and enhanced products and services and/or identify new business opportunities in a timely manner. Moreover, the evolving preferences and needs of our users and consumers could require timely and costly updates to our products and services and related systems, technology and infrastructure.
While the continued introduction of new and/or enhanced products and services is critical to our success, by definition, new products and services have limited operating histories, which could makemakes it difficult for us to evaluate our then current business and future prospects. For example, through Match Group, we
We seek to tailor each of our dating brands and productsservices to meet the preferences of specific user communities.geographies, demographics, and other communities of users. Building a given dating brand or productservice is generally an iterative process that occurs over a meaningful period of time and involves considerable resources and expenditures. Although certain of our newer dating brands and productsservices have experienced significant growth over relatively short periods of time, such as at our Hinge brand over recent years, the historical growth rates of these dating brands and productsservices may not be an indication of future growth rates for such services or our newer dating brands and productsservices generally. We have encountered, and may continue to encounter, risks and difficulties as we build new and/or enhanced productsour newer brands and services.
Lastly, new technologies and policies could interfere with our ability to offer our products and services. For example, third parties continue to introduce technologies (including new and enhanced web browsers and operating systems) that may limit or prevent consumers from installing certain types of applications and/or have features and policies that significantly lessen the likelihood that consumers will install our applications or that previously installed applications will remain in active use. Our The failure to successfully modify our productsscale these brands and services in a cost-effective manner in response to the introduction and adoption of new technologies, featuresaddress these risks and policies and/or find alternative sources of revenue to support products and services that currently generate revenue through advertising,difficulties could adversely affect our business, financial condition, and results of operations.
TheOur growth and profitability rely, in part, on our ability to attract and retain users through cost-effective marketing efforts. Any failure to successfully address any of these risksin those efforts could adversely affect our business, financial condition, and results of operations.
Marketing efforts designed to drive traffic toAttracting and retaining users for our various brands and businesses may not be successful or cost-effective.
Traffic building and conversion initiativesservices involve considerable expenditures for online and offline advertising and marketing. We have made, and expect to continue to make, significant expenditures for search engine marketing (primarily in the form of the purchase of keywords, which we purchase primarily through Google and, to a lesser extent, Microsoft and Yahoo!), online display advertising and traditional offline advertising (including television and radio campaigns) in connection
with these initiatives, which may not be successful or cost-effective. Historically, we have had to increase advertising andour marketing expenditures over time in order to attract and convert consumers, retain users and sustain our growth. For example, in 2023 Tinder launched its first-ever comprehensive global marketing campaign in order to help sustain its growth and attract new users.
InEvolving consumer behavior can affect the caseavailability of paidprofitable marketing opportunities. For example, as traditional television viewership declines and as consumers spend more time on mobile devices rather than desktop computers, the reach of many of our traditional advertising generally,channels continues to contract. Similarly, as consumers communicate less via email and more via text messaging, messaging apps, and other virtual means, the reach of email campaigns designed to attract new and repeat users (and retain current users) for our services is adversely impacted. Additionally, changes by large tech platforms, such as Apple and Google, to advertisers’ ability to access and use unique advertising identifiers, cookies, and other information to acquire potential users, such as Apple’s rules regarding the collection and use of identifiers for advertising (“IDFA”), have adversely impacted, and may continue to adversely impact, our advertising efforts. To continue to reach potential users and grow our businesses, we must identify and devote more of our overall marketing expenditures to newer advertising channels, such as mobile, social media, and online video platforms. Generally, the opportunities in and sophistication of newer advertising channels and methods continue to be less developed, proven, and precise, making it more difficult to assess returns on investment associated with our advertising efforts and to cost-effectively identify potential users. There can be no assurance that we will be able to continue to appropriately manage our marketing efforts in response to these and other trends in the advertising industry. Any failure to do so could adversely affect our business, financial condition, and results of operations.
Distribution and marketing of, and access to, our services rely, in significant part, on a variety of third-party platforms, in particular, mobile app stores. If these third parties limit, prohibit, or otherwise interfere with features or services or change their policies in any material way, it could adversely affect our business, financial condition, and results of operations.
We market and distribute our services (including related mobile applications) through a variety of third-party distribution channels, including Facebook, which has rolled out its own dating service. Our ability to market our brands on any given property or channel is subject to the policies and practices of the relevant third party seller, publisherparty. Certain platforms and channels have, from time to time, limited or prohibited advertisements for our services for a variety of advertising (including search engines and social media platforms) or marketing affiliate. As a result, a third party could limit our ability to purchase certain types of advertising and/or advertise certain of our products and services, which could affect our ability to compete effectively and, in turn, adversely affect our business, financial condition and results of operations. We cannot assure youreasons, including poor behavior by other industry participants. There is no assurance that third partieswe will not limitbe limited or prohibit one or more of our businessesprohibited from using certain current or prospective marketing channels in the future. Further, certain platforms on which we market our brands may not properly monitor or ensure the quality of content located adjacent to or near our advertisements on such platforms, which may have a negative effect on consumers’ perceptions of our own brands due to association with such content, which content our users may deem inappropriate. If this were to happen with a significant marketing channel were to impose such a limitation and/or prohibition on one of more of our businesses generally, for a significant period of time, and/or on a recurring basis, our business, financial condition, and results of operations could be adversely affected. In addition, if we fail to comply with the policies of third party sellers, publishers of advertising and/or marketing affiliates, our advertisements could be removed without notice and/or our accounts could be suspended or terminated, any of which could adversely affect our business, financial condition and results of operations.
In the case of our search engine marketing and optimization efforts, our failure to respond successfully to rapid and frequent changes in the pricing and operating dynamics of search engines, as well as changing policies and guidelines applicable to keyword advertising (which may be unilaterally updated by search engines without advance notice), could adversely affect both our paid search engine marketing efforts and free search engine traffic. Such changes could adversely affect paid listings (both their placement and pricing), as well as the ranking of our brands and businesses within search results, any or all of which could increase our costs (particularly if free traffic is replaced with paid traffic) and adversely affect the effectiveness of our marketing efforts overall. Certain of our businesses engage in efforts similar to search engine optimization through Facebook and other social media platforms (for example, developing content designed to appear higher in a given Facebook News Feed and generate "likes") that involve challenges and risks similar to those we face in connection with our search engine marketing efforts.
Evolving consumer behavior can also affect the availability of cost-effective marketing opportunities. For example, as traditional television viewership declines and media is increasingly consumed through various digital means, the reach of traditional advertising channels is contracting and the number of digital advertising channels is expanding. To continue to reach consumers, engage with users and continue to grow in this environment, we will need to identify and devote more of our overall marketing expenditures to newer digital advertising channels (such as online video and other digital platforms), as well as targeted consumer and user campaigns via these channels. Generally, the opportunities in (and sophistication of) newer advertising channels are undeveloped and unproven relative to traditional channels, which could make it difficult for us to assess returns on our marketing investment in the case of these channels. In addition, as we increasingly depend on newer digital means for traffic, these efforts will involve challenges and risks similar to those we face in connection with our search engine marketing efforts.
Lastly, we also enter into various arrangements with third parties in an effort to drive traffic to our various brands and businesses, which arrangements are generally more cost-effective than traditional marketing efforts. If we are unable to renew existing (and enter into new) arrangements of this nature, sales and marketing costs as a percentage of revenue would increase over the long-term.
Any failure to attract and acquire new (and retain existing) consumer traffic and users in a cost-effective manner could adversely affect our business, financial condition and results of operations.
Certain of our brands and businesses operate in especially competitive industries and innovation by our competitors in these industries could adversely affect our business, financial condition and results of operations.
The dating and home services industries are competitive, with a consistent and growing stream of new products and entrants. Some of our competitors may enjoy better competitive positions in certain geographical areas and/or with consumer demographics that we currently serve or may serve in the future. In addition, some of our competitors, given the primary business in which they engage, can market their products and services online in a more prominent and cost-effective manner than we can. Any of these advantages could enable our competitors to offer products and services that are more appealing to consumers than our products and services and/or respond more quickly and/or cost effectively than we do to evolving market opportunities and trends. For example, search engine providers continue to expand their product and service offerings into non-search-related categories, including home services. Search engine providers can and may display their own integrated or related home services products and services in a more prominent manner than our products and services in search results. This could result in a substantial decrease in free and paid traffic to the businesses within our ANGI Homeservices segment and, in turn, increased marketing expenditures (particularly if free traffic is replaced with paid traffic).
In addition, within the dating and home services industries, costs for consumers to switch among products and services are low or non-existent. And in the case of service providers, while they would lose amounts paid for Marketplace membership packages and advertising if they switched to a competitor before the expiration of the related term, costs for switching over the long term are low. Low switching costs, coupled with the propensity of consumers to try new products and services generally, will most likely result in the continued emergence of new products and services, entrants and business models in the dating and home services industries. Our inability to compete effectively against current or future competitors and new products and services that may emerge could result in decreases in the size and level of engagement of our user and service provider bases, which could have an adverse effect on our business, financial condition and results of operations.
Our success depends, in part, on our ability to build, maintain and/or enhance our various brands.
Through our various businesses, we own and operate a number of widely known consumer brands with strong brand appeal within their respective markets and industries, as well as a number of emerging brands that we are in the process of building. We believe that our success depends, in large part, on our continued ability to maintain and enhance our established brands, as well as build awareness of (and loyalty to) our emerging brands. Our brands and brand-building efforts could be negatively impacted by a number of factors, including product and service quality concerns, consumer complaints, actions brought by consumers, inappropriate and/or criminal actions taken by users and related media coverage, actions taken by governmental or regulatory authorities and data protection and security breaches. In addition, trust in the integrity and objective, unbiased nature of the ratings and reviews found across our home services brands (particularly Angie’s List) contributes significantly to public perception of these brands and their ability to attract consumers and convert them into users. If consumers perceive that ratings and reviews are not authentic in general, the reputation and the strength of the relevant brand could be materially and adversely affected. Moreover, the inability to develop and introduce products and services that resonate with consumers, adapt quickly enough (and/or in a cost effective manner) to evolving changes in the Internet and related technologies, applications and devices and market our products and services successfully (or in a cost-effective manner), could adversely affect our various brands and brand-building efforts, and in turn, our business, financial condition and results of operations.
Our success depends, in part, on our ability to develop and monetize versions of our products and services for mobile and other digital devices.
Our success depends, in part, on our ability to develop and monetize versions of our products and services for mobile and other digital devices. As consumers increasingly access our products and services through mobile and other digital devices (including through digital voice assistants), we will need to devote significant time and resources to ensure that our products and services are accessible across these platforms (and multiple platforms generally). Despite these efforts, we may not be able to keep pace with evolving online trends generally and/or trends in the various markets and industries in which we operate (including changes in the preferences and needs of our users and consumers generally). Even if we do, new and/or enhanced products and services we offer may not resonate with consumers and, in turn, not generate sufficient traffic to our various brands and businesses. Moreover, we may not be able to monetize products and services for mobile and other digital devices as effectively as we have been able to monetize our traditional products and services.
In addition, the success ofAdditionally, our mobile and digital applications is dependent on their interoperability with various third party operating systems, technology, infrastructure and standards over which we have no control and any changes to any of these things that compromise the quality or functionality of our mobile and digital applications could adversely affect their usage levels, and in turn, our ability to attract consumers and advertisers. Our failure or inability to successfully respond to the general shift of consumers to mobile and other digital devices could adversely affect our business, financial condition and results of operations.
Lastly, as technology continues to evolve, products and services that we develop for mobile and other digital devices could require us to modify our related systems, technology and infrastructure. If these modifications are not done in an efficient and cost-effective manner, our products and services for mobile and other digital devices (and related systems, technology and infrastructure) could be rendered obsolete.
The distribution and use of our products and services depends, in part, on third parties.
We distribute our products and servicesalmost exclusively accessed through a variety of third party publishers and distribution channels. For example, as consumers increasingly access our products and services through mobile applications, we (primarily in the case of our dating business and Apalon, one of the businesses within our Applications segment) increasingly depend upon the Apple App Store and the Google Play Store to distribute our mobile applications.Store. Both Apple and Google have broad discretion to change, and from time to time have changed, their respective termspolicies regarding their mobile operating systems and conditions applicable to the distribution of our mobile applications, including those relating to the amount
of (and requirement to pay) certain fees associated with purchases facilitated by Apple and Google through our mobile applications, and to interpret their respective terms and conditionsapp stores in ways that may limit, eliminate, or otherwise interfere with our ability to distribute mobileor market our applications through their stores. stores, our ability to update our applications, including to make bug fixes or other feature updates or upgrades, the features we provide, our ability to access native functionality or other aspects of mobile devices, and our ability to access information about our users that they collect. To the extent either or both of them do so, our business, financial condition, and results of operations have in the past been, and could again in the future be, adversely affected.
Apple and Google are also known to retaliate against application developers who publicly or privately challenge their app store rules and policies, and such retaliation has and could adversely affect our business, financial condition, and results of operations.
The success of our services will depend, in part, on our ability to access, collect, and use personal data about our users and subscribers.
We cannot assure yourely on the Apple App Store and Google Play Store to distribute and monetize our mobile applications. Our users and subscribers engage with these platforms directly and may be subject to requirements regarding the use of their payment systems for various transactions. As a result of this disintermediation, these platforms receive and do not share with us key user data that Applewe would otherwise receive if we transacted with our users and subscribers directly. If these platforms continue to or Google will not limit.increasingly limit, eliminate, or otherwise interfere with the distributionour ability to access, collect, and use key user data, our ability to identify and communicate with a meaningful portion of our mobile applications.user and subscriber bases and provide services to help keep our users safe may be adversely impacted. If either or bothso, our customer relationship management efforts, our ability to reach new segments of them did so,our user and subscriber bases and the population generally, the efficiency of our paid marketing efforts, the rates we are able to charge advertisers seeking to reach users and subscribers on our various properties, our ability to comply with applicable law, and our ability to identify and exclude users and subscribers whose access would violate applicable terms and conditions, including underage individuals and bad actors, may be negatively impacted, and our business, financial condition, and results of operations could be adversely affected.
The use of certain of our products and services also depends, in part, on third parties. For example, many users of Match Group's Tinder and certain other dating products currently register for (and log in to) these dating products exclusively through their Facebook profiles. While Match Group recently launched an alternate authentication method that allows users to register for (and log into) Tinder using their mobile phone number, no assurances can be provided that this method will be widely adopted by users. Facebook has broad discretion to change its terms and conditions applicable to the use of its platform and to interpret its terms and conditions in ways that could limit, eliminate or otherwise interfere with our ability to use Facebook as an authentication method and if Facebook did so and the alternate method described above is not widely adopted by users or becomes unavailable for any reason, Match Group’s, and in turn, our, business, financial condition and results of operations could be adversely affected.
Lastly, certain of the businesses within our Applications segment have entered into (and expect to continue to enter into) agreements to distribute search boxes, browser extensions and other applications to users through third parties. Most of these agreements are either non-exclusive and short-term in nature or, in the case of long‑term or exclusive agreements, are terminable by either party in certain specified circumstances. The inability of these businesses to enter into new (or renew existing) agreements to distribute search boxes, browser extensions and other applications through third parties for any reason would result in decreases in traffic to our various brands and businesses, queries and advertising revenue, which could have an adverse effect on our business, financial condition and results of operations.
General economic events or trends, particularly those that adversely impact advertising spending levels and consumer confidence and spending behavior, could harm our business, financial condition and results of operations.
We have historically been, and will continue to be, particularly sensitive to events and trends that adversely impact advertising spending levels and consumer confidence and spending behavior. A significant portion of our consolidated revenue (and a substantial portion of our net cash from operations that we can freely access), is attributable to online advertising, primarily revenue from our Applications and Publishing segments. Accordingly, we are particularly sensitive to events and trends that could result in decreased advertising expenditures. Advertising expenditures have historically been cyclical in nature, reflecting overall economic conditions and budgeting and buying patterns, as well as levels of consumer confidence and discretionary spending.
Similarly, some of our businesses (primarily those within our ANGI Homeservices segment) are particularly sensitive to events and trends that adversely impact consumer confidence and spending behavior. For example, in the event of a general economic downturn or sudden disruption in business conditions, consumer confidence, spending levels and access to credit could be adversely affected. The occurrence of any of these events or trends could result in consumers delaying or foregoing home services projects, which could result in decreases in Marketplace service requests and related fees paid by Marketplace service professionals for consumer matches, which could adversely affect our business, financial condition and results of operations.
In addition, because a significant number of service professionals across ANGI Homeservices brands are sole proprietorships and small businesses, they may be particularly impacted by events and trends that adversely impact consumer confidence, spending behavior and access to credit. If so, they may be less likely to pay for Marketplace membership and/or advertising, which could result in turnover at the Marketplace and/or any of our directories. Any significant and/or recurring turnover over a prolonged period could adversely impact the number and quality of service professionals in the Marketplace and our directories, as well as the reach of (and breadth of services offered through) the Marketplace and our directories, any or all of which could result in a decrease in traffic to ANGI Homeservices brands and businesses and increased costs, which could adversely affect our business, financial condition and results of operations.
In the recent past, adverse economic conditions have caused, and if such conditions were to recur in the future they could cause, decreases and/or delays in advertising expenditures and discretionary spending by consumers and limited access to credit, which would reduce our revenues and adversely affect our business, financial condition and results of operations.
Communicating with users and consumers via e-mail is critical to our success, and any erosion in our ability to communicate in this fashion that is not sufficiently replaced by other means could adversely affect our business, financial condition and results of operations.
Historically, one of our primary means of communicating with consumers and keeping our users engaged with our products and services has been via e-mail communication. As consumer habits continue to evolve in the era of mobile and other digital devices and messaging and social media apps, usage of e-mail, particularly among younger consumers, has declined and we expect this trend to continue. In addition, deliverability and other restrictions imposed by third party e-mail providers and/or applicable law could limit or prevent our ability to send e-mails to consumers and users. A continued and significant erosion in our ability to communicate successfully with consumers and users via e-mail could have an adverse impact on the user experience, user engagement levels and the rate at which non‑paying users become paid subscribers. While we continually work to find new means of communicating and connecting with consumers and our users (for example, through push notifications), we cannot assure you that such alternative means of communication will be as effective as e-mail has been historically. Any failure to develop or take advantage of new means of communication and/or limitations on such means imposed by applicable law, mobile and digital device manufacturers or otherwise could adversely affect our business, financial condition and results of operations.
Each of our dating products monetizes users at different rates. If a meaningful migration of our user base from our higher monetizing dating products to our lower monetizing dating products were to occur, it could adversely affect our business, financial condition and results of operations.
Through Match Group, we own, operate and manage a large and diverse portfolio of dating products. Each dating product has its own mix of free and paid features designed to optimize the user experience for, and revenue generation from, that product’s user community. In general, the mix of features for the various dating products within our more established brands leads to higher monetization rates per user than the mix of features for the various dating products within our newer brands. If a significant portion of our user base were to migrate to our less profitable dating brands, our business, financial condition and results of operations could be adversely affected.
As the distribution of our dating productsservices through digital app stores increases, in order to maintain our profit margins, we have taken steps to, and in the future may need to further, offset increasing digital app store fees by decreasing traditional marketing expenditures, increasing user volume or monetization per user, consolidating back-office and technical functions, or by engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.generally.
As users of our dating products continue to shift to mobile and other digital devices, we increasinglyWe rely uponon the Apple App Store and the Google Play Store to distribute and monetize our mobile applications.applications and related in-app services. While our mobile dating applications are generally free to download from these stores, we offer our users canthe opportunity to purchase subscriptions and certain à la carte features throughwithin these applications. We determine the prices at which these subscriptions and features are sold; however, related purchases mustof these subscriptions and features are required in most cases to be processed through the in-app payment systems provided by Apple and Google, although some of our applications are currently able to a lesser extent, Google. As a result,use their own payment systems for in-app purchases made on Android devices. Where we are required to use
Apple’s or Google’s payment systems, we pay Apple and Google, as applicable, a meaningful share (generally 30% or, for subscriptions purchased on Android devices, 15%) of the revenue we receive from these transactions. Where payments on Android devices are processed through other payment systems, we are also required to pay Google a meaningful share. However we have entered into a partnership with Google that will provide value exchange across our broad relationship with them, which we expect to help offset the additional costs that our brands expect to incur over the three years starting in 2024 associated with implementing Google’s User Choice Billing system, which allows application developers to offer an additional billing system alongside Google Play’s billing system. Additionally, while Apple was recently forced to change its rules in the U.S. marketplace on anti-steering to allow for payment processing outside its payment systems, Apple has stated that it will still charge up to 27% for those transactions. We do not expect to realize any meaningful decrease in app store fees as a result of this change. In the EU, the Digital Markets Act is set to go into effect in March 2024. Apple has submitted its plan for compliance, which would lower the 30% service fee in the EU to 17% for our applications, but would also add a payment processing fee of 3%, as well as a 0.50 Euro fee per download (including updates) per year. Apple’s plan is subject to approval by EU regulators. For additional information, see “Item 1—Business—Dependencies on services provided by others—App Stores.”
While we are constantly innovating on and creating our own payment systems and methods, given the ever increasing distribution of our dating productsservices through digital app stores and the combination of their strict anti-steering rules and mandates to use the in-app payment system requirements,payments systems tied into those app stores, we have taken steps to, and in the future may need to further, offset these increased digital app store fees by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user, consolidating back-office or technical functions, or by engaging in other efforts to increase revenue or decrease costs generally, orgenerally. For example, in 2023 we began consolidating some of our business, financial condition and results of operations could be adversely affected.
Our success depends, in part, of the ability of ANGI Homeserviceslegacy brands’ platforms to establish and maintain relationships with quality service professionals.
We will needdecrease operating costs. Any failure to continue to attract, retain and grow the number of skilled and reliable service professionals who can provide home services that consumers want in a timely manner across ANGI Homeservices platforms. To do so, we must continue to offer products and services that resonate with consumers and service professionals generally, as well provide service professionals with an attractive return on their marketing and advertising investments. If we fail to provide compelling products and services across ANGI Homeservices brands and businesses, Marketplace service professionals may leave (or fail to join) the Marketplace and certified service professionals may leave (of fail to join) the Angie’s List nationwide online directory, one or both of which would result in a less attractive overall digital marketplace for consumers seeking quality service professionals. Any decrease in quality service professionals (or the lack of new quality service professionals) would result in a smaller and less diverse Marketplace and smaller and less diverse directories, which could adversely impact the consumer experience, and in turn, result in decreases in service requests and directory searches, which could adversely impact our business, financial condition and results of operations.
We depend upon arrangements with Google and any adverse change in this relationshipoffset increased app store fees could adversely affect our business, financial condition, and results of operations.
A meaningful portionChallenges with properly managing the use of artificial intelligence could result in reputational harm, competitive harm, and legal liability.
We currently incorporate AI into certain of our consolidated revenue (andservices and are working to further integrate AI technologies into our services, which integrations may become important to our operations over time. Our competitors or other third parties may incorporate AI into their services more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, AI algorithms and training methodologies may be flawed. If the content or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, offensive, biased, or otherwise improper or harmful, we may face reputational consequences or legal liability, and our business, financial condition, and results of operations may be adversely affected. Further, the use of AI has been known to result in, and may in the future result in, cybersecurity incidents that implicate the personal data of end users of AI-enhanced services. Any such cybersecurity incidents related to our use of AI could adversely affect our reputation and results of operations. AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability. The rapid evolution of AI will require the dedication of significant resources to develop, test, and maintain AI technologies, including to further implement AI ethically in order to minimize unintended harmful impact. While we aim to deploy AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise.
The legal and regulatory landscape surrounding generative AI technologies is rapidly evolving and uncertain including in the areas of intellectual property, discrimination, cybersecurity, and privacy and data protection. Compliance with existing, new, and changing laws, regulations, and industry standards relating to AI may limit some uses of AI, impose significant operational costs, and limit our ability to develop, deploy, or use AI technologies. Further, the continued integration of any AI technologies into our service may result in new or enhanced governmental or regulatory scrutiny. Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory action, or brand and reputational harm.
Foreign currency exchange rate fluctuations have adversely affected and may in the future adversely affect our results of operations.
We operate in various international markets, including jurisdictions within the EU and Asia. During periods of a substantial portionstrengthening U.S. dollar, our international revenues have been and will be reduced when translated into U.S. dollars. In addition, as foreign currency exchange rates fluctuate, the translation of our net cash from operations that we can freely access) is attributableinternational revenues into U.S. dollar-denominated operating results affects the period-over-period comparability of such results and will also result in foreign currency exchange gains and losses. For additional information, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—Effects of Changes in Foreign Exchange Rates on Revenue,“ and “Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk.”
We depend on our key personnel.
Our future success will depend upon our continued ability to a services agreementidentify, hire, develop, motivate, and retain highly skilled individuals across the globe, with Google. Pursuant to this agreement, we display and syndicate paid listings provided by Google in response to search queries generated by usersthe continued contributions of our Applicationssenior management being especially critical to our success. Competition for well-qualified employees across Match Group and Publishing properties.its various businesses is intense, particularly in the case of senior leadership and technology roles, and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. Our ability to attract, retain, and motivate employees may also be adversely affected by stock price volatility. In exchangeparticular, declines in our stock price, or lower stock price performance relative to competitors for makingtalent, have reduced the retentive value of our search traffic availablestock-based awards, which can impact the competitiveness of our compensation. Further, in the past we have had, and may continue to Google,have for the foreseeable future, significant amounts of stock-based compensation expense due to the competitive market for executive and technical talent, which includes competitors that are much larger than us.
Effective succession planning is also important to our future success. At times we receive a sharehave experienced significant changes to our senior leadership team. Those changes and any future significant leadership changes or senior management transitions involve inherent risk. If we fail to ensure the effective transfer of the revenue generated by the paid listings supplied to us,senior management or other institutional knowledge as well as smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic, financial, and operating goals, as well as our business, financial condition, and results of operations generally, could be adversely affected. In addition to intense competition for talent, workforce dynamics are constantly evolving, such as recent broad shifts to hybrid work models. If we do not manage changing workforce dynamics effectively, it could materially adversely affect our culture, reputation, and operational flexibility.
Our success depends, in part, on the integrity of our systems and infrastructures and on our ability to enhance, expand, and adapt these systems and infrastructures in a timely and cost-effective manner.
To succeed, our systems and infrastructures must perform well on a consistent basis. We have experienced and may from time to time experience system interruptions that make some or all of our systems or data unavailable and prevent our services from functioning properly for our users. Any such interruption could arise for any number of reasons, including as a result of our current efforts to consolidate some of the legacy brands’ platforms or as a result of actions by government agencies. Further, our systems and infrastructures are vulnerable to damage from cyberattacks, fire, power loss, telecommunications failures, computer viruses, software bugs, acts of God, and similar events. While we have backup systems in place for certain other search‑related services. Our current agreement with Google expires on March 31, 2020aspects of our operations, not all of our systems and infrastructures are fully redundant, disaster recovery planning is not sufficient for all eventualities, and our property and business interruption insurance coverage may not be adequate to fully compensate us for any losses that we may choose to terminate this agreement effective March 31, 2019.
The amountsuffer. Any interruptions or outages, regardless of revenue we receive from Google depends on a numberthe cause, could negatively impact our users’ experiences with our platforms, tarnish our brands’ reputations, and decrease demand for our services, any or all of factors outside of our control, including the amount Google charges for advertisements, the efficiency of Google’s system in attracting advertisers and serving up paid listings in response to search queries and parameters established by Google regarding the number and placement of paid listings displayed in response to search queries. In addition, Google makes judgments about the relative attractiveness (to advertisers) of clicks on paid listings from searches performed on our Applications and Publishing properties and these judgments factor into the amount of revenue we receive. Google also makes judgments about the relative attractiveness (to users) of paid listings from searches and these judgments factor into the amount of advertisements we can purchase. Changes to the amount Google charges advertisers, the efficiency of Google’s paid listings network, Google's judgment about the relative attractiveness to advertisers of clicks on paid listings from our Applications and Publishing properties or to the parameters applicable to the display of paid listings generally could result in a decrease in the amount of revenue we receive from Google andwhich could adversely affect our business, financial condition, and results of operations. Such changes could come about
We also continually work to expand and enhance the efficiency and scalability of our technology and network systems to improve the experience of our users, accommodate substantial increases in the volume of traffic to our various platforms, ensure acceptable load times for a number of reasons, including general market conditions, competition or policy and operating decisions made by Google.
