As filed with the Securities and Exchange Commission on February 17 , 2021March 1, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 20202022
Or
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from__________to__________ |
Commission File No. 001-39356
IAC/INTERACTIVECORPIAC Inc.
(Exact name of registrant as specified in its charter)
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| Delaware | | 84-3727412 |
(State or other jurisdiction
of incorporation or organization) | | (I.R.S. Employer Identification No.) |
555 West 18th Street, New York, New York 10011
(Address of registrant's principal executive offices)
(212) 314-7300
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol | Name of exchange on which registered |
Common Stock, par value $0.001$0.0001 | IAC | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☐☒ | Accelerated filer | ☐ | Non-accelerated filer | ☒☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by a check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issues its audit report.report ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 29, 2021,February 10, 2023, the following shares of the Registrant's Common Stock were outstanding: | | | | | | | | |
| Common Stock | 82,977,60283,082,172 | |
| Class B Common Stock | 5,789,499 | |
| Total | 88,767,10188,871,671 | |
AsThe aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2020,2022 was $5,996,916,064. For the Registrant's common stock was 0t publicly traded.purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant.
Documents Incorporated By Reference:
Portions of the Registrant's proxy statement for its 20212023 Annual Meeting of Stockholders are incorporated by reference into Part III herein.
TABLE OF CONTENTS
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PART I
Item 1. Business
OVERVIEW
Who We Are
IAC operates Vimeo,is today comprised of category leading businesses, including Angi Inc., Dotdash Meredith and Care.com, among many other businesses, and also has majority ownership of ANGI Homeservices, which operates HomeAdvisor, Angie’s List and Handy.as well as others ranging from early stage to established businesses.
As used herein, “IAC,” the “Company,” “we,” “our,” “us” and other similar terms refer to IAC/InterActiveCorpIAC Inc. and its subsidiaries (unless the context requires otherwise).
Our History
IAC began as a hybrid media/electronic retailing company over twenty-five years ago. Since then, IAC (directly and through predecessor entities) has transformed itself into a leading Internet company through the development, building, acquisition and distribution to its stockholders of a number of businesses over two decades, and IAC continues to build companies and invest opportunistically.
From and after the late 1990s, we acquired a number of e-commerce companies, including Ticketmaster Group (later renamed Ticketmaster), Hotel Reservations Network (later renamed Hotels.com), Expedia.com, Match.com, LendingTree (later renamed Tree.com, Inc.), TripAdvisor, HomeAdvisor and AskJeeves,Ask Jeeves, as well as Interval International.International (later renamed Interval Leisure Group, Inc.).
In 2005, we completed the separation of our travel and travel-related businesses and investments into an independent public company, called Expedia, Inc. (now known as Expedia Group, Inc.). In 2008, we separated into five independent publicly tradedpublic companies: IAC (then IAC/InterActiveCorp), HSN, Inc. (now part of Qurate Retail, Inc.), Interval Leisure Group, Inc. (now part of Marriott Vacations Worldwide Corporation), Ticketmaster (now part ofknown as Live Nation Entertainment, Inc.) and Tree.com, Inc. (now known as LendingTree, Inc.). Following this transaction, we continued to invest in and acquire e-commerce companies, including About.com (now known as(later renamed Dotdash) and a number of online dating companies in the United States and various jurisdictions abroad.
In 2017, we completed the combination of the businesses in our former HomeAdvisor financial reporting segment with those of Angie’s List, Inc. under a new publicly traded holdingpublic company, that we control, ANGI Homeservices Inc. (“ANGI Homeservices”(now known as Angi Inc.)., that we control. And in 2018, through ANGI Homeservices,this entity we acquired Handy Technologies, Inc., a leading platform in the United States for connecting consumers looking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals.
In February 2020, we acquired Care.com, thea leading online destination for families to easily connect with caregivers for their children, aging parents, pets and homes, and for a wide variety of caregivers to easily connect with families.families seeking care services. In June 2020, we completed the separation of our online dating businesses into an independent public company, called Match Group, Inc.
In May 2021, we completed the spin-off of our full stake in our Vimeo business, after which Vimeo, Inc. (formerly Vimeo Holdings, Inc. (“Vimeo”)) became an independent public company. In December 2021, through Dotdash Media Inc., we completed the acquisition of Meredith Holdings Corp., owner of a portfolio of publishing brands, such as PEOPLE, Better Homes & Gardens, FOOD & WINE, Allrecipes, Southern Living and InStyle. Following the acquisition, we refer to the combined entity, which operates the brands and businesses of our former Dotdash financial reporting segment and those of Meredith Holdings Corp., as Dotdash Meredith.
In April 2022, we announced a $60 million primary and secondary investment in Vivian Health, a platform to efficiently connect healthcare professionals with job opportunities, in which we hold a controlling interest. In November 2022, we completed the sale of Bluecrew, a technology driven staffing platform exclusively for flexible W-2 work. Lastly, we hold a meaningful stake (initial and follow-on stakes acquired in August 2020 we announced that we had acquired an approximate 12% interestand August 2022, respectively) in MGM Resorts International, a leader in gaming, hospitality and leisure (“MGM”), for an aggregate of approximately $1 billion, introducing a new opportunity for us in the online gaming space.
In December 2020, we announced that the IAC board of directors had approved a plan to spin-off our full stake in our Vimeo business to IAC stockholders. Our Vimeo business will be separated from the remaining businesses of IAC through a series of transactions (which we refer to as the “Spin-off”) which, if completed in their entirety, will result in the transfer of our Vimeo business to Vimeo Holdings, Inc. (a newly formed subsidiary of IAC), which will be an independent, separately traded public company following the Spin-off (“New Vimeo”). The proposed transaction, which is subject to a number of conditions (including final approval by the IAC board of directors, certain IAC stockholder approvals and other customary conditions and approvals), is expected to close in the second quarter of 2021.leisure.
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, Barry Diller, IAC’s Chairman and Senior Executive, his spouse (Diane von Furstenberg) and his stepson (Alexander von Furstenberg), collectively hold (directly and through certain trusts) 5,789,499 shares of IAC Class B common stock representing 100% of the outstanding shares of Class B common stock. Together with shares of IAC common stock held as of the date of this report by Mr. Diller personally (172,708), Mr. von Furstenberg personally (66,004)(75,510), a trust for the benefit of certain members of Mr. Diller’s family (136,711) and a family foundation (1,711), these holdings collectively represent approximately 41.441.3 % of the total outstanding voting power of IAC (based on the number of shares of IAC common and Class B common stock outstanding on January 29, 2021)February 10, 2023). As of the date of this report, Mr. Diller also holds 1,000,000 vested options to purchase shares of IAC common stock.
Pursuant to that certain voting agreement, dated as of November 5, 2020, by and among Mr. Diller and the trustees of certain trusts through which all 5,789,499 shares of Class B common stock and 136,711 shares of common stock are held (the “Diller Parties”), on the one hand, and Joseph M. Levin, IAC’s Chief Executive Officer, on the other hand, (the “Voting Agreement”):
•the Diller Parties agreed to vote all shares of IAC common stock and IAC Class B common stock held by them in favor of Mr. Levin’s election to the IAC board of directors at each meeting of IAC stockholders at which Mr. Levin stands for election;
•prior to a vote being taken on specified Contingent Matters (a material acquisition or disposition of any assets or business by IAC or its subsidiaries, the entry by IAC into a material new line of business and the spin-off or split-off to IAC stockholders of (or similar transaction involving) a material business of IAC (excluding Vimeo, Inc.)) submitted for the approval of IAC stockholders,stockholder approval), Mr. Diller (or following Mr. Diller’s death or disability or Mr. Diller ceasing to serve as a director or executive officer of IAC, Alexander von Furstenberg or his successor), in consultation with the other Diller Parties, and Mr. Levin, will seek agreement on how to vote the shares of IAC common stock and IAC Class B common stock held by the Diller Parties, Parties;provided, however, that if an agreement is not reached to support any such proposal, the Diller Parties have agreed to vote all shares of IAC common stock and IAC Class B common stock held by them against any such proposal; and
•if any of the Diller Parties determines to sell shares of IAC Class B common stock to a person other than Mr. Diller, his family members or certain entities controlled by such persons, they will discuss with Mr. Levin selling such shares to him before selling to any other party.
The Voting Agreement will automatically terminate upon a "Change“Change in Control"Control” of IAC (as defined in the Restricted Stock Agreement between Mr. Levin and the Company dated November 5, 2020) or the termination of Mr. Levin’s employment with IAC.
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 IAC 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 certain members of his family), he generally has the right to consent to certain limited matters specified in the governance agreement 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 the IAC securities beneficially ownedheld by Mr. Diller and certain members of his family (as described above), Mr. Diller and these family members are, collectively, currently in a position to influence subject(subject to IAC’s organizational documents and Delaware law,law) the composition of the IACIAC's board of directors and the outcome of corporate actions requiring shareholder approval such(such as mergers, business combinations and dispositions of assets, among other corporate transactions.transactions). In addition, as a result of the Voting Agreement, Mr. Levin is currently in a position, subject to IAC’s organizational documents and Delaware law, to influence his election to IAC's board of directors and influence the outcome of Contingent Matters (as defined in the Voting Agreement).
DESCRIPTION OF IAC BUSINESSES
ANGI HomeservicesDotdash Meredith
Overview
Our Dotdash Meredith segment consists of its Digital and Print businesses. Through these businesses, we are one of the largest digital and print publishers in America, with a portfolio of over 40 publishing brands that collectively provide inspiring, informative, entertaining and empowering content to millions of consumers each month.
These Digital and Print businesses engage consumers across multiple media platforms and formats, as well as through licensing arrangements and magazines. Dotdash Meredith's portfolio of publishing brands (by vertical, brand and format) is as follows:
•Entertainment: PEOPLE (digital and print), Entertainment Weekly (digital) and People en Español (digital);
•Lifestyle: Allrecipes (digital and print), Better Homes & Gardens (digital and print), Southern Living (digital and print), The Spruce Eats (digital), Travel + Leisure (digital and print), Simply Recipes (digital), InStyle (digital), Real Simple, (digital and print), Food & Wine (digital and print), Martha Stewart Living (digital), Shape (digital), EatingWell (digital), The Spruce (digital), Lifewire (digital), Byrdie (digital), Serious Eats (digital), Liquor.com (digital), Brides (digital), Midwest Living (digital and print), TripSavvy (digital), Treehugger (digital), MyDomaine (digital), Daily Paws (digital and print), Magnolia Journal (print), Successful Farming (digital and print), American Patchwork & Quilting (digital and print), WOOD (digital and print), CookingLight (digital and print), Coastal Living (print), Traditional Home (print) and Sweet July (digital and print); and
•Health & Finance (all digital): Investopedia, Verywell Health, Parents, Health, The Balance, Verywell Mind, Verywell Family, Parents Latina and Verywell Fit.
Digital
The Digital business delivers digital content through a portfolio of brands that have leadership in those subject areas that Dotdash Meredith believes matter most to consumer audiences (including entertainment, food, home, beauty, travel, health, family, luxury and fashion). The Digital business provides original and engaging digital content in a variety of formats, including articles, illustrations, videos and images, working with hundreds of experts in their respective fields (including doctors, chefs and certified financial advisors, among others) to create and produce thousands of pieces of original content that we publish across our portfolio of brands on a monthly basis.
Print
Through the Print business, we are a leading magazine publisher in the United States. The Print business published 19 magazines as of December 31, 2022, as well as more than 400 special interest publications during the year ended December 31, 2022.
Print editorial teams create premium content covering subjects that Dotdash Meredith believes matter most to consumer audiences in a format that it believes consumers enjoy for its convenience and thoughtful editorial curation. The majority of the publishing brands and content within the Print business (for example, PEOPLE, Better Homes & Gardens and Southern Living) is focused on interests related to women and lifestyle. In addition, special interest publications provide in-depth information, education and entertainment on single topics and trends that Dotdash Meredith believes are timely and relevant to consumer audiences (including food, home, entertainment, and health and wellness). Most special interest publications have a high ratio of editorial to advertising content and are premium priced (for consumers) relative to subscription titles (see below).
The Print business distributes print magazines on a subscription basis (both direct and via agency partners) and through newsstands, with the majority of distribution occurring on a subscription basis. The Print business had approximately 20 million active subscriptions as of December 31, 2022. The majority of Dotdash Meredith subscription publications are issued between four and twelve times annually, with PEOPLE issued weekly. Single copies of subscription and special interest publications are sold through newsstands.
Revenue
Dotdash Meredith revenue consists of digital and print revenue. Digital revenue consists principally of advertising, performance marketing and licensing and other revenue. Print revenue consists principally of subscription, advertising, project and other, newsstand and performance marketing revenue.
Digital. Advertising revenue is generated primarily through digital display advertisements sold directly by Dotdash Meredith's sales team and through programmatic advertising networks. Performance marketing revenue includes commissions generated through affiliate commerce, affinity marketing and performance marketing channels. Affiliate commerce and performance marketing commission revenue is generated when Dotdash Meredith brands refer consumers to commerce partner websites resulting in a purchase or transaction. Affinity marketing programs partner with third parties to market and place magazine subscriptions online for both Dotdash Meredith and third-party publisher titles where Dotdash Meredith acts as an agent. Licensing revenue includes symbolic licenses, which include direct-to-retail product partnerships based on Dotdash Meredith's brands, and functional licenses, which consist of content licensing agreements.
Print. Subscription revenue relates to the sale of Dotdash Meredith print magazine subscriptions. Print advertising revenue relates to the sale of advertising in magazines directly to advertisers or through advertising agencies. Project and other revenue relates to other revenue streams that are primarily project based and may relate to any one or combination of the following activities: audience targeting advertising, custom publishing, content strategy and development, email marketing, social media, database marketing and search engine optimization. Newsstand revenue is related to single copy print magazines or bundles of single copy magazines sold to wholesalers for resale on newsstands. Performance marketing principally consists of affinity marketing revenue, in connection with which Dotdash Meredith partners with traditional customer facing channels (such as brick and mortar retailers and call centers) to place print magazine subscriptions for third-party publishers.
Marketing
The Digital business markets its digital content through a full suite of digital distribution channels, as well as via direct navigation to its various branded websites. The Print business markets its content through a variety of channels, includingdirect mail, search engines, social media, email, websites, affiliate links and third-party partnerships. Dotdash Meredith prefers a subscription-focused distribution approach for print publications because of its belief that this approach fosters long-term, direct relationships with consumers and creates greater monetization opportunities.
Competition
The Digital business is characterized by ever evolving technology, frequent product evolution and changing preferences of consumers, advertisers and marketers. Digital media is intensely competitive, particularly for consumer attention (both attracting and retaining), driving traffic to various Dotdash Meredith Digital brands through search engines (and the display of information from such brands (and links to websites offering Dotdash Meredith content) within search engine results) and spending from advertisers and marketers. In the case of the Digital business, competitors primarily include diversified multi-platform media companies, other online publishers and destination websites with brands in similar vertical content categories, news aggregators, search engines and social media platforms. Some of these competitors may have longer operating histories, greater brand recognition, larger user bases and/or greater financial, technical or marketing resources than Dotdash Meredith does. As a result, these competitors may have the ability to devote comparatively greater resources to the development and promotion of their digital content, which could result in greater market acceptance of their digital content relative to Dotdash Meredith digital content.
Print publishing is a highly competitive business. Dotdash Meredith Print magazines and related publishing products and services compete primarily with other print magazine publishers, as well as other mass media (online and offline) and many other leisure-time activities. While competition is strong for established print magazine brands, gaining readership for new print magazines and special interest publications is especially competitive.
We believe that the ability of the Digital and Print businesses to compete successfully will depend primarily upon the following factors:
•the ability to maintain and grow their large reach to American consumers across existing, as well as new and emerging platforms;
•the quality of the content and editorial features in digital content, print magazines and special interest publications;
•the ability to continue to maintain and build recognized expertise and authority in the vertical subject areas that Dotdash Meredith believes matter most to consumer audiences, and to continue to create content and experiences that are useful, relevant and entertaining to consumer audiences and reflect their evolving preferences;
•the ability to continue to attract (and increase) traffic to Digital publishing brands through search engines, including the ability to ensure that information from such brands and related links are displayed prominently in search engine results, as well as the ability to respond to changes in the usage and functioning of search engines;
•the ability to continue to build and maintain brand recognition, trust and loyalty across the Dotdash Meredith portfolio of publishing brands;
•the performance and visibility of the Dotdash Meredith portfolio of publishing brands (primarily across digital platforms) relative to those of its competitors;
•the ability to continue to grow and diversify monetization solutions, including advertising, e-commerce and affiliate relationships, performance marketing and other solutions;
•the ability to leverage existing proprietary platforms and data to provide consumer audiences with performant and relevant sites and experiences that are respectful (with targeted, limited ads) and privacy and search engine policy compliant;
•the ability to maintain and grow relationships with advertisers, in the case of the Digital business, through performant ads, targeting audiences and unique branded offerings (all with efficient reach to influence branding through to purchase) and in the case of the Print business, which will depend on:
•the rates charged for print advertising;
•the circulation levels of print magazines and the profit derived from such circulation;
•the breadth of demographic reach in terms of subscriptions and readership; and
•the ability to consistently provide advertisers and marketers with a compelling return on their investments;
•the ability to grow e-commerce related content and experiences and leverage the Dotdash Meredith portfolio of publishing brands and expertise to result in purchases and transactions and to continue to maintain good relationships with third parties upon which we depend in connection these efforts; and
•in the case of the Print business only:
•the ability to retain existing subscribers and successfully drive new subscribers to print magazines in a cost-effective manner;
•the ability to maintain print advertising rate cards and the number of pages sold by brand and issue;
•prices charged for print magazines; and
•the ability to provide quality customer service to advertisers, marketers and subscribers.
Angi Inc.
Overview
Our
Angi Inc. (formerly ANGI Homeservices segment includes the North American (United States and Canada) and European businesses and operations of ANGI Homeservices Inc. (“ANGI” or “ANGI Homeservices”), is a publicly traded company formed on September 29, 2017 to facilitate the combination of the businesses in our former HomeAdvisor financial reporting segment and Angie’s List, Inc. (“Angie’s List”). As of December 31, 2020, IAC’s economic and voting interest in ANGI Homeservices was 84.3% and 98.2%, respectively.
Through ANGI’s various brands, including HomeAdvisor, Angie’s List and Handy, we connectthat connects quality home service professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping,landscaping. During the year ended December 31, 2022, over 220,000 domestic service professionals actively sought consumer leads, completed jobs or advertised work through Angi Inc. platforms. Additionally, consumers turned to at least one Angi Inc. business to find a service professional for approximately 29 million projects during the year ended December 31, 2022.
In the fourth quarter of 2022, our Angi Inc. segment presentation was changed to reflect four operating segments, which now include: (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (includes Europe and Canada), with consumers.the various businesses within those segments operating under multiple brands. Angi Inc.'s financial information for prior periods has been recast to conform to the current period presentation.
Through ANGI, we acquired Handy Technologies, Inc. (“Handy”), a leading platform in
In the United States, for connecting individuals looking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals, in October 2018. ANGI also owns and operates Fixd Repair, a home warranty and service company, mHelpDesk, a provider of cloud-based field service software for small to mid-size businesses, and CraftJack, a third party lead generation service that connects homethe Ads business provides service professionals with consumers lookingthe capability to complete home projects.
In addition to ANGI’s leading U.S. operations, ANGI owns leading home services online marketplaces in France (Travaux), Germany (MyHammer), Netherlands (Werkspot)engage with potential customers, as well as with quoting, invoicing and Italy (Instapro), owns controlling stakes in leading home services online marketplaces in the United Kingdom (MyBuilder) and Canada (HomeStars), and has operations in Austria through its MyHammer business.
Services
Overview.payment services. The HomeAdvisor digital marketplace service (“HomeAdvisor”) connectsLeads business provides consumers with tools and resources to help them find and communicate with local, pre-screened and customer-rated service professionals nationwide for home repair, maintenance and improvement projects. HomeAdvisor providesThe Services business allows consumers with toolsto browse and resources to help them find local, pre-screened and customer-ratedbuy common household services at set prices directly from Angi Inc., rather than requesting quotes from service professionals, as well as instantly book appointments online. HomeAdvisor also connects 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. Handy connects consumers lookingonline for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals. ConsumersWhen consumers request and pay for household services directly through the Handy platform and Handy fulfills theseplatforms within the Services business, requests through the use ofare fulfilled by independently established home services providers engaged in a trade, occupation and/or business that customarily providesprovide such services. Together, we refer to the HomeAdvisor and Handy businesses in the United States as the “Marketplace.” All MarketplaceThe matching services and pre-priced booking servicesofferings and related tools and directories are provided to consumers free of charge. The Roofing business provides roof replacement and repair services.
For the quarter ended December 31, 2020, the Marketplace had a network of approximately 208,000 transacting service professionals, each of whom paid for consumer matches and/or or performed a job sourced through HomeAdvisor and/or Handy. Collectively, this service professional network provided services in more than 500 categoriesAds and 400 discrete geographical areas in the United States. Leads
Overview. The Marketplace generated approximately 32 million service requests during the year ended December 31, 2020. Service requests consist of fully completed and submitted domestic customer service requests submitted to HomeAdvisor and pre-priced bookings sourced through the HomeAdvisor and Handy platforms.
Angie’s ListAds business connects consumers with service professionals for local services through a nationwide online directory of service professionals in over 700across more than 500 service categories, as well as provides consumers with valuable tools, services and content (including verified reviews of local service professionals), to help them research, shop and hire for local services. Consumers can access the Angie’s List nationwide online directory and related basic tools and services free of charge upon registration, as well as viaby way of purchased membership packages. Angie’s ListThe Ads business also sells time-basedterm-based website and mobile and call centermagazine advertising to service professionals.professionals, as well as provides them with quoting, invoicing and payment services. The Leads business connects consumers with local, pre-screened and customer-rated service professionals nationwide for home repair, maintenance and improvement projects through a digital marketplace, as well as provides consumers with tools and resources relating to their service professional search.
Marketplace
Consumer ServicesServices. . Consumers can submitsearch for a request toservice professional in the nationwide online directory and/or be matched with a service professional through the HomeAdvisor and Handy platforms,Leads digital marketplace, as well as through certain paths on the Angie’s List platform and various third partythird-party affiliate platforms. Depending on the nature of the service request and the path through which it was submitted, consumers are generally matchedConsumers can also book appointments with up to four HomeAdvisor service professionals a Handy service professional or a combination of HomeAdvisorthrough online on-demand services and connect with service professionals by phone, as well as access related basic tools and services, including an online True Cost Guide, which provides project cost information for hundreds of project types nationwide, and a library of home services-related content consisting 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 from the Angie’s List nationwide directory (as and if available for the given service request).professionals.
Matches made through HomeAdvisor platforms and paths and various third party affiliate platforms are made by way of HomeAdvisor’sAngi Inc.’s proprietary algorithm, based on several factors (including the type of services desired, location and the number of service professionals available to fulfill the request). Matches made through the Handy platform and path are basedDepending on the typenature of the service desired, locationrequest and the datepath through which it was submitted, consumers are generally matched with service professionals from the Leads digital marketplace, a Services service professional or a combination of Ads and timeLeads service professionals from the consumer wants the service to be provided.
nationwide directory and digital marketplace, respectively (as and if available for a given search request).
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In all cases, service professionals may contact consumers with whom they have been matched (or who have booked a job) directly and consumers can generally review profiles, ratings and reviews of presented service professionals and select the service professional whom they believe best meets their specific needs. Consumers are under no obligation to work with any service professional(s) referred by or found through any of ANGI’s branded platformsAngi Inc. or third partythird-party affiliate platforms.
For matches described above, in the case of HomeAdvisor service professionals, consumers Consumers are responsible for booking the service and for paying the service professional directly, which can be done by the consumer independently or via the HomeAdvisor Pro-Pay App. In 2020, we expanded the features of this app to provide consumers with the ability to finance payments to service providers through a third party in addition to the ability to payindependently.
Consumers can rate service professionals directly throughlisted in the app. Innationwide online directory on a one- to five- star rating scale based on a variety of criteria, including overall experience, availability, price, quality, responsiveness, punctuality, professionalism and other criteria, depending on the casetype of Handyservice provided. Ratings on each applicable criterion are weighted across all reviews submitted for the service professional to produce such professional’s overall rating. Consumers can also provide a detailed description of their experiences with service providers. Ratings and reviews cannot be submitted anonymously, and there are processes in place to prevent service professionals consumers book and pay for services directly through the Handy platform and then the Handy platform fulfills the booking with independently established home services providers engaged in a trade, occupation and/from reporting on themselves or business that customarily provides such services.
In addition to the general matching services described above, HomeAdvisor provides several on-demand services, including Instant Booking and Instant Connect. Also, in the case of certain tasks, HomeAdvisor provides pre-priced booking services, pursuant to which consumers can request services through a HomeAdvisor platform and pay HomeAdvisor for the services directly. HomeAdvisor then fulfills the booking with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. Lastly, consumers can also access the online HomeAdvisor True Cost Guide, which provides project cost information for more than 400 project types nationwide,their competitors, as well as a library of home services-related content.
In addition to the general matching services described above, in certain markets, consumers can also submit a request to book a specific Handy service professional for a given job. Also, consumers who purchase furniture, electronics, appliances and other home-related items from select third party retail partners online (and in certain markets, in store) can simultaneously purchase assembly, installation and other related services to be fulfilled by Handy service professionals, which are then paid for directly through the applicable third party retail partner platform.detect fraudulent or otherwise problematic reviews.