Our services agreement with Google also requires that we comply with certain guidelines for the use of Google brands and services, including guidelines that govern which products and applications may access Googleour services, and keep up with changes in technology and user preferences. Any failure to do so in a timely and cost-effective manner could adversely affect our users’ experience with our various services, thereby negatively impacting the manner in which Google’s paid listings are displayed within search results across various third party platforms demand for our services,
and products (includingcould increase our Applications and Publishing properties). Our services agreement also requires that we establish guidelines to govern certain activitiescosts, either of third parties to whom we syndicate paid listings, including the manner in which these parties drive search traffic to their websites and display paid listings. Google may generally unilaterally update its policies and guidelines without advance notice, which could in turn require modifications to, or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly to address or otherwise adversely affect our business, financial condition, and results of operations. Noncompliance with Google’s guidelines by
From time to time we have and may continue to, augment and enhance, or transition to other, enterprise resource planning, human resources, financial, or other systems. Such actions may cause us orto experience difficulties in managing our systems and processes, which could disrupt our operations, the third parties to whom we are permitted to syndicate paid listings or through which we secure distribution arrangements for certainmanagement of our Applications properties could, if not cured,finances, and the reporting of our financial results, which, in turn, may result in our inability to manage the suspension of some or all Google services to our properties (or the websitesgrowth of our third party partners) and/or the terminationbusiness and to accurately forecast and report our results, each of the services agreement by Google.
The termination of the services agreement by Google, the curtailment of our rights under the agreement (whether pursuant to the terms thereof or otherwise) and/or the failure of Google to perform its obligations under the agreement would have an adverse effect onwhich could adversely affect our business, financial condition, and results of operations. If any of these events were to occur, we may not be able to find another suitable alternate paid listings provider (or if an alternate provider were found, the economic and other terms of the agreement and the quality of paid listings may be inferior relative to our arrangements with, and the paid listings supplied by, Google) or otherwise replace the lost revenues.
Foreign currency exchange rate fluctuations could adversely affect our results of operations.
We operate in certain foreign markets, primarily in various jurisdictions within the European Union, and as a result, are exposed to foreign exchange risk for both the Euro and British Pound ("GBP"). During the fiscal years ended December 31, 2017 and 2016, approximately 30% and 26%, respectively, of our total revenues were international revenues. We translate international revenues into U.S. Dollar-denominated results. As a result, as foreign currency exchange rates fluctuate, the translation of the statement of operations of our international businesses into U.S. Dollars affects the period-over-period comparability of operating results. The average GBP and Euro versus the U.S. Dollar exchange rate was approximately 5% higher and 2% lower, respectively, in 2017 compared to 2016.
We are also exposed to foreign currency exchange gains and losses to the extent we or are subsidiaries conduct transactions in, and/or have assets and/or liabilities that are denominated in, a currency other than the relevant entity's functional currency. We recorded foreign currency exchange losses of $16.8 million and gains of $34.4 million for the fiscal years ended December 31, 2017 and 2016, respectively. The increase in GBP versus the U.S. Dollar during 2017 and the decrease in the GBP versus the U.S. Dollar during 2016 following the Brexit vote on June 23, 2016 generated the majority of
our foreign currency exchange losses and gains during these fiscal years. For additional detail regarding these gains and losses, see "Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk."
Foreign currency exchange gains and losses historically have not been material to the Company. As a result, historically, we have not hedged our foreign currency exposures. The continued growth and expansion of our international operations into new markets and jurisdictions increases our exposure to foreign exchange rate fluctuations. Significant foreign currency exchange rate fluctuations, in the case of one currency or collectively with other currencies, could adversely affect our future results of operations.
We may not be able to protect our systems technology and infrastructure from cyberattacks. In addition, wecyberattacks and may be adversely impactedaffected by cyberattacks experienced by third parties. Any disruption of our systems, technology and infrastructure or compromise of our user data or other information due to cyberattacks could adversely affect our business, financial condition and results of operations.
We are regularly under attack by perpetrators of random or targeted malicious technology-related events, such as cyberattacks, computer hacking, computer viruses, worms, bot attacks or other destructive or disruptive software, distributed denial of service attacks, and attempts to misappropriate customer information, including personal user information (includingdata, credit card information) or other malicious activities. Events of this nature could compromise the integrity of our systems, technologyinformation, and infrastructure, as well as our various products and services, which could in turn adversely affect our users. The incidence of events of this nature (or any combination thereof) is on the rise worldwide.
account login credentials. While we continuously develop and maintain systems to detect and prevent events of this nature from impacting our various businesses (and their respective systems, technology, infrastructure, products, services and users), and have invested (and continue to invest) heavily in these effortsthe protection of our systems and infrastructure, in related personnel and training, these efforts are costly and require ongoing monitoring and updating as technologies change and efforts to overcome preventative security measures become more sophisticated. Despitein employing a data minimization strategy, where appropriate, there can be no assurance that our efforts we cannot assure you that we will prevent significant breaches in our systems or other such events from occurring. Some of our systems have experienced past security incidents, and, although they did not experience significant eventshave a material adverse effect on our operating results, there can be no assurance of this naturea similar result in the future andfuture. There is also no guarantee that a series of incidents may not be determined to be material at a later date in the aggregate, even if such an event does occur, that it willthey may not adversely affect our business, financial condition and resultsbe material individually at the time of operations.
their occurrence. Any cyberattackcyber or security breachsimilar attack we experienceare unable to protect ourselves against could damage our systems technology and infrastructure, and/or those of our users, prevent us from providing our products and services, compromisetarnish our brand reputation, result in the integritydisclosure of confidential or sensitive information of our products and services, damage our reputation, erode our brandsusers, and/or be costly to remedy, as well as subject us to investigations by regulatory authorities fines and/or litigation that could result in liability to third parties. Even if we do not experience such events, the
The impact of any such eventscyber or similar attacks experienced by third parties with whom we do business (or upon whom wewho provide services to us or otherwise rely in connection withprocess data on our operations)behalf could have a similar effect.effect on us. Moreover, even cyberattacks and security breachescyber or similar attacks that do not impactdirectly affect us directlyor our third party service providers or data processors may result in consumers beingwidespread access to user data, for instance through account login credentials that such users might have used across multiple internet sites, including our sites, or directly through access to user data that these third party service providers could process in the context of the services they provide to us. These events can lead to government enforcement actions, fines, and litigation, as well as loss of consumer confidence generally, which could make users less likely to use or continue to use online products and services generally.
In addition, we may not have adequate insurance coverage to compensate for losses resulting fromgenerally, including our services. The occurrence of any of these events.events could have an adverse effect on our business, financial condition, and results of operations.
Our success depends, in part, on the integrity of third-party systems and infrastructure.
We rely on third parties, primarily data center and cloud-based, hosted web service providers, such as Amazon Web Services, as well as third party computer systems, service providers, and broadband and other communications systems, in connection with the provision of our services generally, as well as to facilitate and process certain transactions with our users. We have no control over any of these third parties or their operations and such third party systems are increasingly complex. Any changes in service levels at our data centers or hosted web service providers or any interruptions, outages, or delays in our systems or those of our third party providers, deterioration in the performance of these systems, or cyber or similar attacks on these systems could impair our ability to provide our services or process transactions with our users, which would adversely impact our business, financial condition, and results of operations. For additional information, see “Item 1—Business—Dependencies on services provided by others—Cloud and Other Services.”
If the security of personal and confidential or sensitive user information, including credit card information that we maintain and store is breached or otherwise accessed by unauthorized persons, it may be costly to mitigate the impact of such an event and our reputation could be harmed and our business, financial condition and results of operations could be adversely affected.harmed.
We receive, process, store, and transmit a significant amount of personal user and other confidential or sensitive user or other information, including, without limitation, credit card information and in the case of certain ofuser-to-user communications. We also enable our products and services, enable users to share their personal information with each other. In some cases, we retainengage third party vendorsservice providers to store or process this information. While weWe continuously develop and maintain systems to
protect the security, integrity, and confidentiality of this information, but we have experienced past incidents and cannot guarantee that inadvertent or unauthorized use or disclosure will not occur in the future or that third parties will not gain unauthorized access to, or will not use for unauthorized purposes, this information despite our efforts. If anyWhen such event were toevents occur, we may not be able to remedy the event,them, and we may be required by an increasing number of laws to notify regulators and individuals whose personal information was processed, used, or disclosed without authorization. We may also be subject to claims against us, including government enforcement actions, fines, and litigation, and have to expend significant capital and other resources to mitigate the impact of such an event,events, including developing and to develop and implementimplementing protections to prevent future events of this nature from occurring. If a breachWhen breaches of our security (or the security of third party vendors we have retained) occurs,our service providers) occur, the perception of the effectiveness of our security measures, the security measures of our service providers, and our reputation may be harmed, we couldmay lose current and potential users, and the recognition of our various brandsbrands’ reputations and businesses and their competitive positions couldmay be diminished,tarnished, any or all of which might adversely affect our business, financial condition, and results of operations.
Our business is subject to complex and evolving U.S. and international laws and regulations, including with respect to data privacy and platform liability. These laws and regulations are subject to change and uncertain interpretation, and could result in changes to our business practices, increased cost of operations, declines in user growth or engagement, claims, monetary penalties, or other harm to our business.
We are subject to a variety of laws and regulations in the United States and abroad that involve matters that are important to or may otherwise impact our business. See “Item 1—Business—Government regulation.” These U.S. federal, state, and municipal and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and subject to change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from state to state and country to country. These laws and regulations, as well as any associated inquiries, investigations, or other government actions, may be costly to comply with and have in the past, and may in the future delay or impede the development of new services, require changes to or cessation of certain business practices, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business, including fines or modifications to existing business practices. See “Item 3 Legal Proceedings—Irish Data Protection Commission Inquiry Regarding Tinder’s Practices.”
In the case of tax laws, positions that we have taken or will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial condition, and results of operations.
Proposed or new legislation and regulations could also adversely affect our business. See “Item 1—Business—Government regulation.” To the extent such new or more stringent measures are required to be implemented, impose new liability, or limit or remove existing protections, our business, financial condition, and results of operations could be adversely affected.
The adoption of any laws or regulations that adversely affect the popularity or growth in use of the internet or our services, including laws or regulations that undermine open and neutrally administered internet access, could decrease user demand for our service offerings and increase our cost of doing business. For example, in 2017, the Federal Communications Commission adopted an order reversing net neutrality protections in the United States, including the repeal of specific rules against blocking, throttling, or “paid prioritization” of content or services by internet service providers. To the extent internet service providers engage in such blocking, throttling, “paid prioritization” of content, or similar actions as a result of this order and the adoption of similar laws or regulations, our business, financial condition, and results of operations could be adversely affected.
We are subject to a number of risks related to credit card payments, including data security breaches and fraud that we or third parties experience, or additional regulation, any of which could adversely affect our business, financial condition, and results of operations.
Certain of our businessesWe accept payment (including recurring payments) from our users primarily through credit card transactions and certain online payment service providers. The ability of these businesses to access payment information on a real time‑basis without having to proactively reach out to users to process payments for products and services (including auto-renewal payments or payments for premium features on or with certain of our products or services) is critical to our success.
When we or a third party experience(s)experiences a data security breach involving credit card information,
affected cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party’s customer base and the greater the number of credit card accounts impacted, and the more likely it is that our users would be impacted by such a breach. IfTo the extent our users are ever affected by such a breach weexperienced by us or a third party, such users would need to contact affected individualsbe contacted to obtain new paymentcredit card information and process any pending transactions. It is likely that we would not be able to reach all affected individuals,users, and even if we could, some users’ new paymentcredit card information for some individuals may not be obtained and some pending transactions may not be processed, which could adversely affect our business, financial condition, and results of operations.
Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of service providers of online products and services to protect their personal information generally, which could cause them to stop using their credit cards online andor choose alternative payment methods that are not asless convenient or more costly for us or otherwise restrict our ability to process payments without significant user effort.
Our ability to access credit card information on a real-time basis without having to proactively reach out to affected individuals could also be adversely impacted by increases in various fees charged by credit card companies and processors (such as transaction, interchange, chargeback and/or other fees), the malfunction of credit card billing systems and software and non-compliance with applicable payment card association operating rules, certification requirements and rules governing electronic funds transfers, including the Payment Card Industry Data Security Standard ("PCI DSS"), a security standard with which companies that collect, store or transmit certain data related to credit and debit cards, credit and debit card holders and credit and debit card transactions are required to comply.
IfAdditionally, if we fail to adequately prevent fraudulent credit card transactions, and/or comply with the PCI DSS, we couldmay face litigation, fines, governmental enforcement action, civil liability, diminished public perception of our security measures, significantly higher credit card-related costs and substantial remediation costs, or refusal by credit card processors to continue to process payments on our behalf, any of which could adversely affect our business, financial condition, and results of operations.
The processing, storage, use and disclosureInappropriate actions by certain of personal data could give rise to liabilities and increased costs as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights and compliance with laws designed to prevent unauthorized access of personal dataour users could be costly.attributed to us and damage our brands’ reputations, which in turn could adversely affect our business.
We receive, transmitUsers of our services have been, and store a large volumemay in the future be, physically, financially, emotionally, or otherwise harmed by other individuals that such users met or may meet through the use of personal informationone of our services. When one or more of our users suffers or alleges to have suffered any such harm, we have in the past, and could in the future, experience negative publicity or legal action that could damage our reputation and our brands. Similar events affecting users of our competitors’ services have in the past, and could in the future, result in negative publicity for our industry generally, which could in turn negatively affect our business.
In addition, the reputations of our brands may be adversely affected by the actions of our users that are deemed to be hostile, offensive, defamatory, inappropriate, untrue, or unlawful. While we have systems and processes in place that aim to monitor and review the appropriateness of the content accessible through our services, and have adopted policies regarding illegal, offensive, or inappropriate use of our services, our users have in the past, and could in the future, nonetheless engage in activities that violate our policies. Such bad actors may also use emerging technologies, such as AI, to engage in such activities, which would make it more difficult for us and other user data (including personal credit card data,users to detect and prevent such negative behavior. Our safeguards may not be sufficient to avoid harm to our reputation and brands, especially if such hostile, offensive, or inappropriate use is well-publicized.
Our business and results of operations have been and may in the future be adversely affected by global health pandemics.
Our business could be materially and adversely affected by the outbreak of a widespread health epidemic or pandemic, such as the Coronavirus Disease 2019 (COVID-19) pandemic. The COVID-19 pandemic reached across the globe, resulting in the implementation of significant governmental measures intended to control the spread of the virus, including lockdowns, closures, quarantines, and travel bans, as well as private content (suchchanges in consumer behavior as videosindividuals became reluctant to engage in social activities with people outside their households. Such measures had an adverse impact on global economic conditions and correspondence)) in connection withconsumer confidence and spending, and adversely affected users’ ability to pay, for our services.
The ultimate extent of the processingimpact of search queries, the provision of online products and services, payment transactions and advertisingany epidemic, pandemic, or other health crisis on our various properties. The mannerbusiness will depend on multiple factors that are highly uncertain and cannot be predicted, including its severity, location, and duration, and actions taken to contain or further prevent its spread. Additionally, pandemics could increase the magnitude of many of the other risks described in this annual report, and have other adverse effects on our operations that we are not currently able to predict. If our business and the markets in which we share, store, use, discloseoperate experience a prolonged occurrence of adverse public health conditions, it could materially and adversely affect our business, financial condition, and results of operations.
We may fail to adequately protect this information is determined byour intellectual property rights or may be accused of infringing the respective privacyintellectual property rights of third parties.
We rely heavily upon our trademarks and data security policiesrelated domain names and logos to market our brands and to build and maintain brand loyalty and recognition. We also rely upon patented and patent-pending proprietary technologies and trade secrets relating to our services.
We rely on a combination of our various businesses. These policies are, in turn, subject to federal, state and foreign laws and regulations, as well as evolving industry standardscontractual restrictions with employees, customers, suppliers, and practices, regarding privacy generallyothers, to establish and the sharing, storage, use, disclosure and protection of personal information and user data. These laws, regulations, standards and practices are changing, inconsistent and conflicting and subject to differing interpretations, and new laws, regulations, standards and practices of this nature are proposed and adopted from time to time.
protect our intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and reserve, register, and renew domain names as we deem appropriate. Effective trademark protection may not be available or sought in 2016, the European Commission adopted the General Data Protection Regulation (the "GDPR"), a comprehensive European Union privacyevery country in which our services are made available, and data protection reform that becomes effective in May 2018. The GDPR, which applies to companies that are organized in the European Union (or otherwise provide services to (or monitor) consumers who reside in the European Union), imposes strict standards regarding the sharing, storage, use, disclosure and protection of end user data and significant penalties (monetary and otherwise) for non-compliance. In addition, the European Union is considering an update to its Privacy and Electronic Communications Directive to impose stricter rules regardingcontractual disputes may affect the use of cookies in connection with the provisionmarks governed by private contract. Similarly, not every variation of online productsa domain name may be available or registered, even if available.
We generally seek to apply for patents or other similar statutory protections as and serviceswhen we deem appropriate, based on then-current facts and circumstances, and will continue to consumers who residedo so in the European Union. In addition, the potential exit from the European Union by the United Kingdom could result in thefuture. No assurances can be given that any patent application of new and
conflicting data privacy and protection laws and standards to our operations in the United Kingdom and how we handle personal data of consumers who reside in the United Kingdom. In addition, there are a number of draft privacy laws and regulations under consideration in the U.S. (including in various states) and in various foreign jurisdictions in which we do business.
While we believe that we comply with applicable privacy policies, laws and regulations, as well as evolving industry standards and practices relating to privacy and data security in all material respects, there is no assurance that we will not be subject to claims that we have violated applicable laws and regulations, standards and practices, that wefiled or will be able to successfully defend against such claims or that wefile will not be subject to significant fines and penalties in the event of non-compliance. Moreover, any failure or perceived failure by us (or the third parties with whom we have contracted to handle such information) to comply with applicable privacy policies, laws, regulations or privacy‑related contractual obligations or any compromise of security that results in unauthorized access to (or use or transmission of) personal information could result in a variety of claimspatent being issued, or that any existing or future patents will afford adequate protection against us, including governmental enforcement actions, significant fines, litigation, claims of breach of contractcompetitors and indemnity bysimilar technologies. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon patents we own.
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise, third parties could copy or otherwise obtain and adverse publicity. Inuse our intellectual property without authorization, our existing trademarks, patents, or trade secrets can be, and, on rare occasions, have been, determined to be invalid or unenforceable, or laws and interpretations of laws regarding the caseenforceability of such an event,existing intellectual property rights may change over time in a manner that provides less protection. The occurrence of any of these events could tarnish our reputation may be harmed, we could lose current and potential users and the competitive positions ofbrands’ reputations, limit our various brands and businesses could be diminished,ability to market them, or impede our ability to effectively compete against competitors with similar technologies, any or all of which could adversely affect our business, financial condition, and results of operations.
In addition, compliance with the numerous privacy and data protection laws in the various countries in which our businesses operate (particularly the GDPR) could be costly, as well as result in delays in the development of new products and services if significant resources are allocated to compliance efforts, particularly as these laws become more comprehensive in scope, more commonplace and continue to evolve. If these costs and/or product and service delays are significant, our business, financial condition and results of operations could be adversely affected.
Lastly, evolving privacy and data protection laws in the various countries in which are businesses operate could prevent us from introducing products and services in jurisdictions in which we wish to do business and/or continuing to offer certain products and services in jurisdictions in which we currently operate. If markets in new jurisdictions in which we cannot do business are large and/or revenue attributable to products and services we can no longer offer is significant, our business, financial condition and results of operations could be adversely affected.
Our success depends, in part, on the integrity and quality of our systems, technology and infrastructure and those of third parties. System interruptions and the lack of integration and redundancy in our and third party information systems may adversely affect our business.
To succeed, our systems, technology and infrastructure must perform well on a consistent basis. From time to time, we may experience occasional interruptions that make some or allhave been subject to legal proceedings and claims regarding intellectual property, including claims of alleged infringement of trademarks, copyrights, patents, and other intellectual property rights held by third parties and of invalidity of our systems, technology, infrastructure or user data unavailable or that prevent usown rights. In addition, from providing products and services; any such interruption could arise for any number of reasons. Furthermore, fire, power loss, telecommunications failure, natural disasters, acts of war or terrorism, acts of God and other similar events or disruptions may damage or interrupt computer, data, cloud-based web hosting, broadband, wireless or other storage or communications systems at any time. Any event of this nature could cause system interruptions, delays and loss of critical data, and could prevent us from providing our products and servicestime to consumers. Whiletime we have backup systemsengaged in place for certain aspects of our operations, our systems, technologylitigation, and infrastructure are not fully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. Any such interruptions or outages, regardless of the cause, could negatively impact the consumer experience, tarnish the reputation of our brands and decrease demand for our products and services, any or all of which could adversely affect our business, financial condition and results of operations.
We also continually work to expand and enhance the efficiency and scalability of our systems, technology and infrastructure to improve the consumer experience, accommodate substantial increases in traffic volume to our various brands, ensure acceptable page load times and keep up with technology and evolving user and consumer preferences. Any failurecontinue to do so in a timelythe future, to enforce our intellectual property rights, protect our trade secrets and cost-effective mannerpatents, or to determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could adversely affect the user experience across our brandsresult in substantial costs and businesses, which could adversely affect demand for our productsdiversion of management and services and/or increase our costs,technical resources, any of which could adversely affect our business, financial condition, and results of operations.
We also rely on third party computer systems, data center service providers, cloud-based web hosting service providersoperate in various international markets, including certain markets in which we have limited experience, and broadband, wireless and other communications systems service providerssome of our brands continue to seek to increase their international scope. As a result, we face additional risks in connection with the provisioncertain of our productsinternational operations.
Operating internationally, particularly in countries in which we have limited experience, exposes us to a number of risks in addition to those otherwise described in this annual report, such as:
•operational and compliance challenges caused by distance, language, and cultural differences;
•difficulties in staffing and managing international operations;
•differing levels of social and technological acceptance of our services generally, as well asor lack of acceptance of them generally;
•differing and potentially adverse tax laws;
•compliance challenges due to facilitatedifferent laws and process certain transactions with users. We have no control overregulatory environments, particularly in the case of privacy, data security, intermediary or platform liability, and consumer protection;
•competitive environments that favor local businesses or local knowledge of such environments;
•limitations on the level of intellectual property protection; and
•trade sanctions, political unrest, terrorism, war, and epidemics or the threat of any of these third partiesevents.
The occurrence of any or their operations.
Any interruptions, outages or delaysall of the events described above could adversely affect our international operations, which could in our systems, technology and infrastructure or those of our third party providers, changes in service levels or any deterioration in performance, could impair our ability to provide our products and services and/or process certain transactions. If any of these events were to occur, it could damage our reputation and result in the loss of users, which couldturn adversely affect our business, financial condition, and results of operations.
We may experience operational and financial risks in connection with acquisitions.
We have made acquisitions in the past, including our acquisition of Hyperconnect in 2021, and continue to seek potential acquisition candidates. We may experience operational and financial risks in connection with historical and future acquisitions if we are unable to:
•properly value prospective acquisitions, especially those with limited operating histories;
•fully identify potential risks and liabilities associated with acquired businesses;
•accurately project the future financial condition and results of operations of acquired businesses;
•successfully integrate the operations, financial, and other administrative systems of the acquired businesses with our existing operations and otherwisesystems;
•retain or hire senior management and other key personnel at acquired businesses; and
•successfully support the acquired businesses in executing on strategic plans, including expansion into geographies where we have presence and experience.
Furthermore, we may not be costly to remedy.
Mr. Dillersuccessful in addressing other challenges encountered in connection with our acquisitions and certain membersthe anticipated benefits of his family collectively have sole voting and/one or investment power over a significant percentage of the voting powermore of our stock. As a result, Mr. Diller and these family members are able to exercise significant influence over the composition of our Board of Directors, matters subject to stockholder approval and our operations.
As of the date of this report, Mr. Diller, his spouse, Diane von Furstenberg, and his stepson, Alexander von Furstenberg, collectively beneficially own 5,789,499 shares of IAC Class B common stock by virtue of their respective voting and/or investment power(s) over these securities, 4,530,075 of which are held in trusts for the benefit of Mr. Diller and certain members of his family and the remainder of which are held by Mr. Diller personally. Shares of IAC Class B common stock beneficially owned by Mr. Diller, his spouse and his stepson collectively represent 100% of IAC’s outstanding Class B common stock and, together with shares of IAC common stock held as of the date of this report by Mr. von Furstenberg (58,542), a trust for the benefit of certain members of Mr. Diller's family (136,711) and a family foundation (1,711), represent approximately 43.1% of the total outstanding voting power of IAC (based on the number of shares of IAC common stock outstanding on February 2, 2018). As of the date of this report, Mr. Diller also holds 800,000 vested options and 500,000 unvested options to purchase IAC common stock.
acquisitions may not be realized. In addition, pursuant to an amended and restated governance agreement between IAC and Mr. Diller, for so long as Mr. Diller serves as IAC’s Chairman and Senior Executive and he beneficially owns (within the meaningsuch acquisitions can result in material diversion of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) at least 5,000,000 shares of IAC Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficially owned by him directly and indirectly through trusts for the benefit of him and certain members of his family), he generally has the right to consent to limited matters in the event that IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over a continuous twelve-month period.
As a result of IAC securities beneficially owned by Mr. Diller and certain members of his family, Mr. Diller and these family members are, collectively, currently in a position to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcome of corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions. In addition, this concentration of investment and voting power could discourage others from initiating a potential merger, takeovermanagement’s attention or other changeresources from our existing businesses. The occurrence of control transaction that may otherwise be beneficial to IAC, whichany of these events could adversely affect the market price of IAC securities.
We dependhave an adverse effect on our key personnel.
Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled individuals, with the continued contributions of our senior management being especially critical to our success. Competition for well-qualified employees across IAC and its various businesses is intense and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. While we have established programs to attract new employees and provide incentives to retain existing employees, particularly our senior management, we cannot assure you that we will be able to attract new employees or retain the services of our senior management or any other key employees in the future. Effective succession planning is also important to our future success. If we fail to ensure the effective transfer of senior management knowledge to successors and smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic, financial and operating goals, as well as our business, financial condition, and results of operations.
We have incurred impairment charges related to our intangible assets in the past and may incur further impairment charges related to our goodwill and other intangible assets in the future, which have required us to, and in the future may again require us to, record a significant charge to earnings.
We acquire other companies and intangible assets and may not realize all the economic benefit from those acquisitions, which could cause an impairment of goodwill or intangible assets. We assess goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if an event occurs or there is a change in circumstances that indicates the carrying value may not be recoverable, including, but not limited to, a decline in our stock price and market capitalization, reduced future cash flow estimates, or slower growth rates in our industry. For example, in 2022, we recorded impairment charges related to Hyperconnect intangible assets that stemmed from a decline in long-term projections for the business since the acquisition in 2021, including adverse foreign currency impacts in certain of Hyperconnect’s key markets, and the use of higher discount rates to value the assets. We may in the future be required to record additional significant charges in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is determined, which would negatively affect our results of operations. For further information, see “Note 5—Goodwill and Intangible Assets” to the consolidated financial statements included in “Part II, Item 8—Consolidated Financial Statements and Supplementary Data.”
We are subject to litigation, and adverse outcomes in such litigation could have an adverse effect on our financial condition.
We are, and from time to time may become, subject to litigation and various legal proceedings, including litigation and proceedings related to employment matters, intellectual property matters, and privacy and consumer protection laws, as well as stockholder derivative suits, class action lawsuits, mass arbitrations, and other matters. Such litigation and proceedings may involve claims for substantial amounts of money or for other relief, result in significant costs for legal representation, arbitration fees, or other legal or related services, or might necessitate changes to our business or operations. The defense of these actions is time consuming and expensive. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we may establish reserves and/or disclose the relevant litigation claims or legal proceedings, as and when required or appropriate. These assessments and estimates are based on information available to
management at the time of such assessment or estimation and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by our current assessments and estimates. Our failure to successfully defend or settle any of these litigation claims or legal proceedings could result in liability that, to the extent not covered by our insurance, could have an adverse effect on our business, financial condition, and results of operations. See “Item 3—Legal Proceedings.”
Our operations generally,are subject to volatile global economic conditions, particularly those that adversely impact consumer confidence and spending behavior.
Adverse macroeconomic conditions, including lower consumer confidence, changes to fiscal and monetary policy, the availability and cost of credit, and weakness in the economies in which we and our users are located, have adversely affected and may continue to adversely affect our business, financial condition, and results of operations. In recent years, the United States, Europe and other key global markets have experienced historically high levels of inflation, which have impacted, among other things, employee compensation expenses. If inflation rates rise again or continue to remain historically high or further increase in those locations where inflation rates remain elevated, it will likely affect our expenses, and may reduce consumer discretionary spending, which could be adversely affected.affect the buying power of our users and lead to a reduced demand for our services, particularly for à la carte features or at brands that serve consumers with less discretionary income. Other events and trends that could result in decreased levels of consumer confidence and discretionary spending include a general economic downturn, recessionary concerns, high unemployment levels, and increased interest rates, as well as any sudden disruption in business conditions. Additionally, geopolitical developments, such as wars in Ukraine and the Middle East, tensions with China, climate change, and the responses by central banking authorities to control inflation, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.
Risks relating to our indebtedness
Our indebtedness may affect our ability to operate our business, which could have a material adverse effect on our financial condition and results of operations. We and our subsidiaries may incur additional indebtedness, including secured indebtedness.
As of December 31, 2017,2023, we had total debt outstanding of approximately $2.1$3.9 billion including $1.3 billion and $275 million of total debt outstanding at Match Group and ANGI Homeservices, respectively. As of that date, we had borrowing availability of $300 million, and Match Group had borrowing availability of $500$749.6 million under our respective revolving credit facilities. Neither Match Group, ANGI Homeservices nor any of their respective subsidiaries guarantee anyfacility.
Our indebtedness of IAC or are currently subject to any of the covenants related tocould have important consequences, such indebtedness. Similarly, neither IAC nor any of its subsidiaries (other than Match Group and its subsidiaries in the case of Match Group indebtedness and ANGI Homeservices and its subsidiaries in the case of ANGI Homeservices indebtedness) guarantee any indebtedness of Match Group or ANGI Homeservices nor are subject to any of the covenants related to such indebtedness.as:
The terms of the indebtedness of IAC, Match Group and ANGI Homeservices could:
limit•limiting our respective abilitiesability to obtain additional financing to fund working capital needs, acquisitions, capital expenditures, or other debt service requirements or for other purposes;
limit•limiting our respective abilitiesability to use operating cash flow to pursue acquisitions or invest in other areas, of our respective businesses because we must dedicate a substantial portion of these funds to service indebtedness;
limit our respective abilities to compete with other companies who are notsuch as highly leveraged;
restrict any one or more of us from making strategic acquisitions, developing propertiesnew brands, services, or exploiting business opportunities;
restrict the way in which one or more of us conducts•restricting our business because ofoperations due to financial and operating covenants in the agreements governing our indebtedness;and certain of our subsidiaries’ existing and future indebtedness, including certain covenants that restrict the ability of our subsidiaries to pay dividends or make other distributions to us; and
expose one or more of•exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our respectiveor our subsidiaries’ debt instruments which if not cured or waived,that could have a material adverse effect on our business, financial condition, and operating results;results.
increase our respective vulnerabilities to a downturn in general economic conditions or in pricing of our various products and services; and
limit our respective abilities to react to changing market conditions in the various industries in which we do business.
In addition to our respective debt service obligations, the operations of IAC, Match Group and ANGI Homeservices require substantial investments on a continuing basis. The ability of any of us to make scheduled debt payments, to refinance indebtedness obligations and to fund capital and non-capital expenditures necessary to maintain the condition of our respective operating assets and properties, as well as to provide capacity for the growth of our respective businesses, depends on our respective financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors.
Subject to certain restrictions in the agreements governing certain indebtedness, we and our subsidiaries may incur significant additional indebtedness, including additional unsecured and secured indebtedness. Although the terms of agreements governing certain indebtednessour credit agreement and the indentures related to our senior notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. If we and/or any ofnew debt is added to our subsidiaries incur additional indebtedness,and our subsidiaries’ current debt levels, the risks described above could increase.
Also, if an event a default has occurred Further, as financial markets have become more costly to access due to increased interest rates or our leverage ratio exceeds thresholds specifiedother changes in the agreements governing our indebtedness,economic conditions, our ability to pay dividendsraise additional capital may be negatively impacted, and any refinancing or restructuring could be at higher interest rates and may require us to make distributions and repurchase or redeemcomply with more onerous covenants, which could further restrict our stock would be limited and the agreements governing the indebtednessbusiness operations.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.
TheOur ability of IAC, Match Group and ANGI Homeservices to satisfy our respective debt obligations will depend upon, among other things:
•our respective future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory, and other factors, many of which are beyond our control; and
the•our future ability of IAC and Match Group to borrow under our respective revolving credit agreements, as well as the future ability of ANGI Homeservices to add one or more incremental term loans or revolving facilities under its credit agreement,facility, the availability of which will depend on, among other things, complianceour complying with the covenants in the then-existing agreements governing suchour indebtedness.
We cannot assure youThere can be no assurance that we, Match Group of ANGI Homeservicesour business will generate sufficient cash flow from our respective operations, or that we Match Group or ANGI Homeservices will be able to draw under our revolving credit facility or otherwise, take the actions described immediately above, in amountsan amount sufficient to fund our respective liquidity needs. See also "-We may not freely access the cash of Match Group, ANGI Homeservices and their respective subsidiaries" below.
If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations, sell equity, and/or negotiate with our lenders to restructure the applicable debt, in order to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. The agreements governing the indebtedness of IAC, Match Group and/or ANGI Homeservices may restrict, or market or business conditions may limit, our ability to avail ourselves of some or all of these options. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due.
We may not freely access the cash of Match Group, ANGI Homeservices and their respective subsidiaries.
IAC's potential sources of cash include our available cash balances, net cash from the operating activities of certain of our subsidiaries, availability under our revolving credit facility and proceeds from asset sales, including marketable securities. The ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or become subject. The agreements governing the indebtedness of Match Group and ANGI Homeservices limit their ability to pay dividends or make distributions, loans or advances to stockholders, including IAC. In addition, because Match Group and ANGI Homeservices are separate and distinct legal entities with public shareholders, they have no obligation to provide us with funds, whether by dividends, distributions, loans or other payments.
Variable rate indebtedness that we have incurred or may incur under our credit agreement will subject us to interest rate risk, which could cause our debt service obligations to increase significantly.
As of December 31, 2017, Match Group and ANGI Homeservices hadWe currently have $425 million and $275 million, respectively, of indebtedness outstanding under their respectiveour term loans.loan and no outstanding borrowings under our revolving credit agreement. Borrowings under boththe term loansloan are, and any borrowings under the revolving credit facilities of IAC or Match Groupfacility will be, at variable interest rates.rates of interest. Indebtedness that bears interest at variable rates exposes us to interest rate risk. Match Group's term loan bears interest at LIBOR plus 2.50% and as of December 31, 2017, the rate in effect was 3.85%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the Match Group term loan would increase or decrease by $4.3 million. The ANGI Homeservices term loan bears interest at LIBOR plus 2.00% and as of December 31, 2017, the rate in effect was 3.38%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the ANGI Homeservices term loan would increase or decrease by $2.8 million. See also "Item 7A-Quantitative“Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk."”
Exchange of our outstanding exchangeable notes may dilute the ownership interests of existing stockholders or may otherwise depress the price of our common stock.
We are obligated as a guarantor under the indentures relating to the outstanding exchangeable notes issued by certain of our subsidiaries. The exchange of some or all of the exchangeable notes may dilute the ownership interests of our stockholders to the extent we deliver shares of our common stock upon exchange. While outstanding hedges relating to the exchangeable notes are expected to reduce the potential dilutive effect on our common stock upon any exchange and/or offset any cash payment the issuers of the exchangeable notes would be required to make in excess of the principal amount of the exchanged notes, outstanding warrants relating to the exchangeable notes have a dilutive effect to the extent that the market price per share of our common stock exceeds the strike price of the warrants. Any sales in the public market of our common stock issuable upon exchange of any exchangeable notes could adversely affect prevailing market prices of our common stock. In addition, the existence of the exchangeable notes may encourage short selling of our common stock by market participants because the exchange of the exchangeable notes could be used to satisfy short positions. In addition, the anticipated exchange of the exchangeable notes could depress the price of our common stock.
Risks relating to the Separation
If the transactions effected in connection with the Separation were to fail to qualify as generally tax-free for U.S. federal income tax purposes, we and our stockholders could suffer material adverse consequences.
On June 30, 2020, the companies formerly known as Match Group, Inc. (referred to as “Former Match Group”) and IAC/InterActiveCorp (referred to as “Former IAC”) completed the separation of the Company from IAC through a series of transactions that resulted in two, separate public companies—(1) Match Group, which consists of the businesses of Former Match Group and certain financing subsidiaries previously owned by Former
IAC, and (2) IAC/InterActiveCorp, formerly known as IAC Holdings, Inc. (“IAC”), consisting of Former IAC’s businesses other than Match Group (the “Separation”). Following the completion of the Separation and the merger of Former Match Group into a wholly-owned subsidiary (“Merger Sub”) of Former IAC (the “Merger”), Former Match Group’s successor became a wholly-owned subsidiary of Match Group and most of Former IAC’s existing other subsidiaries came to be held under a separate public company. Former IAC and IAC received opinions from outside counsel that the Separation and related transactions taken together, and the Merger, were tax-free for U.S. federal income tax purposes. These opinions were based upon and rely on various facts and assumptions, as well as certain representations and undertakings of Former IAC, Former Match Group, IAC, and Match Group, including relating to the past and future conduct of Former IAC, Former Match Group, IAC, and Match Group. If any of these representations or undertakings is, or becomes, inaccurate or incomplete, or if any of the representations or covenants contained in any of the transaction-related agreements or in any document relating to the opinions of counsel is, or becomes, inaccurate or is not complied with by Former IAC, Former Match Group, IAC, Match Group, or any of their respective subsidiaries, the opinions of counsel may be invalid and the conclusions reached therein could be jeopardized.
Notwithstanding receipt of the opinions of counsel regarding the transactions, the U.S. Internal Revenue Service (“IRS”) could determine that some or all of the transactions effected in connection with the Separation should be treated as taxable for U.S. federal income tax purposes if it determines that any of the representations, assumptions, or undertakings upon which the opinions of counsel were based are inaccurate or have not been complied with. Moreover, even if the foregoing representations, assumptions, or undertakings are accurate and have been complied with, the opinions of counsel merely represent the judgment of such counsel and are not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinions of counsel. Accordingly, there can be no assurance that the IRS will not assert that the transactions effected in connection with the Separation do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail with such a challenge, parties to the Separation, including Match Group could be subject to tax with respect to the Separation.
For example, if the transactions effected in connection with the Separation were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986 (as amended, the “Code”), in general, for U.S. federal income tax purposes, we would recognize a taxable gain as if the distribution of New IAC stock in connection with the Separation had been sold in a taxable sale for its fair market value. Even if the transactions effected in connection with the Separation were to otherwise qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code, taxable gain may be triggered under Section 355(e) of the Code if the transactions effected in connection with the Separation were, or later transactions are, deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50 percent or greater interest (by vote or value) in us or IAC. For this purpose, any acquisitions of (i) Former IAC stock or Former Match Group stock before the Separation or (ii) IAC stock or Match Group stock within the period beginning two years before the Separation and ending two years after the Separation are presumed to be part of such a plan, although we or IAC may be able to rebut that presumption.
In addition to potential tax liabilities relating to Former Match Group, we and our subsidiaries could be liable to satisfy any tax liabilities relating to Former IAC or IAC with respect to the Separation if their tax-free treatment for U.S. federal income tax purposes were successfully challenged by the IRS. While, in some cases, IAC may be obligated under certain agreements to indemnify us for some or all of such taxes, even in those cases, there is no assurance that they will in fact indemnify us.
In addition, if the Merger were determined to be taxable for U.S. federal income tax purposes, we would be subject to tax on the transfer of the assets of Former Match to Merger Sub. If we or our subsidiaries were required to pay taxes imposed on us with respect to the Separation, our cash flows would be adversely affected.
Risks relating to ownership of our common stock
You may experience dilution with respectdue to your investmentthe issuance of additional securities in IAC, and IAC may experience dilution with respectthe future.
Our dilutive securities consist of vested options to its investments in Match Group and ANGI Homeservices, as a resultpurchase shares of compensatory equity awards.
We have issued various compensatory equity awards, includingour common stock, options, stock appreciation rights and restricted stock unit awards, equity awards denominated in the equity of our non-public subsidiaries but settleable in shares of our common stock, as well asthe exchangeable notes, and the exchangeable note warrants.
These dilutive securities are reflected in equity of our various consolidated subsidiaries, including Match Group and ANGI Homeservices. For more information regarding these awards and their impact on our diluteddilutive earnings per share calculation contained in our financial statements for fiscal years ended December 31, 2023, 2022, and 2021. For more information, see "Note 13-Stock-Based Compensation" and "Note 12-Earnings Per Share,” respectively,“Note 10—Earnings per Share” to the consolidated financial statements included in "Item 8-Consolidated“Part II, Item 8—Consolidated Financial Statements and Supplementary Data."
The issuance of shares of IAC common” Intra-quarter movements in our stock in settlement of these equity awards could dilute your ownership interest in IAC. Awards denominated in shares of Match Group or ANGI Homeservices common stock that are settled in shares of those subsidiaries could dilute IAC’s ownership interest in Match Group and ANGI Homeservices, respectively. The dilution of our ownership stake(s) in Match Group and/or ANGI Homeservices could impact our ability, among other things, to maintain Match Group and/or ANGI Homeservices as part of our consolidated tax group for U.S. federal income tax purposes, to effect a tax-free distribution of our Match Group and/or ANGI Homeservices stake(s) to our stockholders or to maintain control of Match Group and/or ANGI Homeservices. As we generally have the right to maintain our levels of ownership in Match Group
and ANGI Homeservices to the extent Match Group or ANGI Homeservices issues additional shares of their respective capital stock in the future pursuant to investor rights agreements, we do not intend to allow any of the foregoing to occur.
With respect to awards denominated in shares of our non-publicly traded subsidiaries, we estimate the dilutive impact of those awards based on our estimated fair value of those subsidiaries. Those estimates may change from time to time, and the fair value determined in connection with vesting and liquidity eventsprice could lead to more or less dilution than reflected in our diluted earnings per share calculation.these calculations.
We maydo not be ableplan to identify suitable acquisition candidates and even if we do so, we may experience operational and financial risksdeclare any regular cash dividends in connection with acquisitions and/or not realize anticipated benefits following acquisitions. In addition, some of the businesses we acquire may incur significant losses from operations or experience impairment of carrying value.foreseeable future.
We have made numerous acquisitionsno current plans to pay cash dividends on our common stock. Instead, we anticipate that all of our future earnings will be retained to support our operations, to finance the growth and development of our business, and to fund our share repurchase program. We are not obligated to pay dividends on our common stock. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
Provisions in our certificate of incorporation and bylaws or Delaware law may discourage, delay, or prevent a change of control of our company or changes in our management and, therefore, depress the pasttrading price of our common stock.
Delaware corporate law and our certificate of incorporation and bylaws contain provisions that could discourage, delay, or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous, including provisions which:
•authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;
•establish a classified board of directors, as a result of which our board is divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting;
•prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•provide that certain litigation against us can be brought only in Delaware (subject to certain exceptions); and
•provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws.
Any provision of our certificate of incorporation, our bylaws, or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Our certificate of incorporation could prevent us from benefiting from corporate opportunities that might otherwise have been available to us.
Our certificate of incorporation includes a “corporate opportunity” provision in which Match Group and its affiliates renounce any interests or expectancy in corporate opportunities which become known to any of Match Group’s directors or officers who are also officers or directors of IAC.
Generally, Match Group’s officers or directors who are also IAC’s officers or directors will not be liable to Match Group or its stockholders for breach of any fiduciary duty because such person fails to communicate or offer to Match Group a corporate opportunity that has been communicated or offered to IAC, that may also be a corporate opportunity of Match Group or because such person communicates or offers to IAC any corporate
opportunity that may also be a corporate opportunity of Match Group. In order for any Match Group director or officer who is also an IAC director or officer not to be liable to Match Group or its stockholders, such opportunity cannot become known to the officer or director in his or her capacity as a Match Group director or officer and cannot be presented to any party other than IAC. In addition, such officer or director cannot pursue such an opportunity in his or her individual capacity. The corporate opportunity provision may exacerbate conflicts of interest between Match Group and IAC because the provision effectively permits any of Match Group’s directors or officers who also serve as an officer or director of IAC to choose to direct a corporate opportunity to IAC instead of to Match Group.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
Match Group maintains an enterprise-wide information security program designed to identify, protect against, detect, respond to, and manage reasonably foreseeable cybersecurity risks and threats. Our information security teams, led by our Senior Vice President, Security Engineering, are responsible for assessing and managing our exposure to information security risks, including by:
•Implementing and enforcing physical, operational and technical security policies, procedures and controls;
•Conducting, and engaging independent third-party experts to conduct, regular internal and external security assessments and audits, including assessments of the security posture of third-party vendors and partners;
•Collaborating with our development teams to engineer and integrate security throughout the product development lifecycle;
•Implementing scalable and continuous data protection practices; and
•Detecting, monitoring, investigating, and responding to potential security threats and incidents.
With a focus on both product and enterprise security, the security program has been set up to protect our information systems from cybersecurity threats as part of our development lifecycles and our ongoing business operations. We implement various technical and operational processes to help prevent, identify, escalate, investigate, resolve, and recover from vulnerabilities and security incidents in a timely manner. These include, but are not limited to, monitoring and detection tools, internal and third-party penetration testing, continuous testing by a dedicated red team, a comprehensive bug bounty program to allow security researchers to assist us in identifying vulnerabilities in our services before they are exploited, and annual and ongoing security awareness training for employees.
We have implemented cybersecurity controls to detect and address threats arising from our use of third-party service providers. Security risk assessments are conducted during onboarding, contract renewal, and when an increased risk profile is identified. We also require specified security controls and other responsibilities from our service providers and we continueinvestigate security incidents affecting them as deemed necessary.
Our policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats are integrated into our overall risk management program and are based on frameworks established by the International Organization for Standardization (“ISO”) and other applicable industry standards. Our cybersecurity policies, standards, processes and practices are regularly assessed by consultants and external auditors. These assessments include a variety of activities, including information security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness. Cybersecurity processes are adjusted based on the information provided from these assessments. We have also obtained industry certifications and attestations that demonstrate our dedication to seekprotecting the data our users entrust to identify potential acquisition candidates that will allow us, including Tinder obtaining certification for its Information Security Management System (ISMS) under the ISO/IEC 27001:2022 standard.
We conduct regular reviews and tests of our information security program and leverage audits by our internal audit team and ongoing testing by our red team. We employ external services to applyconduct tabletop exercises, penetration and vulnerability testing, simulations, and other exercises to evaluate the effectiveness of our expertise to expand their capabilities, as well as maximizeinformation security program and improve our existing assets. As a result, our future growth may depend, in part, on acquisitions. We may not be able to identify suitable acquisition candidates or complete acquisitions on satisfactory pricing or other termssecurity measures and we expect to continue to experience competition in connection with our acquisition-related efforts.
Even if we identify what we believe to be suitable acquisition candidates and negotiate satisfactory terms, we may experience operational and financial risks in connection with acquisitions, andplanning across Match Group’s businesses. The results of these assessments are reported to the extent that we continueAudit Committee of our Board of Directors.
We have established standardized and comprehensive incident response and recovery plans across Match Group’s businesses. Our incident response and recovery plans address — and guide our employees, management, and our Board of Directors on — our response to grow through acquisitions, we will need to:a cybersecurity incident, and our procedures with regard to material incidents. We regularly test and evaluate the effectiveness of our incident response process.
properly value prospective acquisitions, especially those with limited operating histories;
successfully integrate theOur systems periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as the accounting, financial controls, managementloss, misuse or theft of personal information technology, human resources(of third parties, employees, and our users) and other administrative systems, of acquired businesses with our existing operations and systems;
successfully identify and realize potential synergies among acquired and existing businesses;
retaindata, confidential information or hire senior management and other key personnel at acquired businesses; and
successfully manage acquisition‑related strain on the management, operations and financial resources of IAC and its businesses and/or acquired businesses.intellectual property.
We mayhave not be successful in addressing these challengesidentified risks from cybersecurity threats, including from previous cybersecurity incidents, that have materially affected us. However, we face ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect our business strategy, results of operations, or any other problems encountered in connection with historical and future acquisitions, including the Combination. In addition, the anticipated benefits of onefinancial condition. Any significant disruption to our service or more acquisitions, including the anticipated synergies, cost savings and growth opportunities we expectunauthorized access to realize as a result of the Combination, may not be realized. Also, future acquisitionsour systems could result in increased operating losses, potentially dilutive issuancesa loss of equity securitiesusers and the assumptionadversely affect our business, financial condition, and results of contingent liabilities. Lastly, the valueoperations. Further, a penetration of goodwillour systems or a third-party’s systems or other misappropriation or misuse of personal information could subject us to business, regulatory, litigation and other intangible assets acquired could be impacted by one or more continuing unfavorable events and/or trends,reputation risk, which could result in significant impairment charges. The occurrence of any of these events could have an adversea negative effect on our business, financial condition, and results of operations.
We operate in various international markets, some in which we have limited experience. As a result, we face While Match Group maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. For additional discussion of cybersecurity risks, in connection withsee “Item 1A Risk factors—Risks relating to our international operations. Also, webusiness—We may not be able to successfully expand into new, or further intoprotect our existing, international markets.
We currently operate in various jurisdictions abroadsystems and infrastructure from cyberattacks and may continuebe adversely affected by cyberattacks experienced by third parties.”
Governance
Board Oversight
Our Board of Directors, in coordination with the Audit Committee, oversees our management of cybersecurity risk, including our annual enterprise risk assessment, where we assess key risks within the company, including security and technology risks and cybersecurity threats. The Audit Committee directly oversees our cybersecurity program. The Audit Committee receives quarterly cybersecurity updates from management, including risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal and industry cybersecurity incidents. Cybersecurity reviews by the Audit Committee or the Board of Directors generally occur quarterly, or more frequently as determined to expandbe necessary or advisable.
Management’s Role
Our cybersecurity program is managed by our international presence. In orderSVP, Security Engineering, who reports to our Chief Business Affairs and Legal Officer. Our SVP, Security Engineering, has over 20 years of industry experience, including serving in similar roles leading and overseeing cybersecurity programs at other public companies. Our information security program encompasses partnerships among teams that are responsible for cyber governance, prevention, detection and remediation activities within our productscybersecurity environment. Team members have relevant certifications, educational and services in these jurisdictionsindustry experience, including experience holding similar positions at other large technology companies. The information security teams provide regular reports to achieve widespread acceptance, commercial usesenior management and acceptance of the Internet (particularly via mobile devices) must continue to grow, which growth may occur at slower rates than those experienced in the United States. Moreover, we must continue to successfully tailor our productsother relevant teams on various cybersecurity threats, assessments and servicesfindings. Our information security leadership reports directly to the unique customsAudit Committee or the Board of Directors on our cybersecurity program and cultures of foreign jurisdictions, which can be difficultefforts to prevent, detect, mitigate, and costlyremediate issues. We also maintain an escalation process to inform senior management and the failureBoard of Directors of material issues and make determinations with respect to do so could slow our international growth and adversely impact our business, financial condition and resultsany required disclosures.
Operating abroad, particularly in jurisdictions where we have limited experience, exposes us to additional risks, including among others:
operational and compliance challenges caused by distance, language and cultural differences;
difficulties in staffing and managing international operations;
differing levels of social and technological acceptance of our products and services or lack of acceptance of them generally;
foreign currency fluctuations;
restrictions on the transfer of funds among countries and back to the United States and costs associated with repatriating funds to the United States;
differing and potentially adverse tax laws;
multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws by both our employees and our business partners, over whom we exert no control;
competitive environments that favor local businesses;
limitations on the level of intellectual property protection; and
trade sanctions, political unrest, terrorism, war and epidemics or the threat of any of these events.
The occurrence of any or all of these events could adversely affect our international operations, which could in turn adversely affect our business, financial condition and results of operations. Our success in international markets will also depend, in part, on our ability to identify potential acquisition candidates, joint venture or other partners, and to enter into arrangements with these parties on favorable terms and successfully integrate their businesses and operations with our own.
A variety of new laws, or new interpretations of existing laws, could subject us to claims or otherwise harm our business.
We are subject to a variety of laws in the U.S. and abroad that are costly to comply with, can result in negative publicity and diversion of management time and effort, can subject us to claims or other remedies and otherwise harm our business. Some of these laws, such as income, sales, use, value‑added and other tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the various types of businesses in which we are engaged. Many of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. Laws that do reference the Internet are being interpreted by the courts, but their applicability and scope remain uncertain. In addition, evolving Internet business practices may attract increased legal and regulatory attention. For example, the U.S. Federal Trade Commission continues to monitor the use of paid search and online "native" advertising (a form of advertising in which sponsored content is presented in a manner that could be viewed as similar to traditional editorial content) to ensure that it is presented in a manner that is not confusing or deceptive.
Any failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our business, financial condition and results of operations. In addition, if the laws to which we are currently subject are amended or interpreted adversely to our interests, or if new adverse laws are adopted, our products and services might need to be modified to comply with such laws, which would increase our costs and could result in decreased demand for our products and services to the extent that we pass on such costs to our users. Specifically, in the case of tax laws, positions that we have taken or will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken to date comply with applicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will not adversely affect us. Any events of this nature could adversely affect our business, financial condition and results of operations.
Moreover, laws that adversely impact use (or growth in use) of the Internet or that regulate the practices of third parties upon which we rely to provide our online products and services could decrease user demand for our products and services, increase costs or otherwise harm our business. For example, in December 2017, the U.S. Federal Communications Commission (the "FCC") adopted an order reversing its May 2016 Open Internet Order, which codified "network neutrality," the principle that Internet service providers should treat all data traveling through their networks the same, not discriminating or charging differentially by content, website, platform or application. As a result of this reversal, broadband Internet access providers now have more power to prioritize different types of Internet traffic and set pricing, which means they could discriminate against Internet traffic of our businesses in favor of others (by way of blocking or throttling traffic from our businesses, "paid prioritization" of traffic through their networks generally or other similar actions) and/or charge us to provide our products and
services via their networks. If any of these actions were to occur, our costs could increase and our business, financial condition and results of operations would be adversely affected.
Lastly, the passage or adoption of any new or amended legislation or regulation affecting the ability of our businesses to periodically charge for recurring membership or subscription payments could harm our business. For example, the European Union Payment Services directive, which became effective in January 2018 and regulates payment services and payment service providers, could restrict the ability of certain of our businesses to process auto-renewal payments for, as well offer promotional or differentiated pricing tiers to, users who reside in the European Union.
We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.
We rely heavily upon our trademarks and related domain names and logos to market our brands and to build and maintain brand loyalty and recognition, as well as upon trade secrets. We also rely, to a lesser extent, upon patented and patent-pending proprietary technologies with expiration dates ranging from 2019 to 2038.
We rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect our various intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and reserve, register and renew domain names as we deem appropriate. Effective trademark protection may not be available or may not be sought in every country in which products and services are made available and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available.