Marketplace
Service Professional ServicesServices. . HomeAdvisor service professionals pay fees for consumer matchesThe Ads business sells term-based website and subscription fees for HomeAdvisor memberships, which are available for purchase through our sales force. The basic HomeAdvisor annual membership package includes membership in the HomeAdvisor network ofmobile and magazine advertising to certified service professionals, as well as access to consumer matches (for which additional fees are paid) through HomeAdvisor platforms and a listing in the HomeAdvisor online directory and certain other affiliate directories, among other benefits.
In addition to the commercial membership terms, in order to be admitted to the HomeAdvisor network, service professionals must satisfy certain criteria, including verification of any state-level licensure requirements and owners or principals of businesses affiliated with service professionals passing certain criminal background checks. Service professionals must maintain at least a three-star customer rating to remain in the HomeAdvisor network. If a service professional in the HomeAdvisor network fails to meet any eligibility criteria during the applicable membership term, refuses to participate in our complaint resolution process and/or engages in what we determine to be prohibited behavior through any of our service channels, the service professional will be subject to removal from the HomeAdvisor network.
Service professionals on the Handy platform are provided with access to a pool of consumers seeking service professionals. In order to be admitted to the Handy platform, service professionals must verify their home services experience, as well as satisfy certain credential verification and background checks, either as individual service professionals or as owners or principals of businesses affiliated with service professionals. Service professionals must maintain an acceptable customer service rating to remain on the Handy platform and access to the platform will be revoked in the case of service professionals who repeatedly receive low customer service ratings.
Angie’s List Consumer Services. Through Angie’s List, consumers can register and search for a service professional in the Angie’s List nationwide online directory and/or be matched with a service professional. Consumers who register can access ratings and reviews and search for service professionals, as well as access certain promotions. Two premium membership packages are available for a fee, which include varying degrees of online and phone support, access to exclusive promotions and features and the award-winning Angie’s List print magazine.
Angie’s List Service Professional Services. Angie’s List provides service professionalsthem with a variety of services and tools, including certification. Generally,quoting, invoicing and payment services. In order to become a certified service professionals with an overall member grade below a “B” are not eligible for certification. Serviceprofessional, service professionals must satisfy certain criteria, for certification, including retainingearning the requisite member grade,rating and validating their home services experience, and owners or principals of businesses affiliated with service professionals must pass certain criminal background checks and attest to applicable licensure requirements. Generally, service professionals with an average consumer rating below a “3” are not eligible for certification. Once eligibility criteria are satisfied, service professionals mustbecome certified and can then purchase term-based advertising to obtain certification. As of December 31, 2020, there were approximately 39,000and/or be matched with consumers. If a certified service professionals under contract for advertising.professional fails to meet any eligibility criteria, refuses to participate in Angi Inc.'s complaint resolution process and/or engages in what Angi Inc. determines to be prohibited behavior through any Angi Inc.
platform, existing advertising and exclusive promotions will be suspended and the related advertising contact may be terminated.
Certified service professionals rotate among the first service professionals listed in the nationwide online 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 to be matched with a service professional, HomeAdvisor’sAngi Inc.’s proprietary algorithm will determine where a given service professional appears within related results.
Service professionals pay fees for consumer matches, at their election, and subscription fees for Leads memberships. The basic annual membership package includes membership in the digital marketplace, as well as access to consumer matches (for which additional fees are generally paid) and a listing in the Leads online directory and certain other affiliated directories, among other benefits. In addition to complying with commercial membership terms, once a member, service professionals must maintain the requisite customer rating (at least three stars). And if a service professional fails to meet any eligibility criteria during the membership term, refuses to participate in Angi Inc.'s complaint resolution process or engages in what Angi Inc. determines to be prohibited behavior through any Angi Inc. platforms, the service professional may be removed from the digital marketplace.
Services
Overview.Through the Services business, Angi Inc. provides a pre-priced offering, pursuant to which consumers can request services through Angi and Handy branded platforms and pay for such services on the applicable platform directly. When consumers request household services directly through Services platforms, requests are fulfilled by independently established home services providers engaged in a trade, occupation and/or business that customarily provide such services.
Consumer Services. Consumers can submit requests for work to be done on Angi and Handy branded platforms and referrals will be made based on the type of service desired, location and the date and time the consumer wants the service to be provided. In addition, consumers who purchase furniture, electronics, appliances and other home-related items from select third-party retail partners online (and in certain markets, in store) can simultaneously purchase assembly, installation and other related services to be fulfilled by a Services service professional, which services are then paid for by the consumer directly through the applicable third-party retail partner platform.
Service Professional Services. Services service professionals are provided with access to a pool of consumers seeking service professionals and must validate their home services experience, as well as attest to applicable licensure requirements and maintain an acceptable rating to remain on Services platforms. In addition, owners or principals of businesses affiliated with Services service professionals must pass certain criminal background checks. Access to Services platforms will be revoked for service professionals that repeatedly receive low customer satisfaction ratings.
Roofing
The business within our Roofing segment provides roof replacement and repair services, primarily in Florida (and, to a lesser extent, in Arizona and Texas). Requests for roof replacement and repair services are currently fulfilled via Angi Roofing, LLC, the entity that was formed by Angi Inc. in July 2021 to acquire certain assets and liabilities of Total Home Roofing, LLC. Roofing consumers are identified through lead generation services, as well as through word-of-mouth and referrals. Angi Roofing, LLC contracts with independent roofing professionals in each market to fulfill service requests.
International (Europe and Canada)
Through the International (Europe and Canada) segment, Angi Inc. also operates several international businesses that connect consumers with home service professionals, including: (i) Travaux, MyHammer and Werkspot, leading home services marketplaces in France, Germany and the Netherlands, respectively, (ii) MyBuilder, one of the leading home services marketplaces in the United Kingdom, (iii) the Austrian operations of MyHammer, (iv) the Italian operations of Werkspot and (v) Homestars, a leading home services marketplace in Canada. Angi Inc. owns controlling interests in Travaux, MyHammer, Werkspot and MyBuilder and wholly owns Homestars. The business models of the international businesses vary by jurisdiction and differ in certain respects from the business models of Angi Inc.’s various domestic businesses.
Revenue
ANGI
Ads and Leads revenue is primarily derived fromreflects domestic ads and leads revenue, including consumer connection revenue which consists of fees paid by HomeAdvisor service professionals for consumer matches, (regardless of whether the service professional ultimately provides the requested service) and revenue from completed jobs sourced through the HomeAdvisorservice professionals under contract for advertising and Handy platforms. membership subscription revenue from service professionals and consumers.Consumer connection revenue varies based upon several factors, including the
service requested, product experience offered and geographic location of service.
ANGI Services revenue is also derived from: (i) sales of time-based website, mobileprimarily reflects revenue from pre-priced offerings, pursuant to which consumers request services through Services platforms and call center advertisingAngi Inc. then engages a service professional to perform the service. Roofing revenue primarily reflects revenue from Angi Inc.’s roof replacement offering, through which consumers purchase services directly from the Roofing business and Angi Inc. then engages a Roofing service professional to fulfill these requests. International revenue reflects revenue generated within the International segment (includes businesses in Europe and Canada), including consumer connection revenue for consumer matches and membership subscription revenue from service professionals (ii) HomeAdvisor service professional membership subscription fees, (iii) membership subscription fees from consumers and (iv) service warranty subscription and other services.consumers.
Marketing
In March 2021, Angi Inc. (then known as ANGI Homeservices Inc.) updated one of its leading websites and brands, Angie’s List, to Angi, and concentrated its marketing investment in the Angi brand in order to focus its marketing, sales and branding efforts to a single brand.
Angi Inc. markets its various products and services to consumers primarily through digital marketing (primarily paid and free search engine marketing, display advertising and third partythird-party affiliate agreements) and, as well as through traditional offline marketing (national television and radio campaigns), as well as through free search engine marketing and email.e-mail. Pursuant to third partythird-party affiliate agreements, third parties agree to advertise and promote certain of ourAngi Inc.’s various products and services (and those of certain of ourits various service professionals) on their platforms. In exchange for these efforts, these third parties are paid a fixed fee when visitors from their platforms click through and submit a valid service request through the applicable ANGI platform,Angi Inc. platforms, or when visitors submit a valid service request on the affiliate platform and the affiliate transmits the service request the applicable ANGI platform. ANGIto Angi Inc. Angi Inc. also markets its various products and services to consumers through relationships with select third partythird-party retail partners and, to a lesser extent, through partnerships with other contextually related websites and direct mail.
ANGI
Angi Inc. markets HomeAdvisorterm-based advertising and related products, as well as matching services and digital marketplace membership subscriptions, to service professionals primarily through its sales force, which is based in various locations across the United States (the Denver, Colorado area: Lenexa, Kansas; New York, New York; Indianapolis, Indiana; and Chicago, Illinois), as well as through remotely-based sales representatives.force. These products and services are also marketed, together with Handy products, pre-priced booking servicesofferings and various directories, through paid search engine marketing, digital media advertising and direct relationships with trade associations and manufacturers. Term-based advertising
Competition
The home services industry is highly competitive and fragmented, and in many important respects, local in nature. ANGIOur Angi Inc. businesses compete with, among others: (i) search engines and online directories, (ii) home and/or local services-related 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. ANGIThese businesses also competescompete with local and national retailers of home improvement products that offer or promote installation services. ANGI believes itsWe believe Angi Inc.’s biggest competition comes from the traditional methods most people currently use to find service professionals, which are by word-of-mouth and through referrals.
We believe that ANGI’sthe ability of Angi Inc. to compete successfully will depend primarily upon the following factors:
•the ability to continue to successfully build and maintain awareness of, and trust and loyalty to, the Angi brand;
•the functionality of Angi Inc. websites and mobile applications and the attractiveness of their features and Angi Inc. products and services generally to consumers and service professionals, as well as the continued ability to introduce new products and services that resonate with consumers and service professionals generally;
•the ability to expand pre-priced offerings, while balancing the overall mix of service requests and directory services on Angi Inc. platforms generally;
•the size, quality, diversity and stability of ANGI’sthe network of service professionals and the breadth of its online directory listings;
•itsthe ability to consistently generate service requests jobs and pre-priced bookings through the Marketplace and leads through ANGI’s online directoriesAngi Inc. platforms that generate businessconvert into revenue for service professionals in a cost-effective manner;
•itsthe ability to continue to attract (and increase) traffic to Angi Inc. brands and platforms through search engines, including the ability to ensure that information from such brands and platforms and related links are displayed prominently in free search engine results and that paid search marketing efforts are cost-effective, as well as the ability to respond to changes in the usage and functioning of search engines;
•the ability to increasingly engage with consumers directly through itsAngi Inc. platforms, including its various mobile applications (rather than through search engine marketing or via free search engine referrals);
•the functionality of the websites and mobile applications of ANGI’s various brands and the attractiveness of their features and ANGI’s products and services generally to consumers and service professionals, as well as ANGI’s continued ability to introduce new products and services that resonate with consumers and service professionals generally;
•its ability to continue to build and maintain awareness of, and trust in and loyalty to, ANGI’s various brands, particularly its Angie’s List, HomeAdvisor and Handy brands; and
•the quality and consistency of service professional pre-screening processes and ongoing quality control efforts, as well as the reliability, depth and timeliness of customer ratings and reviews.
Vimeo
Overview
Through Vimeo, we operate the world’s leading all-in-one video software solution, providing the full breadth of video tools through a software-as-a-service (“SaaS”) model. Vimeo’s comprehensive tools empower its users to create and communicate through high-quality video on a single, integrated platform. At December 31, 2020, IAC held 89.7% of Vimeo’s Class A voting common stock and 97.6% of Vimeo's Class B non-voting common stock, or 93.2% of Vimeo's total outstanding capital stock.
Services
Vimeo offers its services on basic (free), self-serve subscription plan and enterprise subscription plan bases, effectively employing a “freemium” pricing strategy that offers free membership and access to its video tools alongside paid subscription plans for advanced video capabilities.
Any user can access a basic (free) Vimeo membership by signing up with an email address. With a basic membership, users can create, record, upload and share videos through Vimeo’s website and native apps for free. Basic users are subject to weekly and total caps on uploaded videos and do not have access to advanced video capabilities, such as live streaming or the ability to add team members. Vimeo provides opportunities for basic users to upgrade to a paid subscription at natural points in the user experience, such as when a basic user nears or hits an uploaded video cap. Vimeo also highlights the advanced video capabilities of its subscription plans natively within the basic user experience.
Vimeo also offers various subscription plans on a “self-serve” basis, which means that users can sign up directly through Vimeo’s website and native apps and pay related subscription fees by way of a credit card or in-app purchase mechanisms. Subscription fees for self-serve plans vary depending upon the precise mix of capabilities within a given plan type, which include video creation, collaboration, distribution, hosting, marketing, monetization and analytics, and in the case of higher-priced plan types, the ability to add multiple team members to the plan.
Vimeo also offers various enterprise subscription plans through its sales force. Enterprise plans provide users with additional capabilities beyond the self-serve plans described immediately above, as well as options for dedicated support, account management, service level agreements and professional live event services. Types of enterprise plans currently include: (i) Vimeo Enterprise, an organization-wide video solution that includes secure unlimited live streaming of events, a corporate video portal, single-sign-on support, content delivery network optimization to improve quality-of-service in corporate networks and the ability to use Vimeo technology on a fully branded basis (so that the company’s own branding is featured instead of Vimeo branding), (ii) Vimeo OTT, an over-the-top (OTT) video monetization solution that allows users to launch and run their own video streaming channels directly to their respective audiences through a branded web portal, mobile apps and Internet-enabled TV apps, and (iii) Vimeo Custom, custom plans designed and optimized for high-volume users (for example, plans that offer significantly higher storage or bandwidth).
As of December 31, 2020, there were approximately 1.5 million subscribers to Vimeo’s various self-serve and enterprise plans and its video player was embedded on millions of websites and powered billions of views a month, with over 300,000 new videos being uploaded to the Vimeo platform each day.
Marketing
Vimeo acquires subscribers primarily through: (i) the conversion of basic (free) users to subscribers through organic efforts, including word-of-mouth referrals and in-product messaging, (ii) the acquisition of subscribers through marketing spend, primarily through digital media channels (including paid search engine marketing, social media, email campaigns and display advertising), (iii) in the case of subscribers to its enterprise services, its sales force, and (iv) the acquisition of subscribers through third party partnerships and integrations.
Revenue
Vimeo revenue is derived primarily from annual and monthly SaaS subscription fees paid by subscribers for self-serve and enterprise subscription plans, with the most common subscription being an annual subscription.
Competition
Vimeo competes with large social media platforms (such as Facebook and YouTube) that allow users to share videos for free, as well as provide users with a built-in audience, social media-specific capabilities and the ability to monetize video through advertising. Unlike Vimeo, these platforms generally do not allow users to control whether advertising accompanies their videos (and if so, the type of advertising). Vimeo also competes with a variety of companies that provide niche video services focused on a specific user segment or video use case.
We believe that Vimeo differentiates itself from its competitors by providing an ad-free, high quality centralized video solution that eliminates the need for users to connect and pay for multiple software providers and is easy to use and affordable. We also believe that the diversity, size and engagement of Vimeo’s creative community is an asset that is difficult for others to replicate.
We believe that Vimeo’s ability to compete successfully will depend primarily upon the following factors:
•the quality of its technology platforms, video tools and user and subscriber experience;
•whether its SaaS subscription plans resonate with subscribers, particularly with small business and enterprise subscribers;
•its ability to drive visitors to its platforms and acquire subscribers in a sustainable manner through its sales and marketing efforts;
•its ability to retain existing subscribers by continuing to provide a compelling value proposition and convert users of its basic (free) service into subscribers;
•the continued ability of users and subscribers to distribute Vimeo-hosted content across third party platforms (including social media platforms (Facebook, YouTube, LinkedIn, Twitter and Pinterest), vertical content websites, apps and marketplaces) and the prominence and visibility of such content within search engine results and third-party platforms;
•its ability to continue to host and stream high-bandwidth video on a scalable platform; and
•the recognition and strength of the Vimeo brand relative to competitor brands.
Dotdash
Overview
Dotdash is a portfolio of digital publishing brands that collectively provide expert information and inspiration in select vertical content categories to over 90 million users each month.
Content
As of the date of this annual report, Dotdash consisted of the following brands:
•the Verywell family of brands, which provides information and resources through which users can explore a full spectrum of health and wellness topics, from comprehensive information on medical conditions to advice on fitness, nutrition, mental health, pregnancy and more;
•the Spruce family of brands, which provides information and resources relating to home decor, home repair, recipes, cooking techniques, pets and crafts, as well as practical, real-life tips and inspiration to help users create their best home;
•the Balance family of brands, which provides information and resources relating to personal finance, career and small business topics that makes personal finance easy to understand and clear, practical and straightforward personal financial advice;
•Investopedia, an online resource that provides investment and personal finance education and information;
•Lifewire, a leading online technology information property that provides expert-created, real-world technology information, resources and content with informative visuals and straightforward instruction to help users fix tech gadgets, learn how to perform specific tech tasks and find the best tech products;
•TripSavvy, a travel website written by real experts (not anonymous reviewers) where users can find useful travel advice and inspiration from destinations all over the world;
•Simply Recipes, a food and cooking website that provides original recipes designed to help people get easy and delicious food on the table for themselves and their families;
•Serious Eats, a leading online resource for all things food and drink, including meticulously tested recipes, in-depth, science-based explanations of cooking techniques, detailed reviews of cooking equipment and guides to ingredients, dishes and cuisines, as well as food-focused essays, investigations and profiles;
•Byrdie and MyDomaine, beauty and lifestyle websites where users can find beauty, style and healthy relationship advice, as well as curated home-design inspiration and fresh recipes;
•Brides, a leading online resource that inspires and guides users as they make decisions from pre-engagement to honeymoon and that is committed to bringing its users an inclusive look at the world of weddings (every type of couple, wedding and celebration);
•Liquor.com, a website dedicated to good drinking and good living that features award-winning articles, hand-selected cocktail recipes, bar guides and more;
•TreeHugger.com, a leading online resource for news and information related to sustainability, as well as green news, solutions and product information;
•ThoughtCo, a leading online information and reference site with a focus on expert-created education content where users can find answers to questions and information regarding a broad range of disciplines, including science, technology and math, languages, the humanities and the arts; and
•the general information websites, Liveabout.com and Aboutespanol.com.
Through these brands, Dotdash provides original and engaging digital content in a variety of formats, including articles, illustrations, videos and images. Dotdash works with hundreds of experts in their respective fields to create the content that it publishes, including doctors, chefs and certified financial advisors, among others.
Revenue
Dotdash revenue consists principally of display advertising revenue and performance marketing revenue. Display advertising revenue is generated primarily through digital display advertisements sold directly by the Dotdash sales team and through programmatic advertising networks. Performance marketing revenue includes affiliate commerce and performance marketing commissions. Affiliate commerce commission revenue is generated when Dotdash refers users to commerce partner websites resulting in a purchase or transaction. Performance marketing commissions are generated on a cost-per-click or cost-per-action basis.
Marketing
Dotdash markets its content through a variety of digital distribution channels, including search engines, social media platforms and via direct navigation to Dotdash sites. Users who engage with Dotdash brands are invited to share Dotdash content and sign up for Dotdash email newsletters.
Competition
Dotdash competes with a wide variety of parties in connection with its efforts to attract and retain users and advertisers. Competitors primarily include other online publishers and destination websites with brands in similar vertical content categories and social channels.
Some of Dotdash’s current competitors have longer operating histories, greater brand recognition, larger user bases and/or greater financial, technical or marketing resources than Dotdash does. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their content, which could result in greater market acceptance of their content relative to Dotdash content.
We believe that Dotdash’s ability to compete successfully will depend primarily upon the following factors:
•the quality and freshness of the content and features on Dotdash websites, relative to those of its competitors;
•its ability to successfully create or acquire content (or the rights thereto) in a cost-effective manner;
•the relevance, expertise and authority of the content featured on Dotdash websites; and
•its ability to successfully drive visitors to Dotdash’s portfolio of digital brands in a cost-effective manner.
Search
Overview
Our Search segment consists of Ask Media Group, and our Desktop business. Through Ask Media Group, we primarily providea collection of websites providing general search services and toinformation, and a lesser extent, content, through a variety of ownedDesktop business, which includes direct-to-consumer downloadable desktop applications and operated websites that help users find the information they need.business-to-business partnership operations. Ask Media Group’s websites include, among others,others: Ask.com, a search site with a variety of fresh and contemporary content (celebrities, culture, entertainment, travel and general knowledge); Smarter.comReference.com, a search and general knowledge content site that provides content across select vertical categories (history, business and finance and geography, among other verticals); Consumersearch.com, a search and content website that provides content designed to simplify the product research process; and Shopping.net, a vertical shopping search site, each of which contains a mix of search services and/or content targeted to various user or segment demographics. Through our Desktop business, we are a leading provider of advertising-driven desktop applications.
Products, Services and Content
Through Ask Media Group, we provide search services that generally involve the generation and display on a search results page of a set of hyperlinks to web pages 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. Paid listings are advertisements displayed on search results pages that generally contain a link to an advertiser’s website. Paid listings are generally displayed based on keywords selected by the advertiser and relevancy to the search query. Through certain of Ask Media Group’s various websites, digital content in a variety of formats, primarily articles with images and/or illustrations, as well as slideshows or more in-depth presentations, is also provided in addition to general search services. Display advertisements and/or native advertising (or advertising(advertising that matches the look, feel and function of the content alongside which it appears) generally appear alongside digital content.
Through ourThe Desktop business we own and operateprimarily owns and/or operates a portfolio of legacy (meaning they are no longer actively marketed and distributed to new users) consumer desktop browser applications and websites that provide users with access to a wide variety of online content, tools and services. Aligned around the common theme of making the lives of users easier in just a few clicks, these products span a myriad of categories, including: FromDocToPDF, through which users can convert documents from one format into various others; MapsGalaxy, through which users can access accurate street maps, local traffic conditions and aerial and satellite street views; and A-Z Manuals, through which users can access product instruction manuals online. Users who download our desktop browser applications are provided withservices, including new tab search services as well asand the option of default browser search services. Desktop browser applications are distributed to consumers free of charge on an opt-in basis directly through direct to consumer (primarily the Chrome Web Store) distribution channels. Through our Desktop business, we also develop, distribute and provide a suite of Slimware-branded desktop-support software and services.
Revenue
Ask Media Group revenue consists principally of advertising revenue generated principally through the display of paid listings in response to search queries, as well as from display advertisements appearing alongside content on its various websites and, to a lesser extent, affiliate commerce commission revenue. Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites. The majority of the paid listings displayed by Ask Media Group businesses is supplied to us by Google Inc. (“Google”) pursuant to aour services agreement with Google. Pursuant to this agreement, Ask Media Group businesses 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 paidPaid 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 clickprice-per-click basis and when a user submits a search query through an Ask Media Group business and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing and shares a portion of the fee charged to the advertiser with us.the Ask Media Group business. Ask Media Group recognizes paid listing revenue when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third party,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 third-party distributor
Revenue from display advertising is generated through advertisements sold through programmatic advertising networks.Affiliate commerce commission revenue is generated when an Ask Media Group property refers users to commerce partner websites resulting in a purchase or transaction.
Revenue from our Desktop revenuebusiness largely consists of advertising revenue generated principally through the display of paid listings in response to search queries. The majority of the paid listings displayed by our Desktop businesses are supplied to us by Google in the manner, and pursuant to the services agreement with Google, described above. To a lesser extent, Desktop revenue also includes fees paid by subscribers for downloadable desktop applications, as well as display advertisements.
Marketing
Ask Media Group’s various properties are marketed primarily through the acquisition of traffic from major search engines and their syndication networks, which involves the purchase of keyword-based sponsored listings that link to search results pages of Ask Media Group properties, and other types of display media (primarily banner advertisements).
Ask Media Group content is also marketed through a variety of digital distribution channels, including search engines, social media platforms, display advertising networks and native advertising networks, as well as a number of advertising agencies that acquire traffic via these channels for certain Ask Media Group properties.
Our variousSearch powered desktop applications arewere historically marketed to users primarily through business-to-business partnerships and to a lesser extent digital display advertisements and paid search engine marketing efforts.
Competition
Competition
In the case of general search services, Ask Media Group’s competitors include Google, Yahoo!, Bingmajor search engines and other destination search websites and search-centric portals that engage in marketing efforts similar to those of Ask Media Group, such as System1, CBSi and Verizon Media, among others.Group. In the case of content, Ask Media Group’s competitors primarily include online publishers and destination websites with brands in similar vertical content categories and social channels. We believe that Ask Media Group’s ability to compete successfully will depend primarily upon:
•itsthe continued ability to monetize search traffic via paid search listings;listings, particularly in the case of mobile traffic;
•itsthe continued ability to market itsAsk Media Group search websites in a cost-effective manner; manner, which depends, in part, on the ability to continue to obtain quality traffic from valid sources (from real users with genuine interest) in a cost- effective manner to Ask Media Group search websites;
•the relevance and authority of search results, answers and other content displayed on itsAsk Media Group various properties;
•itsthe continued ability to differentiate Ask Media Group search websites (which depends primarily upon itits continued ability to deliver quality, authoritative and trustworthy content to users), as well as the ability to attract advertisers to these websites;
•itsthe ability to successfully create or acquire content (or the rights thereto) for marketing purposes in a cost-effective manner; and
•itsthe ability to monetize content pages with display, and native advertising and other forms of digital advertising.