We also generally seek to apply for patents or for other similar statutory protections as and if we deem appropriate, based on then current facts and circumstances, and will continue to do so in the future. No assurances can be given that any patent application we have filed (or will file) will result in a patent being issued, or that any existing or future patents will afford adequate protection against competitors and similar technologies. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon patents we own.
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise, third parties could copy or otherwise obtain and use our intellectual property without authorization and/or laws (or interpretations of laws) regarding the enforceability of our existing intellectual property rights can change in an adverse manner. The occurrence of any of these events could result in the erosion of our brands and limitations on our ability to control marketing on or through the Internet using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could adversely affect our business, financial condition and results of operations.
From time to time, we have been subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations. Patent litigation tends to be particularly protracted and expensive.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
IACMatch Group believes that the facilities for its management and operations are generally adequate for its current and near-term future needs. IAC'sMatch Group’s facilities, most of whichwhether owned or leased, are leased by IAC's businesses in various cities and locations in the United States and various jurisdictions abroad, and generally consist of executive and administrative offices operations centers,and data centers and sales offices.centers. We also believe that, if we require additional space, we will be able to lease additional facilities on commercially reasonable terms.
All of IAC's leases are at prevailing market rates. IAC believes that the duration of each lease is adequate. IAC believes that its principal properties, whether owned or leased, are currently adequate for the purposes for which they are used and are suitably maintained for these purposes. IAC does not anticipate any future problems renewing or obtaining suitable leases for any of its principal businesses. IAC's approximately 202,500 square foot corporate headquarters in New York, New York houses offices for IAC corporate and various IAC businesses within the following segments: Match Group, Video, Applications and Publishing.
Item 3. Legal Proceedings
InOverview
We are, and from time to time may become, involved in various legal proceedings arising in the ordinarynormal course of our business the Companyactivities, such as trademark and its subsidiaries are parties to litigation involving property, personal injury, contract, intellectual propertypatent infringement claims, trademark oppositions, and consumer or advertising complaints, as well as stockholder derivative actions, class action lawsuits, mass arbitrations, and other claims.matters. The amounts that may be recovered in such matters may be subject to insurance coverage.
Rules of the Securities and Exchange Commission require the description of material pending legal proceedings (other than ordinary, routine litigation incidental to the registrant's business) to which the registrant or any of its subsidiaries is a party or to which any of their property is subject and advise that proceedings ordinarily need not be described if they primarily involve claims for damages for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of Company management, none of the pending litigation matters that the Company and its subsidiaries are defending, including the litigation matters described below, involves or is likely to involve amounts of that magnitude. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any suchof these matters may be material to our financial position or operations based upon the standard set forth in the rules ofSEC’s rules.
Pursuant to the Securities and Exchange Commission.
Securities Class Action Litigation against Match Group
As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, on February 26, 2016, a putative nationwide class action was filed in federal court in Texas against Match Group, five of its officers and directors, and twelve underwriters of Match Group's initial public offering in November 2015. See David M. Stein v. Match Group, Inc. et al., No. 3:16-cv-549 (U.S. District Court, Northern District of Texas). The complaint alleged that Match Group's registration statement and prospectus issuedTransaction Agreement, entered into in connection with its initial public offering were materially falseour separation from IAC/InterActiveCorp, now known as IAC Inc. (“IAC”), we have agreed to indemnify IAC for matters relating to any business of Former Match Group, including indemnifying IAC for costs related to the matters described below other than the matter described under the heading “Newman Derivative and misleading given their failure to state that: (i) Match Group's Non-dating business would miss its revenue projection for the quarter ended December 31, 2015, and (ii) ARPPU (as defined in "Item 2-Management's Discussion and AnalysisStockholder Class Action Regarding Separation Transaction”.
The official names of Financial Condition and Results of Operations-General-Key Terms") would decline substantiallylegal proceedings in the quarter ended December 31, 2015. The complaint asserted that these alleged failures to timely disclose material information caused Match Group's stock price to drop afterdescriptions below (shown in italics) reflect the announcementoriginal names of its earnings for the quarter ended December 31, 2015. The complaint pleaded claims underparties when the Securities Act of 1933 for untrue statements of material fact in, or omissions of material facts from, the registration statement, the prospectus, and related communications in violation of Sections 11 and 12 and,proceedings were filed as opposed to the officer/director defendants only, control-person liability under Section 15 for Match Group’s alleged violations. The complaint sought among other relief class certification and damages in an unspecified amount.
On March 9, 2016, a virtually identical class action complaint was filed incurrent names of the same court againstparties following the same defendants by a different named plaintiff. See Stephany Kam-Wan Chan v.separation of Match Group Inc. et al., No. 3:16-cv-668 (U.S. District Court, Northern District of Texas). On April 25, 2016, Judge Boyle in the Chan case issued an order granting the parties’ joint motion to transfer that case to Judge Lindsay, who is presiding over the earlier-filed Stein case. On April 27, 2016, various current or former Match Group shareholders and their respective law firms filed motions seeking appointment as lead plaintiff(s) and lead or liaison counsel for the putative class. On April 28, 2016, the Court issued orders: (i) consolidating the Chan case into the Stein case, (ii) approving the parties’ stipulation to extend the defendants’ time to respond to the complaint until after the Court has appointed a lead plaintiff and lead counsel for the putative class and has set a schedule for the plaintiff’s filing of a consolidated complaint and the defendants’ response to that pleading, and (iii) referring the various motions for appointment of lead plaintiff(s) and lead or liaison counsel for the putative class to a United States Magistrate Judge for determination. On June 9, 2016, the Magistrate Judge issued an order appointing two lead plaintiffs, two law firms as co-lead plaintiffs’ counsel, and a third law firm as plaintiffs’ liaison counsel. In accordance with this order, the consolidated case is now captioned Mary McCloskey et ano. v. Match Group, Inc. et al., No. 3:16-CV-549-L.
On July 27, 2016, the parties submitted to the Court a joint status report proposing a schedule for the plaintiffs’ filing of a consolidated amended complaint and the parties’ briefing of the defendants’ contemplated motion to dismiss the consolidated complaint. On August 17, 2016, the Court issued an order approving the parties’ proposed schedule. On September 9, 2016, in accordance with the schedule, the plaintiffs filed an amended consolidated complaint. The amended pleading focused solely on allegedly misleading statements or omissions concerning the Match Group’s Non-dating business. The defendants filed motions to dismiss the amended consolidated complaint on November 8, 2016. The plaintiffs filed oppositions to the motions on
December 23, 2016, and the defendants filed replies to the oppositions on February 6, 2017. On September 27, 2017, the court issued an opinion and order: (i) denying, without prejudice to renewal, the defendants’ motions and (ii) directing the plaintiffs to file a further amended pleading addressing the deficiencies in the amended consolidated complaint that were identified in the defendants’ motions. On October 30, 2017, the plaintiffs filed a second amended consolidated complaint, which among other things, dropped their claim under Section 12 of the Securities Act of 1933. Pursuant to an agreed-upon briefing schedule approved by the court, the defendants filed motions to dismiss the second amended consolidated complaint on December 15, 2017, the plaintiffs filed an opposition to the motions on January 29, 2018, and the defendants filed replies to the opposition on February 20, 2018. We and Match Group believe that the material allegations and claims in this lawsuit are without merit and intend to continue to defend vigorously against it.IAC.
Consumer Class Action Litigation Challenging Tinder’s Age-Tiered Pricing
On May 28, 2015, a putative state-wide class action was filed against Tinder in state court in California. See Allan Candelore v. Tinder, Inc., No. BC583162 (Superior Court of California, County of Los Angeles). The complaint principally allegedalleges that Tinder violated California’s Unruh Civil Rights Act by offering and charging users age 30 and over a higher price than younger users for subscriptions to its premium Tinder Plus service. The complaint soughtseeks certification of a class of California Tinder Plus subscribers age 30 and over and damages in an unspecified amount. On September
In a related development, on June 21, 2015, Tinder filed2019, in a demurrer seeking dismissal ofsubstantially similar putative class action asserting the complaint. On October 26, 2015, thesame substantive claims and pending in federal district court issued an opinion sustaining Tinder’s demurrer to the complaint without leave to amend, ruling that the age-based pricing differential for Tinder Plus subscriptions did not violatein California, law in essence because offering a discount to users under age 30 was neither invidious nor unreasonable in light of that age group’s generally more limited financial means. On December 29, 2015, in accordance with its ruling, the court entered judgment dismissinggranting final approval of a class-wide settlement, the action.terms of which were not material to the Company. See Lisa Kim v. Tinder, Inc., No. 18-cv-3093 (Central District of California). Because the approved settlement class in Kim subsumed the proposed settlement class in Candelore, the judgment in Kim effectively rendered Candelore a single-plaintiff lawsuit. On February 1, 2016,March 4, 2022, the plaintifftrial court granted final approval of the settlement agreement, the terms of which were not material to the Company. On March 31, 2022, two objectors to the Kim settlement, represented by the plaintiff’s counsel in Candelore, filed a notice of appeal from the judgment. On January 29, 2018,Kim judgment with the CaliforniaU.S. Court of Appeal (Second Appellate District, Division Three)Appeals for the Ninth Circuit.
On June 27, 2022, the trial court issued an order staying the class claims in Candelore pending the Ninth Circuit’s decision on the Kim appeal. On December 5, 2023, the Ninth Circuit issued an opinion reversing the judgment of dismissal, ruling thatKim settlement. On January 2, 2024, the lower court had erred in sustaining Tinder’s demurrer because the complaint, as pleaded, stated a cognizable claim for violationmandate of the Unruh Act. Because wedecision was issued. The only remaining claim in the Kim case is Kim’s individual claim. In Candelore, the stay was lifted. We believe that the appellate court’s reasoning was flawed as a matter of law and runs afoul of binding California precedent, Tinder intendswe have strong defenses to file a petition with the California Supreme Court seeking interlocutory review of the Court of Appeal’s decision. We and Match Group believe that the allegations in thisthe Candelore lawsuit are without merit and will continue to defend vigorously against it.
FTC Lawsuit Against Former Match Group
On September 25, 2019, the United States Federal Trade Commission (the “FTC”) filed a lawsuit in federal district court in Texas against Former Match Group. See FTC v. Match Group, Inc., No. 3:19:cv-02281-K (Northern District of Texas). The complaint alleges that, prior to mid-2018, for marketing purposes Match.com notified non-paying users that other users were attempting to communicate with them, even though Match.com had
identified those subscriber accounts as potentially fraudulent, thereby inducing non-paying users to subscribe and exposing them to the risk of fraud should they subscribe. The complaint also challenges the adequacy of Match.com’s disclosure of the terms of its six-month guarantee, the efficacy of its cancellation process, and its handling of chargeback disputes. The complaint seeks among other things permanent injunctive relief, civil penalties, restitution, disgorgement, and costs of suit. On March 24, 2022, the court granted our motion to dismiss with prejudice on Claims I and II of the complaint relating to communication notifications and granted our motion to dismiss with respect to all requests for monetary damages on Claims III and IV relating to the guarantee offer and chargeback policy. On July 19, 2022, the FTC filed an amended complaint adding Match Group, LLC as a defendant. On September 11, 2023, both parties filed motions for summary judgment. We believe we have strong defenses to the FTC’s claims regarding Match.com’s practices, policies, and procedures and will continue to defend vigorously against them.
Irish Data Protection Commission Inquiry Regarding Tinder’s Practices
On February 3, 2020, we received a letter from the Irish Data Protection Commission (the “DPC”) notifying us that the DPC had commenced an inquiry examining Tinder’s compliance with the EU’s General Data Protection Regulation (“GDPR”), focusing on Tinder’s processes for handling access and deletion requests and Tinder’s user data retention policies. On January 8, 2024, the DPC provided us with a preliminary draft decision alleging that certain of Tinder’s access and retention policies, largely relating to protecting the safety and privacy of Tinder’s users, violate GDPR requirements. Our response to the preliminary draft decision is due by March 15, 2024. We believe we have strong defenses to these claims and will defend vigorously against them.
Newman Derivative and Stockholder Class Action Regarding Separation Transaction
On June 24, 2020, a Former Match Group shareholder filed a complaint in the Delaware Court of Chancery against Former Match Group and its board of directors, as well as Match Group, IAC Holdings, Inc., and Barry Diller seeking to recover unspecified monetary damages on behalf of the Company and directly as a result of his ownership of Former Match Group stock in relation to the separation of Former Match Group from its former majority shareholder, Match Group. See David Newman et al. v. IAC/Interactive Corp. et al., C.A. No. 2020-0505-MTZ (Delaware Court of Chancery). The complaint alleges that that the special committee established by Former Match Group’s board of directors to negotiate with Match Group regarding the separation transaction was not sufficiently independent of control from Match Group and Mr. Diller and that Former Match Group board members failed to adequately protect Former Match Group’s interest in negotiating the separation transaction, which resulted in a transaction that was unfair to Former Match Group and its shareholders. On January 21, 2021, the case was consolidated with other shareholder actions, and an amended complaint was filed on April 14, 2021. See In Re Match Group, Inc. Derivative Litigation, Consolidated C.A. No. 2020-0505-MTZ (Delaware Court of Chancery). On September 1, 2022, the court granted defendants’ motion to dismiss with prejudice. On October 3, 2022, plaintiffs filed an amended notice of appeal with the Delaware Supreme Court. We believe we have strong defenses to the allegations in this lawsuit and the appeal and will defend vigorously against them.
FTC Investigation of Certain Subsidiary Data Privacy Representations
On March 19, 2020, the FTC issued an initial Civil Investigative Demand (“CID”) to the Company requiring us to produce certain documents and information regarding the allegedly wrongful conduct of OkCupid in 2014 and our public statements in 2019 regarding such conduct and whether such conduct and statements were unfair or deceptive under the FTC Act. On May 26, 2022, the FTC filed a Petition to Enforce Match Civil Investigative Demand. See FTC v. Match Group, Inc., No. 1:22-mc-00054 (District of Columbia). We believe we have strong defenses to the FTC's investigation and petition to enforce and will defend vigorously against them.
Bardaji Securities Class Action
On March 6, 2023, a Match Group shareholder filed a complaint in federal district court in Delaware against Match Group, Inc., its Chief Executive Officer, its former Chief Executive Officer, and its President and Chief Financial Officer seeking to recover unspecified monetary damages on behalf of a class of acquirers of Match Group securities between November 3, 2021 and January 31, 2023. See Leopold Riola Bardaji v. Match Group, Inc. et al, No. 1:23-cv-00245-UNA (District of Delaware). The complaint alleges that Match Group, Inc. misrepresented and/or failed to disclose that its Tinder business was not effectively executing on its new product initiatives; as a result, Tinder was not on track to deliver its planned product initiatives in 2022; and therefore, Match Group, Inc.’s statements about its Tinder’s business, product initiatives, operations, and
prospects lacked a reasonable basis. On July 24, 2023, lead plaintiff Northern California Pipe Trades Trust Funds filed an amended complaint. The amended complaint added allegations regarding misrepresentations relating to Match Group's acquisition of Hyperconnect and the business' subsequent integration and performance. On September 20, 2023, defendants filed a motion to dismiss. We believe that we have strong defenses to the allegations in this lawsuit and will defend vigorously against them.
Item 4. Mine Safety DisclosuresDisclosure
Not applicable.
PART II
Item 5. Market for Registrant'sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Registrant'sRegistrant’s Common Equity and Related Stockholder Matters
IACOur common stock is quoted on the Nasdaq Global Select Market ("NASDAQ"(“NASDAQ”) under the ticker symbol "IAC." There is no established public trading market for IAC Class B common stock. The table below sets forth, for the calendar periods indicated, the high and low sales prices per share for IAC common stock as reported on NASDAQ. As February 28, 2018, the closing price of IAC common stock on NASDAQ was $148.91.
|
| | | | | | | |
| | High | | Low |
| Year Ended December 31, 2017 | | | |
| Fourth Quarter | $ | 137.86 |
| | $ | 116.59 |
|
| Third Quarter | 119.53 |
| | 98.91 |
|
| Second Quarter | 107.98 |
| | 72.84 |
|
| First Quarter | 77.46 |
| | 64.69 |
|
| Year Ended December 31, 2016 | | | |
| Fourth Quarter | $ | 68.75 |
| | $ | 60.39 |
|
| Third Quarter | 64.00 |
| | 55.41 |
|
| Second Quarter | 57.14 |
| | 45.37 |
|
| First Quarter | 60.56 |
| | 38.82 |
|
As of February 2, 2018,January 31, 2024, there were approximately 1,300982 holders of record of the Company's common stock and five holders of record (all trusts for the benefit of Mr. Diller and certain members of his family) of the Company's Class B common stock. As of the date of this report, there were six holders of record (Mr. Diller and five trusts for the benefit of Mr. Diller and certain members of his family) of the Company's Class BCompany’s common stock. Because the substantial majority of the outstanding shares of IACour common stock are held by brokers and other institutions on behalf of shareholders, IAC iswe are not able to estimate the total number of beneficial shareholders represented by these record holders.
We did not pay any cash or other dividends to holders
Stock Performance Graph
The following graph compares the cumulative total return (assuming dividend reinvestment, as applicable) of our common and Class BMatch Group common stock in 2016 and 2017 and do not currently expect that any cash or other dividends will be paid to holders(including such cumulative total return of our common and Class BFormer Match Group common stock for the period prior to, and adjusted for, the separation of Match Group and IAC), the NASDAQ Composite index, the Russell 1000 Technology Index, and the Standard & Poor’s 500 Stock Index, in each case, based on $100 invested at the near future. Any future cash or other dividend declarations are subject to the determinationclose of IAC's Board of Directors.
During the quarter endedtrading on December 31, 2017,2018 through December 31, 2023. The returns shown are based on historical results and are not intended to suggest future performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
Match Group, Inc. Common Stock
Among Match Group, Inc., the Company did not issue or sell any sharesNASDAQ Composite Index,
the Russell 1000 Technology Index, and the S&P 500 Index
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2018 | | 12/31/2019 | | 12/31/2020 | | 12/31/2021 | | 12/31/2022 | | 12/31/2023 |
| Match Group, Inc. | $100.00 | | $191.98 | | $353.50 | | $309.21 | | $97.01 | | $85.34 |
| NASDAQ Composite Index | $100.00 | | $136.73 | | $198.33 | | $242.38 | | $163.58 | | $236.70 |
| Russell 1000 Technology Index | $100.00 | | $147.22 | | $215.97 | | $296.24 | | $193.71 | | $323.27 |
| S&P 500 Index | $100.00 | | $131.47 | | $155.65 | | $200.29 | | $163.98 | | $207.04 |
Issuer Purchases of Equity Securities
The following table sets forth purchases by the Company did not purchase any shares of its common stock during the quarter ended December 31, 2017. As2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | (a)
Total Number of Shares Purchased | | (b)
Average Price Paid Per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | (d) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs(2) |
| October 2023 | — | | | $ | — | | | — | | | $ | 667,394,650 | |
| November 2023 | 2,406,889 | | | $ | 30.75 | | | 2,406,889 | | | 593,378,490 | |
| December 2023 | 829,396 | | | $ | 32.64 | | | 829,396 | | | 566,304,056 | |
| Total | 3,236,285 | | | $ | 31.24 | | | 3,236,285 | | | $ | 566,304,056 | |
______________________(1)Reflects repurchases made pursuant to the $1.0 billion share repurchase program authorized in April 2023 (the “2023 Share Repurchase Program”). On January 30, 2024, the Board of that date, 8,580,742Directors of the Company approved a new share repurchase program of up to $1.0 billion in aggregate value of shares of Match Group stock (the “2024 Share Repurchase Program”). The 2024 Share Repurchase Program replaces the 2023 Share Repurchase Program.
(2)Represents the aggregate value of shares of common stock that remained available for repurchase under the Company's previously announced May 2016 repurchase authorization. IAC may purchase shares pursuant to this repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.2023 Share Repurchase Program.
Item 6. Selected Financial DataReserved
The following selected financial data for the five years ended December 31, 2017 should be read in conjunction with the consolidated financial statements and accompanying notes included herein.Not applicable.
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| | (In thousands, except per share data) |
Statement of Operations Data:(a) | | | | | | | | | |
| Revenue | $ | 3,307,239 |
| | $ | 3,139,882 |
| | $ | 3,230,933 |
| | $ | 3,109,547 |
| | $ | 3,022,987 |
|
| Earnings (loss) from continuing operations | 358,008 |
| | (16,151 | ) | | 113,374 |
| | 234,557 |
| | 281,799 |
|
Earnings from discontinued operations (b) | — |
| | — |
| | — |
| | 174,673 |
| | 1,926 |
|
| Net (earnings) loss attributable to noncontrolling interests | (53,084 | ) | | (25,129 | ) | | 6,098 |
| | 5,643 |
| | 2,059 |
|
| Net earnings (loss) attributable to IAC shareholders | 304,924 |
| | (41,280 | ) | | 119,472 |
| | 414,873 |
| | 285,784 |
|
| Earnings (loss) per share from continuing operations attributable to IAC shareholders: | | | | |
| Basic | $ | 3.81 |
| | $ | (0.52 | ) | | $ | 1.44 |
| | $ | 2.88 |
| | $ | 3.40 |
|
| Diluted | $ | 3.18 |
| | $ | (0.52 | ) | | $ | 1.33 |
| | $ | 2.71 |
| | $ | 3.27 |
|
| | | | | | | | | | |
| Dividends declared per share | $ | — |
| | $ | — |
| | $ | 1.36 |
| | $ | 1.16 |
| | $ | 0.96 |
|
| | | | | | | | | | |
| | December 31, |
| | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| | (In thousands) |
| Balance Sheet Data: | | | | | | | | | |
| Total assets | $ | 5,867,810 |
| | $ | 4,645,873 |
| | $ | 5,188,691 |
| | $ | 4,241,421 |
| | $ | 4,183,810 |
|
| Long-term debt: | | | | | | | | | |
| Current portion of long-term debt | 13,750 |
| | 20,000 |
| | 40,000 |
| | — |
| | — |
|
| Long-term debt, net | 1,979,469 |
| | 1,582,484 |
| | 1,726,954 |
| | 1,064,536 |
| | 1,062,446 |
|
| |
(b) | There were no discontinued operations for the three years ended December 31, 2017. For the year ended December 31, 2014, earnings from discontinued operations were due to the release of tax reserves related to the expiration of the statutes of limitations for federal income taxes for the years 2001 through 2009. |
Item 7. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Key Terms:
WhenOperating and financial metrics:
•Americas includes North America, Central America, South America, and the following terms appearCaribbean islands.
•Europe includes continental Europe, the British Isles, Iceland, Greenland, and Russia (ceased operations in this report, they haveJune 2023), but excludes Turkey (which is included in APAC and Other).
•APAC and Other includes Asia, Australia, the meanings indicated below:Pacific islands, the Middle East, and Africa.
Reportable Segments:
•Match Group - is the world's leading provider of dating products, operating a portfolio of brands, including Tinder, Match, PlentyOfFish and OkCupid.
ANGI Homeservices - is the world's largest digital marketplace for home services, connecting millions of homeowners across the globe with home service professionals, and operates leading brands in eight countries, including HomeAdvisor and Angie's List.
Video - consists of Vimeo, Electus, IAC Films and Daily Burn.
Applications - consists of Consumer, which includes our direct-to-consumer downloadable desktop applications, Apalon, which houses our mobile operations, and SlimWare, which houses our downloadable desktop software and service operations; and Partnerships, which includes our business-to-business partnership operations.
Publishing - consists of Premium Brands, which includes Dotdash, Dictionary.com, Investopedia and The Daily Beast; and Ask & Other, which primarily includes Ask Media Group, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.
Other - consists of The Princeton Review, ShoeBuy and PriceRunner, for periods prior to their sales on March 31, 2017, December 30, 2016 and March 18, 2016, respectively.
Operating metrics:
In connection with the management of our businesses, we identify, measure and assess a variety of operating metrics. The principal metrics we use in managing our businesses are set forth below:
Match Group
North America - Asia (“MG Asia”) consists of the financial resultsbrands primarily focused on Asia and metrics associated with users located in the United StatesMiddle East including Pairs™ and Canada.
Azar®.International -•Evergreen & Emerging (“E&E”) consists primarily of the financial resultsbrands Match®, Meetic®, OkCupid®, Plenty Of Fish®, and metrics associated with users located outside of the United States and Canada.
BLK®.•Direct Revenue - is revenue that is received directly from end users of its productsour services and includes both subscription and à la carte revenue.
•Indirect Revenue is revenue that is not received directly from an end user of our services, substantially all of which is advertising revenue.
Subscribers - •Payersare unique users who purchaseat a subscriptionbrand level in a given month from whom we earned Direct Revenue. When presented as a quarter-to-date or year-to-date value, Payers represents the average of the monthly values for the respective period presented. At a consolidated level, duplicate Payers may exist when we earn revenue from the same individual at multiple brands in a given month, as we are unable to one ofidentify unique individuals across brands in the Match Group's products. Users who purchase only à la carte features are not included in Subscribers.
Group portfolio.Average Subscribers -•Revenue Per Payer (“RPP”) is the number of Subscribers at the end of each day in the relevant measurementaverage monthly revenue earned from a Payer and is Direct Revenue for a period divided by the number of calendar days in that period.
Average Revenue per Subscriber (or "ARPU") - is Direct Revenue from SubscribersPayers in the relevant measurement period, (whether in the form of subscription or àla carte) divided by the Average Subscribers in such period and further divided by the number of calendar days in such period. Direct Revenue from users who are not Subscribers and have purchased only à la carte features is not included in ARPU.
ANGI Homeservices
Marketplace (formerly HomeAdvisor Domestic) Revenue - reflects revenue from the HomeAdvisor domestic marketplace service, including consumer connection revenue for consumer matches and membership subscription revenue from service professionals. It excludes other North America operating subsidiaries within the segment.
Marketplace (formerly HomeAdvisor Domestic) Service Requests - are fully completed and submitted domestic customer service requests on HomeAdvisor.
Marketplace (formerly HomeAdvisor Domestic) Paying Service Professionals (or "Marketplace Paying SPs") - are the number of HomeAdvisor domestic service professionals that had an active membership and/or paid for consumer matchesmonths in the last month of the period.
Video
Vimeo ending subscribers - are the number of subscribers to Vimeo's SaaS video tools at the end of the period.
Operating costs and expenses:
•Cost of revenue - consists primarily of traffic acquisition costs and includes (i) fees paid to Apple and Google related to the distribution and the facilitationamortization of in-app purchases of product features and (ii) payments made to partners who distribute our Partnerships customized browser-based applications and who integrate our paid listings into their websites. These payments include amounts based on revenue share and other arrangements. Cost of revenue also includes production costs related to media produced by Electus and other businesses within our Video segment,purchase fees, hosting fees, compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in data center operations and Match Group customer servicecare functions, live video costs, credit card processing fees, content costs, and expenses associateddata center rent, energy, and bandwidth costs. In-app purchase fees are monies paid to Apple and Google in connection with the operationprocessing of in-app purchases of subscriptions and service features through the Company's data centers. For periods prior to the sale of The Princeton Reviewin-app payment systems provided by Apple and ShoeBuy, cost of revenue also includes rent and cost for teachers and tutors and cost of products sold, including shipping and handling costs, respectively.
Google.•Selling and marketing expense - consists primarily of advertising expenditures which include online marketing, including fees paid to search engines, social media sites and third parties that distribute our Consumer downloadable desktop applications, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the Match Group and ANGI Homeservices brands, and compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in selling and marketing, and sales support.
support functions. Advertising expenditures includes online marketing, including fees paid to search engines and social media sites, offline marketing, and production of advertising content.•General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources, and customer service functions (except for Match Group which includes customer service costs within cost of revenue), fees for professional services (including transaction-related costs for acquisitions), and facilities costs, bad debt expense, software license and maintenance costs and acquisition-related contingent consideration fair value adjustments (described below).
costs.•Product development expense -consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing, and enhancement of productservice offerings and related technology.
Acquisition-related contingent consideration fair value adjustments - relate to the portion34
Long-term debt:
Exchangeable Notes•Credit Facility - On October 2, 2017, a finance subsidiary The revolving credit facility under the credit agreement of the Company issued $517.5 million aggregate principal of 0.875% Exchangeable Senior Notes due October 1, 2022, which notes are guaranteed by the Company and are exchangeable into shares of the Company's common stock. A portion of the proceeds were used to repay the outstanding balance of the 4.875% Senior Notes (described below). Interest is payable each April 1 and October 1, which commences on April 1, 2018. The outstanding balance of the Exchangeable Notes as of MG Holdings II. At December 31, 2017 is $517.5 million. Each $1,0002023, there was $0.4 million outstanding in letters of principalcredit and $749.6 million of availability under the Exchangeable Notes is exchangeable for 6.5713 sharesCredit Facility.
•Term Loan - The term loan facility under the credit agreement of the Company's common stock, which is equivalent to an exchange price of approximately $152.18 per share, subject to adjustment upon the occurrence of specified events.
4.75% Senior Notes - IAC's 4.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15, a portion of which were exchanged for the Match Group 6.75% Senior Notes (described below) on November 16, 2015. The outstanding balance of the 4.75% Senior Notes as of MG Holdings II. At December 31, 2017 is $34.9 million.
4.875% Senior Notes - The outstanding balance of $361.9 million was redeemed on November 30, 2017, using a portion of2022, the proceeds from the Exchangeable Notes.
Match Exchange Offer - Match Group exchanged $445 million of Match Group 6.75% Senior Notes for a substantially like amount of 4.75% Senior Notes on November 16, 2015.
Match Group 6.75% Senior Notes - Match Group's 6.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15. Match Group's 6.75% Senior Notes were issued in exchange for the 4.75% Senior Notes on November 16, 2015. The outstanding balance of $445.2 million was redeemed on December 17, 2017 with the proceeds from the Match Group 5.00% Senior Notes (described below) and cash on hand.
Match Group Term Loan - a seven-year term loan entered into by Match Group on November 16, 2015 in the original amount of $800 million. During 2016, Match Group made $450 million of principal payments, $400 million of which was funded from proceeds of the 6.375% Senior Notes (described below). On August 14, 2017, the Match Group Term Loan was increased by $75 million to $425 million, repriced the outstanding balancebore interest at LIBOR plus 2.50%1.75% and reducedthe then applicable rate was 6.49%. Effective June 30, 2023, we entered into an amendment to replace the LIBOR floor to 0.00%. The outstanding balance ofrate with a term secured overnight financing rate plus an applicable adjustment (“Adjusted Term SOFR”) for future repricing events under the Match Group Term Loan asLoan. As of December 31, 2017 is2023, $425 million. Themillion was outstanding under the Term Loan, which bore interest rateat 7.27% based on the Match GroupAdjusted Term Loan at December 31, 2017 is 3.85%SOFR plus 1.75%.
Match Group 6.375% Senior Notes - Match Group's 6.375% Senior Notes due June 1, 2024, with interest payable each June 1 and December 1. The outstanding balance of the Match Group 6.375% Senior Notes as of December 31, 2017 is $400 million.
Match Group •5.00% Senior Notes - Match Group'sMG Holdings II’s 5.00% Senior Notes due December 15, 2027, with interest payable each June 15 and December 15, which commenceswere issued on December 4, 2017. At December 31, 2023, $450 million aggregate principal amount was outstanding.
•4.625% Senior Notes - MG Holdings II’s 4.625% Senior Notes due June 1, 2028, with interest payable each June 1 and December 1, which were issued on May 19, 2020. At December 31, 2023, $500 million aggregate principal amount was outstanding.
•5.625% Senior Notes - MG Holdings II’s 5.625% Senior Notes due February 15, 2029, with interest payable each February 15 and August 15, which were issued on February 15, 2019. At December 31, 2023, $350 million aggregate principal amount was outstanding.
•4.125% Senior Notes - MG Holdings II’s 4.125% Senior Notes due August 1, 2030, with interest payable each February 1 and August 1, which were issued on February 11, 2020. At December 31, 2023, $500 million aggregate principal amount was outstanding.
•3.625% Senior Notes - MG Holdings II’s 3.625% Senior Notes due October 1, 2031, with interest payable each April 1 and October 1, which were issued on October 4, 2021. At December 31, 2023, $500 million aggregate principal amount was outstanding.
•2022 Exchangeable Notes - The 0.875% Exchangeable Senior Notes issued by Match Group FinanceCo, Inc., a subsidiary of the Company, which were settled prior to December 31, 2022 and are no longer outstanding.
•2026 Exchangeable Notes - The 0.875% Exchangeable Senior Notes due June 15, 2018. The proceeds, along with cash on hand, were used to redeem the outstanding balance2026 issued by Match Group FinanceCo 2, Inc., a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable each June 15 and December 15. At December 31, 2023, $575 million aggregate principal amount was outstanding.
•2030 Exchangeable Notes - The 2.00% Exchangeable Senior Notes due January 15, 2030 issued by Match Group 6.75% Senior Notes. The outstanding balanceFinanceCo 3, Inc., a subsidiary of the Match Group 5.00% Senior Notes asCompany, which are exchangeable into shares of the Company's common stock. Interest is payable each January 15 and July 15. At December 31, 2017 is $450 million.
ANGI Homeservices Term Loan - a five-year term loan entered into by ANGI Homeservices on November 1, 2017 in the2023, $575 million aggregate principal amount of $275 million. The ANGI Homeservices Term Loan currently bears interest at LIBOR plus 2.00%. The outstanding balance of the ANGI Homeservices Term Loan as of December 31, 2017 is $275 million. The interest rate on the ANGI Homeservices Term Loan at December 31, 2017 is 3.38%.
Non-GAAP financial measure:
| |
• | Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") - is a non-GAAP financial measure. See "Principles of Financial Reporting" for the definition of Adjusted EBITDA.•Adjusted Operating Income - is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” for the definition of Adjusted Operating Income and a reconciliation of net earnings attributable to Match Group, Inc. shareholders to operating income and Adjusted Operating Income.
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MANAGEMENT OVERVIEW
IACMatch Group, Inc., through its portfolio companies, is a leading mediaprovider of digital technologies designed to help people make meaningful connections. Our global portfolio of brands includes Tinder®, Hinge®, Match®, Meetic®, OkCupid®, Pairs™, Plenty Of Fish®, Azar®, BLK®, and Internet company composedmore, each built to increase our users’ likelihood of widely known consumerconnecting with others. Through our trusted brands, such aswe provide tailored services to meet the varying preferences of our users. Our services are available in over 40 languages to our users all over the world.
As used herein, “Match Group,” the “Company,” “we,” “our,” “us,” and similar terms refer to Match Tinder, PlentyOfFishGroup, Inc. and OkCupid, which are part of Match Group's online dating portfolio, HomeAdvisor and Angie's List, which are operated by ANGI Homeservices, as well as Vimeo, Dotdash, Dictionary.com, The Daily Beast and Investopedia.its subsidiaries, unless the context indicates otherwise.
Sources of Revenue
Match Group'sAll of our services provide the use of certain features for free as well as a variety of additional features through a subscription or, for certain features, on a pay-per-use, or à la carte, basis. Our revenue is primarily derived directly from users in the form of recurring subscription fees which typically provide unlimited access to a bundleand à la carte purchases.
Subscription revenue is presented net of features for a specific period of time. Revenue is also derived fromcredits and credit card chargebacks. Payers who purchase subscriptions or à la carte features where users pay in advance, primarily by using a feecredit card or through mobile app stores, and, subject to certain conditions identified in our terms and conditions, all purchases are final and nonrefundable. Fees collected, or contractually due, in advance for subscriptions are deferred and recognized as revenue using the straight-line method over the term of the applicable subscription period, which primarily ranges from one week to six months, and corresponding in-app purchase fees incurred on such transactions, if any, are deferred and expensed over the same period. Revenue from the purchase of à la carte features is recognized based on usage. We also earn revenue from online advertising, which is recognized every time an ad is displayed.
Trends affecting our business
Each brand in our portfolio has the goal of using technology to help people make meaningful connections. While the goal is the same for each brand, the means to achieve that goal can be differentiated by how a specific actionbrand targets their primary demographic. With users of our apps often utilizing multiple apps, our brands can often have overlap on targeted users. The overall trends affecting all brands within our portfolio, include the following:
Increase in acceptance and growth of technologies to meet people globally. Over the past decade, there has been meaningful growth in the use of technologies to meet people in North America and Western Europe, and we see the potential for similar growth in the rest of the world in the years ahead. As more internet-connected people seeking connections utilize technologies to meet people, we believe there remains potential for accelerating growth in the use of these technologies in certain global markets where adoption lags more developed countries. As a result, new services, entrants to the market, and business models are likely to continue to emerge, sometimes at the expense of our existing brands, by harnessing a new technology, such as generative artificial intelligence (“AI”) or event,a new or existing distribution channel, creating a new or different approach to connecting people, or some other means.
In-App Purchase Fees.Purchases made by our customers through mobile applications, as opposed to desktop or mobile web, continue to increase, and from online advertisers whoare required in most cases to be processed through the in-app payment systems provided by Apple and Google. Where we are required to use Apple’s or Google’s payment systems, we pay to reach our large audiences.
ANGI Homeservices revenue is primarily derived from consumer connection revenue, which includes fees paid by service professionalsApple and Google, as applicable, a meaningful share (generally 30% or, for consumer matches (regardless of whether the professional ultimately provides the requested service) and membership subscription fees paid by service professionals. Consumer connection revenue varies based upon certain factors including the service requested, type of match (such as Instant Booking, Instant Connect, same day service or next day service) and geographic location of service. Effective with the Combination (described below), revenue is also derived from Angie's List sales of time-based advertising to service professionals and membership subscription fees from consumers.
A substantial portionsubscriptions purchased on Android devices, 15%) of the revenue we receive from these transactions. Where payments on Android devices are processed through other payment systems, we are also required to pay Google a meaningful share of our Applicationsrevenue. However we have entered into a partnership with Google that will provide value exchange across our broad relationship with them, which we expect to help offset the additional costs that our brands expect to incur over the three years starting in 2024 associated with implementing Google’s User Choice Billing system, which allows application developers to offer an additional billing system alongside Google Play’s billing system. Additionally, while Apple was recently forced to change its rules in the U.S. marketplace on anti-steering to allow for payment processing outside its payment systems, Apple has stated that it will still charge up to 27% for those transactions. We do not expect to realize any meaningful decrease in app store fees in the U.S. market as a result of this change. In the EU, the Digital Markets Act is set to go into effect in March 2024. Apple has
submitted its plan for compliance, which would lower the 30% service fee in the EU to 17% for our applications, but would also add a payment processing fee of 3%, as well as a 0.50 Euro fee per download (including updates) per year. Apple’s plan is subject to approval by EU regulators. For additional information, see “Item 1 Business—Dependencies on services provided by others—App Stores.”
Implementing new technologies that enhance our user experience. We expect new technologies, including those utilizing generative AI, to continue to drive user engagement. As new technologies develop we evaluate whether those technologies can be incorporated into our apps to enhance the user experience. We are planning to further integrate AI technologies into our services, which integrations may become important to our operations over time. The rapid evolution of AI will require the dedication of significant resources to develop, test, and Publishing segmentsmaintain these technologies. We expect other technologies to evolve and be tested in our services and incorporated into our apps in the future.
In addition to the trends affecting our overall portfolio, some of our individual brands are affected by certain other trends, including the following:
Tinder. When Tinder was first developed, the smart phone provided a unique way of offering connections that traditional desktop-based services did not offer. Tinder was able to capitalize on the rise in the use of smart phones and with its younger audience was able to achieve considerable scale through word-of-mouth and viral moments on social media without the need to supplement with significant brand marketing. As the availability of services catering to human connections has increased, we have begun to supplement Tinder’s viral growth with brand marketing to build out Tinder’s brand narrative and grow the size of its user base, which has resulted in an increase in selling and marketing expense at Tinder. Recently, Tinder has experienced a decline in user growth, with plans to return to growth with product initiatives that focus on the female experience and younger users.
Hinge. Hinge has developed a strong user base in English speaking markets and began expanding into European markets in the latter half of 2022. Its strong user growth in English speaking and other European markets has helped to contribute to a high level of revenue growth, which we expect will continue into the coming years. As Hinge continues to expand its footprint globally, we intend to continue to focus on adding new features to its service to continue to drive user satisfaction for its target audience of intentioned daters, and to drive additional opportunities for monetization. In the near term, we expect to continue to make investments in the business to support this growth, including investments in product development as well as brand marketing.
MG Asia. The focus of the MG Asia brands has primarily been to serve various Asian and Middle Eastern markets. Plans to grow revenue include further expansion by certain brands into the European and U.S. markets. In Japan, our Pairs brand recently won approval to begin advertising on television. While the results of that advertising are still preliminary, early signs have been encouraging. We expect the advertising to increase Pairs’ brand recognition while we work to grow users through various product initiatives and by partnering with local government to improve declining marriage rates in the country. Our Azar app, which provides one to one video chat, has a strong presence in Asia and the Middle East and is derivedexpanding in Europe and to the U.S. Our Hakuna app provides live streaming services primarily in Korea and Japan.
Evergreen & Emerging. Our collections of brands within E&E include well-known pioneers in online relationships (which we refer to as Evergreen brands) and newer bets which target specific demographics (which we refer to as Emerging brands). Revenues from onlinethe Evergreen brands have declined in recent years, while Emerging brands are in the early stages of growth and in many cases are relying on marketing to increase the size of their user base. In 2023, we began a multi-year process of consolidating technology platforms across various Evergreen brands to enable faster feature releases and to reduce the cost to further develop and maintain those platforms.
Other trends or factors affecting the comparability of our results
Advertising spend. Our advertising most ofspend, which is attributableincluded in our selling and marketing expense, has consistently been one of our larger operating expenses. How we deploy our advertising spend varies among brands, with the majority of our advertising spend taking place online, including social media sites, streaming services, search engines, and influencers. Additionally, some brands utilize out-of-home marketing campaigns, such as on television and outdoor billboards. For established brands, we seek to optimize for total return on advertising spend by frequently analyzing and adjusting spend to focus on marketing channels and markets that generate returns above our services agreement with Google Inc. ("Google"). The Company's services agreement became effectivethresholds. Our data-driven approach provides us the flexibility to scale and optimize
our advertising spend. We spend advertising dollars against an expected lifetime value of a Payer that is realized over a multi-year period. While this advertising spend is intended to be profitable on April 1, 2016, followingthat basis, it is nearly always negative during the expirationperiod in which the expense is incurred. For newer brands that are gaining scale, or existing brands that are expanding into new geographies, we may make incremental advertising investments to establish the brand before optimizing monetization of the previousbrand. In general, our more established brands spend a higher proportion of their revenue on advertising while our newer brands spend a lower proportion and tend to rely more on word of mouth and other viral marketing. Our advertising spend may be incurred unevenly throughout the year.
International markets. Our services agreement. The services agreement expires on March 31, 2020; however,are available across the Company may choose to terminate the agreement effective March 31, 2019. The services agreement requires that we comply with certain guidelines promulgated by Google,world. Our international revenue represented 54% and Google may generally unilaterally update its policies and guidelines without advance notice. Any such updates could in turn require modifications to, or prohibit and/or render obsolete certain55% of our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations. For the years ended December 31, 2017, 2016and2015,total revenue earned from Google was $740.7 million, $824.4 million and $1.3 billion, respectively. For the years ended December 31, 2017, 2016and2015, revenue earned from Google represents 83%, 87% and 94% of Applications revenue and 71%, 73% and 83% of Publishing revenue, respectively.
The revenue earned by our Video segment is derived from subscriptions, media production and distribution, and advertising.
The Princeton Review's revenue was primarily earned from fees received directly from students for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services. ShoeBuy's revenue was derived principally from merchandise sales. PriceRunner's revenue was derived principally from advertising.
Strategic Partnerships, Advertiser Relationships and Online Advertising
A meaningful portion of the Company's revenue is attributable to the services agreement with Google described above. For the years ended December 31, 2017, 20162023 and 2015,2022, respectively. We vary our pricing to align with local market conditions and our international businesses typically earn revenue earned from Google represents 22%, 26% and 40%, respectively,in local currencies. As foreign currency exchange rates change, translation of the statement of operations of our consolidated revenue.international businesses into U.S. dollars affects year-over-year comparability of operating results.
We pay traffic acquisition costs, which consist of fees paid2023 Consolidated Results
In 2023, total revenue grew 6%, operating income increased 78%, and Adjusted Operating Income grew 11% year-over-year. Revenue growth was primarily due to Applestrong growth at Tinder and GoogleHinge. Operating income and Adjusted Operating Income were positively affected by the increase in revenue and decreases in general and administrative expenses primarily related to the distributiondecreases in legal and the facilitationother professional fees. Those positive effects were partially offset by increases in selling and marketing spend at Tinder and Hinge and increases in product development expense primarily due to an increase in compensation expense. Operating income further benefited from decreases in impairment and amortization expense compared to 2022, during which there was an impairment of in-app purchases of product features and payments madecertain intangible assets. That benefit was partially offset by increased stock-based compensation expense primarily due to partners who distribute our Partnerships customized browser-based applications and who integrate our paid listings into their websites. We also pay to market and distribute our services on third-party distribution channels, such as search engines and social media websites such as Facebook. In addition, some of our businesses manage affiliate programs, pursuant to which we pay commissions and fees to third parties based on revenue earned. These distribution channels might also offer their own services and products, as well as those of other third parties, which compete with those we offer.
We market and offer our services and products to consumers through branded websites, allowing consumers to transact directly with us in a convenient manner. We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to our websites and consumers and advertisers to our businesses.
2017 Developments
Combination and Acquisitions
On October 18, 2017, Vimeo acquired Livestream, a leading live video solution that powers millions of events anew stock-based awards granted during the year.
Results of Operations for the
Company's HomeAdvisor segment and Angie's List, Inc. ("Angie's List") combined under a new publicly traded company called ANGI Homeservices Inc. (the "Combination"). At years ended December 31, 2017, IAC owned 86.9%2023, 2022 and 98.5% of the economic and voting interest, respectively, of ANGI Homeservices. See "Note 4—Business Combination" to the consolidated financial statements included2021 The following discussion should be read in
"Itemconjunction with “Item 8. Consolidated Financial Statements and Supplementary Data" for additional information related to the Combination. In connection with the Combination, the Company changed the name of its HomeAdvisor segment to ANGI HomeservicesData.” For a discussion regarding our financial condition and year-over-year comparisons for financial results for this segment are to the historical results of the HomeAdvisor segment (adjusted to reflect corporate allocations from IAC). Duringoperations for the year ended December 31, 2017, the Company incurred $44.1 million in costs related to this transaction (including severance, retention, transaction and integration related costs) as well as deferred revenue write-offs of $7.8 million. The Company expects the remaining aggregate amount of transaction-related expenses, including deferred revenue write-offs, during 2018 to be in the range of $10 million to $20 million. The Company also incurred $122.1 million in stock-based compensation expense during 2017 related2022 compared to the modificationyear ended December 31, 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of previously issued HomeAdvisor vestedFinancial Condition and unvested equity awards, which were converted into ANGI Homeservices' equity awards,Results of Operations” in our Annual Report on Form 10-K for the expense related to previously issued Angie's List equity awards and the acceleration of certain Angie's List equity awards resulting from the termination of employees in connectionfiscal year ended December 31, 2022, filed with the Combination. Stock-based compensation expense arising from the Combination is expected to be approximately $70 million in 2018. HomeAdvisor acquired controlling interests in MyBuilder Limited ("MyBuilder") on March 24, 2017, and HomeStars Inc. ("HomeStars")SEC on February 8, 2017, leading home services platforms in the United Kingdom and Canada, respectively.24, 2023.
Financing Transactions
On December 4, 2017, Match Group completed a private offering of $450 million aggregate principal amount of its 5.00% Senior Notes due December 15, 2027. The proceeds from these notes, along with cash on hand, were used to redeem the outstanding balance of the Match Group 6.75% Senior Notes of $445.2 million on December 17, 2017.
On November 1, 2017, ANGI Homeservices borrowed $275 million under a five-year term loan facility.
On October 2, 2017, a finance subsidiary of the Company issued $517.5 million aggregate principal amount of Exchangeable Notes due October 1, 2022, which notes are guaranteed by the Company and are exchangeable into shares of the Company's common stock. The proceeds from these notes were, in part, loaned to IAC, which repaid the outstanding balance of its 4.875% Senior Notes of $361.9 million on November 30, 2017. Each $1,000 of principal of the Exchangeable Notes is exchangeable for 6.5713 shares of the Company's common stock, which is equivalent to an exchange price of approximately $152.18 per share, subject to adjustment upon the occurrence of specified events.
On August 14, 2017, Match Group increased its Term Loan by $75 million to $425 million, repriced the outstanding balance at LIBOR plus 2.50% and reduced the LIBOR floor to 0.00%. Previously, the interest charged on the Match Group Term Loan was LIBOR plus 3.25%, with a LIBOR floor of 0.75%.
Other Developments
During 2017, the Company repurchased 0.7 million shares of common stock at an average price of $69.73 per share, or $50.1 million in aggregate.
On October 23, 2017, Match Group sold a cost method investment for net proceeds of $60.2 million. The gain on sale of $9.1 million is included in "Other (expense) income, net" in the accompanying consolidated statement of operations.
In July 2017, Match Group elected to convert all outstanding equity awards of its wholly-owned subsidiary Tinder, which awards were primarily held by current and former Tinder employees, to stock options of Match Group (the "Tinder Equity Plan Settlement"). Subsequently, during 2017, Match Group made cash payments of approximately $520 million to cover both withholding taxes paid on behalf of employees exercising these converted awards, as these awards were net settled, and the purchase of certain fully vested awards.
On March 31, 2017, Match Group sold its non-dating business, consisting of The Princeton Review. The non-dating business does not meet the threshold to be reflected as a discontinued operation at the IAC level. The Company moved the non-dating business to its “Other” segment effective March 31, 2017 and prior period segment data has been recast to conform to this presentation.
2017 Consolidated Results
In 2017, the Company's revenue increased $167.4 million, or 5%, operating income increased $221.1 million from a loss of $32.6 million in the prior year and Adjusted EBITDA grew $74.1 million, or 15%. Revenue increased due primarily to an increase of $237.5 million from ANGI Homeservices due, in part, to the Combination, growth of $212.6 million from Match Group and $48.3 million from Video, partially offset by a decline of $259.4 million from Other due to the sales of ShoeBuy, The Princeton Review and PriceRunner on December 30, 2016, March 31, 2017 and March 18, 2016, respectively, and a decline of $45.5 million from Publishing primarily due to the effects of the Google contract. The operating income increase was due primarily to the inclusion in 2016 of a $275.4 million goodwill impairment charge at Publishing, an increase of $74.1 million in Adjusted EBITDA, described below, and a decrease of $37.3 million in amortization of intangibles, partially offset by an increase of $159.8 million in stock-based compensation expense due, in part, to the Combination. The goodwill impairment charge at Publishing in 2016 was driven by the impact from the Google contract, traffic trends and monetization challenges. The Adjusted EBITDA increase was due primarily to growth of $65.6 million from Match Group, a profit from Publishing of $31.5 million in 2017 compared to a loss of $7.6 million in 2016 and growth of $4.5 million from Applications, partially offset by increased losses of $14.5 million from Corporate, $9.2 million from Video and a decline of $8.0 million from ANGI Homeservices due primarily to costs of $44.1 million (including severance, retention, transaction and integration related costs) and deferred revenue write-offs of $7.8 million related to the Combination.
Other events affecting year-over-year comparability that occurred prior to 2017 include:
| |
(i) | the sale of ASKfm on June 30, 2016 (reflected in the Publishing segment) |
| |
(ii) | acquisitions in 2016 and 2015: |
MyHammer Holding AG ("MyHammer") on November 3, 2016 (reflected in the ANGI Homeservices segment)
PlentyOfFish on October 28, 2015 (reflected in the Match Group segment); and
Pairs (also known as Eureka) on April 24, 2015 (reflected in the Match Group segment).
| |
(iii) | costs of $4.9 million and $16.8 million in 2016 and 2015, respectively, related to the consolidation and streamlining of technology systems and European operations at the Match Group segment. This project was complete as of December 31, 2016. |
| |
(iv) | restructuring charges in 2016 of $15.6 million and $2.6 million at the Publishing and Applications segments, respectively, to reduce costs in light of significant declines in revenue from the new Google contract, which was effective April 1, 2016, as well as declines from certain other legacy businesses. |
Results of Operations for the Years Ended December 31, 2017, 2016 and 2015
Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | Change | | % Change | | 2022 | | Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Amounts in thousands, except ARPU) |
| Direct Revenue: | | | | | | | | | | | | | |
| Americas | $ | 1,744,586 | | | $ | 115,517 | | | 7% | | $ | 1,629,069 | | | $ | 117,012 | | | 8% | | $ | 1,512,057 | |
| Europe | 933,413 | | | 84,527 | | | 10% | | 848,886 | | | 27,059 | | | 3% | | 821,827 | |
| APAC and Other | 630,132 | | | (22,134) | | | (3)% | | 652,266 | | | 63,279 | | | 11% | | 588,987 | |
| Total Direct Revenue | 3,308,131 | | | 177,910 | | | 6% | | 3,130,221 | | | 207,350 | | | 7% | | 2,922,871 | |
| Indirect Revenue | 56,373 | | | (2,249) | | | (4)% | | 58,622 | | | (1,784) | | | (3)% | | 60,406 | |
| Total Revenue | $ | 3,364,504 | | | $ | 175,661 | | | 6% | | $ | 3,188,843 | | | $ | 205,566 | | | 7% | | $ | 2,983,277 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Direct Revenue | | | | | | | | | | | | | |
| Tinder | $ | 1,917,629 | | | $ | 123,162 | | | 7% | | $ | 1,794,467 | | | $ | 144,710 | | | 9% | | $ | 1,649,757 | |
| Hinge | 396,485 | | | 112,817 | | | 40% | | 283,668 | | | 87,130 | | | 44% | | 196,538 | |
| MG Asia | 302,591 | | | (19,123) | | | (6)% | | 321,714 | | | 53,072 | | | 20% | | 268,642 | |
| Evergreen & Emerging | 691,426 | | | (38,946) | | | (5)% | | 730,372 | | | (77,562) | | | (10)% | | 807,934 | |
| Total Direct Revenue | $ | 3,308,131 | | | $ | 177,910 | | | 6% | | $ | 3,130,221 | | | $ | 207,350 | | | 7% | | $ | 2,922,871 | |
| | | | | | | | | | | | | |
| Percentage of Total Revenue: | | | | | | | | | | | | |
| Direct Revenue: | | | | | | | | | | | | | |
| Americas | 52% | | | | | | 51% | | | | | | 51% |
| Europe | 28% | | | | | | 27% | | | | | | 27% |
| APAC and Other | 18% | | | | | | 20% | | | | | | 20% |
| Total Direct Revenue | 98% | | | | | | 98% | | | | | | 98% |
| Indirect Revenue | 2% | | | | | | 2% | | | | | | 2% |
| Total Revenue | 100% | | | | | | 100% | | | | | | 100% |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Payers: | | | | | | | | | | | | |
| Americas | 7,579 | | | (590) | | | (7)% | | 8,169 | | | 160 | | | 2% | | 8,009 | |
| Europe | 4,462 | | | (137) | | | (3)% | | 4,599 | | | 110 | | | 2% | | 4,489 | |
| APAC and Other | 3,561 | | | (7) | | | —% | | 3,568 | | | 581 | | | 19% | | 2,987 | |
| Total | 15,602 | | | (734) | | | (4)% | | 16,336 | | | 851 | | | 5% | | 15,485 | |
| | | | | | | | | | | | | |
| (Change calculated using non-rounded numbers) |
| RPP: | | | | | | | | | | | | | |
| Americas | $ | 19.18 | | | $ | 2.56 | | | 15% | | $ | 16.62 | | | $ | 0.89 | | | 6% | | $ | 15.73 | |
| Europe | $ | 17.43 | | | $ | 2.05 | | | 13% | | $ | 15.38 | | | $ | 0.13 | | | 1% | | $ | 15.25 | |
| APAC and Other | $ | 14.75 | | | $ | (0.49) | | | (3)% | | $ | 15.24 | | | $ | (1.19) | | | (7)% | | $ | 16.43 | |
| Total | $ | 17.67 | | | $ | 1.70 | | | 11% | | $ | 15.97 | | | $ | 0.24 | | | 2% | | $ | 15.73 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Match Group | $ | 1,330,661 |
| | $ | 212,551 |
| | 19 | % | | $ | 1,118,110 |
| | $ | 208,405 |
| | 23 | % | | $ | 909,705 |
|
| ANGI Homeservices | 736,386 |
| | 237,496 |
| | 48 | % | | 498,890 |
| | 137,689 |
| | 38 | % | | 361,201 |
|
| Video | 276,994 |
| | 48,345 |
| | 21 | % | | 228,649 |
| | 15,332 |
| | 7 | % | | 213,317 |
|
| Applications | 577,998 |
| | (26,142 | ) | | (4 | )% | | 604,140 |
| | (156,608 | ) | | (21 | )% | | 760,748 |
|
| Publishing | 361,837 |
| | (45,476 | ) | | (11 | )% | | 407,313 |
| | (284,373 | ) | | (41 | )% | | 691,686 |
|
Other* | 23,980 |
| | (259,385 | ) | | (92 | )% | | 283,365 |
| | (11,456 | ) | | (4 | )% | | 294,821 |
|
| Inter-segment elimination | (617 | ) | | (32 | ) | | (6 | )% | | (585 | ) | | (40 | ) | | (7 | )% | | (545 | ) |
| Total | $ | 3,307,239 |
| | $ | 167,357 |
| | 5 | % | | $ | 3,139,882 |
| | $ | (91,051 | ) | | (3 | )% |
| $ | 3,230,933 |
|
________________________
For the year ended December 31, 20172023 compared to the year ended December 31, 20162022
Match Group revenue increased 19%Americas Direct Revenue grew $115.5 million, or 7%, in 2023 versus 2022, driven by International Direct Revenue growth of $146.3 million, or 38%, and North America Direct Revenue growth of $67.6 million, or 10%. Both International and North America Direct Revenue growth were driven by higher Average Subscribers, up 33% and 9%, respectively, due primarily to continued15% growth in Subscribers at Tinder. Total ARPU increased 1%.