Our Desktop business competes with a number of other companies that develop and market similar desktop browser application products and distribute them through direct-to-consumer and third party agreements. Our Desktop business also competes with search engines to provide users with new tab, homepage and/or default search services. We believe that the ability of our Desktop business to compete successfully will depend primarily upon the following factors:
•its ability to maintain industry-leading monetization solutions for desktop browser applications in response to evolving technology and changing requirements from operators of large platforms, including Google;
•the size and stability of its global base of installed desktop application products and the ability to grow this base;
•the continued creation of desktop browser applications that resonate with consumers, which depends upon the continued ability to bundle attractive features, content and services (some of which may be owned by third parties);
•its ability to differentiate its desktop browser applications from those of competitors; and
•its ability to market and distribute desktop browser applications through direct-to-consumer (primarily the Chrome Web Store) channels in a cost-effective manner.
Some competitors of Ask Media Group and our Desktop business have longer operating histories, greater brand recognition, larger user bases and/or greater financial, technical or marketing resources than these businesses do. As a result, they have the ability to devote comparatively greater resources to the development and promotion of their products, services and/or content, which could result in greater market acceptance of their products, services and/or content relative to those of Ask Media Group and our Desktop business.
Emerging & Other
Overview
Our Emerging & Other segment primarily includes:
•Care.com, a leading online destination for families to connect with caregivers for their children, aging parents, pets and homes, and for caregivers to connect with families seeking care services;
•Mosaic Group, a leading developer and provider of global subscription mobile applications;
•Care.com, the leading online destination for familiesVivian Health, a platform to easilyefficiently connect healthcare professionals with caregivers for their children, aging parents, pets and homes and for a wide variety of caregivers to easily connect with families;
•Bluecrew, a technology driven staffing platform exclusively for flexible W-2 work;job opportunities;
•The Daily Beast, a website dedicated to news, commentary, culture and entertainment that publishes original reporting and opinion from its roster of full-time journalists and contributors;
•NurseFly, a platform to efficiently connect healthcare professionals with job opportunities; and
•IAC Films, a provider of production and producer services for feature films, primarily for initial sale and distribution through theatrical releases and video-on-demand services in the United States and internationally.
internationally;
Care.com
Mosaic Group
Overview. OverviewThrough Mosaic Group, we are a leading developer and provider of global subscription mobile applications. As of December 31, 2020, Mosaic Group had approximately 3.8 million mobile paying subscribers.
Through Mosaic Group, collectively, we operated 44 branded mobile applications in over 28 languages across 192 countries as of December 31, 2020. These branded mobile applications consist of applications spanning a variety of categories, each designed to meet the varying and unique needs of subscribers and enhance their daily lives, including: iTranslate, through which subscribers can connect and communicate across numerous languages; TelTech, which develops and distributes unique and innovative mobile communications applications that help protect consumer privacy; Robokiller, which thwarts both telemarketing and illegal spam phone calls; NOAA Radar, which provides up-to-date weather information and storm tracking worldwide; Scanner for Me, which allows users to create, sign and edit PDFs using the camera on their mobile phones; Productive, a goal-setting and habit-tracking app that allows consumers to better plan and control their lives; Planes Live, a go-to companion application for frequent fliers; and Daily Burn, which provides streaming fitness and workout videos. Mosaic Group’s various branded mobile applications are distributed to subscribers primarily through the Apple App Store and Google Play Store.
We believe that Mosaic Group has the personnel, systems and expertise necessary to build and scale leading mobile applications and grow mobile subscription businesses. By applying these resources and skills to both organically developed and acquired mobile applications, Mosaic Group has demonstrated success in scaling mobile applications across a wide variety of utility and productivity categories. With a deep commitment to delivering continuing value to its subscribers and users and a continued focus on entering new categories, data-driven decision-making based on key performance indicators and best-in-class data modeling, user acquisition and optimization teams, Mosaic Group has grown to become one of the world’s leading mobile subscription businesses.
Revenue. Mosaic Group revenue consists primarily of fees paid by subscribers for downloadable mobile applications distributed through the Apple App Store and Google Play Store and directly from consumers, as well as revenue generated from display advertisements.
Marketing.We market our mobile applications to users primarily through digital storefronts (primarily the Apple App Store and Google Play Store) and digital display advertisements on social media, messaging and media platforms, as well as in-app and cross-app advertising.
Competition.The applications industry is competitive and has no single, dominant desktop or mobile application brand globally.
We believe that the ability of Mosaic Group to compete successfully will depend primarily upon the following factors:
•the continued growth of consumer adoption of free and paid mobile applications generally and related engagement levels;
•its ability to operate its various mobile applications as a scalable platform;
•its ability to retain existing subscribers and acquire new subscribers in a cost-effective manner;
•its ability to market and distribute its mobile applications through third party digital app stores, including the Google Play Store and the Apple App Store, in a cost-effective manner;
•its ability to continue to optimize its marketing and monetization strategies;
•the continued growth of smartphone adoption in certain regions of the world, particularly emerging markets;
•the continued strength of Mosaic Group brands; and
•its ability to introduce new and enhanced mobile applications in response to competitor offerings, consumer preferences, platform demands, social trends and evolving technological landscape.
Care.com
Overview. . Through Care.com, we are thea leading online destination for families to easily connect with caregivers for their children, aging parents, pets and homes, and for a wide variety of caregivers to easily connect with families.families seeking care services. Care.com is building a premier destination for families, caregivers and enterprises (through which they can provide care-related benefits to their employees) that features a portfolio of products and services spanning the entire care journey, including guidance for care options, a marketplace for searching for and matchingconnecting with in-home caregivers for a wide range of care options (such as a nannies for children or home health care aidescompanions for seniors), a directory of out-of-home care options, a Safety Center, care management features and access to care-related activitiescontent and resources.
Services. Through Care.com we primarily offeroffers online consumer matching and consumer payment solutions for families searching for care for their loved ones and enterprise solutions (Care For Business) for employers seeking to provide care-related benefits to their employees.
•Consumer matching solutions. Through free and paid memberships to consumer matching services, Care.com offers a variety of resources designed to match and guide families toward the best care for their loved ones. Resources include online matches with potential caregivers and related resources, augmented by assistance from subject matter experts.solutions. Free basic membership provides families with the ability to set up an account, post a job, search and review caregiver profiles and receive applications forfrom background-checked caregivers. PaidTo engage with caregivers, families must generally upgrade to a paid premium membership, in addition towhich includes all basic membership features, provides families withplus the ability to contact caregivers to schedule interviews, request caregiverpurchase additional background checks, reply to applications and messages from caregivers and access certain promotions and discounts. In addition, where available, families can book caregivers for certain care services directly through Care.com for a fee.
Through our consumer matching solutions,services, families arecan be matched with caregivers (in-home and out-of-home) who meet their diverse and evolving care needs (long term, short term(full-time, part-time, long-term, short-term and occasional at irregular intervals). Matching is facilitated by algorithms designed to highlight the most relevant caregiver(s) (based on user-generated content regarding the type and frequency of care requested, hourly rate for the job and responsibilities and other job requirements), as well as an internally monitored messaging system. In-home caregivers create and post detailed Care.com profiles that include photos, bios, work histories and reviews, the type of care they primarily provide, their experience, certifications and qualifications, and their availability, hourly rate and payment details, among other information. Out-of-homeBefore caregivers and other care-related businesses (such as seniorwith Care.com profiles can communicate directly with families seeking care, facilities, tutoring companies, camps and activities) can also market their services, as well as recruit individual caregivers for employment, through Care.com.
To enhance the safety of our consumer matching solutions, we require all individual caregivers on our matching platform in the United States they must complete ato complete CareCheck, a background check conducted(conducted by a third partythird-party consumer reporting agency. Weagency). Care.com also offeroffers families and caregivers the ability to purchase multiple levels of additional background check options through third partya third-party consumer reporting agencies for purchase by families and caregivers.agency. While Care.com strongly believes that While we believe that CareCheck and the additional background checks are good practice and recommend them to families and caregivers,safety measures, they have limitations and even with these safety measures, no assurances can be provided regardingcannot guarantee the future behavior of any caregiver on our platform.using Care.com.
WeCare.com also maintainmaintains a safety centerSafety Center that provides resources and information designed to help families and caregivers
to families for
WeCare.com also encourageencourages members to contact usCare.com if they believe another member or caregiver may have violated ourCare.com's community guidelines.
guidelines.
Out-of-home care-related businesses (such as daycare centers, senior care facilities, tutoring companies, camps and activities) can also market their services through Care.com.
•Consumer payment solutions. Through Care.com, we also offer consumer payments solutions that provide families with several options to manage their financial relationshiprelationships with their caregiver,caregivers, as well as help caregivers professionalize and manage their careers. These payment solutions include:
•HomePay our, a leading payroll and tax product for families thatwho employ nannies, housekeepers or other domestic employees. HomePayis a technology-based, turnkey service that includes automated payroll processing, andas well as household employer-related tax filings at the federal, state and local levels. In addition,levels for families who are required to treat their caregivers as household employees and such caregivers' wages exceed the annual reportable threshold amount that would require them to make tax filings. Facilitating household employer-related tax filings helps to ensure that families are able to avail themselves of certain tax credits and savings, which can help mitigate care-related costs. Similarly, caregivers who are paid through HomePay may qualify for importantlegally can access a variety of benefits, such asincluding unemployment insurance and social security.security benefits (among others). HomePay is available to anyone (not just members of our consumer matching solutions) for a fee; and
•our a peer-to-peer payments solution whichthat enables families to make electronic payments to their caregivers directly through our websiteCare.com's platform or mobile applications. We believeCare.com believes that this solution is particularly applicable to (andrelevant and helpful in the case of)of families who pay caregivers who provide care services at irregular intervals (such as babysitters, after-school caregivers or tutors, or in varying amounts each time services are performed).
•Enterprise solutions. Through Care.com we also offeroffers Care@Work,Care For Business, a comprehensive suite of care benefits and related services that employers can offer their employees as an employee benefit. Currently, employers can choose from a number of services, including:
•our consumer matching solutions;
•back-up care services (in-home and in-center) for employees who need alternative care arrangements
for their child or senior when their regular carecaregiver is not available (for example, due to a school closures
closure or the illness of their child or regular caregiver)caregiver illness); and
•access to consultation and referral services to support a wide array of work-life challenges faced by
employees, such as senior care planning services to assisthelp employees with findingfind the most suitable care option
for their aging family membermembers, access to mental health experts and relatedresources, tutoring and college prep
assistance, lactation support, relocation services and financial guidance and legal services and educational assistance.(among
other services).
.
Employers generally pay for our enterprise solutions on a per employee per year basis and have access to features that allow them to manage employee access and track aggregate usage. Depending on the suite of services selected and the employer’s preference, the employer preferences, employers may subsidize all, a portion or none of the cost of these solutions for employees. Additionally, employers may add services during the term of their contract on an as needed basis to enhance the support they provide to their employees.
Revenue.Care.com generates revenue primarily through subscription fees from families and caregivers for its suite of products and services, as well as through annual contracts with corporate employers who provide access to Care.com’s suite of products and services as an employee benefit and through contracts with businesses that recruit employees through its platform.
Marketing. Care.com markets its various products and services to families and caregivers through a diverse mix of free and paid offline and online marketing, as well as its sales team. We believeCare.com believes that most families and caregivers currently find Care.com through unpaid marketing channels primarily(primarily through word-of-mouth, referrals and online communities and forums,forums), as well as through search engine marketing (free and paid) and repeat users. Paid direct marketing efforts include offline channels, such as network and cable TV, OTT channels and direct mail, as well as through paid search engine marketing, display advertising, third partythird-party affiliate agreements and select paid job board sites. In addition, Care.com markets its employee-benefit product offerings directly to enterprises through its sales team.
Competition. In the case of consumer matching solutions, Care.com primarily competes with traditional offline consumer resources for finding caregivers, as well as online job boards and other online care marketplaces.marketplaces, as well as online care-related platforms in vertical categories. We believe Care.com’s biggest competition comes from the traditional offline methods through which most consumersfamilies find caregivers, which are bythrough word-of-mouth, personal referrals and online communities and forums. In the case of payment solutions,HomePay, Care.com primarily competes with similar products offered by providers of online and offline payroll services. Care.com also competes for a share of the overall recruiting and advertising budgets of care-related businesses with traditional, offline media companies and other online marketing providers. In the case of enterprise solutions,Care For Business, Care.com primarily competes with other providers of employer-sponsored care services and employee benefit products, particularly those that provide backupback-up child and senior care services.
We believe that Care.com’s ability to compete successfully will depend primarily upon the following factors:
•the size, quality, diversity and stability of itsthe Care.com network of families and caregivers;
•the functionality and reliability of itsCare.com websites and mobile applications and the attractiveness of their features (and Care.com’s various products and services) generally to families and caregivers;
•itsthe ability to increase the frequency of family and caregiver use of Care.com products and services generally;
•the continued ability to innovate and introduce new products and services that resonate with families and caregivers;
•the quality, completeness and consistency of caregiver profiles and job postings, as well the reliability of background check and other securitysafety measures and the trustworthiness and reliability of caregivers;
•itsthe ability to continue to build and maintain awareness of, and trust in and loyalty to, the Care.com brandsbrand;
•its ability to continue expand its enterprise solutions business; and
•itsthe ability to continue to expand itsthe enterprise solutions business;
•the ability to continue to attract (and increase) traffic to Care.com through search engines, including the ability to ensure that links to Care.com platforms are displayed prominently in free search engine results and that paid search marketing efforts are cost-effective, as well as the ability to respond to changes in the usage and functioning of search engines; and
•the ability to continue to expand Care.com businesses in jurisdictions outside of the United States.
Mosaic Group
Overview. Through Mosaic Group, we are a leading developer and provider of global subscription mobile applications. As of December 31, 2022, Mosaic Group had approximately 3.5 million mobile paying subscribers.
Mosaic Group operated 45 branded mobile applications in over 28 languages across 192 countries as of December 31, 2022. These branded mobile applications consist of some of the largest and most popular applications in the following verticals: Communications (RoboKiller, TapeACall, Trapcall), Language (iTranslate, Speak & Translate), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero) and Lifestyle (Blossom, Pixomatic). Robokiller thwarts both telemarketing and illegal spam phone calls, TapeACall provides prime-quality call recordings services and TrapCall unmasks the identity of blocked or unknown callers. Through iTranslate, subscribers can connect and communicate across numerous languages, and Speak & Translate provides voice and text translation services.Clime: NOAA Weather Radar Live provides up-to-date weather information and storm tracking worldwide and Weather Live provides customized weather forecasts based on user selected parameters. Through PDF Hero, users can annotate and store all of their PDF files in one place, and through Scan Hero, users can create, sign and edit PDFs by way of the camera on their mobile phones. Blossom provides plant identification and content on plant care and Pixomatic is a photo editing application. Mosaic Group’s various branded mobile applications are distributed to subscribers primarily through the Apple App Store and Google Play Store.
We believe that Mosaic Group has the personnel, systems and expertise necessary to continue to build and scale leading mobile applications and grow mobile subscription businesses. By applying these resources and skills to both organically developed and acquired mobile applications, Mosaic Group has demonstrated success in scaling mobile applications across a wide variety of utility and productivity categories.
Revenue. Mosaic Group revenue consists primarily of fees paid by subscribers for downloadable mobile applications distributed through the Apple App Store and Google Play Store and fees received directly from consumers, as well as display advertisements.
Marketing.Mosaic Group markets its mobile applications to users primarily through digital storefronts (primarily the Apple App Store and the Google Play Store) and digital display advertisements on social media, messaging and media platforms, as well as in-app and cross-app advertising.
Competition.The applications industry is competitive and there is no single, dominant mobile or desktop application brand globally. We believe that the ability of Mosaic Group to compete successfully will depend primarily upon the following factors:
•the continued growth of consumer adoption of free and paid mobile applications generally and related engagement levels;
•the ability to operate Mosaic Group mobile applications as a scalable platform;
•the ability to retain existing subscribers and acquire new subscribers (in the case of mobile traffic) in a cost-effective manner;
•the ability to market and distribute Mosaic Group mobile applications through third party digital app stores (including the Apple App Store and the Google Play Store), in a cost-effective manner;
•the ability to continue to optimize marketing and monetization strategies, including through the diversification of marketing channels and improved acquisition and use of subscriber information;
•the continued growth of smartphone adoption in certain regions of the world, particularly emerging markets;
•the continued strength of Mosaic Group brands; and
•the continued ability to introduce new, enhanced and differentiated mobile applications in response to competitor offerings, consumer preferences, platform demands, social trends and evolving technological landscape.
Intellectual Property
We rely heavily upon our trademarks, service marks 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, and regard this intellectual property as critical to our success. We also rely, to a lesser extent, upon patented and patent-pending proprietary technologies with expiration dates ranging from August 2021April 2023 to July 2037.December 2038.
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. 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 intend to continue to do so in the future.
We rely on a combination of internal and external controls, including applicable laws, rules and regulations, and restrictions with employees, customers, suppliers, affiliates and others to establish, protect and otherwise control our various intellectual property rights.
Government Regulation
We are subject to a variety of domestic and foreign laws and regulations in the U.S. and abroad involving matters that are important to (or may otherwise impact) our various businesses, such as broadband internet access, online commerce, privacy and data security, advertising, intermediary liability, consumer protection, taxation, worker classification and securities compliance. These domestic and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are continually evolving and can be subject to significant change. As a result, the application, interpretation and enforcement of these laws and regulations (and any amended, proposed or new laws and regulations) are
often uncertain, particularly in the Internet industry, and may vary from jurisdiction to jurisdiction and over time, which could result in conflicts with theour current policies and practices and those of IAC and itsour various businesses.
Because we conduct substantially all of our business on the Internet, we are particularly sensitive to laws and regulations that could adversely impact the popularity or growth in use of the Internet and/or online products and services generally, restrict or otherwise unfavorably impact whether or how we may provide our products and services, regulate the practices of third parties upon which we rely to provide our products and services and/or undermine an open and neutrally administered Internet access. For example, in December 2017, the U.S. Federal Communications Commission (the “FCC”) adopted the Restoring Internet Freedom Order. This order, which was released in January 2018 and took effect in June 2018, reversed net neutrality protections in the United States that had been in place since 2015, including the repeal of specific rules against blocking, throttling or “paid prioritization” of content or services by Internet service providers. In the wake of the FCC’s repeal of its net neutrality laws, many states (including California and New York) have adopted their own net neutrality laws imposing some degree of regulation on internet service providers operating in those states. Many of these regulations remain subject to legal challenge in the courts, although some (including the California law), have been allowed to take effect while those challenges are concluded.
Also, Section 230 of the Communications Decency Act of 1996 (“Section 230”), which generally provides immunity for website publishers from liability for third party content appearing on their platforms and the good faith removal of third party content from their platforms that they may deem obscene or offensive (even if constitutionally protected speech), since its adoption has been (and continues to be) subject to a number of challenges. The immunities conferred by Section 230 could also be narrowed or eliminated through amendment, regulatory action or judicial interpretation. In 2018, the U.S. Congress amended Section 230 to remove certain immunities and most recently, in 2020,recent years, various members of the U.S. Congress introduced bills to further limit Section 230 and a petition was fileddecisions in two cases currently before the U.S. Supreme Court could limit protections provided to website publishers by a Department of Commerce entity with the Federal Communications Commission to commence a rulemaking to further limit Section 230. Any future adverse changes to Section 230 could result in additional compliance costs for us and/or exposure forto additional liabilities. In addition, the European Union’s Digital Services Act, which was enacted in November of 2022 (and becomes effective in 2024), enhances the moderation obligations and potential liabilities of digital platforms. Further, in 2023, the United Kingdom is expected to enact the Online Safety Bill, which will significantly increase responsibilities of online platforms to control illegal or harmful activity and grant broad authority to the communications regulator in the United Kingdom to enforce its provisions.
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Because we receive, store and use a substantial amount of information received from or generated by our users and subscribers, we are also impacted by laws and regulations governing privacy, the collection, storage, sharing, use, processing, disclosure and protection of personal data and data security, primarily in the case of our operations in the United States and the European Union and the handling of personal data of users located in the United States and the European Union. Recent examples of comprehensive regulatory initiatives in the area of privacy and data security include a comprehensive European Union privacy and data protection reform, the General Data Protection Regulation (the “GDPR”), which became effective in May 2018. The GDPR, which applies to certain companies that are organized in the European Union or otherwise provide services to (or monitor) consumers who reside in the European Union, imposes significant penalties (monetary and otherwise) for non-compliance, as well as provides a private right of action for individual claimants. The GDPR will continue to be interpreted by European Union data protection regulators, which may require us to make changes to our business practices and could generate additional risks and liabilities. TheData protection regulators in European Union is also considering an update to its Privacymember stated have taken a strict view of cookie consent requirements following the enactment of the GDPR and Electronic Communications Directive to impose stricter rules regardingenforcement actions are on the use of cookies.rise.
In addition, in October 2015, the European Court of Justice (“ECJ”) invalidated the U.S.-EU Safe Harbor framework that had been in place since 2000 for the transfer of personal data from the European Economic Area (the “EEA”) to the U.S., and on July 16, 2020, the ECJ invalidated the EU-U.S. Privacy Shield as an adequate safeguard when transferring personal data from the EEA to the U.S. In addition, alternate legal bases for cross-border data transfers face continuing legal challenges.These regulations continue to evolve and may ultimately require us to devote resources towards compliance and/or make changes to our business practices to ensure compliance, all of which could be costly. Also, the exit from the European Union by the United Kingdom could result in the application of new and conflicting data privacy and protection laws and standards to our operations in the United Kingdom and our handling of personal data of users located in the United Kingdom. At the same time, many jurisdictions abroad in which we do business have already or are currently considering adopting privacy and data protection laws and regulations.
Moreover, while multiple legislative proposals concerning privacy and the protection of user information are being considered by the U.S. Congress and various U.S. state legislatures, certain U.S. state legislatures have already enacted privacy legislation, one of the strictest and most comprehensive of which is the California Consumer Privacy Act of 2018, which became effective on January 1, 2020 (the “CCPA”). The CCPA provides new data privacy rights for California consumers and restricts the ability of certain of our businesses to use personal California user and subscriber information in connection with their various products, services and operations. The CCPA also provides consumers with a private right of action for security breaches, as well as provides for statutory damages. In addition, on November 3, 2020, California voters approved Proposition 24 (the “California Privacy Rights Act of 2020”), which amends certain provisions of the CCPA and becomes effects Januaryfully enforceable on July 1, 2023,2023. The California Privacy Rights Act of 2020 will further restrict the ability of certain of our businesses to use personal California user and subscriber information in connection with their various products and services and operations and/or could impose additional operational requirements on such businesses. Virginia, Colorado, Connecticut and Utah have also passed comprehensive privacy legislation that will become effective in 2023 and 2024, all of which are similar to the CCPA, as amended by the California Privacy Rights Act of 2020. Lastly, the U.S. Federal Trade Commission has also increased(the "FTC") continues to increase its focus on privacy and data security practices,practice and we anticipate this focus to continue. If so, as evidenced by the first-of-its-kind, $5 billion dollar fine against a social media platform for privacy violations in 2019. As a result, we could be subject to various private and governmental claims and actions in this area. See “Risks Relating to Our Business and Operations“Item 1A — Risk Factors — Risk Factors — General Risk Factors — The processing, storage, use and disclosure of personal data could give rise to liabilities and increased costs.”
As a provider of certain subscription-based products and services, we are also impacted by laws or regulations affecting whether and how our businesses may periodically charge users for membership or subscription renewals. For example, the European Union Payment Services Directive, which became effective in 2018, could impact the ability of certain of our businesses to efficiently process auto-renewal payments for, as well as offer promotional or differentiated pricing to, users who reside in the European Union. Similar laws exist in the U.S., including the federal Restore Online Shoppers Confidence Act and various U.S. state laws, and legislative and regulatory enactments or amendments are under consideration in a number of U.S. states.
We are also sensitive to the The adoption of new tax laws. The European Commissionany law that adversely affects revenue from recurring membership and/or subscription payments could adversely affect our business, financial condition and several European countries have recently adopted (or intend to adopt) proposals that would change various aspectsresults of the current tax framework under which certain of our European businesses are taxed, including proposals to change or impose new types of non-income taxes (including taxes based on a percentage of revenue).
In addition,operations, particularly in the case of certain businesses within our ANGI Homeservices segmentDotdash Meredith, Angi Inc., Care.com and to a lesser extent, our Care.com business, we are particularly sensitive to the adoption of worker classification laws, specifically, laws that could effectively require us to change the classification of certain of the service professionals and caregivers affiliated these businesses from independent contractors to employees, as well as changes to state and local laws or judicial decisions relating to the definition and/or classification of independent contractors. For example, California’s worker classification statute (AB 5) effectively narrows the definition of an independent contractor by requiring hiring entities to use a different, stricter test to determine a given worker’s classification. In addition, AB 5 places the burden of proof for classifying workers as independent contractors on hiring entities and provides enforcement powers to the state and certain cities. Also, AB 5 has been the subject of widespread national discussion and it is possible that other jurisdictions, including New York and New Jersey, may enact similar laws. Since we currently treat certain of the service professionals (and, in limited cases, the caregivers) affiliated certain businesses within our ANGI Homeservices segment and Care.com as independent contractors for all purposes, we do not withhold federal, state and local income or other employment related taxes, make federal or state unemployment tax or Federal Insurance Contributions Act payments or provide workers’ compensation insurance with respect to such individuals. If we are required as the result of new or amended laws or regulations to reclassify these individuals as employees, it could be exposed to various liabilities and additional costs, including exposure (for prior and future periods) under federal, state and local tax laws, and workers’ compensation, unemployment benefits, labor, and employment laws, as well as potential liability for penalties and interest.
Also, in the case of the businesses within our ANGI Homeservices segment, we may be subject to certain U.S. state and local licensure requirements related to the provision of pre-priced booking services. If so, typically, licenses must be renewed annually and may be revoked or suspended by the licensing authority for cause at any time. Moreover, in some jurisdictions, the loss of a license for cause could result in the loss of licenses in other jurisdictions and/or could make it more difficult to obtain new and/or renewal licenses. Obtaining and renewing such license and related compliance could be costly and the failure to comply with licensure requirements could result in bad publicity and related damage to our reputation, brands and brand-building efforts and/or actions by governmental and regulatory authorities and/or litigation, as well as generate additional risks and liabilities (including the imposition of penalties).Mosaic Group businesses.
We are also subject to laws, rules and regulations governing the marketing and advertising activities of our various businesses conducted by or through telephone, email, mobile digital devices and the Internet, including the Telephone Consumer Protection Act of 1991, the Telemarketing Sales Rule, the CAN-SPAM act and similar state laws, rules and regulations, as well as local laws, rules and regulations and relevant agency guidelines governing background screening.
In addition, we also are subject to various other federal, state, and local laws, rules and regulations focused on consumer protection. These laws, rules and regulations are enforced by governmental entities such as the FTC and state Attorneys General offices and may confer private rights of action on consumers as well.Changes in these laws, or a proceeding of this nature,
could have an adverse effect on us due to legal costs, impacts on business operations, diversion of management resources, negative publicity, and other factors.
We are also sensitive to the adoption of new tax laws. The European Commission and several European countries have adopted (or intend to adopt) proposals that would change various aspects of the current tax framework under which certain of our European businesses are taxed, including proposals to change or impose new types of non-income taxes (including digital services taxes in the United Kingdom, France and Italy, which are based on a percentage of revenue and tied to where consumers are located). Certain of our businesses are subject to digital services taxes in one or more of the jurisdictions listed above and similar proposed tax laws could adversely affect our business, financial condition and results of operations.
In addition, primarily in the case of certain businesses within our Angi Inc. financial reporting segment, we are sensitive to the adoption of worker classification laws, specifically, laws that could effectively require us to change the classification of certain service professionals from independent contractors to employees. For example, California’s worker classification statute (AB 5) effectively narrowed the definition of an independent contractor, using a strict test to determine a given worker’s classification and placing the burden of proof for meeting that test on the hiring entity. AB 5 also provided enforcement powers to the state and certain cities, leading the state and certain cities to initiate litigation to enforce the new law, particularly against app-based platform companies. AB 5 has been the subject of widespread national discussion, leading other jurisdictions (including Massachusetts, New Jersey and New York, among others) to bring enforcement actions against alleged independent contractor misclassification and/or to propose legislation adopting a legal test similar to the one set forth in AB 5. At the same time, there has been a trend of the Internal Revenue Service entering into work and information sharing arrangements with the U.S. Department of Labor and state taxing authorities to address worker classification issues. Since we currently treat certain service professionals as independent contractors for all purposes, we do not withhold federal, state and local income or other employment related taxes, make federal or state unemployment tax or Federal Insurance Contributions Act payments or provide workers’ compensation insurance with respect to such individuals. If we are required to reclassify service professionals as employees and/or their classification as independent contractors is challenged for any reason, we could be exposed to various liabilities and additional costs for prior and future periods, including exposure under federal, state and local tax laws, workers’ compensation and unemployment benefits, minimum and overtime wage laws and other labor and employment laws, as well as potential liability for penalties and interest. If the amounts related to such liabilities and additional costs are significant, our business, financial condition and results of operations could be adversely affected. As of the date of this report, we are involved in certain legal proceedings and investigations challenging the classification of service professionals as independent contractors, none of which we believe could have a material adverse effect on our business, financial condition and results of operations, and may become involved in other proceedings and investigations of this nature in the future.
Lastly, as a company based in the U.S. with foreign offices in various jurisdictions worldwide, we are subject to a variety of foreign laws governing the foreign operations of its various businesses, as well as U.S. laws that restrict trade and certain practices, such as the Foreign Corrupt Practices Act.
Human Capital
Overview
IAC’s future success depends upon our continued ability to identify, hire, develop, motivate and retain a highly skilled and diverse workforce across our various businesses worldwide. While policies and practices related to the identification, hiring, development, motivation and retention of employees vary across IAC and our various businesses, at their core, such policies and practices are generally designed to: (i) increase long-term IAC stockholder value by attracting, retaining, motivating and rewarding employees with the competence, character, experience, diversity of perspective and ambition necessary to enable the Company to meet its growth objectives, (ii) encourage and support the professional development of, and engender loyalty among, employees who have demonstrated the strength, vision and determination necessary to overcome obstacles and unlock their true professional potential by providing them with appropriate opportunities within IAC and itsour businesses and (iii) help foster a diverse, inclusive and entrepreneurial culture across our various businesses.
In order to achievesachieve these objectives, we believe that we must continue to provide competitive compensation packages and otherwise incentivize employees in unique and attractive ways, as well as develop and promote talent from within and remain committed to building inclusive workplaces and workforces that reflect the diversity of the global population using our products and services each day.
As of December 31, 2020,2022, IAC had approximately 8,200nearly 11,000 employees, substantially all of whichwhom were full-time employees and the substantial majority of whichwhom were based in the United States. We consider our relations with our employees to be good.
Compensation and Benefits
We believe that we must continue to provide competitive compensation packages and other benefits to our workforce. While compensation packages vary across IAC and our various businesses, compensation packages generally consist of base salary (plus commissions in the case of sales and other similar positions) and, on a discretionary basis, annual cash bonuses (on a discretionary basis), and(and in certain cases, equity or equity-based awards.awards).
We also provide comprehensive health, welfare and retirement benefits. Healthcare benefits are significantly subsidized by the Company and the coverage provided reflects our commitment to inclusivity and the physical and mental well-being of all employees.
In the case of welfare benefits, we maintain generous paid time off and paid leave policies across our businesses and offer subsidized backup child and elder care for our employees. We believe in giving back to the causes and charities that are important to our employees and match charitable contributions made by our employees to qualifying charities on a dollar-for-dollar basis, subject to an annual cap per employee. We also encourage our employees to support the communities in which they live and work and provide our employees with paid time off each year to volunteer for charitable and community service projects.
In the case of retirement benefits, in the U.S., we offer our employees a 401(k) retirement savings program with generous employer matching contributions, that are among the most generous in our industry. Specifically, for U.S. full-time employees, we match all pre-tax contributions to IAC’s 401(k) plan, as well as post-tax contributions to Roth individual retirement accounts, dollar for dollar in an amount of up to 10% of an employee’s eligible compensation (subjectsubject to an annual cap).cap per employee. We believe that we have a responsibility to encourage and(and contribute to,to) the retirement readiness of each of our employees and believesbelieve that this generous 401(k) matchretirement savings program matching contribution is a meaningful commitment to the long-term welfare and security of our workforce.
Talent Development
We generally aim to develop talent from within and supplement with external hires. As a result, senior management across the Company and our businesses generally possesses a great depth of knowledge and experience regarding the Company, and our businesses, which is critical for effective succession planning, and with external hires providing a fresh perspective. The human resources teams across the Company and our businesses use internal and external resources to recruit highly skilled, talented and diverse employees, and employee referrals for open positions are encouraged.
In addition, we actively seek to identify the next generation of leaders in technology early and often through the IAC Fellows program, a first-of-its-kind program connecting students from under-served and under-resourced backgrounds with academic and leadership opportunities. IAC Fellows join the program as early as high school and stay for up to six years, rotating across a diverse set of IAC businesses during that time in the form of competitively paid internships that put IAC Fellows in the trenches, testing their skills in real world scenarios. Through these experiences, IAC Fellows gain exposure to different business models, functions and roles within IAC, as well as access to IAC senior leadership as mentors and coaches. IAC Fellows also receive an academic stipend following the completion of each paid internship. If anFor those IAC Fellow isFellows hired by IAC or any of its businesses following the completion of his or hertheir paid internships and who stay for a period of three years, IAC will pay off his or herthe entirety of their school loans in their entirety.loans.
To be eligible for the IAC Fellows program, students must be from low-income backgrounds or families with financial need, with eligibility assessed individually based on the composition and income of a given student’s family, and with first-generation college students being given priority consideration. Students must be citizens or permanent residents of the U.S. and possess the following personal attributes: (i) leadership abilities, (ii) a strong interest in science, technology, computer science and/or math, (iii) demonstrated intellectual curiosity and devotion to study, (iv) a hunger to learn and achieve academically and (v) ethics, integrity and strength of character.
Lastly, through our charitable foundation, we award scholarships to high-achieving students who have a demonstrable need for financial assistance as a result of household income that falls below the designated national poverty level or cultural and/or family background that has placed them at an educational disadvantage. Recipients can use scholarships for various college-related expenses, such as tuition, course-related fees, books, supplies and equipment.
Diversity, Equity and Inclusion
We are committed to building inclusive workplaces and workforces that reflect the diversity of the global population using our products and services each day. Accordingly, we view diversity, equity and inclusion (DE&I) efforts as integral to our success. While DE&I efforts, policies and practices vary across our businesses, they include (in addition to the IAC Fellows program discussed above) at certain of our businesses: (i) pay equity analyses conducted on an annual basis to ensure that women and employees from traditionally under-represented groups are not adversely impacted by pay bias, (ii) employee community
resource groups (ECGs) led and supported by senior executives (and in certain cases, funded by the relevant business), and (iii) incentivizing DE&I by tying bonus structure to diversity goals and metrics and (iv) launching DE&I councils at certain of our businesses that collaborate directly with senior executives to roll out DE&I training, as well to determine ways to diversify product and service experiences, attract a more diverse population of employees and invest in building diverse and equitable local communities.
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 Reportsannual reports on Form 10-K, Quarterly Reportsquarterly reports on Form 10-Q and Current Reportscurrent 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. These reports (including related amendments) are also available at the SEC's website, www.sec.gov.
Code of Business Conduct and Ethics
The Company’s codeCode of ethicsBusiness Conduct and Ethics applies to all of our 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 ir.iac.com under the “Code of Ethics”Conduct” 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 thethis 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 principal executive officers, seniorprincipal financial officers orofficer, principal accounting officer and 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 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’s future financial performance, IAC’s business prospects and strategy, including the separation of the Vimeo business from IAC, anticipated trends and prospects in the industries in which IAC’s businesses operate and other similar matters. These forward-looking statements are based on IAC management's 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‑looking statements for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect IAC’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the 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 IAC management as of the date of this annual report. IAC does not undertake to update these forward‑looking statements.
Risk Factors
RisksRisk Factors Related to Our Business, Operations and Ownership
Marketing efforts designed to drive visitors to our various brands and businesses may not be successful or cost-effective.
Traffic building and conversion initiatives 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!), social media advertising and other 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. Also, to continue to reach consumers and users, we will need to continue to identify and devote more of our overall marketing expenditures to newer digital advertising channels (such as online video, social media, streaming, OTT and other digital platforms), as well as target consumers and users via these channels. Sincechannels in a cost-effective manner. As these channels are undeveloped and unprovencontinue to evolve relative to traditional channels (such as television), it could continue to be difficult to assess returns on related marketing investments. Historically, we have had to increase advertising and marketing expenditures over time in order to attract and convert consumers, retain users of our various products and services and sustain our growth.
Our ability to market our brands and businesses on any given property or channel is subject to the policies of the relevant third partythird-party seller, publisher (including search engines, web browsers and social media platforms with extraordinarily high levels of traffic and numbers of users) or marketing affiliate. As a result, we cannot assure yoube certain that these parties will not limit or prohibit us or our affiliate marketing partners from purchasing certain types of advertising (including the purchase by us of advertising with preferential placement or for certain of our products and services) and/or using one or more current or prospective marketing channels in the future. If a significant marketing channel took such an action 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 partythird-party sellers, publishers 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 addition, any phasing out (or blocking) of third-party cookies by web browsers could adversely affect our business, financial condition and results of operations.
We rely heavily on free search engine marketing to drive traffic to our properties. The display, including rankings, of search results can be affected by a number of factors, many of which are not in our direct control, and may change frequently. Search engines have made changes in the past to their ranking algorithms, methodologies and design layouts that have reduced the prominence of links to websites offering our products and services, and negatively impacted traffic to such websites, and we expect that search engines will continue to make such changes from time to time in the future. However, we may not know how (or otherwise be in a position) to influence actions of this nature taken by search engines. With respect to search results in particular, even when search engines announce the details of their methodologies, their parameters may change from time to time, be poorly defined or be inconsistently interpreted. In addition, if there are changes in the usage and functioning of search engines and/or decreases in consumer use of search engines, for example, as a result of the continued development of artificial intelligence technology, this could negatively impact our ability to drive traffic to our properties.
Our failure to respond successfully to rapid and frequent changes in the operating and pricing dynamics of search engines, as well as changing policies and guidelines applicable to keyword advertising and content quality (which may be unilaterally updated by search engines without advance notice) and any other changes in the usage and functioning of search engines (including decreased consumer use of search engines), could adversely affect our paid and free search engine marketing efforts. Specifically, such changes could adversely affect paid listings (both their placement and pricing), as well as the ranking of links to websites offering our products and services within search results, any or all of which could increase our marketing costs (particularly if free traffic is replaced with paid traffic) and adversely affect the effectiveness of our marketing efforts overall. In addition, the failure to respond successfully to policy updates with respect to the phasing out (or blocking) of third party cookies by web browsers (which may be done unilaterally by web browsers without notice), as well as consumers increasingly choosing to use browsers that do not support third party cookies, could also adversely affect the effectiveness of our marketing efforts at those of our businesses that rely on cookies as a meaningful part of their overall marketing strategy.
Lastly, in addition to acquiring traffic and leads directly from advertising networks, certain of our businesses also enter into various arrangements with third parties (including advertising agencies) to drive traffic to their various brands and businesses and generate leads, which arrangements are generally more cost-effective than traditional marketing efforts. If these businesses are unable to renew existing (and/or(and enter into new) arrangements of this nature, sales and marketing costs as a percentage of revenue would increase over the long-term, which could adversely affect our business, financial condition and results of operations. In addition, in the quality and convertibilitycase of traffic and leads acquired directly and generated through third party arrangements, the quality, validity (from real users with genuine interest and, if applicable, otherwise acquired in a manner that complies with contractual obligations in place with paid listings providers and/or advertisers) and convertibility of such traffic and leads are dependent on many factors, most of which are generally outside of our control. IfWhile certain of our businesses have systems in place designed to mitigate these risks, if the quality, validity and/or convertibility of traffic and leads we acquire directly and/or via third parties do not meet the expectations of the users of our various products and services, our paid listings providers and/or advertisers (as well any third parties who may acquire such traffic or leads from our paid listings providers and/or advertisers), as applicable, our business, financial condition and results of operations could be adversely affected.
We rely on search engines to drive traffic to our various properties. Certain search engine operators offer products and services that compete directly with our products and services. If links to websites offering our products and services are not displayed prominently in search results, traffic to our properties could decline and our business could be adversely affected.
As discussed above, the amount of traffic we attract through search engines is due in large part to how and where information from (and links to websites offering our products and services)services (and related information and links to those properties) are displayed on search engine results pages. Certain search engine operators offer products and services that compete directly with our products and serviceservices and may change their displays or rankings in order to promote their products or services, or the products or services of one or more of our competitors. Any such action could negatively impact the search rankings of links to websites offering our products and services, or the prominence with which such links appear in search results. Our success depends on the ability of links to websites offering our products and services maintainingto maintain a prominent position in search results, and in the event operators of search engines promote their own competing products in the future in a manner that has the effect of reducing the prominence or ranking of links to websites offering our products and services, our business, financial condition and results of operations could be adversely affected.
Certain of our businesses depend upon arrangements with Google.
A meaningful portion of our consolidated revenue (and a substantial portion of our net cash from operations that we can freely access) is attributable to a services agreement with Google. Pursuant to this agreement, we display and syndicate paid listings provided by Google in response to search queries generated through the businesses within our Search financial reporting segment. In exchange for making our search traffic available to Google, we receive a share of the revenue generated by the paid listings supplied to us, as well as certain other search related services. Our agreement with Google expires on March 31, 2023; provided, however, that only in September2024 and provides for an automatic renewal for an additional year absent a notice of each year, wenon-renewal from either party on or Google may, after discussion with the other party, terminate the services agreement, effective on September 30 of the year following the year such notice is given.
before March 31, 2023.
The amount of revenue we receive from Google depends on a number 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 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 performed on our properties and these judgments factor into the number of advertisements that 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 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 and could adversely affect our business, financial condition and results of operations. Such changes could come about 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 the Chrome browser and Chrome Web Store. These guidelines govern which of our products and applications may access Google services or be distributed through its Chrome Web Store, and the manner in which Google’s paid listings are displayed within search results across various third partythird-party platforms and products (including our properties). Our services agreement also requires that we establish guidelines to govern certain activities 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, whether under the services agreement or otherwise, 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 us or the third parties to whom we are permitted to syndicate paid listings or through which we secure distribution arrangements for the businesses within our Search financial reporting segment could result in the suspension of some or all Google services to us (and/or(or the websites of our third party partners) and/or the termination of ourthe services agreement by Google. Google has, in the past, made policy changes generally and under the services agreement, which had a negative impact on the historical and expected future results of operations of our Desktop business, and may do so in the future. In addition, in the last quarter of 2020, Googleas well as suspended services with respect to some of our Desktop products, and may take continued or further action with respect to our products and businesses in the future.
The termination of ourthe services agreement by Google, the curtailment of our rights under the services agreement, (includingincluding the failure to allow our products to access Google services whether(whether pursuant to the terms thereof or otherwise), and/or the failure of Google to perform its obligations under the agreement and/or policy changes implemented by Google under the services agreement or otherwise would have an adverse effect on 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 provider of paid listings (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.
Our success depends, in substantial part, on our continued ability to market, distribute and monetize our products and services through search engines, digital app stores, advertising networks and social media platforms.
The marketing, distribution and monetization of our products and services depends on our ability to cultivate and maintain cost-effective and otherwise satisfactory relationships with search engines, digital app stores, advertising networks and social media platforms, in particular, those operated by Apple, Google, Microsoft, Facebook and Facebook.Amazon. These platforms could decide not to market and distribute some or all of our products and services, change their terms and conditions of use or advertising policies at any time (and without notice), favor their own products and services over our products and services 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 so in the case of one or more of these platforms could have a material adverse effect on our business, financial condition and results of operations.
In particular, as consumers increasingly access our products and services through applications, (both mobile and desktop), we increasingly depend upon the Apple App Store, Google Play Store, and Google’s Chrome Web Store, Microsoft Store and Amazon App Store to distribute our mobile and desktop browser applications. Both Apple and GoogleThe operators of these stores have broad discretion to change their respective terms and conditions applicable to the distribution of our applications, including those relating to privacy and data collection (for example, to require users to opt-in to sharing their devices’ unique identifiers with providers of products and services, which allow them to recognize a given device and track related activity across applications and websites),the amount of (and requirement to pay) certain fees associated with purchases facilitated by Apple and Googlesuch stores through our applications, their ability to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute our applications through theirsuch stores, the features that we may provide in our products and services, our ability to access information about our subscribers and users that they collect, and the manner in which we market in-app products. Apple or GoogleThe operators of these stores could also make changes to their operating systems or payment services that could negatively affect us. No assurances can be provided that Apple and/or Googlethe operators of these stores will not interpret their respective terms and conditions in the manner described above and to the extent either or bothany of them do so, our business, financial condition and results of operations could be adversely affected.
While some of our mobile applications are generally free to download from the Apple App and Google Play Stores,these stores, many of them are subscription-based. While we determine the prices at which these subscriptions are sold, currently, all related purchases must be processed through the in-app payment systems provided by these stores, for which we pay these stores a meaningful share (generally 30%) of the related revenue theywe receive. Given the increasing distribution of our mobile applications through digital app stores and strict in-app payment system requirements, we may need to offset increased digital app store fees by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user or engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.
Our success depends, in part, upon the continued migration of certain markets and industries online and the continued growth and acceptance of online products 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 theour Angi Inc. businesses within our ANGI Homeservices segment and our Care.com business depends, in substantial part, on the continued migration of the home services and care-related services markets, respectively, online. If for any reason these markets do not migrate online as quickly as (or at lower levels than) we expect and consumers and service professionals (and subscribers and caregivers) continue, in large part, to rely on traditional offline efforts to connect with one another, our business, financial condition and results of operations could be adversely affected.
Lastly, the success of our advertising-supported businesses also depends, in part, on their 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 on the continued growth and acceptance of online advertising generally. Any lack of growth in the market for online advertising could adversely affect our business, financial condition and results of operations. See also "-Our success depends, in part, on the ability of our Digital business to successfully expand the digital reach of our portfolio of publishing brands."
Our success depends, in part, on our continued 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 continue to devote significant time and resources to ensure that our products and services are accessible across these platforms (and multiple platforms generally). If we do not keep pace with evolving online, market and industry trends (including the introduction of new and enhanced digital devices and changes in the preferences and needs of consumers generally), offer new and/or enhanced products and services in response to such trends that resonate with consumers, monetize products and services for mobile and other digital devices as effectively as ourits traditional products and services and/or maintain related systems, technology and infrastructure in an efficient and cost-effective manner, our business, financial condition and results of operations could be adversely affected.
In addition, the success of our mobile and other digital products and services depends on their interoperability with various third partythird-party operating systems, technology, infrastructure and standards, over which we have no control. Any changes to any of these things that compromise the quality or functionality of our mobile and digital products and services could adversely affect their usage levels and/or our ability to attract consumers and advertisers, which could adversely affect our business, financial condition and results of operations.
Advertising revenue represents a significant portion of our consolidated revenue. Accordingly, we are sensitive to general economic events and trends that adversely impact advertising spending levels.
A significant portion of our consolidated revenue is attributable to digital and other advertising, primarily revenue from the businesses within our Dotdash Meredith and Search financial reporting segments. Accordingly, events and trends that put economic pressure on advertisers and consumers could continue to result in decreased advertising expenditures and related revenues generally, which would continue to adversely affect our business, financial condition and results of operations. For example, demand for advertising is highly dependent upon the strength of the economy in the United States, so any general economic downturn, recessionary concerns, rising interest rates and increased inflation, as well as any sudden disruption in business conditions, could adversely affect demand for advertising and consumer confidence, and in turn, our business, financial condition and results of operations. Also, as alternative forms of media and entertainment (relative to traditional forms of media) continue to grow, competition for advertising will continue to increase, which could adversely affect demand for (and the effectiveness of) advertising through our various platforms, which in turn could adversely affect our business, financial condition and results of operations.
Our success depends, in part, on the ability of ANGI Homeservicesour Digital business to successfully expand the digital reach of our portfolio of publishing brands.
We intend to continue to focus on digital content and advertising across our portfolio of publishing brands, including the deployment of our playbook for building digital lifestyle brands across Meredith brands. As a result, we intend to continue to increase our investment in our Digital business. If this focus and increased investment does not generate increased revenue from our Digital business and/or if we otherwise do not successfully execute this strategy generally and/or in a cost-effective manner, our business, financial condition and results of operations will be adversely affected.
Revenue from our Print business is declining.
Our Print business generates revenue from various channels, the largest of which are the sale of print magazine subscriptions to consumers and magazine advertising, followed by newsstand sales.The profitability of our print magazine publications (and in turn, our Print business) depends, in substantial part, on our ability to both maintain a profitable audience and sell advertising based on that audience. The industry in which our Print business operates is extremely competitive and such business will continue to face increasing competition from alternative forms of media and entertainment (primarily digital channels). As a result, in 2022 we eliminated the print component of certain of our publishing brands and reduced the circulation of others, which together with continuing trends in the print publishing industry, negatively impacted (and continues to negatively impact) our Print revenue. We continue to expect Print revenue from print magazine subscriptions, advertisers and newsstand sales to decline over the next few years. If we do not offset the decrease in Print magazine subscriptions by increasing subscription prices, our revenue may decline more than we expect. And if we do not offset reductions in revenue with the implementation of cost-cutting measures and continue to proactively manage this decline, our business, financial condition and results of operations could be adversely affected.
Increases in paper and postage prices are difficult to predict and control.
In the case of our Print business, paper and postage represent a significant component of costs. Paper is a commodity and its price can be subject to significant volatility. Paper prices increased during 2022 and reached all time-highs in early 2023. We rely on multiple third parties to supply us with paper for our print magazines, the largest of which are located in the European Union. Our paper supply contracts currently provide for price adjustments based on prevailing market prices and historically, we have been able to realize favorable paper pricing through volume discounts. Our paper suppliers and/or the paper mills upon which they rely for inventory may experience events outside of their and our control that result in supply chain disruptions (for example, labor force disruptions (strikes and union negotiations) and weather, among other events). The United States Postal Services (the “USPS”) distributes substantially all of our subscription magazines and many of our marketing materials. Postal rates are dependent on the operating efficiency of the USPS and on legislative mandates imposed upon the USPS. Although we work with others in the industry and through trade organizations to encourage the USPS to implement efficiencies that will minimize rate increases, we cannot predict with certainty the magnitude of future price changes for paper and postage. Volatility in paper prices, paper supply chain disruptions and/or USPS rate increases could adversely affect our business, financial condition and results of operations.