ANGI Homeservices revenue increased 48% drivenRPP, partially offset by growth of $152.5 million, or 36%, at Marketplace (formerly HomeAdvisor Domestic) and 55% at the European business. Marketplace Revenuea 7% decrease in Payers. RPP growth was driven by a 37% increaseboth higher average prices paid for subscriptions at Tinder due to pricing optimizations and the introduction of weekly subscription offerings. Additionally, we saw increased average prices paid by subscribers at Hinge and increased average á la carte purchases per Payer at Tinder. The decrease in Marketplace Service Requests to 18.1 million and a 26% increase in Marketplace Paying SPs to 181,000. Revenue growth at the European businessPayers was primarily driven by the acquisitions of controlling interests in MyHammer on November 3, 2016 and MyBuilder on March 24, 2017,decreases at Tinder due to pricing optimizations, as well as decreases in Payers at Match and OkCupid, partially offset by organic growth across other regions.increased Payers at Hinge.
Europe Direct Revenue grew $84.5 million, or 10%, in 2017 includes a contribution of $58.9 million from Angie's List since the date of the Combination, which reflects a reduction in revenue of $7.8 million due to the write-off of deferred revenue related to the Combination.
Video revenue increased 21%2023 versus 2022, driven by the sales of TheMeyerowitz Stories (New and Selected) and The Legacy of a Whitetail Deer Hunter and the release of Lady Bird at IAC Films and strong13% growth at Vimeo, which had ending subscribers of 873,000, an increase of 14% year-over-year,in RPP, partially offset by a decline3% decrease in Payers. RPP growth was driven by higher average prices paid for subscriptions at Electus.
Applications revenue decreased 4%Tinder and Hinge. Additionally, we saw increased average á la carte purchases per Payer at Tinder. RPP growth was favorably impacted by the weakening of the U.S. dollar against the Euro compared to 2022. The decrease in Payers was primarily due to a decrease of $37.8 million, or 27%, in Partnerships,decreases at Tinder and Meetic, partially offset by an increase of $11.7increases at Hinge.
APAC and Other Direct Revenue decreased $22.1 million, or 3%, in Consumer. Partnerships revenue continued2023 versus 2022, primarily due to decline due primarilya 3% decrease in RPP, which was unfavorably impacted by the strength of the U.S. dollar compared to the loss of certain partners. TheJapanese Yen and Turkish Lira.
Tinder Direct Revenue grew 7% in 2023 versus 2022, driven by growth in Consumer wasRPP due primarily to growth of 37% at Apalon, driven by higher advertisingpricing optimizations in the U.S. market and new weekly subscription revenue, and growth at SlimWare, driven by higher subscription revenue,offerings, partially offset by lower revenue per querya decrease in Payers partially attributed to the pricing optimizations.
Hinge Direct Revenue grew 40% in 2023 versus 2022, driven by 27% growth in Payers and 10% growth in RPP. The Payer growth at Hinge was across geographies, but in particular in the Consumer desktop applications business. ApalonAmericas and SlimWare together comprised 16%Europe, which was a focus of total Applications revenueinternational expansion in 2017.
Publishing revenue decreased 11% due to $58.8 million, or 20%, lower Ask & Other revenue, partially offset by $13.3 million, or 12%, higher Premium Brands revenue. Ask & Other revenue decreased due to declines in paid traffic primarily2023 for Hinge. RPP increased as a result of pricing optimizations in the Google contract. Premium Brands revenue increaseU.S.
MG Asia Direct Revenue declined 6% in 2023 versus 2022, driven by declines at Hakuna and Pairs, partially offset by growth at Azar.
E&E Direct Revenue declined 5% in 2023 versus 2022, as we continued to moderate marketing spend at our Evergreen brands. The decline at our Evergreen brands was partially offset by growth at our Emerging brands.
Indirect Revenue decreased $2.2 million primarily due to growth at Investopedia and Dotdash duea lower rate per ad impression compared to an increase in organic traffic and advertising revenue.the prior year, partially offset by higher ad impressions.
Cost of revenue (exclusive of depreciation) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Cost of revenue | $954,014 | | $(5,949) | | (1)% | | $959,963 | | $120,655 | | 14% | | $839,308 |
| Percentage of revenue | 28% | | | | | | 30% | | | | | | 28% |
For the year ended December 31, 20162023 compared to the year ended December 31, 20152022
Match GroupCost of revenue increased 23% driven by higher Average Subscribers at both North Americadecreased 1% primarily due to a decrease in live video costs of $22.6 million, a decrease in employee compensation of $6.4 million, and International, up 22% and 46%, respectively, due primarily to growthnet decreases in Subscribers at Tinder and the contribution from the 2015 acquisitionother expenses of PlentyOfFish. This revenue growth was partially offset by a 6% decline in ARPU. North America and International ARPU
decreased 5% and 7%, respectively, due primarily to the continued mix shift towards lower ARPU brands, including Tinder and PlentyOfFish,$8.3 million, all of which had lower price points compared to Match Group's more established brands. North America ARPU decline waswere partially offset by an increase in mix-adjusted rates.
ANGI Homeservices revenue increased 38% due primarily to 44% growth at Marketplace and 18% growth at the European business. Marketplace Revenue growth was driven by a 34% increase in Marketplace Service Requests to 13.2in-app purchase fees of $24.2 million and a 41% increase in Marketplace Paying SPs to 143,000. Revenue growth at the European business was driven by organic growth across all regions as well as the acquisition of a controlling interest in MyHammer.
Video revenue increased 7% due primarily to growth at Electus, Vimeo and Daily Burn, partially offset by lower revenue from IAC Films as 2015 benefited from the release of the movie While We're Young. Vimeo's ending subscribers were 768,000, an increase of 14%, compared to 2015.
Applications revenue decreased 21% due to a 39% decline in Partnerships and a 12% decline in Consumer. Partnerships revenue decreased due primarily to the loss of certain partners. The Consumer decline was driven by lower search revenue from our downloadable desktop applications due primarily to lower monetization, partially offset by strong growth at Apalon and SlimWare, which together comprised 12% of total Applications revenue in 2016.
Publishing revenue decreased 41% due to 54% lower Ask & Other revenue and 25% lower Premium Brands revenue. Ask & Other revenue decreased due to a decline in revenue at Ask Media Group primarily as a result of the new Google contract, which became effective April 1, 2016, as well as declines from certain other legacy businesses. Premium Brands revenue decreased due primarily to declines in monetization, mainly attributable to the new Google contract and organic traffic at Dotdash, partially offset by strong growth at Investopedia and The Daily Beast.
Other revenue decreased 4% due to the sale of PriceRunner on March 18, 2016 and a 6% decrease in revenue at The Princeton Review, partially offset by growth at ShoeBuy. The decrease in revenue at The Princeton Review was primarily due to fewer in-person SAT test preparation courses and in-person tutoring sessions, partially offset by an increase in onlinehosting fees of $7.1 million. In-app fees were $646.7 million in 2023.
Selling and self-paced services.
Cost of revenue
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Cost of revenue (exclusive of depreciation shown separately below) | $651,008 | | $(104,722) | | (14)% | | $755,730 | | $(22,431) | | (3)% | | $778,161 |
| As a percentage of revenue | 20% | | | | | | 24% | | | | | | 24% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Selling and marketing expense | $586,262 | | $51,745 | | 10% | | $534,517 | | $(31,942) | | (6)% | | $566,459 |
| Percentage of revenue | 17% | | | | | | 17% | | | | | | 19% |
For the year ended December 31, 20172023 compared to the year ended December 31, 20162022
Cost of revenue in 2017 decreased from 2016Selling and marketing expense increased primarily due to decreases of $169.4 million from Other, $31.6 million from Publishinghigher marketing spend at Tinder, Hinge, and $20.9 million from Applications, partially offset by increases of $83.9 million from Match Group, $25.9 million from Video and $8.2 million from ANGI Homeservices.
The Other decrease was due to the sales of ShoeBuy and The Princeton Review.
The Publishing decrease was due primarily to reductions of $15.2 million in traffic acquisition costs driven by a decline in revenue at Ask & Other, $8.4 million in rent expense due to vacating a data center in the fourth quarter of 2016 and $6.5 million in content costs due primarily to Dotdash due, in part, to its vertical brand strategy which launched in the second quarter of 2016.
The Applications decrease was due primarily to a reduction of $16.6 million in traffic acquisition costs driven by a decline in revenue at Partnerships and a decrease of $2.9 million in compensation due, in part, to the reductions in workforce in 2016.
The Match Group increase was due primarily to increases of $75.4 million in in-app purchase fees and $5.9 million in hosting fees. The increases were due primarily to the growth at Tinder.
The Video increase was due primarily to an increase in production costs at IAC Films related to the sales of TheMeyerowitz Stories (New and Selected) and The Legacy of a Whitetail Deer Hunter and the release of Lady Bird in the current year period, the contribution from Livestream, which was acquired on October 18, 2017, and an increase of $2.6 million in hosting fees at Vimeo due to subscription growth,certain Emerging brands, partially offset by lower production costsmarketing spend at Electus.
a number of our other brands.The ANGI Homeservices increase was due primarily to the inclusion ofGeneral and administrative expense of $3.7 million from Angie's List resulting from the Combination, an increase of $2.8 million in credit card processing fees due to higher revenue and an increase of $1.6 million in hosting fees, partially offset by a reduction in traffic acquisition costs of $0.4 million. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| General and administrative expense | $413,609 | | $(22,259) | | (5)% | | $435,868 | | $21,047 | | 5% | | $414,821 |
| Percentage of revenue | 12% | | | | | | 14% | | | | | | 14% |
For the year ended December 31, 20162023 compared to the year ended December 31, 20152022
Cost of revenue in 2016 decreased from 2015General and administrative expense declined primarily due to decreasesa decrease in legal and other professional fees of $54.7$25.5 million from Applications and $47.0a decrease in stock-based compensation expense of $7.6 million from Publishing,due to forfeitures of equity awards and modification of certain stock-based awards in the prior year, partially offset by increases of $61.3 million from Match Group, $7.7 million from Video, $7.1 million from Other and $2.9 million from ANGI Homeservices.
The Applications decrease was due primarily to a reduction of $52.0 million in traffic acquisition costs driven by a decline in revenue at Partnerships.
The Publishing decrease was due primarily to reductions of $40.0 million in traffic acquisition costs and $4.6 million in content costs driven by a decline in revenue at Ask & Other, partially offset by $9.2 million in restructuring charges in 2016 related to vacating a data center facility and severance costs in connection with a reduction in workforce.
The Match Group increase was due primarily to a significant increase in in-app purchase fees across multiple brands, including Tinder, and the 2015 acquisitions of PlentyOfFish and Pairs.
The Video increase was due primarily to a net increase in production costs at our media and video businesses and an increase in hosting fees related to Vimeo's subscription growth, increased video plays and expanded On Demand catalog. These increases were partially offset by a reduction in investment in content costs at Vimeo in 2016.employee compensation of $15.7 million.
The Other increase was due primarily to an increase in cost of products sold at ShoeBuy due to increased sales, partially offset by a mix shift to higher margin online products from in-person courses at The Princeton Review and the sale of PriceRunner.
The ANGI Homeservices increase was due primarily to an increase of $1.9 million in credit card processing fees due to higher revenue and an increase of $0.6 million in traffic acquisition costs.
Selling and marketingProduct development expense
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Selling and marketing expense | $1,381,221 | | $134,124 | | 11% | | $1,247,097 | | $(101,196) | | (8)% | | $1,348,293 |
| As a percentage of revenue | 42% | | | | | | 40% | | | | | | 42% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Product development expense | $384,185 | | $50,546 | | 15% | | $333,639 | | $92,590 | | 38% | | $241,049 |
| Percentage of revenue | 11% | | | | | | 10% | | | | | | 8% |
For the year ended December 31, 20172023 compared to the year ended December 31, 20162022
Selling and marketingProduct development expense in 2017 increased from 2016primarily due to increases of $157.3 million from ANGI Homeservices, $26.5 million from Match Group and $17.5 million from Video, partially offset by decreases of $37.6 million from Publishing and $22.3 million from Other.
The ANGI Homeservices increase was due primarily to higher online and offline marketing of $78.2 million, of which $5.3 million was from the inclusion of Angie's List, an increase of $64.9 million in compensation, of which $24.4 million was from the inclusion of Angie's List, and $9.5 million of expense from acquisitions made prior to the Combination. The increase in marketing is due primarily to increased organic investment including television spend. Compensation increased due primarily to an increase of $24.9 million in stock-based compensation expense, of which $9.8 million was from the inclusion of Angie's List, an increase in the sales force and the inclusion of $7.4 million in severance and retention costs related to the Combination. The increase in stock-based compensation expense was due
primarily to the modification of previously issued HomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices' equity awards, the expense related to previously issued Angie's List equity awards and the acceleration of certain Angie's List equity awards resulting from the termination of employees in connection with the Combination.
The Match Group increase was due primarily to higher offline and online marketing of $15.3 million and an increase in compensation expense of $9.1 million. The increase in marketing is$52.0 million, including stock-based compensation, due primarily to an increase in strategic investments in certain international markets at the Tinder business and increased marketing related to the launch of a new brand in Europe, partially offset by a reduction in marketing spend at Match Group's affinity brands. The increase in compensation is primarily related to an increase in headcount at Tinderboth Hinge and the employer portion of payroll taxes paid in connection with the exercise of Match Group options. As a percentage of revenue, selling and marketing expense decreased due primarily to a continued shift towards brands with lower marketing spend and reductions in marketing spend at the affinity brands.Tinder.
The Video increase was due primarily to increases in both online and offline marketing at Vimeo and IAC Films of $10.6 million and $6.5 million, respectively, and compensation at Vimeo and Electus of $2.4 million and $1.7 million, respectively, partially offset by a decrease of $3.5 million in offline marketing at Daily Burn.
The Publishing decrease was due primarily to a reduction of $26.6 million in online marketing, principally related to lower Ask & Other revenue resulting from changes in the Google contract, and a decrease of $8.0 million in compensation due, in part, to reductions in workforce that occurred in 2016 including $3.1 million in restructuring costs in 2016.
The Other decrease was due to the sales of ShoeBuy and The Princeton Review.Depreciation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Depreciation | $61,807 | | $18,213 | | 42% | | $43,594 | | $2,192 | | 5% | | $41,402 |
| Percentage of revenue | 2% | | | | | | 1% | | | | | | 1% |
For the year ended December 31, 20162023 compared to the year ended December 31, 20152022
Selling and marketing expenseDepreciation was higher in 2016 decreased from 20152023 as compared to 2022 primarily due to decreases of $130.2 million from Publishing, $40.1 million from Applications and $11.1 million from Video, partially offset by an increase of $80.8 million from ANGI Homeservices.
The Publishing decrease was due primarily to a reduction of $132.6 million in online marketing, resulting from a decline in revenue, partially offset by $3.1 million in restructuring charges in 2016 related to severance costs in connection with a reduction in workforce.
The Applications decrease was due primarily to a decline of $37.5 million in online marketing, principally related to lower anticipated search revenue from our downloadable desktop applications at Consumer.
The Video decrease was due primarily to a reduction of $8.9 million in online marketing driven primarily by Vimeo.
The ANGI Homeservices increase was due primarily to higher online and offline marketing of $51.2 million and an increase of $27.8 million in compensation due primarily to an increase in the sales force.
General and administrative expenseinternally developed software placed in service.
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| General and administrative expense | $719,257 | | $188,811 | | 36% | | $530,446 | | $18,391 | | 4% | | $512,055 |
| As a percentage of revenue | 22% | | | | | | 17% | | | | | | 16% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Impairments and amortization of intangibles | $ | 47,731 | | | $ | (318,526) | | | (87)% | | $ | 366,257 | | | $ | 337,698 | | | NM | | $ | 28,559 | |
| Percentage of revenue | 1% | | | | | | 11% | | | | | | 1% |
For the year ended December 31, 20172023 compared to the year ended December 31, 20162022
GeneralImpairments and administrative expense in 2017 increased from 2016amortization of intangibles decreased primarily due to increasesimpairments of $192.9 million from ANGI Homeservices, $44.8 million fromboth indefinite-lived intangible assets and definite-lived intangible assets in the prior period.
Operating Income and Adjusted Operating Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| | | | | | | | | | | | | |
| Operating income | $916,896 | | $401,891 | | 78% | | $515,005 | | $(336,674) | | (40)% | | $851,679 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Percentage of revenue | 27% | | | | | | 16% | | | | | | 29% |
| | | | | | | | | | | | | |
| Adjusted Operating Income | $1,258,533 | | $129,797 | | 11% | | $1,128,736 | | $60,280 | | 6% | | $1,068,456 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Percentage of revenue | 37% | | | | | | 35% | | | | | | 36% |
For a reconciliation of net earnings attributable to Match Group, Inc. shareholders to operating income and $20.0 million from Corporate, partially offset by decreases of $58.5 million from Other, $10.2 million from Applications and $9.0 million from Publishing.
The ANGI Homeservices increase was due primarily to higher compensation of $130.7 million, of which $38.4 million was from the inclusion of Angie's List, and $24.3 million in costs related to the Combination including transaction related costs of $14.3 million and integration related costs of $10.0 million. The increase in compensation was due primarily to an increase of $100.5 million in stock-based compensation expense, of which $18.0 million was from the inclusion of Angie's List, an increase in headcount from business growth and the inclusion of $11.8 million in severance and retention costs in 2017 related to the Combination. The increase in stock-based compensation expense was due principally to the modification of previously issued HomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices' equity awards, the expense related to previously issued Angie's List equity awards and the acceleration of certain Angie's List equity awards resulting from the termination of employees in connection with the Combination as well as a modification charge related to a HomeAdvisor equity award in 2017. General and administrative expense also includes increases of $9.2 million in bad debt expense due, in part, to higher Marketplace Revenue, $3.9 million in outsourced customer service expense and $3.2 million in software license and maintenance costs, as well as $9.8 million of expense from acquisitions made prior to the Combination.
The Match Group increase was due primarily to an increase of $20.6 million in compensation, a change of $14.5 million in acquisition-related contingent consideration fair value adjustments (expense of $5.3 million in 2017 versus income of $9.2 million in 2016) and an increase of $6.8 million in professional fees. The increase in compensation was due to an increase of $9.1 million in stock-based compensation expense due primarily to an increase in expense related to a subsidiary denominated equity award held by a non-employee, which award was settled in the third quarter of 2017, the employer portion of payroll taxes paid in connection with the exercise of Match Group options and an increase in headcount from business growth. The increase in professional fees was due primarily to the Tinder Equity Plan Settlement.
The Corporate increase was due primarily to higher compensation costs in 2017, including an increase in stock-based compensation expense due primarily to the issuance of new equity awards since 2016 and higher professional fees.
The Other decrease was due primarily to the sales of The Princeton Review and ShoeBuy.
The Applications decrease was due primarily to the inclusion in 2016 of $12.0 million in expense related to an acquisition-related contingent consideration fair value adjustment and a $2.9 million favorable legal settlement in 2017.
The Publishing decrease was due primarily to the effect of the reductions in workforce in 2016, $2.3 million in restructuring costs included in 2016 and the sale of ASKfm on June 30, 2016.Adjusted Operating Income, see “Non-GAAP Financial Measures.”
For the year ended December 31, 20162023 compared to the year ended December 31, 20152022
GeneralOperating income increased 78% or $401.9 million, and Adjusted Operating Income increased 11% or $129.8 million. Operating income and Adjusted Operated Income each benefited from the increase in revenue of $175.7 million which was driven by growth at Tinder and Hinge, and lower general and administrative expense primarily related to decreases in 2016 increased from 2015 due to increases of $22.1 million from ANGI Homeservices, $12.6 million from Match Grouplegal and $10.5 million from Applications,other professional fees. That benefit was partially offset by decreases of $14.1 million from Publishing, $10.9 million from Otherincreases in selling and $3.0 million from Corporate.
The ANGI Homeservices increase was due primarily to higher compensation of $10.8 million due, in part, to increased headcount,marketing spend and an increase in bad debtproduct development expense primarily due to higher Marketplace Revenue, an increaseincreased compensation expense. Operating income further benefited from decreases in software license and maintenance costs and $2.1impairments of intangible assets of $316.1 million, in transaction-related costs in 2016.
The Match Group increase was due primarily to an increase of $7.5 million in compensation, an increase of $4.0 million in rent due to growth in the business and a decrease in income of $1.9 million in acquisition-related contingent consideration fair value adjustments. The increase in compensation was due to an increase in headcount from both acquisitions and existing business growth, partially offset by a decrease of $2.1 million inincreased stock-based compensation expense due primarily to the inclusion in 2015 of a modification charge related to certain equity awards, partially offset by the issuance of new equity awards since 2015.
The Applications increase was due primarily to a change of $13.8 million in acquisition-related contingent consideration fair value adjustments, which was due to expense of $12.0 million in 2016 versus income of $1.8 million in 2015, partially offset by a decrease in compensation due, in part, to a decrease in headcount related to a reduction in workforce that took place in the first half of 2016.
The Publishing decrease was due primarily to the sale of ASKfm and a decrease in bad debt expense, partially offset by $2.3 million in restructuring charges in 2016 primarily related to severance costs in connection with a reduction in workforce.
The Other decrease was due primarily to decreases in consulting expenses and non-income tax related items at The Princeton Review.
The Corporate decrease was due primarily to a decrease innew stock-based compensation expense resulting from the inclusion in 2015 of a modification charge and a greater number of awards being forfeited in 2016 compared to 2015, partially offset by the issuance of new equity awards in 2016.
Product development expense
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Product development expense | $250,879 | | $38,114 | | 18% | | $212,765 | | $16,142 | | 8% | | $196,623 |
| As a percentage of revenue | 8% | | | | | | 7% | | | | | | 6% |
For the year ended December 31, 2017 compared to the year ended December 31, 2016
Product development expense in 2017 increased from 2016 due to increases of $27.3 million from ANGI Homeservices, $23.0 million from Match Group and $5.2 million from Video, partially offset by decreases of $6.3 million from Publishing, $4.6 million from Other and $4.4 million from Applications.
The ANGI Homeservices increase was due primarily to an increase of $23.0 million in compensation, of which $6.8 million was from the inclusion of Angie's List, and $2.9 million of expense from acquisitions made prior to the Combination. The increase in compensation was due principally to an increase of $14.5 million in stock-based compensation expense due to the modification of previously issued HomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices' equity awards in connection with the Combination and increased headcount.
The Match Group increase was due primarily to an increase of $20.7 million in compensation driven by an increase of $14.4 million related to increased headcount and the employer portion of payroll taxes paid in connection with the exercise of Match Group options, and an increase of $6.3 million in stock-based compensation expense due primarily to new grants issued since 2016.
The Video increase was due primarily to the acquisition of Livestream.
The Publishing decrease was due primarily to lower compensation and other employee-related costs of $3.8 million due, in part, to reductions in workforce in 2016 including $1.2 million in restructuring costs in 2016 and the sale of ASKfm.
The Other decrease was due primarily to the sale of The Princeton Review.
The Applications decrease was due primarily to a decrease of $3.6 million in compensation due, in part, to a decrease in headcount related to reductions in workforce in 2016.
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Product development expense in 2016 increased from 2015 due to increases of $14.1 million from Match Group, $3.8 million from ANGI Homeservices, $3.3 million from Video and $2.3 million from Publishing, partially offset by a decrease of $6.6 million from Applications.
The Match Group increase was primarily related to an increase of $7.4 million in stock-based compensation expense, increased headcount at Tinder, and the 2015 acquisitions of PlentyOfFish and Pairs. The increase in stock-based compensation expense was due primarily to the issuance of new equity awards and a net increase in expense associated with the modification of certain equity awards since 2015.
The ANGI Homeservices increase was due primarily to an increase of $2.5 million in compensation and other employee-related costs due primarily to an increase in headcount.
The Video increase was due primarily to an increase in compensation at Vimeo due, in part, to increased headcount.
The Publishing increase was due primarily to $1.2 million in restructuring charges related to severance costs in connection with a reduction in workforce.
The Applications decrease was due primarily to a decrease of $4.4 million in compensation due, in part, to a decrease in headcount related to a reduction in workforce that took place in the first half of 2016.
Depreciation
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Depreciation | $74,265 | | $2,589 | | 4% | | $71,676 | | $9,471 | | 15% | | $62,205 |
| As a percentage of revenue | 2% | | | | | | 2% | | | | | | 2% |
For the year ended December 31, 2017 compared to the year ended December 31, 2016
Depreciation in 2017 increased from 2016 due primarily to the increased depreciation at ANGI Homeservices and Match Group related to continued corporate growth, partially offset by the sales of The Princeton Review and ShoeBuy.
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Depreciation in 2016 increased from 2015 due primarily to acquisitions and capital expenditures, partially offset by certain fixed assets becoming fully depreciated.
Operating income (loss)
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Match Group | $ | 360,517 |
| | $ | 44,968 |
| | 14 | % | | $ | 315,549 |
| | $ | 102,568 |
| | 48 | % | | $ | 212,981 |
|
| ANGI Homeservices | (149,176 | ) | | (174,539 | ) | | NM |
| | 25,363 |
| | 26,931 |
| | NM |
| | (1,568 | ) |
| Video | (35,659 | ) | | (8,003 | ) | | (29 | )% | | (27,656 | ) | | 11,100 |
| | 29 | % | | (38,756 | ) |
| Applications | 130,176 |
| | 20,513 |
| | 19 | % | | 109,663 |
| | (65,482 | ) | | (37 | )% | | 175,145 |
|
| Publishing | 15,670 |
| | 350,087 |
| | NM |
| | (334,417 | ) | | (307,725 | ) | | (1153 | )% | | (26,692 | ) |
| Other | (5,621 | ) | | 6,057 |
| | 52 | % | | (11,678 | ) | | 16,933 |
| | 59 | % | | (28,611 | ) |
| Corporate | (127,441 | ) | | (17,992 | ) | | (16 | )% | | (109,449 | ) | | 3,462 |
| | 3 | % | | (112,911 | ) |
| Total | $ | 188,466 |
| | $ | 221,091 |
| | NM |
| | $ | (32,625 | ) | | $ | (212,213 | ) | | NM |
| | $ | 179,588 |
|
| | | | | | | | | | | | | | |
| As a percentage of revenue | 6% | | | | | | (1)% | | | | | | 6% |
________________________
NM = Not meaningful.