We rely on a single supplier to print our magazines and primarily rely on two wholesalers to distribute our magazines through newsstands.
In the case of our Print business, we produce print magazines in the United States and rely on one supplier (the only one capable of producing such print magazines) to do so. We also rely primarily on two wholesalers, each of which is the only distributor of scale in its respective geographical regions, to distribute the substantial majority of our print magazines to newsstands in the United States. If for any reason, our one supplier fails to deliver our print magazines and/or one or both of the two wholesalers cannot distribute our print magazines to newsstands, our business, financial condition and results of operations could be adversely affected. In this case, we may not be able to move the printing of our print magazines to an alternative supplier and/or the distribution of our print magazines to alternative wholesalers, particularly given the contracting nature of the print magazine market generally (and shrinking wholesaler options). And even if we were to find alternative vendors, the economic and other terms of the arrangements and the quality of the services provided could be inferior relative to the arrangements with our current vendors and/or we may not be able to replace lost revenues. Any transitions in this regard would be costly and time consuming and could adversely affect our business, financial condition and results of operations.
Our pension plan obligations could increase.
In connection with the acquisition of Meredith Holdings Corp. in December 2021, our Dotdash Meredith business assumed certain pension plan obligations. The two largest of these pension plans are funded plans in the United Kingdom and the United States, both of which are overfunded on a U.S. GAAP basis (see “Item 8—Financial Statements and Supplementary Data—Note 13—Pension and Postretirement Benefit Plans”). The pension plan in the United Kingdom relates to a business that was sold by Meredith Holdings Corp. prior to December 2021, and as of the date of this annual report, there are no active participants in such plan accruing benefits. In addition, as of the date of this annual report, the pension plan in the United States has been terminated and no participants are accruing additional service credits under the plan. While the Company does not expect to have to make any contributions to these plans, that could change based upon future events.
Our success depends, in part, on the ability of Angi Inc. and Care.com to establish and maintain relationships with quality and trustworthy service professionals and caregivers.
We must continue to attract, retain and grow the number of skilled and reliable service professionals who can provide services across ANGI HomeservicesAngi Inc. platforms and caregivers who can provide care-related services through the Care.com platform. If we do not offer innovative products and services that resonate with consumers and service professionals (and subscribers and caregivers) generally, as well as provide service professionals and caregivers with an attractive return on their marketing and advertising investments, the number of service professionals and caregivers affiliated with ANGI HomeservicesAngi Inc. and Care.com platforms, respectively, would decrease. Any such decrease would result in smaller and less diverse networks and directories of service professionals and caregivers, and in turn, decreases in service requests, pre-priced bookings and directory searches, as well as subscriber requests for caregivers, which could adversely impact our business, financial condition and results of operations.
In addition to valuing the skill and reliability of service professionals and caregivers, consumers and families want to work with service professionals and caregivers whom they can trust to work in their homes and with their family members and with whom they can feel safe. While there are screening processes and certain other safety-related measures in place at these businesses (which generally include certain, limited background checks) intended to try and prevent unsuitable service professionals and caregivers from joining and remaining on our various platforms, these processes have limitations and, even with these safety measures, no assurances can be provided regarding
the future behavior of any service provider or caregiver on our platforms. Inappropriate and/or unlawful behavior on the part of service professionals and caregivers generally (particularly any such behavior that compromises their trustworthiness and/or of the safety of consumers and families) could result in decreases in service requests and subscriber requests for caregivers and related care services, bad publicity and related damage to our reputation, brands and brand-building efforts and/or actions by governmental and regulatory authorities, criminal proceedings and/or litigation. The occurrence or any of these events could, in turn, adversely affect our business, financial condition and results of operations.
The Angi Inc. brand integration initiative may continue to involve substantial costs, including as a result of a continued negative impact on organic search placement.
In March 2021, Angi Inc. updated one of its leading websites and brands, Angie’s List, to Angi, and since then, has concentrated its marketing investment on the Angi brand in order to focus its marketing, sales and branding efforts on a single brand. To date, Angi Inc. has incurred (and we expect will continue to incur) substantial costs as a result of this brand integration initiative and the Angi brand may not be able to achieve or maintain brand name recognition or status that is comparable to the recognition and status previously enjoyed by Angie’s List.
Angi Inc. relies heavily on free (or organic) search results from search engine optimization and paid search engine marketing efforts to drive traffic to its platforms. The brand integration initiative initially adversely affected the placement and ranking of Angi Inc. websites, particularly Angi.com, in organic search results as Angi does not have the same domain history as Angie’s List. Organic search results have continued to decline year-over-year and remain below pre-March 2021 levels. In addition, the shift of marketing support to the Angi brand (away from the HomeAdvisor brand) continues to negatively affect (and we expect that it will continue to negatively affect) the efficiency of Angi’s Inc.’s search engine marketing efforts. The continuing occurrence of any or all of these events and trends could adversely affect our business, financial condition and results of operations.
Our success depends, in part, on the ability of ANGI HomeservicesAngi Inc. to expand pre-priced booking services.offerings, while balancing the overall mix of service requests and directory services on Angi Inc. platforms generally.
Through certain businessesThe Services business within our ANGI HomeservicesAngi Inc. financial reporting segment we provideprovides a pre-priced booking services,offering, pursuant to which we contract with service professionals to perform specific tasksconsumers can request services through Services platforms and pay for specific consumers at an agreed upon price. In contrast to Marketplacesuch services on the applicable platform directly. These service requests pursuant to which we match service professionals to consumer opportunities, through our pre-priced bookingare then fulfilled by independently established home services we contract directly withproviders engaged in a service professional to perform a contracted task at a contracted price.trade, occupation and/or business that customarily provide such services. Increases in pre-priced bookingsofferings (which we expect to be the case over time) could reduce the levellevels of service provider responsesprofessional participation at Angi Inc.'s other businesses, and in turn, adversely affect our business, financial condition and results of operations.
Our success depends, in part, on our ability to service requestsaccess, collect and use personal data about our users and subscribers.
We depend on search engines, digital app stores and social media platforms, in particular, those operated by Google, Apple and Facebook, to market, distribute and monetize our products and services. Our users and subscribers engage with these platforms directly, and in the case of digital app stores, are generally subject to requirements regarding the use of their payment systems for various transactions. As a result, these platforms generally receive personal data about our users and subscribers that we would otherwise receive if we transacted with our users and subscribers directly. Certain of these platforms have restricted (and continue to restrict) our access to personal data about our users and subscribers obtained through their platforms. In addition, the Marketplaceprivacy and data collection policies of certain platforms require users to opt-in to sharing their devices’ unique identifiers with our businesses, which allow them to recognize a given device and track related activity across applications and websites, primarily for marketing purposes. If these platforms continue to limit, eliminate or otherwise interfere with our ability to access, collect and use personal data about our users and subscribers, our ability to identify, communicate with and market to a meaningful portion of our user and subscriber bases may be adversely impacted. If so, our customer relationship management efforts, our ability to identify, target and reach new segments of 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 of our various properties and our directories.
In addition, while pre-priced bookingability to develop and implement safety features, policies and procedures for certain of our products and services offer potentially higher profit opportunities, they also involve greater financial risk becausecould be adversely affected. We cannot assure you that the search engines, digital app stores and social media platforms upon which we bearrely will not continue to (or continue to increasingly) limit, eliminate or otherwise interfere with our ability to access, collect and use personal data about our users and subscribers. To the impactextent that any or all of cost overruns, which could result in increased costs and expenses. For example, we could miscalculate the costs, materials and/or or time needed to complete consumer requests or consumers could provide us with inaccurate information, which could result in us charging consumers too little for contracted tasks, which in turn would result in us having to absorb the actual, higher cost for contracted tasks or risk not being able to find service professionals to perform contracted tasks at contracted rates. Ourthem do so, our business, financial condition and results of operations could be adversely affected if our actual costs exceed the assumptions used in offering contracted tasks through our pre-priced booking services.affected.
Our ability to engage directly with our users, subscribers, consumers, service professionals and caregivers directly on a timely basis is critical to our success.
As consumers increasingly communicate via mobile and other digital devices and messaging and social media apps, email usage of email (particularly among younger consumers) has declined and we expect this trend to continue. In addition, deliverability and other restrictions could limit or prevent our ability to send emails to users, subscribers, consumers, service professionals and caregivers. A continued and significant erosion in our ability to engage with users, subscribers, consumers, service professionals and caregivers via email could adversely impact the user experience, engagement levels and conversion rates, which could adversely affect our business, financial condition and results of operations. We cannot assure you that any alternative means of communication (for example, push notifications and text messaging) will be as effective as email has been historically.
Our success depends, in part, on our ability to access, collect and use personal data about our users and subscribers.
We depend on search engines, digital app stores and social media platforms (in particular, those operated by Google, Apple and Facebook) to market, distribute and monetize our products and services. Our users and subscribers engage with these platforms directly, and in the case of digital app stores, may be subject to requirements regarding the use of their payment systems for various transactions. As a result, these platforms may receive personal data about our users and subscribers that we would otherwise receive if we transacted with our users and subscribers directly. Certain of these platforms have restricted our access to personal data about our users and subscribers obtained through their platforms. If these platforms limit or increasingly limit, eliminate or otherwise interfere with our ability to access, collect and use personal data about our users and subscribers that they have collected, our ability to identify and communicate with a meaningful portion of our user and subscriber bases may be adversely impacted. If so, our customer relationship management efforts, our ability to identify, target and reach new segments of 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 and our ability to develop and implement safety features, policies and procedures for certain of our products and services could be adversely affected. We cannot assure you that the search engines, digital app stores and social media platforms upon which we rely will not limit or increasingly limit, eliminate or otherwise interfere with our ability to access, collect and use personal data about our users and subscribers that they have collected. To the extent that any or all of them do so, our business, financial condition and results of operations could be adversely affected.
Mr. Diller, certain members of his family and Mr. Levin are able to exercise significant influence over the composition of IAC’s Board of Directors, matters subject to stockholder approval and/orand IAC’s operations.
As of the date of this report,February 10, 2023, Mr. Diller, his spouse Diane(Diane von Furstenberg,Furstenberg) and his stepson Alexander(Alexander von Furstenberg,Furstenberg) collectively held (directly and through certain trusts) shares of IAC Class B common stock and IAC common stock that represented approximately 41.4%41.3 % of the total outstanding voting power of IAC (based on the number of shares of IAC common stock and IAC Class B common stock outstanding and entitled to vote as of January 29, 2021) and they will collectively hold shares of Class B common stock and common stockon February 10, 2023).
representing the same percentage of the total outstanding voting power of IAC following the completion of the Spin-off as they hold immediately before the Spin-off.
As a result of the IAC securities held by Mr. Diller and the members of his family described above,these individuals, such individuals are and will be, collectively, in a position to influence (subject to IAC’s organizational documents and Delaware law), the composition of IAC’s Boardboard of Directorsdirectors and the outcome of corporate actions requiring shareholder approval such(such as mergers, business combinations and dispositions of assets, among other corporate transactions.transactions). These shares are also subject to a voting agreement with Mr. Levin, IAC’s Chief Executive Officer, and will continue to be following the completion of the Spin-off.Officer. As a result of the Voting Agreement, Mr. Levin is currently in a position, subject to IAC’s organizational documents and Delaware law, to influence his election to IAC'sIAC’s board of directors and influence the outcome of Contingent Matters (as defined in the Voting Agreement). This concentration of investment and voting power could discourage others from initiating a potential merger, takeover or other change of control transaction that may otherwise be beneficial to IAC and its shareholders, which could adversely affect the market price of IAC securities.
In addition, the holdersall or a portion of the shares of IAC Class B common stock could sell all or a portion of those sharesbe sold to a third party, which could result in the purchaser obtaining significant influence over IAC, the composition of IAC’s Boardboard of Directors,directors, matters subject to stockholder approval and IAC’s operations, without consideration being paid to holders of shares of IAC common stock, and without holders of shares of IAC common stock having a right to consent to the identity of such purchaser. Pursuant to the Voting Agreement, if any of the holders of the IAC Class B common stock were to determine to sell shares of IAC Class B common stock to a person other than Mr. Diller, his family members or certain entities controlled by such persons, they have agreed that they will discuss with Mr. Levin selling such shares to him before selling to any other party.
Risk Factors Related to Our Liquidity, Indebtedness and Dilution
Current and future indebtedness could affect our ability to operate our business, which could have a material adverse effect on our business, financial condition and results of operations.
On December 1, 2021, Dotdash Meredith, Inc. entered into the Dotdash Meredith Credit Agreement, which provides for: (i) a five year $350 million Dotdash Meredith Term Loan A, (ii) a seven-year Dotdash Meredith $1.25 billion Term Loan B and (iii) a five year $150 million Dotdash Meredith Revolving Facility. As of December 31, 2022, we had total debt outstanding of approximately $2.1 billion, consisting of $350 million and $1.25 billion under the Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B, respectively, and $500 million of ANGI Group Senior Notes.
The Dotdash Meredith Credit Agreement contains a number of covenants that restrict the ability of Dotdash Meredith and certain of its subsidiaries to take specified actions, including, among other things (and subject to certain exceptions): (i) creating liens, (ii) incurring indebtedness, (iii) making investments and acquisitions, (iv) engaging in mergers, dissolutions and other fundamental changes, (v) making dispositions, (vi) making restricted payments (including dividends and certain prepayments of junior debt), (vii) consummating transactions with affiliates, (viii) entering into sale-leaseback transactions, (ix) placing restrictions on distributions from subsidiaries, and (x) changing its fiscal year. The Dotdash Meredith Credit Agreement also contains customary affirmative covenants and events of default. For a description of certain restrictions in effect following the test period ended December 31, 2022, see “Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Position, Liquidity and Capital Resources- Liquidity and Capital Resources-Liquidity Assessment.” The obligations under the Dotdash Meredith Credit Agreement are guaranteed by certain of Dotdash Meredith’s wholly-owned subsidiaries and are secured by substantially all of the assets of Dotdash Meredith and certain of its subsidiaries. Neither we nor any of our subsidiaries (other than Dotdash Meredith and its subsidiaries in the case of obligations under the Dotdash Meredith Credit Agreement) guarantee any indebtedness of Dotdash Meredith nor are they subject to any of the covenants related to such indebtedness.
The terms of the Dotdash Meredith indebtedness could:
•limit our ability to obtain financings and the ability Dotdash Meredith to obtain additional financings to fund working capital needs, acquisitions, capital expenditures or debt service requirements or for other purposes;
•limit our ability to use operating cash flow in other areas of our businesses in the event that we need to dedicate a substantial portion of these funds to service Dotdash Meredith indebtedness;
•limit our ability and the ability of Dotdash Meredith to compete with other companies who are not as highly leveraged;
•restrict us or Dotdash Meredith from making strategic acquisitions, developing properties or exploiting business opportunities;
•restrict the way in which we or Dotdash Meredith conduct business;
•expose us to potential events of default, which if not cured or waived, could have a material adverse effect on our business, financial condition and operating results and that of Dotdash Meredith;
•increase our and Dotdash Meredith’s vulnerability to a downturn in general economic conditions or in pricing of our various products and services; and
•limit our ability and the ability of Dotdash Meredith to react to changing market conditions in the various industries in which we do business.
We may incur, and subject to restrictions in the Dotdash Meredith Credit Agreement, Dotdash Meredith may incur, additional, indebtedness. Any additional indebtedness incurred by us (or Dotdash Meredith in compliance with applicable restrictions) that is significant could increase the risks described above.
We may not be able to generate sufficient cash to service all of our indebtedness.
The ability of Dotdash Meredith and Angi Inc. to satisfy scheduled debt obligations under their respective debt agreements will depend upon, among other things:
•their 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;
•their future ability to incur indebtedness; and
•in the case of Dotdash Meredith only, the future ability to borrow under the Dotdash Meredith Revolving Facility, which will depend on, among other things, the ability of Dotdash Meredith to comply with the covenants governing its existing indebtedness.
Neither Dotdash Meredith nor Angi Inc. may be able to generate sufficient cash flow from their respective operations (and/or, in the case of Dotdash Meredith only, borrow under the Dotdash Meredith Revolving Facility) in amounts sufficient to meet their respective scheduled debt obligations. See “Part I—also “-We may not freely access the cash of Dotdash Meredith and Angi Inc. and its subsidiaries” below. If so, they could be forced to reduce or delay capital expenditures, sell assets or seek additional capital (in the case of Dotdash Meredith only, in a manner that complies with the terms (including certain restrictions and limitations) of the Dotdash Meredith Credit Agreement). If these efforts do not generate sufficient funds to meet scheduled debt obligations, they would need to seek additional financing and/or negotiate with lenders to restructure or refinance their respective outstanding indebtedness. Their ability to do so would depend on the condition of the capital markets and their respective financial condition at such time. Any such financing, restructuring or refinancing could be on less favorable terms than those of their current respective indebtedness (and if Dotdash Meredith is the borrower, would need to comply with the terms (including certain restrictions and limitations) of such agreement).
Variable rate indebtedness subjects us to interest rate risk.
As of December 31, 2022, we had total debt outstanding of approximately $2.1 billion, consisting of $350 million and $1.25 billion under the Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B, respectively, which bear interest at variable rates, and $500 million in aggregate principal amount of ANGI Group Senior Notes, which bear interest at a fixed rate. As of that date, we had borrowing availability of $150 million under the Dotdash Meredith Revolving Facility. Borrowings under the Dotdash Meredith Term Loans A and B are, and any borrowings under the Dotdash Meredith Revolving Facility will be, at variable interest rates, which exposes us to interest rate risk. For details regarding: (i) the variable interest rates applicable to indebtedness outstanding under the Dotdash Meredith Credit Agreement as of December 31, 2022 and how certain increases and decreases in those rates would affect related interest expense as of December 31, 2022 and generally, and (ii) the fixed interest rates applicable to the ANGI Group Senior Notes and how certain increases and decreases in market rates relative to those rate would affect the fair value of this indebtedness, see “Item 1—Equity Ownership7A-Quantitative and Vote.Qualitative Disclosures About Market Risk.”
We may not freely access the cash of ANGI HomeservicesDotdash Meredith and/or Angi Inc. and itstheir respective subsidiaries.
PotentialOur potential sources of cash for us include our available cash balances, net cash from the operating activities of certain of our subsidiaries and proceeds from asset sales, including marketable securities. While the ability of our operating subsidiaries to pay dividends or make other payments or advances to us depends on their individual operating results and applicable statutory, regulatory or contractual restrictions generally, in the case of ANGI Homeservices,Dotdash Meredith, the terms of its indebtednessthe Dotdash Meredith Credit Agreement limit itsthe ability of Dotdash Meredith to pay dividends or make distributions, loans or advances to stockholders (including IAC) in certain circumstances. In addition, because ANGI HomeservicesAngi Inc. is a separate and distinct publicly traded legal entity, with public shareholders, itAngi Inc. has no obligation to provide us with funds.
You may experience dilution with respect to your investment in IAC, and weIAC may experience dilution with respect to ourits investment in ANGI Homeservices,Angi Inc., as a result of compensatory equity awards.
We haveIAC has issued various compensatory equity awards, including stock options, shares of restricted stock, stock appreciation rights and restricted stock unit awards and stock appreciation rights denominated in shares of IAC common stock, as well as in the equity of certain of ourits consolidated subsidiaries, including ANGI Homeservices. Angi Inc. and certain of its subsidiaries.
The issuance of shares of IAC common stock in settlement of these equity awards could dilute your ownership interest in IAC. And ANGI HomeservicesAngi Inc. compensatory equity awards that are settled in shares of ANGI HomeservicesClass A common stock of Angi Inc. could dilute ourIAC’s ownership interest in ANGI Homeservices.Angi Inc. The dilution of ourIAC’s ownership stake in ANGI HomeservicesAngi Inc. could impact ourits ability, among other things, to maintain ANGI HomeservicesAngi Inc. as part of ourits consolidated tax group for U.S. federal income tax purposes, to effect a tax-free distribution of our ANGI Homeservicesits Angi Inc. stake to IACits stockholders or to maintain control of ANGI Homeservices.Angi Inc. As weIAC generally havehas the right to maintain our levelits levels of ownership in ANGI HomeservicesAngi Inc. to the extent ANGI HomeservicesAngi Inc. issues additional shares of its capital stock in the future pursuant to an investor rights agreement, we doIAC does not currently intend to allow any of the foregoing to occur.
With respect to awards denominated in shares of ourIAC’s non-publicly traded subsidiaries, we estimateIAC estimates the dilutive impact of those awards based on ourthe estimated fair value of those subsidiaries. Those estimates may change from time to time, and the fair value we determinedetermined in connection with vesting and liquidity events could lead to more or less dilution than reflected in ourIAC’s diluted earnings per share calculation.
The total addressable market of our Vimeo business may prove to be smaller than it expects.
While we believe, based upon internal data, that every small and midsized business and every larger enterprise will need an online video presence to succeed, the number of entities that are willing and able to pay fees for software-based video services may not be as large as our Vimeo business expects and we have not conducted research by a third party to validate its data and thesis.
Our Vimeo business may not have the right product/market fit.
Our Vimeo business depends upon attracting new subscribers and retaining existing ones. To do so, it must provide products with an attractive value proposition. Our Vimeo business may fail to do that if it:
•fails to innovate and provide new and useful features that its users and subscribers want;
•releases products that fail to reliably operate (due to bugs or service interruptions);
•releases products too late relative to competitors;
•prices its products in an uncompetitive manner; or
•fails to educate its users and subscribers about its features.
Our Vimeo business may not be able to convert its free users into subscribers.
An essential part of the strategy of our Vimeo business for attracting subscribers depends upon offering basic services for free and converting a certain portion of free users into subscribers over time. While a majority of subscribers began as free users, only a small percentage of free users become paying users over time. The ability of our Vimeo business to convert users into subscribers at this or a higher rate may not materialize if:
•the number of free users declines, which could occur due to (among other things) reduced visibility of the Vimeo brand or services;
•our Vimeo business overestimates the number of free users who have the propensity to pay due to issues with duplicative, fraudulent or spam accounts;
•free users do not repeatedly use the free product, either because they are unaware of the features our Vimeo business offers or because the features are not perceived as useful;
•our Vimeo business fails to optimize the conversion of free users by communicating the value of its subscription plans;
•our Vimeo business experiences headwinds in its international expansion due to variety of reasons, including language and cultural barriers, as well as unfavorable regulatory environments; or
•service offerings and pricing are not competitive.
If efforts to convert free users into subscribers do not succeed, our Vimeo business will have to rely more heavily on paid marketing efforts to acquire new subscribers and therefore achieve growth. Such a shift would cause our Vimeo business to incur higher costs in acquiring users, which would reduce its profits.
Our Vimeo business may not be able to scale its business effectively.
Our Vimeo business may not be able to capitalize on the market’s demand for video if it cannot scale its operations. For example, Vimeo might experience delays in onboarding new user and subscribers and responding to increased customer support tickets, and it may not be able to handle increased loads on its servers during peak times. All of these things would result in missed opportunities or user and subscriber frustration that could negatively affect user and Vimeo’s subscriber growth and retention, which could in turn adversely affect our business, financial condition and results of operations.
Our Vimeo business may experience service interruptions.
Our Vimeo business typically does not provide 100% uptime across its video services in any given month. This may be due to technical errors (bugs), human error (by employees and contractors), interruptions experienced by key vendors (such as cloud-based service or payment providers), higher than anticipated traffic and/or cyberattacks. Interruptions in key aspects of Vimeo’s video services (notably, video delivery and payment processing) could result in lost business, credits payable to subscribers with service level agreements, increased user and subscriber support tickets, remediation costs and increased subscriber churn (lost renewals). In severe cases, our Vimeo business could face litigation or reputational risk, particularly if an interruption occurs during a high-profile event. Any such interruptions and/or related effects could adversely affect our business, financial condition and results of operations.
The hosting and delivery costs borne by our Vimeo business may increase unexpectedly.
Hosting and delivery costs comprise the largest component of cost of goods sold for our Vimeo business and as a result, these costs materially influence its gross margin. These costs could increase unexpectedly if Vimeo experiences rapid growth over a short period of time (either in terms of users and subscribers or bandwidth consumed), fails to address subscribers who use more bandwidth than its plans permit (either by failing to charge them overage fees or by failing to limit their bandwidth) or fails to distribute increased bandwidth across its content delivery network (CDN) vendors in a cost-optimal manner by, for example, moving traffic to the lowest-cost provider. Vimeo may not be able to pass these costs to its subscribers, which could adversely affect our business, financial condition and results of operations.
General Risk Factors
Our businesses operate in especially competitive and evolving industries.
The industries in which our brands and businesses operate 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, user demographics and/or other key areas that we currently serve or may serve in the future. Generally, (and particularly in the case of theour brands and businesses within our ANGI Homeservices segment), we compete with search engine providers and online marketplaces that can market their products and services online in a more prominent and cost-effective manner than we can. We also generally compete with social media platforms with access to large existing pools of potential users and their personal information, which means these platforms can drive visitors to their products and services, as well as better tailor products and service to individual users, at little to no cost relative to those involved with our efforts. Any of these advantages could enable our competitors to offer products and services that are more appealing to consumers than our products and services, respond more quickly and/or cost effectively than we do to evolving market opportunities and trends and/or display their own integrated or related products and services in a more prominent manner than our products and services in search results, any or all of which could adversely affect our business, financial condition and results of operations.