For the year ended December 31, 2017 compared to the year ended December 31, 2016
Operating income in 2017 increased from a loss in 2016 due primarily to the inclusion in 2016 of a $275.4 million goodwill impairment charge at Publishing, an increase of $74.1 million in Adjusted EBITDA described below, and a decrease of $37.3 million in amortization of intangibles, partially offset by an increase of $159.8 million in stock-based compensation expense, a change of $3.2 million in acquisition-related contingent consideration fair value adjustments and an increase of $2.6 million in depreciation expense. The goodwill impairment charge at Publishing in 2016 was driven by the impact from the
Google contract, traffic trends and monetization challenges. The decrease in amortization of intangibles was due primarily to lower expense in 2017 as a result of a Publishing trade name and certain intangible assets from the PlentyOfFish acquisition now being fully amortized, partially offset by expense in 2017 related to the Combination. Amortization of intangibles was further impacted by the inclusion of an impairment charge in 2016 of $11.6 million related to certain Publishing indefinite-lived trade names. The increase in stock-based compensation expense was due primarily to an increase of $140.3 million at ANGI Homeservices due primarily to the modification and acceleration charges related to the Combination, as well as an increase in expense related to a subsidiary denominated equity award held by a non-employee, which award was settledgranted during the third quarter of 2017, and the issuance of new equity awards since 2016.year.
At December 31, 2017,2023, there was $423.2$368.9 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-basedstock-based awards, which is expected to be recognized over a weighted average period of approximately 2.52.0 years.
Interest expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Interest expense | $159,887 | | $14,340 | | 10% | | $145,547 | | $15,054 | | 12% | | $130,493 |
| | | | | | | | | | | | | |
For the year ended December 31, 20162023 compared to the year ended December 31, 20152022
Operating income in 2016 decreasedInterest expense increased primarily due to a loss from 2015 despite an increasehigher interest rate on the Term Loan in the current period.
Other income (expense), net | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Other income (expense), net | $19,772 | | $11,739 | | 146% | | $8,033 | | $473,071 | | NM | | $(465,038) |
________________________
NM = not meaningful
Other income, net, in 2023 includes interest income of $26.8 million, in Adjusted EBITDA described below, due primarily to increases of $261.3 million in goodwill impairment charges, $9.5 million in depreciation and a change of $18.0 million in acquisition-related contingent consideration fair value adjustments, partially offset by a decrease of $60.5$7.9 million in amortization of intangibles. The increasenet foreign currency losses.
Other income, net, in goodwill impairment charges was due to the write-off of goodwill of $275.4 million at Publishing in 2016 compared to the write-off of goodwill of $14.1 million at ShoeBuy in 2015. The goodwill impairment charge at Publishing was driven by the impact from the new Google contract, which was effective April 1, 2016, traffic trends and monetization challenges and the corresponding impact on the then estimated fair value. The Publishing goodwill impairment charge was recorded in the second quarter of 2016. The change in acquisition-related contingent consideration fair value adjustments was primarily the result of expense in 2016 of $2.6 million versus2022 includes interest income of $15.5$4.4 million, in 2015. The decrease in amortizationgains of intangibles was due primarily$3.5 million related to finalization of a reduction in impairment charges during 2016,legal settlement, and gains of $2.7 million related to mark-to-market adjustments pertaining to liability classified equity instruments. These items were partially offset by $23.3$2.0 million in amortization related to a change in classificationnet foreign currency losses.
Income tax provision (benefit) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | $ Change | | % Change | | 2022 | | $ Change | | % Change | | 2021 |
| | | | | | | | | | | | | |
| (Dollars in thousands) |
| Income tax provision (benefit) | $125,309 | | $109,948 | | NM | | $15,361 | | $35,258 | | NM | | $(19,897) |
| Effective income tax rate | 16% | | | | | | 4% | | | | | | NM |
For discussion of a Publishing trade name from an indefinite-lived intangible asset to a definite-lived intangible asset, effective April 1, 2016. The Company recorded an impairment charge in 2016 of $11.6 million compared to an impairment charge in 2015 of $88.0 million all related to certain Publishing indefinite-lived trade names.
Adjusted EBITDA
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Match Group | $ | 468,941 |
| | $ | 65,561 |
| | 16 | % | | $ | 403,380 |
| | $ | 118,826 |
| | 42 | % | | $ | 284,554 |
|
| ANGI Homeservices | 37,858 |
| | (7,993 | ) | | (17 | )% | | 45,851 |
| | 29,138 |
| | 174 | % | | 16,713 |
|
| Video | (30,446 | ) | | (9,199 | ) | | (43 | )% | | (21,247 | ) | | 17,137 |
| | 45 | % | | (38,384 | ) |
| Applications | 136,757 |
| | 4,481 |
| | 3 | % | | 132,276 |
| | (51,982 | ) | | (28 | )% | | 184,258 |
|
| Publishing | 31,470 |
| | 39,041 |
| | NM |
| | (7,571 | ) | | (95,359 | ) | | NM |
| | 87,788 |
|
| Other | (1,532 | ) | | (3,334 | ) | | NM |
| | 1,802 |
| | (2,932 | ) | | (62 | )% | | 4,734 |
|
| Corporate | (67,755 | ) | | (14,483 | ) | | (27 | )% | | (53,272 | ) | | 601 |
| | 1 | % | | (53,873 | ) |
| Total | $ | 575,293 |
| | $ | 74,074 |
| | 15 | % | | $ | 501,219 |
| | $ | 15,429 |
| | 3 | % | | $ | 485,790 |
|
| | | | | | | | | | | | | | |
| As a percentage of revenue | 17% | | | | | | 16% | | | | | | 15% |
Data.”
For the year ended December 31, 2017 compared to2023, the year ended December 31, 2016
Match Group Adjusted EBITDA increasedCompany recorded an income tax provision from continuing operations of $125.3 million at an effective tax rate of 16% due, which is lower than the statutory rate primarily to an increase of $212.6 million in revenue and lower selling and marketing expense as a percentage of revenue due to (i) a release of a valuation allowance associated with U.S. foreign tax credits that we now expect to utilize, (ii) a lower tax rate on U.S. income derived from foreign sources, and (iii) the ongoing product mix towards brands with lower marketing spendgeneration of federal and a reduction in marketing spend at Match Group's affinity brands,state research credits. These benefits were partially offset by an increase in cost of revenue, general and administrative expense and product development expense. General and administrative expense and product development expense increased due, in part, to expense of $12.7 million associated with the employer portion of payrollstate income taxes and professional fees resulting from the Tinder Equity Plan Settlement.
ANGI Homeservices Adjusted EBITDA decreased to $37.9 million, despite an increase of $237.5 million in revenue, due primarily to an increase in selling and marketing expense, higher compensation expense due, in part, to increase headcount, the inclusion in 2017 of $44.1 million in costs related to the Combination (including severance, retention, transaction and integration related costs) and increases in bad debt expense due, in part, to higher Marketplace Revenue, outsourced customer service expense and software license and maintenance costs. The higher losses at the European businesses were driven primarily by the European expansion strategy, including increased investment in online and offline marketing and higher compensation costs. Adjusted EBITDA in 2017 was further impacted by write-offs of deferred revenue related to the Combination of $7.8 million and the acquisition of HomeStars of $0.7 million.
Video Adjusted EBITDA loss increased 43%, despite higher revenue, due to declines at Electus and higher losses from Vimeo (including the impact of deferred revenue write-offs of $2.1 million related to acquisition of Livestream), partially offset by the contribution from IAC Films and reduced losses at Daily Burn. The increased Adjusted EBITDA loss at Vimeo, despite higher revenue, reflects our investments in marketing and product development to grow the business.
Applications Adjusted EBITDA increased 3%, despite a 4% decrease in revenue, due primarily to lower operating costs. Adjusted EBITDA in 2016 includes $2.6 million in restructuring costs.
Publishing Adjusted EBITDA improved to a profit of $31.5 million in 2017 from a loss of $7.6 million in 2016, despite lower revenue, due primarily to lower operating costs resulting from restructurings in 2016 and the sale of ASKfm. Results in 2016 included $15.6 million in restructuring charges related to vacating a data center and severance costs in an effort to reduce costs in light of significant declines in revenue from the new Google contract.
Corporate Adjusted EBITDA loss increased $14.5 million due primarily to higher compensation costs and professional fees.nondeductible stock-based compensation.
For the year ended December 31, 2016 compared to the year ended December 31, 2015
Match Group Adjusted EBITDA increased 42% due primarily to higher revenue and a decrease in selling and marketing expense as a percentage of revenue as the product mix continued to shift towards brands with lower marketing spend, partially offset by an increase in cost of revenue driven by a significant increase in in-app purchase fees. Additionally, there were $11.8 million of lower costs in 2016 related to the consolidation and streamlining of technology systems and European operations ($4.9 million in 2016 compared to $16.8 million in 2015).
ANGI Homeservices Adjusted EBITDA increased 174% due primarily to higher revenue, partially offset by an increased investment in online and offline marketing and $2.1 million in transaction-related costs. Adjusted EBITDA was further impacted by higher compensation due primarily to increased headcount and an increase in bad debt expense due to higher Marketplace Revenue.
Video Adjusted EBITDA loss improved 45% due primarily to reduced losses at Vimeo and Daily Burn and increased profits at Electus.
Applications Adjusted EBITDA decreased 28% due primarily to lower revenue, partially offset by decreases in cost of revenue and selling and marketing expense. Adjusted EBITDA was further impacted by $2.6 million in restructuring charges.
Publishing Adjusted EBITDA declined to a loss in 2016 due primarily to lower revenue and $15.6 million in restructuring charges related to vacating a data center and severance costs during 2016 in an effort to reduce costs in light of significant declines in revenue from the new Google contract ($9.2 million in cost of revenue, $3.1 million in selling and marketing expense, $2.3 million in general and administrative expense and $1.2 million in product development expense). Adjusted EBITDA was further impacted by decreases in selling and marketing expense, cost of revenue and general and administrative expense exclusive of the restructuring charges.
Other Adjusted EBITDA decreased 62% due to the sale of PriceRunner in the first quarter of 2016, partially offset by profits from The Princeton Review in 2016 and improved Adjusted EBITDA at ShoeBuy resulting from increased revenue.
Corporate Adjusted EBITDA loss was essentially flat compared to 2015.
Interest expense
|
| | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Interest expense | $105,295 | | $(3,815) | | (3)% | | $ | 109,110 |
| | $35,474 | | 48% | | 73,636 |
Interest expense in 2017 decreased from 2016 due primarily to lower interest expense of $16.0 million related to the 2016 prepayment and 2017 repricing of the Match Group Term Loan and $6.6 million related to the repayment of the outstanding balances of the 4.875% Senior Notes and Match Group 6.75% Senior Notes in the fourth quarter of 2017. Partially offsetting these decreases are increases of $10.9 million of interest expense associated with the Match Group 6.375% Senior Notes, $5.2 million from the issuance of the Exchangeable Notes, $1.8 million related to the Match Group 5.00% Senior Notes and $1.7 million from the ANGI Homeservices Term Loan.
Interest expense in 2016 increased from 2015 due to the $800 million of borrowings under the Match Group Term Loan in November 2015, of which $400 million was refinanced on June 1, 2016 with the Match Group 6.375% Senior Notes, and the 2% higher interest rate associated with the Match Group 6.75% Senior Notes which were issued in exchange for a substantially like amount of 4.75% Senior Notes, partially offset by lower interest expense due to repurchases and redemptions of the 4.875% and 4.75% Senior Notes during the year.
Other (expense) income, net
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Other (expense) income, net | $(16,213) | | $(76,863) | | (127)% | | $60,650 | | $23,712 | | 64% | | $36,938 |
Other expense, net in 2017 includes $16.8 million in net foreign currency exchange losses due primarily to the weakening of the dollar relative to the British Pound, expense of $15.4 million related to the extinguishment of the Match Group 6.75% Senior Notes and repricing of the Match Group Term Loan, expense of $13.0 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity award held by a non-employee, $12.2 million in other-than-temporary impairment charges related to certain investments and expense of $1.2 million related to the write-off of deferred financing costs associated with the repayment of the 4.875% Senior Notes, partially offset by $34.9 million in gains related to the sales of certain investments and interest income of $11.4 million.
Other income, net in 2016 includes gains of $37.5 million and $12.0 million related to the sale of ShoeBuy and PriceRunner, respectively, $34.4 million in net foreign currency exchange gains due to strengthening of the dollar relative to the British Pound and Euro, interest income of $5.1 million and a $3.6 million gain related to the sale of marketable equity securities, partially offset by a non-cash charge of $12.1 million related to the write-off of a proportionate share of original issue discount and deferred financing costs associated with the repayment of $440 million of the Match Group Term Loan, $10.7 million in other-than-temporary impairment charges related to certain investments, a loss of $3.8 million related to the sale of ASKfm, a $3.6 million loss on the 4.75% and 4.875% Senior Note redemptions and repurchases and an expense of $2.5 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity award held by a non-employee.
Other income, net in 2015 included a gain of $34.3 million from a real estate transaction, $5.4 million in net foreign currency exchange gains due to the strengthening of the dollar relative to the Euro and $4.3 million in interest income, partially offset by $6.7 million in other-than-temporary impairment charges related to certain investments and expense of $2.3 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity award held by a non-employee.
Income tax benefit (provision)
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Income tax benefit (provision) | $291,050 | | NM | | NM | | $64,934 | | NM | | NM | | $(29,516) |
| Effective income tax rate | NM | | | | | | 80% | | | | | | 21% |
In 2017,2022, the Company recorded an income tax benefitprovision from continuing operations of $291.1$15.4 million at an effective tax rate of 4%, which wasis lower than the statutory rate primarily due primarily to the effect of adopting the provisions of the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, on January 1, 2017 and foreign income taxed at lower rates, partially offset by the effect of the Tax Cuts and Jobs Act (the “Tax Act”) discussed below. Under ASU No. 2016-09,(i) excess tax benefits generated by the exercise purchase or settlementand vesting of stock-based awards, (ii) a release of $361.8 million in 2017 are recognized as a reduction to the income tax provision rather than as an increase to additional paid-in capital.
On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act subjects to U.S. taxationvaluation allowance on certain previously deferred earnings of foreign subsidiaries as of December 31, 2017 (“Transition Tax”) and implements a number of changes that take effect on January 1, 2018, including but not limited to, a reduction of the U.S. federal corporate tax rate from 35% to 21% and a new minimum tax on intangible income earned by foreign subsidiaries. The Company’s income tax provision for the year ended December 31, 2017 includes an expense of $63.8 million related to the Tax Act, of which, $62.7 million relates to the Transition Tax and $1.1 million relates to the remeasurement of U.S. net deferred tax assets that we expect to utilize, (iii) favorable outcomes of tax audits and (iv) a lower tax rate on U.S. income derived from foreign sources. The benefits were partially offset by higher state income taxes due to the reductionhigher taxable income in the corporate incomeU.S.
A number of countries are actively drafting legislation to implement the OECD international tax rate. The Company has sufficient current year net operating losses to offsetframework, including the taxable income resultingPillar II minimum tax regime with effect from the Transition Tax and, therefore, will not be required to pay the one-time Transition Tax.
The Transition Tax on deemed repatriated foreign earnings is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of the Company's foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, among other factors, the amount of post-1986 E&P of its foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company was able to make a reasonable estimate of the Transition Tax and has recorded a provisional transition tax expense of $62.7 million. Any adjustment of the Company's provisional tax expense will be reflected as a change in estimate in its results in the period in which the change in estimate is made in accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.January 1, 2024 or later. The Company is continuing to gather additional information to more precisely compute the amountmonitor these developments and any potential impact on its results of the Transition Taxoperations.
NON-GAAP FINANCIAL MEASURES
Match Group reports Adjusted Operating Income and expects to finalize its calculation prior to the filing of its U.S. federal tax return, which is due on October 15, 2018. The additional information includes, but is not limited to, the allocation and sourcing of income and deductions in 2017 for purposes of calculating the utilization ofRevenue excluding foreign tax credits. In addition, our estimates may also be impacted and adjusted as the law is clarified and additional guidance is issued at the federal and state levels.
In 2016, the Company recorded an income tax benefit of $64.9 million, which represented an effective income tax rate of 80%. The effective income tax rate was higher than the statutory rate of 35% due primarily to foreign income taxed at lower rates and the non-taxable gain on the sale of ShoeBuy, partially offset by the non-deductible portion of the goodwill impairment charge at the Publishing segment.
In 2015, the Company recorded an income tax provision of $29.5 million, which represented an effective income tax rate of 21%. The effective income tax rate was lower than the statutory rate of 35% due primarily to the realization of certain deferred tax assets, foreign income taxed at lower rates, the non-taxable gain on contingent consideration fair value adjustments, and a reduction in tax reserves and related interest due to the expiration of statutes of limitations, partially offset by a non-deductible goodwill impairment charge and unbenefited losses of unconsolidated subsidiaries.
Net (earnings) loss attributable to noncontrolling interests
Noncontrolling interests represent the noncontrolling holders’ percentage share of earnings or losses from the subsidiaries in which the Company holds a majority, but less than 100%, ownership interest and the resultsexchange effects, both of which are included in our consolidated financial statements.
|
| | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | $ Change | | % Change | | 2016 | | $ Change | | % Change | | 2015 |
| | (Dollars in thousands) |
| Net (earnings) loss attributable to noncontrolling interests | $(53,084) | | $(27,955) | | 111% | | $(25,129) | | $(31,227) | | NM | | $6,098 |
Net earnings attributable to noncontrolling interests in 2017 primarily represents the publicly-held interest in Match Group's earnings, partially offset by ANGI Homeservices losses.
Net earnings attributable to noncontrolling interests in 2016 primarily represented the proportionate share of the noncontrolling holders' ownership in Match Group.
Net loss attributable to noncontrolling interests in 2015 primarily represented the proportionate share of the noncontrolling holders' ownership in certain subsidiaries within the Video, ANGI Homeservices and Publishing segments and Match Group.
PRINCIPLES OF FINANCIAL REPORTING
IAC reports Adjusted EBITDA as a supplemental measuremeasures to U.S. generally accepted accounting principles ("GAAP"(“GAAP”). This measureAdjusted Operating Income is one ofamong the primary metrics by which we evaluate the performance of our businesses,business, on which our internal budgets arebudget is based, and by which management is compensated. Revenue excluding foreign exchange effects provides a comparable framework for assessing how our business performed without the effect of exchange rate differences when compared to prior periods. We believe that investors should have access to and we are obligated to provide, the same set of tools that we use in analyzing our results. ThisThese non-GAAP measuremeasures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. IACMatch Group endeavors to compensate for the limitations of the non-GAAP measuremeasures presented by providing the comparable GAAP measuremeasures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure.measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure,measures, which we discuss below.
Definition of Non-GAAP MeasureAdjusted Operating Income
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")Operating Income 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.arrangements, as applicable. We believe this measure is useful forto analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. The above items are excluded from our Adjusted EBITDAOperating Income measure because these itemsthey are non-cash in nature, and we believe that by excluding these items,nature. Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced. Adjusted EBITDAOperating Income has certain limitations in thatbecause it does not take into accountexcludes the impact to IAC's statement of operations of certain expenses.
Non-Cash Expenses That Are Excluded From Non-GAAP MeasureAdjusted Operating Income
Stock-based compensationexpense consists principally of expense associated with the grants including unvested grants assumed in acquisitions (including the Combination), of stock options, restricted stock units ("RSUs"(“RSUs”), performance-based RSUs, and market-based awards. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method; however, performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period). UponTo the exercise of stock options and market-based stock options, the awards are gross settled, and the vesting of RSUs, performance-based RSUs and market-based awards RSUs, theextent stock-based awards are settled on a net basis, with the Company remittingwe remit the required tax-withholding amountamounts from its current funds.
Depreciation is a non-cash expense relating to our property and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.
Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions (including the Combination).acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as contractor and service professional relationships, technology, customer lists, and user base, content, trade names, and membership,technology, are valued and amortized over their estimated lives. Value is also assigned to (i) acquired indefinite-lived intangible assets, which compriseconsist of trade names and trademarks, and (ii) goodwill, thatwhich are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
The following table reconciles net earnings attributable to Match Group, Inc. shareholders to operating income and losses recognizedAdjusted Operating Income: | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2023 | | 2022 | | 2021 |
| | | | | |
| (In thousands) |
| Net earnings attributable to Match Group, Inc. shareholders | $ | 651,539 | | | $ | 361,946 | | | $ | 277,723 | |
| Add back: | | | | | |
| Net loss attributable to noncontrolling interests | (67) | | | (2,027) | | | (1,169) | |
| Loss (earnings) from discontinued operations, net of tax | — | | | 2,211 | | | (509) | |
| Income tax provision (benefit) | 125,309 | | | 15,361 | | | (19,897) | |
| Other (income) expense, net | (19,772) | | | (8,033) | | | 465,038 | |
| Interest expense | 159,887 | | | 145,547 | | | 130,493 | |
| Operating Income | 916,896 | | | 515,005 | | | 851,679 | |
| Stock-based compensation expense | 232,099 | | | 203,880 | | | 146,816 | |
| Depreciation | 61,807 | | | 43,594 | | | 41,402 | |
| Impairments and amortization of intangibles | 47,731 | | | 366,257 | | | 28,559 | |
| | | | | |
| Adjusted Operating Income | $ | 1,258,533 | | | $ | 1,128,736 | | | $ | 1,068,456 | |
Effects of Changes in Foreign Exchange Rates on changesRevenue
The impact of foreign exchange rates on the Company, due to its global reach, may be an important factor in understanding period over period comparisons if movement in exchange rates is significant. Since our results are reported in U.S. dollars, international revenue is favorably impacted as the fair valueU.S. dollar weakens relative to other currencies, and unfavorably impacted as the U.S. dollar strengthens relative to other currencies. We believe the presentation of contingent consideration arrangements are accounting adjustmentsrevenue excluding the effects from foreign exchange, in addition to report contingent consideration liabilities at fair value. These adjustments can be highly variable and are excluded from our assessment ofreported revenue, helps improve investors’ ability to understand the Company’s performance because they are considered non-operational in nature and, therefore, areit excludes the impact of foreign currency volatility that is not indicative of Match Group’s core operating results.
Revenue excluding foreign exchange effects compares results between periods as if exchange rates had remained constant period over period. Revenue excluding foreign exchange effects is calculated by translating current or future performance orperiod revenue using prior period exchange rates. The percentage change in revenue excluding foreign exchange effects is calculated by determining the ongoing costchange in current period revenue over prior period revenue where current period revenue is translated using prior period exchange rates.
The following tables present the impact of foreign exchange effects on total revenue and Direct Revenue by geographic region, and RPP on a total basis and by geographic region, for the year ended December 31, 2023 compared to the year ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | | |
| | 2023 | | $ Change | | % Change | | 2022 | | | | | | | | |
| | | | | | | | | | | | | | | |
| | (Dollars in thousands) |
| Revenue, as reported | $ | 3,364,504 | | | $ | 175,661 | | | 6% | | $ | 3,188,843 | | | | | | | | | |
| Foreign exchange effects | 48,517 | | | | | | | | | | | | | | | |
| Revenue excluding foreign exchange effects | $ | 3,413,021 | | | $ | 224,178 | | | 7% | | $ | 3,188,843 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Americas Direct Revenue, as reported | $ | 1,744,586 | | | $ | 115,517 | | | 7% | | $ | 1,629,069 | | | | | | | | | |
| Foreign exchange effects | 13,680 | | | | | | | | | | | | | | | |
| Americas Direct Revenue, excluding foreign exchange effects | $ | 1,758,266 | | | $ | 129,197 | | | 8% | | $ | 1,629,069 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Europe Direct Revenue, as reported | $ | 933,413 | | | $ | 84,527 | | | 10% | | $ | 848,886 | | | | | | | | | |
| Foreign exchange effects | (17,628) | | | | | | | | | | | | | | | |
| Europe Direct Revenue, excluding foreign exchange effects | $ | 915,785 | | | $ | 66,899 | | | 8% | | $ | 848,886 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| APAC and Other Direct Revenue, as reported | $ | 630,132 | | | $ | (22,134) | | | (3)% | | $ | 652,266 | | | | | | | | | |
| Foreign exchange effects | 52,307 | | | | | | | | | | | | | | | |
| APAC and Other Direct Revenue, excluding foreign exchange effects | $ | 682,439 | | | $ | 30,173 | | | 5% | | $ | 652,266 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Tinder Direct Revenue, as reported | $ | 1,917,629 | | | $ | 123,162 | | | 7% | | $ | 1,794,467 | | | | | | | | | |
| Foreign exchange effects | 22,160 | | | | | | | | | | | | | | | |
| Tinder Direct Revenue, excluding foreign exchange effects | $ | 1,939,789 | | | $ | 145,322 | | | 8% | | $ | 1,794,467 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Hinge Direct Revenue, as reported | $ | 396,485 | | | $ | 112,817 | | | 40% | | $ | 283,668 | | | | | | | | | |
| Foreign exchange effects | 832 | | | | | | | | | | | | | | | |
| Hinge Direct Revenue, excluding foreign exchange effects | $ | 397,317 | | | $ | 113,649 | | | 40% | | $ | 283,668 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| MG Asia Direct Revenue, as reported | $ | 302,591 | | | $ | (19,123) | | | (6)% | | $ | 321,714 | | | | | | | | | |
| Foreign exchange effects | 24,753 | | | | | | | | | | | | | | | |
| MG Asia Direct Revenue, excluding foreign exchange effects | $ | 327,344 | | | $ | 5,630 | | | 2% | | $ | 321,714 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| E&E Direct Revenue, as reported | $ | 691,426 | | | $ | (38,946) | | | (5)% | | $ | 730,372 | | | | | | | | | |
| Foreign exchange effects | 614 | | | | | | | | | | | | | | | |
| E&E Direct Revenue, excluding foreign exchange effects | $ | 692,040 | | | $ | (38,332) | | | (5)% | | $ | 730,372 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | | |
| | 2023 | | $ Change | | % Change | | 2022 | | | | | | | | |
| | | | | | | | | | | | | | | |
| RPP, as reported | $ | 17.67 | | | $ | 1.70 | | | 11% | | $ | 15.97 | | | | | | | | | |
| Foreign exchange effects | 0.26 | | | | | | | | | | | | | | | |
| RPP, excluding foreign exchange effects | $ | 17.93 | | | $ | 1.96 | | | 12% | | $ | 15.97 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Americas RPP, as reported | $ | 19.18 | | | $ | 2.56 | | | 15% | | $ | 16.62 | | | | | | | | | |
| Foreign exchange effects | 0.15 | | | | | | | | | | | | | | | |
| Americas RPP, excluding foreign exchange effects | $ | 19.33 | | | $ | 2.71 | | | 16% | | $ | 16.62 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Europe RPP, as reported | $ | 17.43 | | | $ | 2.05 | | | 13% | | $ | 15.38 | | | | | | | | | |
| Foreign exchange effects | (0.33) | | | | | | | | | | | | | | | |
| Europe RPP, excluding foreign exchange effects | $ | 17.10 | | | $ | 1.72 | | | 11% | | $ | 15.38 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| APAC and Other RPP, as reported | $ | 14.75 | | | $ | (0.49) | | | (3)% | | $ | 15.24 | | | | | | | | | |
| Foreign exchange effects | 1.22 | | | | | | | | | | | | | | | |
| APAC and Other RPP, excluding foreign exchange effects | $ | 15.97 | | | $ | 0.73 | | | 5% | | $ | 15.24 | | | | | | | | | |
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Position | | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| | | |
| (In thousands) |
| Cash and cash equivalents: | | | |
| United States | $ | 647,177 | | | $ | 399,732 | |
| All other countries | 215,263 | | | 172,663 | |
| Total cash and cash equivalents | 862,440 | | | 572,395 | |
| Short-term investments | 6,200 | | | 8,723 | |
| Total cash and cash equivalents and short-term investments | $ | 868,640 | | | $ | 581,118 | |
| | | |
| Long-term debt, net: | | | |
| Credit Facility due February 13, 2025 | $ | — | | | $ | — | |
| Term Loan due February 13, 2027 | 425,000 | | | 425,000 | |
| | | |
| 5.00% Senior Notes due December 15, 2027 | 450,000 | | | 450,000 | |
| 4.625% Senior Notes due June 1, 2028 | 500,000 | | | 500,000 | |
| 5.625% Senior Notes due February 15, 2029 | 350,000 | | | 350,000 | |
| 4.125% Senior Notes due August 1, 2030 | 500,000 | | | 500,000 | |
| 3.625% Senior Notes due October 1, 2031 | 500,000 | | | 500,000 | |
| | | |
| 2026 Exchangeable Notes due June 15, 2026 | 575,000 | | | 575,000 | |
| 2030 Exchangeable Notes due January 15, 2030 | 575,000 | | | 575,000 | |
| Total long-term debt | 3,875,000 | | | 3,875,000 | |
| | | |
| Less: Unamortized original issue discount | 3,479 | | | 4,366 | |
| Less: Unamortized debt issuance costs | 29,279 | | | 34,908 | |
| Total long-term debt, net | $ | 3,842,242 | | | $ | 3,835,726 | |
|
| | | | | | | | |
| | | December 31, |
| | | 2017 | | 2016 |
| | | (In thousands) |
| Cash and cash equivalents: | | | | |
United States(a) | | $ | 1,178,616 |
| | $ | 815,588 |
|
All other countries(b) | | 452,193 |
| | 513,599 |
|
| Total cash and cash equivalents | | 1,630,809 |
| | 1,329,187 |
|
Marketable securities (United States)(c) | | 4,995 |
| | 89,342 |
|
Total cash and cash equivalents and marketable securities(d)(e) | | $ | 1,635,804 |
| | $ | 1,418,529 |
|
| | | | | |
| Match Group Debt: | | | | |
| Match Group Term Loan | | $ | 425,000 |
| | $ | 350,000 |
|
| Match Group 6.75% Senior Notes | | — |
| | 445,172 |
|
| Match Group 6.375% Senior Notes | | 400,000 |
| | 400,000 |
|
| Match Group 5.00% Senior Notes | | 450,000 |
| | — |
|
| Total Match Group long-term debt | | 1,275,000 |
| | 1,195,172 |
|
| Less: unamortized original issue discount and original issue premium, net | | 8,668 |
| | 5,245 |
|
| Less: unamortized debt issuance costs | | 13,636 |
| | 13,434 |
|
| Total Match Group debt, net | | 1,252,696 |
| | 1,176,493 |
|
| | | | | |
| ANGI Homeservices Debt: | | | | |
| ANGI Homeservices Term Loan | | 275,000 |
| | — |
|
| Less: current portion of ANGI Homeservices long-term debt | | 13,750 |
| | — |
|
| Less: unamortized debt issuance costs | | 2,938 |
| | — |
|
| Total ANGI Homeservices debt, net | | 258,312 |
| | — |
|
| | | | | |
| IAC Debt: | | | | |
| Exchangeable Notes | | 517,500 |
| | — |
|
| 4.75% Senior Notes | | 34,859 |
| | 38,109 |
|
| 4.875% Senior Notes | | — |
| | 390,214 |
|
| Total IAC long-term debt | | 552,359 |
| | 428,323 |
|
| Less: current portion of IAC long-term debt | | — |
| | 20,000 |
|
Less: unamortized original issue discount
| | 67,158 |
| | — |
|
| Less: unamortized debt issuance costs | | 16,740 |
| | 2,332 |
|
| Total IAC debt, net | | 468,461 |
| | 405,991 |
|
| | | | | |
| Total long-term debt, net | | $ | 1,979,469 |
| | $ | 1,582,484 |
|
| |
(a)
| Domestically, cash equivalents primarily consist of AAA rated government money market funds and commercial paper rated A1/P1 or better with maturities less than 91 days from the date of purchase, and treasury discount notes. |
| |
(b)
| Internationally, cash equivalents primarily consist of AAA rated government money market funds and time deposits with maturities of less than 91 days. Approximately $420 million of the Company’s international cash can be repatriated without any significant tax consequences as it has been substantially subjected to U.S. income taxes due to the Transition Tax imposed by the Tax Act. If needed for our U.S. operations, the remaining cash and cash equivalents held by the Company's foreign subsidiaries could be repatriated, however, under current law, would be subject to foreign, federal and state income taxes of approximately $8 million. We have not provided for any such tax because the Company currently does not anticipate a need to repatriate these funds to finance our U.S. operations and it is the Company's intent to indefinitely reinvest these funds outside of the U.S. |
| |
(c)
| At December 31, 2017, marketable securities consist of commercial paper rated A1+/P1 with an initial maturity of more than 91 days. At December 31, 2016, marketable securities consist of commercial paper rated A1/P1, treasury discount notes, and short-to-medium-term debt securities issued by investment grade corporate issuers. The Company invests in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity to fund current operations or satisfy other cash requirements as needed. The Company also may invest in equity securities as part of its investment strategy. |
| |
(d)
| At December 31, 2017 and 2016, cash and cash equivalents include Match Group's domestic and international cash and cash equivalents of $203.5 million and $69.2 million; and $114.0 million and $139.6 million, respectively. Match Group is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely access the cash of Match Group and its subsidiaries. Match Group generated $321.1 million and $259.6 million of operating cash flows for the years ended December 31, 2017 and 2016, respectively. In addition, agreements governing Match Group’s indebtedness limit the payment of dividends or distributions, loans or advances to stockholders, including the Company, in the event a default has occurred or Match Group's leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0. |
| |
(e)
| At December 31, 2017, cash and cash equivalents include ANGI Homeservices' domestic and international cash and cash equivalents of $214.8 million and $6.7 million, respectively. At December 31, 2016, all of ANGI Homeservices' cash and cash equivalents of $36.4 million was held internationally. ANGI Homeservices is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely access the cash of ANGI Homeservices and its subsidiaries. ANGI Homeservices generated $41.8 million and $47.9 million of operating cash flows for the years ended December 31, 2017 and 2016, respectively. In addition, the agreement governing ANGI Homeservices’ Term Loan limits the payment of dividends or distributions in the event a default has occurred or ANGI Homeservices’ leverage ratio (as defined in the indentures) exceeds 4.0 to 1.0. |
IAC, Match Group and ANGI Homeservices Long-term Debt
Cash Flow Information
In summary, the Company'sCompany’s cash flows from continuing operations are as follows: | | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2023 | | 2022 | | 2021 |
| | | | | |
| (In thousands) |
| Net cash provided by operating activities attributable to continuing operations | $ | 896,791 | | | $ | 525,688 | | | $ | 912,499 | |
| Net cash used in investing activities attributable to continuing operations | (76,581) | | | (71,702) | | | (939,825) | |
| Net cash (used in) provided by financing activities attributable to continuing operations | (534,068) | | | (689,173) | | | 111,106 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| | (In thousands) |
| Net cash provided by (used in): | | | | | |
| Operating activities | $ | 416,690 |
| | $ | 344,141 |
| | $ | 405,671 |
|
| Investing activities | 39,508 |
| | 12,862 |
| | (582,721 | ) |
| Financing activities | (166,124 | ) | | (502,829 | ) | | 678,390 |
|
Net cash provided by operating activities consists of earnings adjusted for non-cash items, the effect of changesattributable to continuing operations in working capital and acquisition-related contingent consideration payments (to the extent greater than the liability initially recognized at the time of acquisition). Non-cash2023 includes adjustments include stock-based compensation expense, depreciation, amortization of intangibles, goodwill impairments, deferred income taxes, acquisition-related contingent consideration fair value adjustments, gains from the sale of businesses and investments and a real estate transaction, impairments of long-term investments and bad debt expense.
2017
Adjustments to earnings consistconsisting primarily of $264.6$232.1 million of stock-based compensation expense, $74.3expense; $61.8 million of depreciation, $42.1 million of amortization of intangibles, $28.9 million of bad debt expense, $12.2depreciation; $47.7 million of impairments on long-term investments, and $43.6 millionamortization of other adjustments, which primarily consist of losses on bond redemptions and net foreign currency exchange losses, partially offset by $285.3 million ofintangibles; deferred income taxes of
$26.6 million; and $32.7other adjustments of $9.9 million, which includes amortization of net gains from the saledeferred financing costs of businesses and investments. The deferred income tax benefit primarily relates to the net operating loss created primarily by excess tax benefits of $361.8 million related to stock-based awards and the modification charge for the conversion and acceleration of stock-based awards in connection with the Combination, partially offset by the provisional Transition Tax.$6.5 million. The decrease in cash from changes in working capital primarily consists primarily of an increase in accounts receivable of $115.2$107.4 million primarily related to the timing of receipts and an increase in revenue from app stores, and a decrease in accounts payable and other current liabilitiesdeferred revenue of $14.1$41.2 million as weekly subscriptions have increased. These decreases in cash were partially offset by an increase in deferred revenueto working capital from other assets of $39.2$25.1 million. The increase in accounts receivable is primarily due to (i) the timing of cash receipts and revenue increasingly sourced through mobile app stores at Match Group, which are settled more slowly than traditional credit cards; and (ii) revenue growth at ANGI Homeservices. The decrease in accounts payable and other current liabilities is due to: (i) a decrease at Match Group due to the cash settlement of former subsidiary denominated equity awards held by a non-employee, (ii) a decrease in accrued employee compensation mainly related to the timing of payments of cash bonuses, partially offset by (iii) an increase
in accrued advertising at Match Group. The increase in deferred revenue is due mainly to growth in subscription sales at Match Group and Vimeo, as well as growth in subscription sales and time-based advertising to service professionals at ANGI Homeservices, partially offset by decreases at Electus and Notional mainly due to the delivery of programming related to various production deals.
Net cash provided byused in investing activities includes net proceeds from saleattributable to continuing operations in 2023 consists primarily of businesses and investmentscapital expenditures of $185.8$67.4 million which isthat are primarily related to the sale of The Princeton Review and a Match Group cost method investment, and proceeds (net of purchases) of marketable debt securities of $84.5 million, partially offset by acquisitions and purchases of investments of $158.2 million, which includes Livestream, MyBuilder, Angie's List and HomeStars acquisitions, and capital expenditures of $75.5 million, primarily related to investments ininternal development of capitalized software at Match Group and ANGI Homeservicescomputer hardware to support their products and services, computer hardware and the Company's purchase of a 50% ownership interest in an aircraft as a replacement for an existing 50% interest in a previously owned aircraft, which was sold on February 13, 2018.our services.
Net cash used in financing activities includes principal payments made on Match Group and IAC debtattributable to continuing operations in 2023 is primarily due to purchases of $445.2treasury stock of $546.2 million and $393.5payments of $5.9 million respectively, the payment of $272.5 million for the purchase of certain fully vested stock-based awards, the payment of $254.2 million, $93.8 million and $10.1 million for withholding taxes paid on behalf of Match Group, IAC and ANGI Homeservices employees respectively, on net settledfor net-settled stock-based awards, $74.4 million for the Exchangeable Notes hedge, $56.4 million for the repurchaseawards. These uses of 0.8 million shares of IAC common stock at an average price of $69.24 per share, $33.7 million of debt issuance costs primarily related to the Exchangeable Notes and the 5.00% Match Group Senior Notes, $27.3 million in acquisition-related contingent consideration payments (included in operating activities is $11.1 million for an acquisition-related contingent consideration payment made in excess of the amount initially recognized at the time of acquisition) and $15.4 million for the purchase of noncontrolling interests,cash were partially offset by $525.0$19.9 million inof proceeds from the issuance of Match Group debt, $517.5 million in proceeds from the issuance of the Exchangeable Notes, $275.0 million in proceeds from the ANGI Homeservices Term Loan, $82.4 million and $59.4 million in proceeds from the issuance of IAC and Match Group common stock respectively, pursuant to stock-based awards, $23.7 millionawards.
2022
Net cash provided by operating activities attributable to continuing operations in proceeds from the issuance2022 includes adjustments to earnings consisting primarily of warrants, a $20.1 million decrease in restricted cash that relates to settled IAC bond redemptions and $10.6$366.3 million of funds returned from escrow for the MyHammer tender offer.
2016
Adjustments to earnings consist primarilyimpairments and amortization of $275.4 million of goodwill impairment at the Publishing segment, $104.8intangibles; $203.9 million of stock-based compensation expense, $79.4expense; $43.6 million of depreciation; and other adjustments of $7.0 million, which includes amortization of intangibles, $71.7 milliondeferred financing costs of depreciation, $17.7 million of bad debt expense, and $10.7 million of impairments on long-term investments, partially offset by $119.2 million of deferred income taxes and $51.0 million of net gains from the sale of businesses and investments. The$6.7 million. Partially offsetting these adjustments was a deferred income tax benefit primarily relates to the Publishing goodwill impairment.of $30.0 million. The decrease in cash from changes in working capital primarily consists primarily of a decrease in accounts payable and other current liabilities of $52.4$472.6 million due mainly to the settlement payment for Rad, et al. v. IAC/InterActiveCorp, et al. and related arbitrations, and timing of other payments; an increase in other assetsaccounts receivable of $12.9$6.7 million primarily related to increased revenue from mobile applications; and a decrease in deferred revenue of $6.5 million. These uses of cash were partially offset by an increase in deferred revenuefrom other assets of $35.8$59.6 million and an increase in income taxes payable and receivable of $9.0 million. The decrease in accounts payable and other current liabilities is due to (i) a decrease in accrued advertising and revenue share expense at Publishing and Applications mainlyprimarily due to the effectamortization of the new Google contract, which became effective April 1, 2016, (ii) a decreaseprepaid hosting services.
Net cash used in VAT payables related mainlyinvesting activities attributable to decreasescontinuing operations in international revenue at Publishing, and (iii) decreases in payables at Match Group due to the timing2022 consists primarily of payments. The increase in other assets iscapital expenditures of $49.1 million that are primarily related to an increase in production costs at IAC Films. The increase in deferred revenue is mainly due to growth in subscription sales at Match Group, ANGI Homeservices and Vimeo. The increase in income taxes payable and receivable is primarily due to receipt of 2015 capital loss refund in 2016 and 2016 income tax accruals in excess of 2016 income tax payments, partially offset by payment of 2015 tax liabilities in 2016.
Net cash provided by investing activities includes net proceeds from the sale of businesses, investments and assets of $172.2 million, which mainly relate to the sale of PriceRunner and ShoeBuy, partially offset by capital expenditures of $78.0 million, primarily related to investments ininternal development of capitalized software at Match Group and ANGI Homeservices to support their products and services, as well as leasehold improvements and computer hardware purchases (net of sales and maturities) of marketable debt securities of $61.6 million,to support our services, and cash used in acquisitions and purchasesan acquisition, net of investmentscash acquired, of $31.0$25.7 million.
Net cash used in financing activities includes $450.0attributable to continuing operations in 2022 is primarily due to purchases of treasury stock of $482.0 million, in principal payments on Match Group debt, $308.9of $176.3 million forto settle the repurchaseoutstanding 2022 Exchangeable Notes, payments of 6.2$109.3 million shares of IAC common stock at an average price of $49.74 per share, $126.4 million in principal payments on IAC debt and $29.8 million and $26.7 million for the payment of withholding taxes paid on behalf of Match Groupemployees for net-settled stock-based awards, purchases of non-controlling interests for $10.6 million, and IAC employees, respectively, on net settled stock-based awards,payments of $7.5 million to settle outstanding warrants associated with the 2022 Exchangeable Notes. These uses of cash were partially offset by $400.0proceeds of $75.9 million in
related to the settlement of certain note hedges associated with the 2022 Exchangeable Notes, and $20.5 million of proceeds from the issuance of Match Group debt and $39.4 million and $25.8 million in proceeds from the issuance of Match Group and IAC common stock, respectively, pursuant to stock-based awards.
2015
Adjustments to earnings consist primarily of $140.0 million of amortization of intangibles, $105.5 million of stock-based compensation expense, $62.2 million of depreciation, $16.6 million of bad debt expense and $14.1 million of goodwill impairment, partially offset by $59.8 million of deferred income taxes, $34.3 million of gain on a real estate transaction, and $15.5 million in acquisition-related contingent consideration fair value adjustments. The deferred income tax benefit primarily relates to amortization of intangibles and stock-based compensation. The increase from changes in working capital consists primarily of an increase in deferred revenue of $66.9 million and an increase in income taxes payable and receivable of $24.2 million, partially offset by an increase in accounts receivable of $29.7 million and an increase in other assets of $21.2 million. The increase in deferred revenue was due mainly to growth in subscription sales at Match Group, Vimeo and ANGI Homeservices, increases related to acquisitions, and increases at Electus, CollegeHumor and Notional mainly due to the timing of various production deals. The increase in income taxes payable and receivable was due to 2015 income tax accruals in excess of 2015 income tax payments. The increase in accounts receivable was primarily due to growth in Match Group's in-app purchases sold through their mobile products and revenue growth at ANGI Homeservices. The increase in other assets was primarily due to Match Group, relating to an increase in prepaid expenses, primarily from growth and the signing of longer-term contracts, as well as an increase in VAT refund receivables in the Publishing segment.
Net cash used in investing activities includes acquisitions and purchases of investments of $651.9 million, which includes PlentyOfFish, and capital expenditures of $62.0 million, primarily related to investments in development of capitalized software to support our products and services, and computer hardware, partially offset by proceeds from sales and maturities (net of purchases) of marketable securities of $125.3 million, and net proceeds from the sale of long-term investments and an asset of $9.4 million.
Net cash provided by financing activities includes $788.0 million in borrowings from the Match Group Term Loan, $428.8 million in net proceeds received from Match Group's initial public offering and $27.3 million in proceeds from the issuance of IAC common stock pursuant to stock-based awards, partially offset by $200.0 million used for the repurchase of 3.0 million shares of common stock at an average price of $67.68 per share, $113.2 million related to the payment of cash dividends to IAC shareholders, $80.0 million for the early redemption of the Liberty Bonds, $65.7 million for the payment of withholding taxes paid on behalf of IAC employees on net settled stock-based awards, $32.2 million for the purchase of noncontrolling interests, $23.4 million for the purchase of certain fully vested stock-based awards and $19.1 million of debt issuance costs primarily associated with the Match Group Term Loan and revolving credit facility.awards.
Liquidity and Capital Resources
The Company'sCompany’s principal sources of liquidity are its cash and cash equivalents as well as cash flows generated from operations. IAC's consolidated cash and cash equivalents atAt December 31, 2017 were $1.6 billion, of which $272.62023, $749.6 million was held by Match Group and $221.5 million was held by ANGI Homeservices. The Company generated $416.7 million of operating cash flows foravailable under the year ended December 31, 2017, of which $321.1 million was generated by Match Group and $41.8 million was generated by ANGI Homeservices. Each of Match Group and ANGI Homeservices is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely access the cash of Match Group and ANGI Homeservices and their respective subsidiaries. In addition, agreements governing Match Group's indebtedness limit the payment of dividends or distributions in the event a default has occurred or Match Group's leverage ratio (as defined in the Match Group Indentures) exceeds 5.0 to 1.0. In addition, the agreement governing ANGI Homeservices’ Term Loan limits the payment of dividends or distributions in the event a default has occurred or ANGI Homeservices’ leverage ratio (as defined in the Term Loan facility) exceeds 4.0 to 1.0. As of December 31, 2017, there are no restrictions on Match Group's or ANGI Homeservices' ability to pay dividends under these debt agreements.
IAC has a $300 million revolving credit facilityCredit Facility that expires on October 7, 2020. Match GroupFebruary 13, 2025.
The Company has various obligations related to long-term debt instruments and operating leases. For additional information on long-term debt, including maturity dates and interest rates, see “Note 7—Long-term Debt, net” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.” For additional information on the operating leases, including a $500 million revolving credit facility that expires on October 7, 2020. At December 31, 2017, there were no outstanding borrowings underschedule of obligations by year, see “Note 13—Leases” to the IAC Credit Facility or the Match Group Credit Facility.consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.” The Company believes it has sufficient cash flows from operations to satisfy these future obligations.
The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations. The Company's 2018Company expects that 2024 cash capital expenditures will be between $55 million and $65 million, relatively flat to 2023 cash capital expenditures.
We have entered into various purchase commitments, primarily consisting of web hosting services that are expected to be higher than 2017currently committed through December 2026. Our obligations under these various purchase commitments, which were impacted by approximately 20% to 25%, driven,usage rates in part, by higher capital expenditures2023, are $103.2 million for ANGI Homeservices2024, $85.0 million for 2025, and Match Group related to the$14.2 million for 2026.
development of capitalized software to support our products and services and for ANGI Homeservices' new corporate headquarters, partially offset by lower capital expendituresThe Company does not have any off-balance sheet arrangements at Corporate.
At December 31, 2017, IAC had 8.6 million shares remaining in its share repurchase authorization. IAC may purchase shares over an indefinite period of time on the open market and in privately negotiated transactions, depending on2023, other than those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.described above.
In May 2017,2022, our Board of Directors approved a share repurchase program (the “2022 Share Repurchase Program”) to repurchase up to 12.5 million shares of our common stock. On April 28, 2023, our Board of Directors approved a share repurchase program (the “2023 Share Repurchase Program”) for the repurchase of up to $1.0 billion in aggregate value of shares of Match Group stock, which replaced the 2022 Share Repurchase Program. During the year ended December 31, 2023, we repurchased 13.5 million shares for $546.2 million, on a trade date basis, under the 2022 and 2023 Share Repurchase Programs.
On January 30, 2024, the Board of Directors of the Company approved a new share repurchase program (the “2024 Share Repurchase Program”) for the repurchase of up to $1.0 billion in aggregate value of shares of Match Group authorized Match Group to repurchase up to 6 millionstock. The 2024 Share Repurchase Program replaces the 2023 Share Repurchase Program. Under the 2024 Share Repurchase Program, shares of itsour common stock. Match Group has not repurchasedstock may be purchased on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans. The 2024 Share Repurchase Program may be commenced, suspended or discontinued at any shares related to this repurchase authorization.time.
The Company has granted stock options and stock settled stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries to employees and management of those subsidiaries. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. The valueAt December 31, 2023, all of the stock options and stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly, these interests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price. These interests can have significant value in the event of significant appreciation. The interests are ultimately settled in IAC common stock with fair market value generally determined by negotiation or arbitration. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IAC shares equal to the intrinsic value of the award at exercise less an amount equal to the requiredCompany’s international cash tax withholding payment. The number of shares ultimately needed to settle these awards may vary significantly as a result of both movements in our stock price and a determination of fair value of the relevant subsidiary that is different than our estimate. The number of IAC common shares that would be required to settle these interests, other than for Match Group and ANGI Homeservices subsidiaries, at current estimated fair values, including vested and unvested interests, at December 31, 2017 is 0.1 million shares. Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $15.2 million at December 31, 2017, assuming a 50% withholding rate.
In July 2017, Tinder, Inc. (“Tinder”) was merged into Match Group and as a result, all Tinder denominated equity awards were converted into Match Group tandem stock options ("Tandem Awards"). All of the Tandem Awards exercised during 2017 were exercised on a net basis and settled in IAC common shares. Assuming all vested and unvested Match Group Tandem Awards outstanding on December 31, 2017 were exercised on a net basis on that date and settled using IAC stock, 0.8 million IAC common shares would have been issued in settlement. Match Group would have remitted $102.4 million in cash in withholding taxes (assuming a 50% withholding rate) on behalf of the employees and issued 3.3 million of its common shares to IAC as reimbursement.
In connection with the Combination, previously issued stock appreciation rights that related to common stock of HomeAdvisor (US) were converted into stock appreciation rights that are settleable in Class A shares of ANGI Homeservices. IAC has the right to settle these awards using shares of IAC common stock. Assuming all vested and unvested stock appreciation rights outstanding on December 31, 2017 were exercised on a net basis on that date and settled using IAC stock, 1.4 million IAC common shares would have been issued in settlement. ANGI Homeservices would have remitted $171.3 million in cash in withholding taxes (assuming a 50% withholding rate) on behalf of the employees and issued 16.4 million of its common shares to IAC as reimbursement.
As of December 31, 2017, IAC's economic and voting interest in Match Group is 81.2% and 97.6%, respectively, and in ANGI Homeservices is 86.9% and 98.5%, respectively. Certain Match Group and ANGI Homeservices equity awards can be settled either in IAC common shares or the common shares of these subsidiaries at IAC's election. The Company currently expects to settle a sufficient number of awards in IAC shares to maintain an economic interest in both Match Group and ANGI Homeservices of at least 80%.repatriated without significant tax consequences.
The Company will not be required to pay the one-time Transition Tax under the Tax Act because of its net operating loss position. The Company does not expect to be a full U.S. federal cash income tax payer until 2021, which is in line with previous estimates. We expect the Tax Act to favorably impact our future liquidity, primarily as a result of a reduction in the U.S. corporate income tax rate from 35% to 21%, which will lower our effective tax rate and annual tax liability.
The Company believes its existing cash, cash equivalents and expected positive cash flows generated from operations will be sufficient to fund our normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments for the foreseeable future. The Company's liquidity could be negatively affected by a decrease in demand for our products and services. The Company’sOur indebtedness could limit our ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditure orexpenditures, debt service, or other requirements; and (ii) use operating cash flow to makepursue acquisitions
capital expenditures, or invest in other areas, such as developing properties and exploiting business opportunities. The Company may make additional acquisitions and investments and, as a result, the Company may need to raise additional capital through future debt or equity financing to make additional acquisitions and investments or to provide for greater financial flexibility. Additional financing may not be available on terms favorable to usthe Company or at all.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Goodwill and indefinite-lived intangible assets are assessed annually for impairment as of October 1, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value.
intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company'sspecific trade names and trademarks. The future cash flows are based on the Company’s most recent forecast and budget and, for years beyond the budget, the Company’s estimates are based, in part, on forecasted growth rates. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed at least annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company'sCompany’s quantitative assessments as part of the annual indefinite-lived impairment assessment ranged from 11%15% to 18% in 2023 and 12% to 16% in both 2017 and 2016,2022, and the royalty rates used ranged from 2%3% to 7%8% in both 20172023 and 2016.2022.
that these lives may be changed. During the year ended December 31, 2022, the Company recognized an impairment charge related to Hyperconnect intangible assets with definitive lives of $25.8 million, which is included within impairment and amortization of intangibles. The carrying value of property and equipment and definite-lived intangible assets is $519.8was $122.7 million and $341.1$168.7 million, at December 31, 20172023 and 2016,2022, respectively.
A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. AsWe consider all available evidence, both positive and negative,
The Company conducts business in certain foreign markets, primarily in various jurisdictions within the European Union,in Europe and asAsia. As a result, iswe are exposed to foreign exchange risk for bothrelated to certain currencies, primarily the Euro, and British Pound ("GBP"(“GBP”), Japanese Yen (“JPY”), Turkish Lira (“TRY”), and Argentine Peso (“ARS”).
Foreign currency exchange gains or losses historically have not been material to the Company. As a result, we have not historically the Company has not hedged any foreign currency exposures.exposures, although we may hedge foreign currencies in the future to limit the impact of foreign currency exchange gains and losses. The continued growth and expansion of our international operations into new countries increases our exposure to foreign exchange rate fluctuations. Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could have a significant impact onadversely affect our future results of operations.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control-IntegratedControl–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1, 2018February 23, 2024 expressed an unqualified opinion thereon.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1996.