In addition, costs to switch among products and services are generally low orto non-existent andgiven that consumers generally have a propensity to try new products and services (and use multiple products and services simultaneously). As a result, we expect the continued emergence of new products and services, entrantscompetitors and business models in the various industries in which itsour brands and businesses operate. Our inability to continue to innovate and compete effectively against new products and services, competitors and competitorsbusiness models could result in decreases in the size and levels of engagement of our various user and subscriber bases, which could adversely affect our business, financial condition and results of operations.
We are sensitive to general economic events orand trends, particularly those that adversely impact advertising spending levels and consumer confidence and spending behavior.behavior, as well as geopolitical conflicts.
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 the businesses within our Dotdash and Search segments. Accordingly, eventsEvents and trends that result in decreased advertising expenditures and/or levels of consumer confidence and discretionary spending (for example, a general economic downturn, recessionary concerns, rising interest rates and increased inflation, as well as any sudden disruption in business conditions) could adversely affect our business, financial condition and results of operations.
Similarly, the Our Angi Inc. businesses within our ANGI Homeservices segment are particularly sensitive to events and trends that could result in consumers delaying or foregoing home services projects (including difficulties obtaining supplies for and financing for such projects) and service professionals being less likely to pay for consumer matches, pre-priced bookings, Marketplace subscriptions and/or time-based advertising, whichAngi Inc.'s various products and services. Similarly, our Care.com business is particularly sensitive to events and trends that could result in decreases in Marketplace service requests, pre-priced bookings and directory searches.adversely impact the ability of families to pay for caregiver services. Any such decreasesevents or trends could result in turnover at the Marketplace and/or any ANGI Homeservices directories, adversely impact the number and quality of service professionals at the Marketplace and in any ANGI Homeservices directoriescaregivers affiliated with these businesses and/or could adversely impact the reach of (and breathbreadth of services offered through) the Marketplace and ANGI Homeservices directories,these businesses, any or all of which could adversely affect our business, financial condition and results of operations. Also, negative changesLastly, in capital marketsthe case of our Mosaic Group business, most of our marketing and customer service employees and related resources are located in Belarus. Given the ongoing geopolitical conflict involving Russia and the Ukraine, our Mosaic Group business could adversely impactexperience general disruption in its day-to-day operations and the abilityexecution of the third party with which ANGI Homeservices has contractedits long term strategic goals, employee turnover and performance issues in Belarus due to offer a consumer financing option through the HomeAdvisor Pro-Pay App to fulfill its obligations,health and safety concerns and related increases in relocation requests and expenses, any or all of which could adversely impact the launch and ongoing rollout of this option, and in turn,affect 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 and recognition 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. Events that could adversely impact our brands and brand-building efforts include (among others): product and service quality concerns, consumer complaints or lawsuits, lack of awareness of the policies of our various businesses and/or how they are applied in practice, our failure to respond to consumer, user, service professional and caregiver feedback, ineffective advertising, inappropriate and/or unlawful actions taken by consumers, users, service professionals and caregivers, actions taken by governmental or regulatory authorities, data protection and security breaches and related bad publicity. The occurrence or any of these events could, in turn, adversely affect our business, financial condition and results of operations. See also “ — Risks Relating to Our Business, Operations and Ownership — The Angi Inc. brand integration initiative may continue to involve substantial costs, including as a result of a continued negative impact on organic search placement.”
The global outbreak of COVID-19 and other similar outbreaks could continue to adversely affect our business, financial condition and results of operations.
Our business could be materially and adversely affected byThe impact on the outbreak of a widespread health epidemic or pandemic, including the continuing outbreak ofCompany from the coronavirus (COVID-19), which has been declared a “pandemic” by("COVID-19") and the World Health Organization. The continuing outbreak of COVID-19 has caused a widespread global health crisis, and governments in affected regions have implemented measures designed to curbcontain its spread such as social distancing, government-imposed quarantinescontinues to impact the comparability of the Company's year-over-year financial performance.
and lockdowns, travel bans and other public health safety measures. These measures have resulted in significant social disruption and have had (and are likely to continue to have) an adverse effect on economic conditions generally, advertising expenditures and consumer confidence and spending, all of which could have an adverse effect on our business, financial condition and results of operations.
Since the initial outbreak,As previously disclosed, the impact of COVID-19
in 2020 on our
Angi Inc. businesses
has varied from business to business and from month to month. To date,initially resulted in a decline in demand for
certain of our products and services and advertising rates have generally decreased and, despite increased service requests,
at our ANGI Homeservices business, the limited abilitydriven primarily by decreases in demand in certain categories of
jobs (particularly discretionary indoor projects). While these businesses experienced a rebound in service
professionalsrequests from mid-2020 through early 2021, service requests did start to fulfill these requests as a result of labor decline in May 2021and material constraints has negatively impactedcontinued to decline during 2022 due, in part, to COVID-19 measures that were more widely in place in prior periods. While the ability of ANGI Homeservicesthese businesses to monetize these requests. ANGI Homeservices continued to experience strong demand for home servicesservice requests rebounded modestly in the second half of 2020. Also,2021 and the first half of 2022, that improved monetization rate trend plateaued in the third quarter of 2022 and is now in line with monetization rates experienced pre-COVID-19. No assurances can be provided that our Angi Inc. businesses will be able to dateincrease service requests and continue to improve monetization rates, or that service professionals' businesses (and related revenue and profitability) will not be adversely impacted in the future. In addition, certain businesses within our Vimeo business has seen strongDotdash Meredith financial reporting segment experienced decreases in digital advertising and/or performance marketing revenue growth asin the demand for communication via video has increased due to the pandemic. Lastly, certain of our advertising-supported businesses experienced a decline in revenue due, in part, to decreased advertising due to COVID-19, and we recorded impairments during the fiscal year ended December 31, 2020 related2022 compared to our desktop business and certain securities (see “Item 7—the prior year, due (in part) to lower traffic compared to prior year COVID-19 traffic highs. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations —Overview—for IAC — Overview — Consolidated and Combined Results”)Results.”
Any future outbreak of a widespread health epidemic or pandemic (or the United Statescontinuing outbreak of COVID-19) and Europe, which are the first and second largest markets for our products and services, respectively, experienced significant resurgences of COVID-19, with record levels of infection being reported during the fourth quarter of 2020 and continuing into the first quarter of 2021. These resurgences and government-imposed measures designed to control thecontain its spread of COVID-19 continue tocould adversely impact our ability to conduct ordinary course business activities for the foreseeable future and could adversely impact employee productivity and increase operating costs. Moreover, we may also experience business disruption if the ordinary course operations of our contractors, vendors and/or business partners are adversely affected. Any of these measures could adversely affect our business, financial condition and results of operations.
The extent to which developments related to any future widespread health epidemic or pandemic (or the continuing COVID-19 pandemic) and measures designed to curb its spread could impact (or continue to impact ourimpact) the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to COVID-19. The longer the global outbreak and measures designed to curb the spread of COVID-19 continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for our various products and services), the greater the adverse impact is likely to be on our business, financial condition and results of operations and the more limited our ability will be to try and make up for delayed or lost revenues.
The COVID-19 outbreak may also have the effect of heightening many of the other risks described in this report and we will continue to evaluate the nature and extent of the impact of the COVID-19 outbreak on our business, financial condition and results of operations.
Furthermore, because COVID-19 did not begin to impact IAC’s results until late in the first quarter of 2020, any current or future impacts may not be directly comparable to any historical periods and are not necessarily indicative of any future impacts that COVID-19 may have on IAC’s results. The impact of COVID-19 on IAC’s revenues and expenses may also fluctuate differently over the duration of the pandemic.Company’s control.
We may not be able to protect our systems, technology and infrastructure from cyberattacks and cyberattacks experienced by third parties may adversely affect us.
We are regularly under attacksubjected to attacks by perpetratorscyber criminals through the use of malicious technology-related events, such as botnets, malware or other destructive or disruptive software, distributed denial of service attacks, phishing, attempts to misappropriate user information and account login credentials and other similar malicious activities. The incidence of events of this nature (or any combination thereof) is on the rise worldwide. While we continuously develop and maintain systems, processes and procedures designed to detect and prevent events of this nature from impacting our systems, technology, infrastructure, products, services and users, and have invested (and continue to invest) heavily in these efforts and related personnel and training and deploy data minimization strategies (where appropriate), these efforts are costly and require ongoing monitoring and updating as technologies change and efforts to overcome preventative security measures become more sophisticated. Despite these efforts, some of our systems have experienced past security incidents, none of which had a material adverse effect on our business, financial condition and results of operations, and we could experience significant or material events of this nature in the future.
Any event of this nature that we experience could damage our systems, technology and infrastructure and/or those of our users, prevent us from providing our products and services, compromise the integrity of our products and services, damage our reputation, erode our brands 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 firsthand, the impact of any such events experienced by third parties upon which we rely and with which we contract for various products and services could have a similar effect. No assurances can be provided that we will not experience future events involving third party service providers that could adversely affect our business, financial conditionscondition and results of operations in a significant or material manner. We may not have adequate insurance coverage to compensate for losses resulting from any of these events. If we (or any third party with which we do business or otherwise rely upon) experience(s) an event of this nature, our business, financial condition and results of operations could be adversely affected.
If personal, confidential or sensitive user information is breached or otherwise accessed by unauthorized persons, it may be costly for us to mitigate and our reputation could be harmed.
We receive, process, store and transmit a significant amount of personal, confidential and/or sensitive user and subscriber information and, in the case of certain of our products and services, enable users and subscribers to share their personal information with each other. While we continuously develop and maintain systems designed to protect the security, integrity and confidentiality of this information (and only engage third-partiesthird parties to store this information who do the same), we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information. When such events occur, we may not be able to remedy them, we may be required by law to notify regulators and impacted individuals and it may be costly for us to mitigate the impact of such events and to develop and implement protections to prevent future events of this nature from occurring. When breaches of security (our security(ours or that of any third party that we engage to store such information) occur, we could face governmental enforcement actions, significant fines, litigation (including consumer class actions) and the reputation of our brands and businessesbusiness could be harmed, any or all of which could adversely affect our business, financial condition and results of operations. While we may have insurance coverage for certain of these matters, any such losses may exceed or not be covered by insurance.In addition, if any of the search engines, digital app stores or social media platforms through which we market, distribute and monetize our products and services were to experience a breach, third parties could gain unauthorized access to personal data about our users and subscribers, which could indirectly harm the reputation of our brands and businessesbusiness and, in turn, adversely affect our business, financial condition and results of operations.
The processing, storage, use and disclosure of personal data could give rise to liabilities and increased costs.
We receive, transmit and store a large volume of personal information and other user and subscriber data (including private content, such as videos and correspondence) in connection with the processing of search queries, the provision of online products and services generally and the display of advertising on our various properties. The manner in which we share, store, use, disclose and protect this information is determined by the respective privacy and data security policies of our various businesses, as well as federal, state and foreign laws and regulations and evolving industry standards and practices, which are changing, and in some cases, inconsistent and conflicting and subject to differing interpretations. In addition, new laws, regulations and industry standards and practices of this nature are proposed and adopted from time to time. For a description of laws, regulations and rules concerning the processing, storage and use of disclosure of personal data, see “Item 1—Business—“Item 1 — Business — Description of IAC Businesses—Businesses — Government Regulation.Regulation.” While we believe that we comply with applicable privacy and data protection policies, laws and regulations and industry standards and practices in all material respects, we could still be subject to claims of non-compliance that we may not be able to successfully defend and/or may result in significant fines and penalties. Moreover, any non-compliance or perceived non-compliance by us (and/or any third party we engage) or any compromise of security that results in unauthorized access to (or use or transmission of) personal information could result in a variety of claims against us, including governmental enforcement actions, significant fines, litigation (including consumer class actions), claims of breach of contract and indemnity by third parties and adverse publicity. When such events occur, our reputation could be harmed and the competitive positions of our various brands and businesses could be diminished, which could adversely affect our business, financial condition and results of operations. Additionally, to the extent multiple U.S. state-level (or(and/or European Union member-state level) laws arecontinue to be introduced with inconsistent or conflicting standards and there is no federal or European Union regulation to preempt such laws, compliance could be even more difficult to achieve and our potential exposure to the risks discussed above could increase.
Lastly, ongoing compliance with existing (and compliance with future) privacy and data protection laws worldwide could beis (and we expect that it will continue to be) costly. The devotion of significant costs to compliance (versus to the development of products and services) could result in delays in the development of new products and services, us ceasing to provide problematic products and services in existing jurisdictions and us being prevented from introducing products and services in new and existing jurisdictions, any or all of which could adversely affect our business, financial condition and results of operations.
Our success depends, in part, on the integrity, quality, efficiency and scalability of our systems, technology and infrastructure, and those of third parties.
We rely on our systems, technology and infrastructure to perform well on a consistent basis. From time to time in the past, we have experienced (and in the future we may experience) occasional interruptions that make some or all of this framework and related information unavailable or that prevent us from providing products and services; any such interruption could arise for any number of reasons. We also rely on third party data center service providers and cloud-based, hosted web service providers, as well as third party computer systems and a variety of communications systems and service providers in connection with the provision of our products and services generally, as well as to facilitate and process certain payment and other transactions with users. We have no control over any of these third parties or their operations and the interruption of any of the services provided by these parties could prevent us from accessing user and subscriber information and providing our products and services.
The framework described aboveOur systems, technology and infrastructure could be damaged or interrupted at any time due to cyberattacks, fire, power loss, telecommunications failure, natural disasters, acts of war or terrorism, acts of God and other similar events or disruptions. Any event of this nature could prevent us from providing our products and services at all (or result in the provision of our products on a delayed or interrupted basis) and/or result in the loss of critical data. While we and the third parties upon whom we rely have certain backup systems in place for certain aspects of our and their respective frameworks, none of these frameworks are 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. When such damages, interruptions or outages occur, our reputation could be harmed and the competitive positions of our various brands and businesses could be diminished, 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 frameworksystems, technology and infrastructure to improve the consumer and user experience, accommodate substantial increases in the number of visitors to our various platforms, ensure acceptable load times for our various products and services and keep up with changes in user and subscriber preferences. If we do not continue to do so in a timely and cost-effective manner, user and subscriberssubscriber experiences and demand across our brands and businesses could be adversely affected, which couldwould adversely affect our business, financial condition and results of operations.
We depend on our key personnel.
Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled, diverse and talented individuals worldwide, particularly in the case of senior management.leadership. Competition for well-qualified employees across IAC and its various businesses has been (and willis expected to continue to be) intense, particularly in the case of senior leadership and technology roles, and we must continue to attract new (and retain existing) employees to compete effectively. While we have established programs to attract new (and retain existing) key and other employees, we may not be able to attract new (ordo so in the future. If we fail to retain existing) key and other employees, this could result in the future. In addition, ifloss of institutional knowledge and the disruption of our day-to-day operations, which could adversely impact the effectiveness of our internal control framework and the ability of IAC and its various businesses to successfully execute long term strategic initiatives and other goals. If we do not ensure the effective transfer of knowledge to successors and smooth transitions (particularly in the case of senior management)leadership) by way of tailored succession plans across ourIAC and its various businesses, our business, financial condition and results of operations could be adversely affected.
Risks Relating to the Spin-off and IAC Securities Following the Spin-off
The Spin-off may be abandoned by IAC at any time prior to completion, and is subject to certain closing conditions that, if not satisfied or waived, will result in the Spin-off not being completed. If the Spin-off is not completed, the market price of IAC securities may decline.
The IAC board of directors may abandon the Spin-off at any time prior to completion. In addition, the completion of the Spin-off is subject to the satisfaction (or waiver) of a number of conditions, including the receipt of certain approvals from IAC stockholders and the final approval of the IAC board of directors. Some of the conditions to the completion of the Spin-off are outside of the control of IAC and New Vimeo. If any condition to the closing of the Spin-off is not satisfied or waived, or if the IAC board of directors otherwise determines to abandon the Spin-off, the Spin-off will not be completed.
The impact of the COVID-19 pandemic and the resulting social and economic disruption may increase the risk that one or more of the closing conditions will not be satisfied and the Spin-off will not occur or that the completion of the Spin-off will be significantly delayed.
If IAC and New Vimeo do not complete the Spin-off, the market price of IAC securities may fluctuate to the extent that the current market prices of those shares reflect a market assumption that the Spin-off will be completed. IAC will also be obligated to pay certain legal and accounting fees and related expenses in connection with the Spin-off, whether or not the Spin-off is completed. In addition, each of IAC and its Vimeo business has expended, and will continue to expend, significant management resources in an effort to complete the Spin-off. If the Spin-off is not completed, IAC and its Vimeo business will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.
IAC and New Vimeo may be unable to achieve some or all of the benefits that they expect to achieve through the Spin-off.
IAC and New Vimeo may be unable to achieve the full strategic and financial benefits expected to result from the Spin-off, or such benefits may be delayed or may never occur at all. The Spin-off is expected to provide the following benefits, among others:
•enabling each of IAC and New Vimeo to adopt a capital structure and to make investments best suited for their own respective objectives and needs, including allowing New Vimeo to raise equity capital without the constraint of investment considerations at the IAC level;
•creating a “pure play” New Vimeo equity currency in order to facilitate capital raising, strategic acquisitions and employee compensation;
•the potential increase in the aggregate equity value of the two companies, including by permitting New Vimeo to develop an investor base that focuses on companies similar to its business;
•increasing transparency at each of IAC and New Vimeo, including by allowing each business to be covered by equity analysts who specialize in their respective industries; and
•enhancing IAC’s ability to focus on building the scale of its remaining businesses and improving alignment among those businesses through the separation of its Vimeo business, which, as a “software as a service” company, does not currently align with the operating model of IAC’s other businesses.
IAC and New Vimeo may not achieve these or other anticipated benefits for a variety of reasons, including, among others: (i) the possibility that the Spin-off will be abandoned prior to completion, or will otherwise not be completed, (ii) the possibility that IAC’s non-Vimeo businesses will not be successful, and that IAC will not succeed in identifying new profitable acquisitions or other opportunities or in developing its existing businesses, (iii) the fact that IAC and New Vimeo will be more susceptible to market fluctuations and other adverse events following the consummation of the Spin-off, (iv) the risk of litigation, injunctions or other legal proceedings relating to the Spin-off, (v) the Spin-off will require significant amounts of management time and effort, which may divert management attention from operating and growing the respective businesses of IAC and New Vimeo and (vi) the other actions required to separate the respective businesses of IAC and New Vimeo prior to closing could disrupt the respective operations of IAC and New Vimeo. If IAC and New Vimeo fail to achieve some or all of the benefits expected to result from the Spin-off, or if such benefits are delayed, the business, financial condition and results of operations of IAC and/or New Vimeo could be materially and adversely affected.
Following the Spin-off, the financial profile of each of IAC and New Vimeo will change, and each will be a smaller, less diversified company than IAC prior to the Spin-off.
The Spin-off will result in each of IAC and New Vimeo being smaller, less diversified companies with more limited businesses, which in New Vimeo’s case will be concentrated in its industry, than IAC prior to the Spin-off. As a result, each of IAC and New Vimeo may be more vulnerable to changing market conditions, which could have a material adverse effect on their respective business, financial condition and results of operations and may subject them to increased volatility.
If the Spin-off were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, IAC, New Vimeo and their respective stockholders could suffer material adverse consequences.
The completion of the Spin-off is conditioned upon, among other things, the receipt of a tax opinion from IAC’s outside counsel to the effect that the Spin-off will qualify as a “reorganization” within the meaning of Sections 368(a)(1)(D) and 355(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
This tax opinion will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of IAC and New Vimeo, including those relating to the past and future conduct of IAC and New Vimeo. If any of these representations, statements or undertakings is (or becomes) inaccurate or incomplete, or if any of the representations or covenants contained in any of the transaction-related agreements and documents or in any document relating to the tax opinion are inaccurate or not complied with by IAC or New Vimeo, the tax opinion may be invalid and the conclusions reached therein could be jeopardized.
Notwithstanding our receipt of the tax opinion, no assurances can be provided that the U.S. Internal Revenue Service (the “IRS”) will agree that the Spin-off qualifies for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain a challenge to this treatment. In the event the IRS were to prevail with such a challenge, IAC and New Vimeo and their respective stockholders could suffer material adverse consequences.
If the Spin-off did not qualify as a tax-free transaction for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, IAC would recognize a taxable gain as if it had sold the New Vimeo stock in a taxable sale for its fair market value. In such case, IAC stockholders who receive New Vimeo common stock in the Spin-off would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. Even if the Spin-off were otherwise to
qualify as a tax-free transaction under Sections 355(a) and 368(a)(1)(D) of the Code it may result in taxable gain to IAC (but not its stockholders) under Section 355(e) of the Code if the Spin-off were 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 IAC or New Vimeo within two years before or after the Spin-off.
IAC and New Vimeo will be parties to a tax matters agreement, pursuant to which, among other things, each of them will be responsible for certain tax liabilities and obligations following the Spin-off. In addition, pursuant to the agreement, New Vimeo will generally be required to indemnify IAC for any taxes resulting from the failure of the Spin-off to qualify for the intended tax-free treatment (and related amounts) to the extent that the failure to so qualify is attributable to: (i) an acquisition of all or a portion of the equity securities or assets of New Vimeo, whether by merger or otherwise (and regardless of whether New Vimeo participated in or otherwise facilitated the acquisition), (ii) certain other actions or inactions on the part of New Vimeo or (iii) any of the representations or undertakings made by New Vimeo in any of the transaction- related agreements and documents or in any documents relating to the tax opinion being incorrect or violated.
After the Spin-off, actual or potential conflicts of interest may develop between the management and directors of IAC, on the one hand, and the management and directors of New Vimeo, on the other hand, or between management and directors of either entity and the management and directors of Expedia Group, Inc. or Match Group, Inc.
After the completion of the Spin-off, the management and directors of IAC and New Vimeo may own both IAC capital stock and New Vimeo capital stock, and the parties anticipate that certain members of IAC’s senior management team may be directors of New Vimeo after the completion of the Spin-Off. This overlap could create (or appear to create) potential conflicts of interest when directors and executive officers of New IAC and New Vimeo face decisions that could have different implications for IAC and New Vimeo. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between IAC and New Vimeo regarding terms of the agreements governing the Spin-off and the relationship between IAC and New Vimeo thereafter or any commercial agreements between the parties or their affiliates. Potential conflicts of interest could also arise if IAC and New Vimeo enter into any commercial arrangements in the future. Actual or potential conflicts of interest may also develop as a result of officers or directors of IAC and/or New Vimeo who are also officers or directors of Expedia Group, Inc. or Match Group, Inc.
The aggregate value of the IAC and New Vimeo securities that current holders of IAC capital stock receive in the Spin-off might be less than the value of the IAC securities that they held before the Spin-off.
If IAC completes the Spin-off, holders of IAC capital stock as of immediately prior to the Spin-off will receive a combination of shares of IAC capital stock and New Vimeo capital stock. The prices at which shares of IAC securities and/or New Vimeo securities may trade at post-Spin-off are unpredictable. Therefore, the combined market value of one share of IAC common stock and a to be determined number of shares of New Vimeo common stock post-Spin-off may be less than, equal to or greater than the market value of one share of IAC common stock prior to the Spin-off.
Additionally, the value of IAC securities and/or New Vimeo securities may be negatively impacted by a number of factors, after the completion of the Spin-off. Some of these matters are described in these risk factors and others may or may not have been identified by IAC or New Vimeo prior to the completion of the Spin-off, and many of them are not within the control of IAC or New Vimeo. Should any adverse circumstances, facts, changes or effects come to pass, the combined value of the IAC and New Vimeo securities could be less than the value of IAC securities before the Spin-off.
Substantial sales of IAC common stock following the Spin-off, or the perception that such sales might occur, could depress the market price of IAC common stock, which is already expected to be lower than the pre-Spin-off market price of IAC common stock due to IAC no longer having any ownership interest in its Vimeo business.
The post-Spin-off market price of IAC common stock is expected to be lower than the pre-Spin-off market price of IAC common stock, as IAC will no longer have an ownership interest in its Vimeo business. In addition, the smaller size and different investment characteristics of IAC may not appeal to the current investor base of IAC and/or could result in less equity analyst coverage, which could result in sales of substantial amounts of IAC common stock in the public market following the Spin-off, or the perception that such sales might occur. There is no assurance that there will be sufficient buying interest to offset any such sales, and, accordingly, the price of IAC common stock may be depressed by those sales and have periods of volatility.
After the Spin-off, financial institutions could remove IAC securities from investment indices. In addition, IAC securities may not meet the investment guidelines of institutional investors. In either case, these factors could negatively impact the price of IAC securities and could impair the ability of IAC to raise capital through the sale of securities.
Some holders of IAC securities are index funds tied to stock exchange and/or other stock or investment indices, or are institutional investors bound by various investment guidelines. Companies are generally selected for investment indices, and in some cases selected by institutional investors, based on factors such as market capitalization, industry, trading liquidity and
financial condition. The Spin-off will reduce IAC’s market capitalization. As a result, one or more investment indices may remove IAC securities from their indices. In addition, IAC securities that are received in the Spin-off may not meet the investment guidelines of some institutional investors. Consequently, these index funds and institutional investors may have to sell some or all of the securities they receive in the Spin-off, and the prices of IAC securities may fall as a result. Any such decline could impair the ability of IAC to raise capital through future sales of securities.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
IAC believes that the facilities for its management and operations are generally adequate for its current and near-term future needs. IAC’s facilities, most of which are leased by IAC’s businesses in various cities and locations in the United States and various jurisdictions abroad, generally consist of executive and administrative offices, operations centers, data centers and sales offices.
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 on commercially reasonable terms for any of its principal businesses. IAC’s approximately 202,500nearly 200,000 square foot corporate headquarters in New York, New York houses offices for IAC corporate and various IAC businesses within the following segments: Vimeo, SearchAngi Inc. and Emerging & Other.Other financial reporting segments. In addition, through our Dotdash Meredith financial reporting segment, we own certain buildings in Des Moines, Iowa with approximately 389,000 in square footage that primarily house offices and production facilities for certain Dotdash Meredith employees and were part of Meredith Holdings Corp.'s former corporate headquarters/campus.
Item 3. Legal Proceedings
Overview
In the ordinary course of business, the CompanyIAC and its subsidiaries are (or may become) parties to litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholdershareholder derivative actions, class action lawsuits and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage. The litigation matters described below involve issues or claims that may be of particular interest to ourIAC's stockholders, regardless of whether any of these matters may be material to ourIAC's financial position or operations based upon the standard set forth in the rules of the Securities and Exchange Commission.
Tinder Optionholder Litigation against IAC and Match Group
On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. (“Tinder”), an operating business of Match Group, filed a lawsuit in New York state court against IAC and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018 (Supreme Court, New York County). The complaint alleges that in 2017, the defendants: (i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by two investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their stock options, and (ii) then wrongfully merged Tinder into Match Group, thereby depriving the plaintiffs of their contractual right to later valuations of Tinder on a stand‑alone basis. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Match Group only), and interference with prospective economic advantage, and seeks compensatory damages in the amount of at least $2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employed by Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs.
On October 9, 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expert determination any challenge to which is both time-barred under applicable law and available only on narrow substantive grounds that the plaintiffs have not pleaded in their complaint; the plaintiffs opposed the motion. On June 13, 2019, the court issued a decision and order: (i) granting the motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment, (ii) granting the motion to dismiss the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and (iii) otherwise denying the motion to dismiss. On June 21, 2019, the defendants filed a notice of appeal from the trial court’s partial denial of their motion to dismiss, and the parties thereafter briefed the appeal. On October 29, 2019, the Appellate Division, First Department, issued an order affirming the lower court’s decision. On November 22, 2019, the defendants filed a motion for reargument or, in the alternative, leave to appeal the Appellate Division’s order to the New York Court of Appeals; the plaintiffs opposed the motion. On May 21, 2020, the Appellate Division issued an order: (i) granting the defendants’ motion for reargument, vacating its prior decision, and replacing it with a new decision that affirmed the lower court’s decision on different grounds, and (ii) denying the defendants’ motion for leave to appeal the initial (and now vacated) decision to the Court of Appeals, without prejudice to the defendants’ filing a motion for leave to appeal the new decision to the Court of Appeals. On June 5, 2020, the defendants filed a motion for leave to appeal the Appellate Division’s May 21 decision to the Court of Appeals; the plaintiffs opposed the motion. On July 24, 2020, the Appellate Division issued an order denying the motion.SEC rules.
On June 3, 2019, the defendants filed a second motion to dismiss and for other relief based upon certain provisions of the plaintiffs’ agreement with a litigation funding firm; the plaintiffs opposed the motion, which remains pending. On July 15, 2019, the defendants filed an answer denying the material allegations of the complaint, as well as counterclaims against former Tinder CEO Sean Rad for breach of contract and unjust enrichment based upon his alleged misappropriation of confidential company information. On September 13, 2019, the defendants filed an amended answer and counterclaims, adding claims based on Rad’s alleged unauthorized recording of conversations with company employees. On November 21, 2019, the defendants filed a second amended answer and counterclaims, adding claims based on Rad’s alleged unauthorized destruction of company information and breach of his non-solicitation obligations. On January 30, 2020, the parties participated in a mediation that did not result in the resolution of the matter.
Document discovery in the case is substantially complete; deposition discovery, which had been on hiatus in light of the COVID-19 pandemic, is nearing completion. On July 12, 2020, the four individuals who earlier had discontinued their claims in the lawsuit commenced separate arbitration proceedings against IAC and Match Group before the American Arbitration Association in California, asserting the same claims and seeking the same relief as the six remaining plaintiffs in the lawsuit. On September 14, 2020, the defendants filed a motion to stay the trial in the New York action in favor of the California arbitration; the plaintiffs opposed the motion. On November 16, 2020, the court denied the motion. The court has provisionally scheduled the New York action for trial commencing on November 8, 2021.
In the California arbitration, on December 8, 2020, the claimants filed a motion to stay the proceedings in favor of the New York lawsuit; the respondents opposed the motion. On December 22, 2020, the respondents requested permission to file a motion for summary judgment on the claims arising out of the merger of Tinder into Match Group; the claimants opposed the request. On January 28, 2021, the arbitrator issued a decision and order: (i) denying the claimants’ motion to stay the proceedings, (ii) granting the respondents’ request to file a motion for summary judgment on the merger claims, provided that the motion await the close of fact discovery in the New York lawsuit, and (iii) setting a provisional hearing date of February 7, 2022.
IAC believes that the allegations against it in the New York lawsuit and the California arbitration are without merit and will continue to defend vigorously against them.
Pursuant to the Transaction Agreement (as defined in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—MTCH Separation”), Match Group has agreed to indemnify the Company for matters relating to any business of Match Group, including indemnifying the Company for costs related to the matter described above.
Shareholder Litigation Arising Out of the MTCH Separation of Match Group from IAC
On June 24, 2020, a shareholder class action and derivative lawsuit was filed in Delaware state court against then
IAC/InterActiveCorp (now Match Group, Inc.), then IAC Holdings, Inc. (now(subsequently renamed IAC/InterActiveCorp)InterActiveCorp and now known as IAC Inc.), IAC’sIAC's Chairman and Senior Executive.Executive, Barry Diller, former Match Group (as a nominal defendant only), and the ten members of former Match Group’s BoardGroup's board of Directorsdirectors at the time of the MTCH Separation (as defined in “Item 7—Management’sItem 7-Management's Discussion and Analysis of Financial Condition and Results of Operations—Operations- MTCH Separation”)Separation), challenging, on behalf of a putative class of then Match Group public shareholders, the agreed-upon terms of the MTCH Separation. SeeDavid Newman v. IAC/InterActiveCorp et al.,No. 2020-0505 (Delaware Chancery Court). The gravamen of the complaint is that the terms of the MTCH Separation are unfair to former Match Group and unduly beneficial to IAC as a result of undue influence by IAC and Mr. Diller over the then Match Group directors who unanimously approved the transaction. The complaint assertsasserted direct and derivative claims for: (i) breach of fiduciary duty against IAC and Mr. Diller as former controlling shareholders of Match Group, (ii) breach of fiduciary duty against the Match Group directors who unanimously approved the MTCH Separation, (iii) breach of contract (i.e.(i.e., a provision of former Match Group’sGroup's charter), (iv) breach of the implied covenant of good faith and fair dealing, and (v) tortious interference with contract against IAC. The complaint seekssought various declarations and damages in an unspecified amount.
On September 24, 2020, the defendants filed motions to dismiss the complaint.
On January 8, 2021, instead of responding to the motions to dismiss, the plaintiff, joined by another plaintiff, Boilermakers National Annuity Trust, filed an amended complaint. In addition, on January 7, 2021, another complaint challenging the MTCH separationSeparation was filed against substantially the same defendants in the same court. See Construction Industry & Laborers Joint Pension Trust for Southern Nevada Plan A v. IAC/InterActiveCorp et al. (Delaware Chancery Court). The two cases have been consolidated under the captionIn re Match Group, Inc. Derivative Litigation,No. 2020-0505. In light of the competing complaints,On March 15, 2021, the court has scheduled a hearingissued an order appointing Construction Industry and Laborers Joint Pension Trust for March 9, 2021 to determine who will serveSouthern Nevada Plan A as lead plaintiff(s)plaintiff in the litigation and directing it to file a consolidated complaint by April 14, 2021, and on that date the lead counsel forplaintiff filed the plaintiff(s) in this litigation.consolidated complaint.
On June 22, 2021, the defendants filed motions to dismiss the consolidated complaint. On September 3, 2021, instead of responding to the motions, the plaintiffs filed motions to add City of Hallandale Beach Police Officers’ and Firefighters’ Personnel Retirement Trust as a co-lead plaintiff and to amend and supplement the consolidated complaint, which latter motion the defendants opposed. On October 27, 2021, the court issued an order granting the motions. On November 2, 2021, the plaintiffs filed an amended and supplemented consolidated complaint.
On December 10, 2021, the defendants filed motions to dismiss the amended and supplemented consolidated complaint, which the plaintiffs opposed. On September 1, 2022, the court issued an opinion and order granting the defendants' motions to dismiss the complaint with prejudice. On October 3, 2022, the plaintiffs filed a notice of appeal to the Delaware Supreme Court from the Chancery Court's order of dismissal. The appeal has been fully briefed and oral argument has yet to be scheduled.
IAC believes that the allegations in this litigation are without merit and will continue to defend vigorously against them.
Shareholder Litigation Regarding the Proposed Vimeo Spin-off
On January 22, 2021, a putative shareholder class action was filed in New York state court against IAC and the members of IAC’s board of directors. See Dean Drulias v. Joseph Levin et al., No. 650504/2021 (Supreme Court, New York County). The gravamen of the complaint is that the Company’s proposed spin-off of its Vimeo subsidiary is being driven by IAC’s controlling shareholder, Chairman and Senior Executive Barry Diller, allegedly in order to: (i) generate additional cash for IAC to invest in the gaming industry, (ii) decrease IAC’s stock price to facilitate additional share purchases by Mr. Diller and (iii) generate additional cash for Mr. Diller without diluting his controlling interest in IAC. The complaint also asserts claims under Delaware law against IAC’s board of directors for breach of fiduciary duty on account of its approval of the Spin-off and against IAC and its board of directors for their respective failures to include certain allegedly material information in the Company’s proxy materials related to the proposed transaction. The complaint seeks damages in an unspecified amount, as well as an order requiring the Company to include additional disclosures in the proxy materials related to the proposed transaction. IAC believes that the allegations in this lawsuit are without merit and will defend vigorously against them.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market for Registrant’s Common Equity and Related Stockholder Matters
IAC common stock is quoted on the Nasdaq Global Select Market (“NASDAQ”) under the ticker symbol “IAC.” There is no established public trading market for IAC Class B common stock.
As of January 29, 2021,February 10, 2023, there were approximately 1,000850 holders of record of the Company’sIAC common stock and four holders of record (trusts for the benefit of Mr. Diller and/or certain members of his family) of the Company’sIAC Class B common stock. Because the substantial majority of the outstanding shares of IAC common stock are held by brokers and other institutions on behalf of shareholders, IAC is not able to estimate the total number of beneficial holders represented by these record holders.
Dividends
We do not currently expect that any cash or other dividends will be paid to holders of ourIAC common stock or Class B common stock in the near future. Any future cash dividend or other dividend declarations are subject to the determination of IAC’s Boardboard of Directors.
directors.
Unregistered Sales of Equity Securities
During the quarter ended December 31, 2020,2022, the Company did not issue or sell any shares of itsIAC common stock or other equity securities pursuant to unregistered transactions.
Issuer Purchases of Equity Securities
The CompanyWe did not purchase any shares of itsIAC common stock during the quarter ended December 31, 2020.2022. As of that date, 8,036,2266,934,494 shares of IAC common stock remained available for repurchase under the Company’sour previously announced June 2020 repurchase authorization. The CompanyWe may repurchase shares of IAC common stock 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,(without limitation) market conditions, share price and future outlook.
Item 6. Selected Financial DataReserved
Not required.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Acquisition of Meredith:
On December 1, 2021, Dotdash Media Inc. (formerly known as About Inc., and referred to herein as "Dotdash"), a wholly-owned subsidiary of IAC Inc. (formerly known as IAC/InterActiveCorp, and referred to herein as "IAC" or the "Company"), completed the acquisition of Meredith Holdings Corporation ("Meredith"), the former subsidiary of Meredith Corporation, comprising its digital and magazine businesses and its corporate operations. The parent of the combined entity is Dotdash Meredith, Inc. ("Dotdash Meredith").
Vimeo Spin-off:
On May 25, 2021, IAC completed the spin-off of its full stake in Vimeo, Inc. (formerly Vimeo Holdings, Inc. ("Vimeo")) to IAC shareholders (which we refer to as the “Spin-off”). Following the Spin-off, Vimeo became an independent, separately traded public company. Therefore, Vimeo is presented as a discontinued operation within the Company's financial statements for all periods.
MTCH Separation:
On December 19, 2019, IAC/InterActiveCorp ("Old IAC") entered into a Transaction Agreement (as amended, as of April 28, 2020 and June 22, 2020, the "Transaction Agreement") with Match Group, Inc. ("Old MTCH"), IAC Holdings, Inc. ("New IAC" or the "Company"), a direct wholly ownedwholly-owned subsidiary of Old IAC, and Valentine Merger Sub LLC, an indirect wholly ownedwholly-owned subsidiary of Old IAC. On June 30, 2020, the businesses of Old MTCH were separated from the remaining businesses of Old IAC through a series of transactions that resulted in the pre-transaction stockholders of Old IAC owning shares in two, separate public companies—(1) Old IAC, which was renamed Match Group, Inc. ("New Match") and which owns the businesses of Old MTCH and certain Old IAC financing subsidiaries, and (2) New IAC, which was renamed IAC/InterActiveCorp, and which owns Old IAC's other businesses—and the pre-transaction stockholders of Old MTCH (other than Old IAC) owning shares in New Match. This transaction is referred to as the "MTCH Separation."
Spin-off:
On December 22, 2020, IAC announced that its Board of Directors approved a plan to spin-off its full stake in Vimeo to IAC shareholders. IAC's Vimeo business will be separated from the remaining businesses of IAC through a series of transactions (which we refer to as the “Spin-off”) that, if completed in their entirety, will result in the transfer of IAC's Vimeo business to Vimeo Holdings, Inc. ("SpinCo"), a newly formed subsidiary of IAC, with SpinCo becoming an independent, separately traded public company through a spin-off from IAC, and Vimeo, the IAC subsidiary that currently holds the Vimeo business, becoming a wholly-owned subsidiary of SpinCo. The proposed transaction is subject to a number of conditions including final approval by IAC's Board of Directors, approval of the separation proposal by IAC stockholders, and other customary conditions and approvals and is expected to close in the second quarter of 2021.
Defined Terms and Operating Metrics:
Unless otherwise indicated or as the context otherwise requires, certain terms used in this annual report, which include the principal operating metrics we use in managing our business, are defined below:
•ANGI HomeservicesDotdashMeredith - one of the largest digital and print publishers in America. From mobile to magazines, nearly 200 million people trust us to help them make decisions, take action, and find inspiration. Dotdash Meredith's over 40 iconic brands include PEOPLE, Better Homes & Gardens, Verywell, FOOD & WINE, The Spruce, Allrecipes, Byrdie, REAL SIMPLE, Investopedia, and Southern Living.
•Angi Inc. ("ANGI Homeservices" or "ANGI") - a publicly traded company that connects quality home service professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping, with consumers through category-transforming products under brands such as HomeAdvisor, Angie’s Listlandscaping. In the fourth quarter of 2022, the Angi Inc. segment presentation was changed to reflect its four operating segments, which now include: (i) Ads and Handy.Leads, (ii) Services, (iii) Roofing and (iv) International (includes Europe and Canada). Angi Inc.'s financial information for prior periods has been recast to conform to the current period presentation. At December 31, 2020, IAC’s2022, the Company’s economic interest and voting interest in ANGIAngi Inc. were 84.3%84.1% and 98.2%98.1%, respectively.
•Vimeo, Inc. ("Vimeo") - operates a cloud-based software platform for professionals, teams and organizations to create, collaborate and communicate with video. Vimeo’s all-in-one software solution makes video easier and more effective than ever before, offering the full range of video tools through a recurring software-as-a-service ("SaaS" model) that enables subscribers to create, stream, host, distribute, market, monetize and analyze videos online and across devices.
•Dotdash - is a portfolio of digital publishing brands that collectively provide expert information and inspiration in select vertical content categories. Through our brands, Dotdash provides original and engaging digital content in a variety of formats, including articles, illustrations, videos and images.
•Search - consists of Ask Media Group, a collection of websites providing general search services and information, and Desktop, which includes our direct-to-consumer downloadable desktop applications and our business-to-business partnership operations.
•Emerging & Other - consists of of:
◦Care.com the, a leading online destination for families to easily connect with caregivers which wasfor their children, aging parents, pets and homes and for caregivers to connect with families seeking care services. Care.com's brands include Care For Business, Care.com offerings to enterprises, and HomePay. Care.com acquired Lifecare, a leading provider of family care benefits, on February 11, 2020, October 27, 2020;
◦Mosaic Group, a leading developer and provider of global subscription mobile applications. Mosaic Group has a portfolio of some of the largest and most popular applications in the following verticals: Communications (RoboKiller, Bluecrew, NurseFly, a healthcare staffing platform acquired on June 26, 2019, The Daily Beast, IAC FilmsTapeACall, Trapcall), Language (iTranslate, Speak & Translate), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero) and Lifestyle(Blossom, Pixomatic) and, for periods prior to its sale on March 16, 2020, College Humor Media.July 12, 2022, Daily Burn; and
ANGI HomeservicesDotdash Meredith
•MarketplaceDigital Revenue - - primarily includes revenue from the HomeAdvisorconsists principally of advertising, performance marketing, and Handy domestic marketplaces, including consumer connection revenue for consumer matches, revenue from pre-priced jobs sourced through the HomeAdvisorlicensing and Handy platforms, and service professional membership subscriptionother revenue. It excludes revenue from Angie's List and HomeStars. Effective January 1, 2020, Fixd Repair has been moved to Marketplace from Advertising & Other and prior year amounts have been reclassified to conform to the current year presentation.
•Advertising & OtherRevenue - includes Angie’s List revenue (revenue from service professionals under contract for advertising and membership subscription fees from consumers) as well as revenue from mHelpDesk and HomeStars.
•Marketplace Service Requests - are fully completed and submitted domestic customer service requests to HomeAdvisor and includes pre-priced jobs sourced through the HomeAdvisor and Handy platforms.
•Marketplace Monetized Transactions - are fully completed and submitted domestic customer service requests to HomeAdvisor that were matched to and paid for by a service professional and includes pre-priced jobs sourced through the HomeAdvisor and Handy platforms in the period.
•Advertising Service Professionals ("Advertising SPs") - are the total number of Angie’s List service professionals under contract for advertising at the end of the period.
Vimeo
•Subscribers - is the number of users who have an active subscription to one of Vimeo's paid plans measured at the end of the relevant period. Vimeo counts each account with a subscription plan as a subscriber. In the case of enterprise customers who maintain multiple accounts across Vimeo's platforms as part of a single enterprise subscription plan, Vimeo counts only one subscriber. Vimeo does not count team members who have access to a subscriber’s account as additional subscribers.
•Average Subscribers - is the sum of the number of Subscribers at the beginning and at the end of the relevant measurement period divided by two.
•Average Revenue per User (“ARPU”) -is the annualized revenue for the relevant period divided by Average Subscribers. For periods that are less than a full year, annualized revenue is calculated by dividing the revenue for that particular period by the number of calendar days in the period and multiplying this value by the number of days in that year.
Dotdash
•Display Advertising Revenue - primarily includes revenue generated from display advertisements sold both directly through our sales team and via programmatic exchanges.
•Dotdash Performance Marketing Revenue - primarily includes affiliate commerce and performance marketing commissions generated when consumers are directed from our properties to third-party service providers. Affiliate commerce commissions are generated when a consumer completes a purchase or transaction. Performance marketing commissions are generated on a cost-per-click or cost-per-new accountcost-per-action basis.
•Print Revenue - primarily includes subscription, advertising, newsstand, and performance marketing revenue.
Angi Inc.
•Ads and Leads Revenue - primarily reflects domestic ads and leads revenue, including consumer connection revenue for consumer matches, revenue from service professionals under contract for advertising and membership subscription revenue from service professionals and consumers.
•Services Revenue - primarily reflects domestic revenue from pre-priced offerings by which the consumer requests services through an Angi Inc. platform and Angi Inc. engages a service professional to perform the service.
•RoofingRevenue- primarily reflects revenue from the roof replacement business offering by which the consumer purchases services directly from Angi Inc. and Angi Inc. engages a service professional to perform the service.
•International Revenue- primarily reflects revenue generated within the International segment (comprised of businesses in Europe and Canada), including consumer connection revenue for consumer matches and membership subscription revenue from service professionals and consumers.
•Service Requests - are (i) fully completed and submitted domestic service requests for connections with Ads and Leads service professionals, (ii) contacts to Ads and Leads service professionals generated via the service professional directory from unique users in unique categories (such that multiple contacts from the same user in the same category in the same day are counted as one Service Request), and (iii) requests to book Services jobs in the period.
•Monetized Transactions - are (i) Service Requests that are matched to a paying Ads and Leads service professional in the period and (ii) completed and in-process Service jobs in the period; a single Service Request can result in multiple monetized transactions.
Operating Costs and Expenses:
•Cost of revenue (exclusive of depreciation) - consists primarily of traffic acquisition costs, which includesinclude (i) payments made to partners who direct traffic to our Ask Media Group websites and who distribute our business-to-business customized browser-based applications and who integrate our paid listings into their websites and (ii) the amortization of fees paid to Apple and Google related to the distribution of apps and the facilitation of in-app purchases of product features. Traffic acquisition costs include payment of amounts based on revenue share and other arrangements. Cost of revenue also includes production, distribution and editorial costs at Dotdash Meredith, payments made to independent third-party service professionals who performperformed work contracted under pre-pricedServices or Roofing arrangements, through the HomeAdvisor and Handy platforms, compensation expense (including stock-based compensation expense) and other employee-related costs, for Vimeoroofing material and Care.com customer care and support functions,third-party contactor costs associated with Roofing, credit card processing fees, payments made to workers staffed by Bluecrew, hosting fees, credit card processing fees, content costs, and production costs related to IAC Films and College Humor, for periods prior to its sale on March 16, 2020.November 9, 2022, hosting fees, and payments made to care providers for
•Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including throughfees paid to search engines, and social media sites, fees paid to third parties that distribute our direct-to-consumer downloadable desktop applications, offlineother online marketing which is primarily television advertising,platforms, app platforms and partner-related payments to those who direct traffic to the brands within our ANGIAngi Inc. segment, andoffline marketing, which is primarily television advertising, compensation expense (including stock-based compensation expense) and other employee-related costs for ANGI's and Vimeo's sales force and marketing personnel.personnel, subscription acquisition costs related to Dotdash Meredith, and outsourced personnel and consulting costs.
•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, human resources and customer service functions (except for Vimeo and Care.com, which includeincludes customer service costs within cost"Cost of revenue)revenue" in the statement of operations), fees for professional services (including transaction-related costs related to the acquisition of Meredith, the Spin-off, the MTCH Separation, the Spin-off and other acquisitions), rent expense, facilities costs, provision for credit losses, rent expense and facilities cost, software license and maintenance costs, and acquisition-related contingent consideration fair value adjustments (described below). The customer service function at ANGIAngi Inc. includes personnel who provide support to its service professionals and consumers.
•Product development expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs and third-party contractorscontractor costs that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology and software license and maintenance costs.
•Acquisition-related contingent consideration fair value adjustments - relate to the portion of the purchase price of certain acquisitions that is contingent upon the financial performance and/or operating metric targets of the acquired company. The fair value of the liability is estimated at the date of acquisition and adjusted each reporting period until the liability is settled. Significant changes in financial performance and/or operating metrics will result in a significantly higher or lower fair value measurement. The changes in the estimated fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount if the arrangement is longer than one year, are recognized in "General and administrative expense" in the accompanying statement of operations.
•Dotdash Meredith Term Loan A - due December 1, 2026. The outstanding balance of the Dotdash Meredith Term Loan A is $332.5 million and $350.0 million at December 31, 2022 and 2021, respectively, and bore interest at an adjusted term secured overnight financing rate ("Adjusted Term SOFR") plus 2.25% and 2.00%, or 5.91% and 2.15%, at December 31, 2022 and 2021, respectively. The Dotdash Meredith Term Loan A has quarterly principal payments.
•Dotdash Meredith Term Loan B - due December 1, 2028. The outstanding balance of the Dotdash Meredith Term Loan B is $1.24 billion and $1.25 billion at December 31, 2022 and 2021, respectively, and bore interest at Adjusted Term SOFR, subject to a minimum of 0.50%, plus 4.00%, or 8.22% and 4.50% at December 31, 2022 and 2021, respectively. The Dotdash Meredith Term Loan B has quarterly principal payments.
•Dotdash Meredith Revolving Facility - Dotdash Meredith's $150 million revolving credit facility expires on December 1, 2026. At December 31, 2022 and 2021, there were no outstanding borrowings under the Dotdash Meredith Revolving Facility.
•ANGI Group Senior Notes - Onon August 20, 2020, ANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of ANGI,Angi Inc., issued $500 million of its 3.875% Senior Notes due August 15, 2028, with interest payable February 15 and August 15 of each year, commencing February 15, 2021.
•ANGI Group Term Loan - due November 5, 2023. Pursuant to the joinder agreement entered into on August 12, 2020, ANGI Group became the successor borrower under the ANGI Group Term Loan and ANGI Homeservices Inc.’s obligations thereunder were terminated. The outstanding balance of the ANGI Group Term Loan as of December 31, 2020 is $220.0 million and quarterly principal payments are required through maturity. In December 2020, ANGI Group prepaid its required quarterly principal payments for the year ending December 31, 2021 in the aggregate amount of $13.8 million. At December 31, 2020 and 2019, the ANGI Group Term Loan bore interest at LIBOR plus 2.00%, or 2.16%, and 1.50%, or 3.25%, respectively.
•ANGI Group Revolving Facility - The ANGI Group $250 million revolving credit facility expires on November 5, 2023. Pursuant to the joinder agreement entered into on August 12, 2020, ANGI Group became the successor borrower under the ANGI Group Revolving Facility and ANGI Homeservices Inc.’s obligations thereunder were terminated. At December 31, 2020 and 2019, there were no outstanding borrowings under the ANGI Group Revolving Facility. The ANGI Group Revolving Facility and ANGI Group Term Loan are collectively referred to as the ANGI Group Credit Agreement.year.
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 and a reconciliation of net (loss) earnings attributable to IAC shareholders to operating loss(loss) to Adjusted EBITDA for the years ended December 31, 20202022, 2021 and 2019.2020.
MANAGEMENT OVERVIEW
As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer to IAC/InterActiveCorp and its subsidiaries (unless the context requires otherwise).
The Company operates Vimeo, Dotdash and Care.com, among many other online businesses, and has majority ownership of ANGI Homeservices, which operates HomeAdvisor, Angie’s List and Handy.
As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer to IAC Inc. and its subsidiaries (unless the context requires otherwise).
Sources of Revenue
ANGIDotdash Meredith
Digital
Dotdash Meredith revenue consists of digital and print revenue. Digital revenue consists principally of advertising, performance marketing, and licensing and other revenue. Print revenue consists principally of subscription, advertising, project and other, newsstand and performance marketing revenue.
Advertising revenue is generated primarily derivedthrough digital advertisements sold by Dotdash Meredith's sales team directly to the advertisers or through advertising agencies and through programmatic advertising networks. Performance marketing revenue includes commissions generated through affiliate commerce, affinity marketing and performance marketing channels. Affiliate commerce and performance marketing commission revenue is generated when Dotdash Meredith brands refer consumers to commerce partner websites resulting in a purchase or transaction. Affinity marketing programs are arrangements where Dotdash Meredith acts as an agent for both Dotdash Meredith and the third-party publishers to market and place magazine subscriptions online. Commissions are earned when a subscriber name has been provided to the publisher and any free trial period is completed. Licensing and other revenue primarily includes revenue generated through brand and content licensing agreements. Brand licensing generates royalties from (i)multiple long-term trademark licensing agreements with retailers, manufacturers, publishers, and service providers.
Print
Subscription revenue relates to the sale of Dotdash Meredith's print magazines. Most of Dotdash Meredith's subscription sales are prepaid at the time of order and may be canceled at any time for a refund of the pro rata portion of the initial subscription. Advertising revenue relates to the sale of advertising in magazines directly to advertisers or through advertising agencies. Revenue is recognized on the magazine issue’s on-sale date, which is the date the magazine is published. Project and other revenue relates to other revenue streams that are primarily project based and may relate to any one or combination of the following activities: audience targeted advertising, custom publishing, content strategy and development, email marketing, social media, database marketing and search engine optimization. Newsstand revenue is related to single copy magazines or bundles of single copy magazines sold to wholesalers for resale on newsstands. Publications sold to magazine wholesalers are sold with the right to receive credit from Dotdash Meredith for magazines returned to the wholesaler by retailers. Performance marketing revenue principally consists of affinity marketing revenue through which Dotdash Meredith places magazine subscriptions for third-party publishers.
Angi Inc.
Ads and Leads revenue includes consumer connection revenue which comprises fees paid by HomeAdvisor service professionals for consumer matches, (regardless of whether the service professional ultimately provides the requested service), and revenue from completed jobs sourced through the HomeAdvisorservice professionals under contract for advertising and Handy platforms, and (ii) HomeAdvisor service professional membership subscription fees.revenue from service professionals and consumers. Consumer connection revenue varies based upon several factors, including the service requested, product experience offered, and geographic location of service. Revenue is also derivedServices revenue primarily reflects pre-priced offerings by which the consumer requests services through Services platforms and Angi Inc. engages a service professional to perform the service. Roofing revenue primarily reflects revenue from (i) sales of time-based website, mobilethe roof replacement business offering by which the consumer purchases services directly from the Roofing business and call center advertisingAngi Inc. then engages a service professional to perform the service. International revenue primarily reflects consumer connection revenue for consumer matches and membership subscription from service professionals and (ii) membership subscription fees from consumers. Prior to
From January 1, 2020 ANGI's Handy businessthrough December 31, 2022, Services recorded revenue on a netgross basis. Effective January 1, 2020, ANGI2023, Angi Inc. modified the HandyServices terms and conditions so that Handy,the service professional, rather than the service professional,Angi Inc., has the contractual relationship with the consumer to deliver the service and Handy, rather thanAngi Inc.'s performance obligation to the consumer has the contractual relationshipis to connect them with the service professional. Consumers request services and pay for such services directly through the Handy platform and then Handy fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. This change in contractual terms requires grossnet revenue accounting treatment effective January 1, 2020. Also, in the case of certain tasks, HomeAdvisor provides a pre-priced product offering, pursuant2023. There is no impact to which consumers can request services through a HomeAdvisor platform and pay HomeAdvisor for the services directly. HomeAdvisor then fulfills the request with independently established home services providers engaged in a trade, occupation and/operating income or business that customarily provides such services. Revenue from HomeAdvisor’s pre-priced product offering is also recorded on a gross basis effective January 1, 2020. The change to gross revenue reporting for Handy and HomeAdvisor’s pre-priced product offering, effective January 1, 2020, resulted in an increase in revenue of $73.8 million during the year ended December 31, 2020.
Vimeo revenue is derived primarily from annual and monthly SaaS subscription fees paid by subscribers for self-serve and enterprise subscription plans.
Dotdash revenue consists principally of Display Advertising Revenue and Performance Marketing Revenue.Adjusted EBITDA.
Search
The Search segment consists of Ask Media Group and the Desktop business. Ask Media Group and Desktop revenue consist principally of advertising revenue, which is generated primarily through the display of paid listings in response to search queries. The majority of the paid listings displayed are supplied to us by Google Inc. ("Google") pursuant to theour services agreement with Google, described below under "Services Agreement with Google.Google (the "Services Agreement")." Ask Media Group also earns revenue from display advertisements (sold directly and through programmatic ad sales)advertising networks).Desktop revenue also includes fees paid by subscribers for downloadable desktop applications, as well as display advertisements.
Emerging and Other
Included in the Emerging & Other segment are Care.com and Mosaic Group. Care.com generates revenue through subscription fees from families and caregivers to its suite of products and services, as well as through annual contracts with corporate employers who provide access to Care.com’s suite of products and services as an employee benefit and through contracts with businesses that recruit employees through its platform. Mosaic Group revenue consists primarily of fees paid by subscribers for downloadable mobile applications distributed through the Apple App Store and Google Play Store and fees received directly tofrom consumers, as well as display advertisements. Revenue for the remaining businesses within the Emerging & Other segment is generated primarily through marketplace services, advertising, media production and distribution, and subscriptions.
Services Agreement with Google (the "Services Agreement")
A meaningful portionThe Company and Google are parties to an amended Services Agreement which expires on March 31, 2024 and provides for an automatic renewal for an additional one-year period absent a notice of the Company's revenue (and a substantial portion of IAC’s net cashnon-renewal from operations that it can freely access)is attributable to the Services Agreement. In addition, theeither party on or before March 31, 2023. The Company earns certain other advertising revenue from Google that is not attributable to the Services Agreement. A meaningful portion of the Company’s net cash from operating activities attributable to continuing operations that it can freely access is attributable to revenue earned pursuant to the Services Agreement and other revenue earned from Google.
For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, total revenue earned from Google was $556.4$701.5 million, $733.5$755.1 million and $825.2$556.1 million, respectively, representing 18%13%, 27%20%, and
33% 20%, respectively, of the Company's total revenue. The related accounts receivable totaled $61.9 million and $53.0 million at December 31, 2020 and 2019, respectively.
The total revenue earned from the Services Agreement for the years ended December 31, 2022, 2021 and 2020, 2019 and 2018, was $498.3$514.8 million, $677.0$661.3 million and $765.6$498.3 million, respectively, representing 16%10%, 25%18% and 30%18%, respectively, of the Company's total revenue. The related accounts receivable totaled $74.1 million and $89.1 million at December 31, 2022 and 2021, respectively.
The revenue attributable to the Services Agreement is earned by Ask Media Group and the Desktop business, and Ask Media Group, both withinwhich comprise the Search segment. For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, revenue earned from the Services Agreement was $153.5$424.3 million, $291.1$542.1 million and $426.5$344.8 million, respectively, within Ask Media Group, and $90.5 million, $119.1 million and $153.5 million, respectively, within the Desktop business and $344.8 million, $385.9 million and $339.0 million, respectively, within Ask Media Group.business.
The Services Agreement expires on March 31, 2023; provided that during each September, either party may, after discussion with the other party, terminate the Services Agreement, effective on September 30 of the year following the year such notice is given. Neither party gave notice to the other party to terminate the Services Agreement pursuant to this provision in September 2020.
The Services Agreement requires that the Company comply with certain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice. These updates may be specific to the Services Agreement or could be more general and thereby impact the Company as well as other companies. These policy and guideline updates have in the past and could in the future require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which have been and could be costly to address or negatively impact revenue and have had or otherwiseand in the future could have an adverse effect on our financial condition and results of operations. As described below, Google has made changes to the policies under the Services Agreement and has also made industry-wide changes that have negatively impacted the Desktop business and itbusiness-to-consumer (“B2C”) business. Google may do somake changes in the future.future that could impact the revenue earned from Google, including under the Services Agreement.
Certain industry-wide policy changes became effective on July 1, 2019 and August 27, 2020. These industry-wide changes, combined with other changes toincreased enforcement of policies under the Services Agreement, during the second half of 2019, have had a negative impact on the historical and expected future results of operations of the DesktopB2C business. In addition, at multiple times duringDuring the fourth quarter of 2020, Google suspended services with respect to some of IAC'sB2C’s products and may do so with respect to other products in the future. The DesktopAs a result, the B2C business elected to modify certain marketing strategies in early January 2021. Subsequently, Google informed us of another policy change in the first quarter of 2021 that became effective on May 10, 2021. We anticipated that this Google policy change would eliminate our ability to successfully introduce and market new B2C products that would be profitable. Therefore, we undertook cost reduction measures and effectively eliminated all marketing of B2C products beginning in March 2021. This elimination of marketing positively impacted profitability starting in the second quarter of 2021 because revenue from B2C products is expectedearned over multiple periods beyond just the period in which the initial marketing is incurred. Following the cessation of the introduction of new products in March 2021, the B2C revenue stream relates solely to further reduce the then existing installed base of products. We expect future revenue and profitabilityprofits of the DesktopB2C business in 2021.to decline significantly.
The reduction in revenue and profitability was the primary factor in the goodwill and indefinite-lived intangible asset impairments related to the Desktop business recorded inDuring the year ended December 31, 2020, the Company reassessed the fair values of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded goodwill and intangible asset impairments of $265.1 million and $32.2 million, respectively. The impactreduction in the Company’s fair value estimates was due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to policy changes implemented by Google and other browsers. The effects of COVD-19 wasCOVID-19 on monetization were an additional factor.
Angi Inc.'s Brand Integration Initiative
In March 2021, ANGI Homeservices Inc. changed its name to Angi Inc. and updated one of its leading websites and brands, Angie’s List, to Angi, and since then, has concentrated its marketing investment in the Angi brand in order to focus its marketing, sales, and branding efforts on a single brand.
Angi Inc. relies heavily on free, or organic, search results from search engine optimization and paid search engine marketing to drive traffic to its websites. This brand integration initiative initially adversely affected the placement and ranking of Angi Inc. websites, particularly Angi.com, in organic search results. Organic search results have been declining year-over-year and are still below pre-March 2021 levels. The shift of marketing to support Angi, away from HomeAdvisor, powered by Angi, has had and continues to have a negative effect on the efficiency of its search engine marketing efforts. Angi Inc. will continue to optimize the efficiency and conversion of marketing to HomeAdvisor to maintain profitable demand generation to that domain for the foreseeable future but they do expect the trend of declining traffic to continue due to sustained marketing emphasis in favor of Angi.
Angi Services Investment
Services was launched in August 2019, and Angi Inc. invested significantly since its inception through 2022. Angi Inc.'s investment in Services peaked in the first quarter of 2022 and Angi Inc. saw both positive and negative trends on profits from the Services offerings since inception. Angi Inc. expects a positive year-over-year trend to continue through 2023 as it focuses on less complex services and more profitable business offerings.
Dotdash Meredith Restructuring Charges
For the year ended December 31, 2022, Dotdash Meredith incurred a total of $80.2 million of restructuring charges, including $55.9 million of severance and related costs. The restructuring charges for the year ended December 31, 2022 include $21.3 million of impairment charges related to the consolidation of certain leased spaces following the Meredith acquisition, consisting of impairments of $14.3 million and $7.0 million of a right-of-use asset ("ROU asset") and related leasehold improvements and furniture and equipment, respectively, which are included in "General and administrative expense" and "Depreciation," respectively, in the statement of operations.
In the first quarter of 2022, Dotdash Meredith announced its plans to discontinue certain print publications and the shutdown of PeopleTV to focus the portfolio and further enable investments toward digital growth. Dotdash Meredith also announced a voluntary retirement program in the first quarter of 2022 for employees who met certain age and service requirements. In December 2022, Dotdash Meredith management committed to a reduction in force plan, which was announced in late January 2023, to better align its cost structure given the difficult market and current economic uncertainty.
Distribution, Marketing and Advertiser Relationships
We pay traffic acquisition costs, which consist of payments made to partners who direct traffic to our Ask Media Group websites, who distribute our business-to-business customized browser-based applications and who integrate our paid listings into their websites, and fees paid to Apple and Google related to the distribution of apps and the facilitation of Mosaic Group's subscription-based in-app purchases of product features. We also pay to market and distribute our services on third-party distribution channels, such as Google and other search engines and social media websites such as Facebook. With the acquisition of Meredith, we also pay subscription acquisition costs, which represent commission payments to third-party agents to sell magazine subscriptions within our print business. 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.
COVID-19 Update and Impairments
The impact onCOVID-19 pandemic and the various responses to it created significant volatility, uncertainty and economic disruption. Recently there has been a return to normal societal interactions, including the way the Company operates its businesses.
Angi Inc.
As previously disclosed, the impact of COVID-19 initially resulted in a decline in demand for Service Requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While Angi Inc. experienced a rebound in Service Requests from mid-2020 through early 2021, Service Requests started to decline in May 2021 and have continued to decline during 2022 due, in part, to COVID-19 measures that were more widely in place in prior periods. Angi Inc.'s ability to monetize service requests rebounded modestly in the second half of 2021 and the first half of 2022; however, that improved monetization plateaued in the third quarter of 2022 and is now in line with monetization rates experienced pre-COVID-19.
Dotdash Meredith
Digital advertising and performance marketing revenue at Dotdash, excluding Meredith, declined in 2022, compared to 2021 due in part to lower traffic to its sites compared to prior year COVID-19 outbreak, whichtraffic highs. Post-acquisition, Meredith has been declaredexperienced a "pandemic" bysimilar impact to its digital advertising revenue.
Search
In the World Health Organization, has been varied. quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were a contributing indicator of possible impairment for certain of its assets and identified impairments at the Desktop reporting unit of $212.0 million and $21.4 million related to goodwill and certain indefinite-lived intangible assets, respectively.
In the quarter ended September 30, 2020, the Company recorded additional impairments of $53.2 million and $10.8 million related to the goodwill and intangible assets, respectively, of the Desktop reporting unit. These impairments were due in part to the effects of COVID-19 on monetization. Refer to "Services Agreement with Google (the "Services Agreement")" above for additional information.
Other
In addition to the impairments at Search, in the quarter ended March 31, 2020, the Company identified impairments of $51.5 million of certain equity securities without readily determinable fair values, and $7.5 million of a note receivable and a warrant related to certain investees as a result of the effects of COVID-19.
Future Outlook
The extent to which developments related to the COVID-19 outbreakpandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the speedcontinuing spread of contagion,COVID-19, the developmentseverity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and implementation of effective preventative measuresattitudes toward receiving them, materials and possible treatments,supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to the operating
environmentResults of Operations for the Years Ended December 31, 2022, 2021 and 2020.
Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Dotdash Meredith | | | | | | | | | | | | | |
| Digital | $ | 931,482 | | | $ | 564,348 | | | 154 | % | | $ | 367,134 | | | 153,381 | | | 72% | | $ | 213,753 | |
| Print | 1,026,128 | | | 934,126 | | | 1,015 | % | | 92,002 | | | 92,002 | | | N/A | | — | |
| Intersegment eliminations | (22,911) | | | (20,048) | | | (700) | % | | (2,863) | | | (2,863) | | | N/A | | — | |
| Total Dotdash Meredith | 1,934,699 | | | 1,478,426 | | | 324 | % | | 456,273 | | | 242,520 | | | 113% | | 213,753 | |
| Angi Inc. | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | |
| Ads and Leads | 1,282,061 | | | 54,987 | | | 4 | % | | 1,227,074 | | | 8,319 | | | 1% | | 1,218,755 | |
| Services | 381,256 | | | 91,308 | | | 31 | % | | 289,948 | | | 127,409 | | | 78% | | 162,539 | |
| Roofing | 137,509 | | | 69,481 | | | 102 | % | | 68,028 | | | 68,028 | | | N/A | | — | |
| Intersegment eliminations | (10,340) | | | (8,433) | | | (442) | % | | (1,907) | | | (1,907) | | | N/A | | — | |
| Total Domestic | 1,790,486 | | | 207,343 | | | 13 | % | | 1,583,143 | | | 201,849 | | | 15% | | 1,381,294 | |
| International | 101,038 | | | (1,257) | | | (1) | % | | 102,295 | | | 15,664 | | | 18% | | 86,631 | |
| Total Angi Inc. | 1,891,524 | | | 206,086 | | | 12 | % | | 1,685,438 | | | 217,513 | | | 15% | | 1,467,925 | |
| Search | 731,431 | | | (141,915) | | | (16) | % | | 873,346 | | | 260,072 | | | 42% | | 613,274 | |
| Emerging & Other | 685,956 | | | 781 | | | — | % | | 685,175 | | | 215,416 | | | 46% | | 469,759 | |
| Intersegment eliminations | (8,330) | | | (7,725) | | | (1,278) | % | | (605) | | | (430) | | | (244)% | | (175) | |
| Total | $ | 5,235,280 | | | $ | 1,535,653 | | | 42 | % | | $ | 3,699,627 | | | $ | 935,091 | | | 34% | | $ | 2,764,536 | |
________________________
N/A = Not applicable
For the year ended December 31, 2022 compared to the year ended December 31, 2021
•Dotdash Meredith revenue increased 324% to $1.9 billion due to the contribution of $1.5 billion from Meredith, acquired December 1, 2021, partially offset by decreases of $11.8 million, or 11%, in Dotdash Performance Marketing Revenue and $7.0 million, or 4%, in Dotdash Advertising Revenue. The decrease in Dotdash Performance Marketing Revenue was due to primarily to declines in both affiliate commerce commission revenue and performance marketing commission revenue due primarily to lower traffic to its sites compared to the prior year COVID-19 traffic highs. The decrease in Dotdash Advertising Revenue was due primarily to a decrease in advertising sold through its sales team and lower programmatic rates.
•Angi Inc. revenue increased 12% to $1.9 billion driven by increases of $91.3 million, or 31%, from Services, $69.5 million or 102% from Roofing and $55.0 million, or 4%, from Ads and Leads partially offset by a decrease of $1.3 million, or 1%, from International.
◦The increase in Services was due primarily to an increase in average revenue per Monetized Transactions due to higher average-order-value jobs in complex service categories and an increase in Monetized Transactions during 2022 compared to 2021, as well as significant uncertainty concerningprice increases in certain job categories.
◦The increase in Roofing was due primarily to the nearinclusion of revenue for twelve months in the current year compared to six months in the prior year.
◦The increase in Ads and long term economic ramificationsLeads was due primarily to price increases implemented during the second quarter of 2022 and the anniversary of the COVID-19 outbreak,Angi Inc. brand integration, described above under "Angi Inc. Brand Integration Initiative," that began in March 2021.
◦The decrease in International was due primarily to the unfavorable impact of the strengthening of the U.S. dollar relative to the Euro and British Pound.
•Search revenue decreased 16% to $731.4 million due to decreases of $101.5 million, or 14% from Ask Media Group and $40.4 million, or 29%, from Desktop. The decrease from Ask Media Group was due to a reduction in marketing from affiliate partners driving fewer visitors to ad supported search and content websites. The decrease from Desktop was due primarily to the Google policy changes announced in the prior year described above under "Services Agreement with Google (the "Services Agreement")."
•Emerging & Other revenue increased slightly to $686.0 million due primarily to a 10% increase at Care.com and growth from Vivian Health, partially offset by lower revenue at Mosaic Group, IAC Films, Bluecrew, which have adverselywas sold on November 9, 2022, and Daily Beast.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
•Dotdash Meredith revenue increased 113% to $456.3 million due to the contribution of $169.9 million from Meredith, acquired December 1, 2021, growth from Dotdash of $44.5 million, or 32%, in Advertising Revenue and $28.1 million, or 37%, higher Performance Marketing Revenue. The growth in Dotdash Advertising Revenue was driven by an increase in advertising sold at higher rates in 2021 through its direct sales and programmatic channels as the prior year rates were negatively impacted our abilityby COVID-19. The increase in Dotdash Performance Marketing Revenue was due primarily to forecast our resultsgrowth in both affiliate commerce commission revenue and respondperformance marketing commission revenue due to increased online sales and new performance marketing products.
•Angi Inc. revenue increased 15% to $1.7 billion driven by increases of $127.4 million, or 78%, from Services, $68.0 million from Roofing, $15.7 million, or 18%, from International and $8.3 million, or 1%, from Ads and Leads.
◦The increase in Services was due primarily to increased Monetized Transactions during 2021 compared to 2020.
◦Roofing was acquired on July 1, 2021 and contributed $68.0 million in revenue in 2021.
◦The increase in International was due primarily to strong growth across all of its markets due to increased consumer demand and the favorable impact of the weakening of the U.S. dollar relative to the Euro and British Pound.
◦The increase in Ads and Leads was due primarily to an increase in advertising revenue, partially offset by the disposition of a timelybusiness in the second quarter of 2021.
•Search revenue increased 42% to $873.3 million due to growth of $301.0 million, or 70%, from Ask Media Group, partially offset by a decrease of $40.9 million, or 23%, from Desktop. The increase from Ask Media Group was due to higher and effective mannermore efficient marketing driving increased visitors to trendsad supported search and content websites and an increase in advertising rates in 2021 as the prior year rates were negatively impacted by COVID-19. The decrease from Desktop was due primarily to the Google policy changes announced in the fourth quarter of 2020 and the first quarter of 2021 described above under "Services Agreement with Google (the "Services Agreement")."
•Emerging & Other revenue increased 46% to $685.2 million due primarily to the contribution and growth of Care.com, acquired February 11, 2020, the addition of Lifecare, acquired by Care.com in October 2020, and increases from IAC Films, Bluecrew, Vivian Health, and The Daily Beast.
Cost of revenue (exclusive of depreciation shown separately below)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Cost of revenue (exclusive of depreciation shown separately below) | $ | 1,922,697 | | | $ | 626,415 | | | 48 | % | | $ | 1,296,282 | | | $ | 550,917 | | | 74% | | $ | 745,365 | |
| As a percentage of revenue | 37% | | | | | | 35% | | | | | | 27% |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
Cost of revenue in 2022 increased from 2021 due primarily to increases of $680.9 million from Dotdash Meredith and $112.2 million from Angi Inc., partially offset by a decrease of $145.8 million from Search.
•The Dotdash Meredith increase was due primarily to an increase of $673.9 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, and an increase of $8.7 million in compensation expense related to increased editorial headcount at Dotdash. Included in Meredith's expense is $23.6 million of restructuring costs primarily related to the COVID-19 outbreak. The longer the global outbreak and measures designed to curb the spreadreorganization of the virus continueDotdash Meredith business described above under "Dotdash Meredith Restructuring Charges."
•The Angi Inc. increase was due primarily to adversely affect levelsincreases of consumer confidence, discretionary spending$64.1 million from Services and $49.4 million from Roofing.
◦The Services increase was due primarily to an increase in payments to third-party professional service providers resulting from growth in the business.
◦The Roofing increase was due primarily to the inclusion of roofing materials and third-party contractor costs for twelve months in the current year compared to six months in the prior year.
•The Search decrease was due primarily to a decrease in traffic acquisition costs of $159.7 million at Ask Media Group, partially offset by an increase in traffic acquisition costs of $15.1 million at Desktop. The decrease in traffic acquisition costs at Ask Media Group was due primarily to a decrease in the proportion of revenue earned from affiliate partners who direct traffic to our websites. The increase in traffic acquisition costs at Desktop was a result of higher revenue share rates resulting in higher expense compared to the prior year.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
Cost of revenue in 2021 increased from 2020 due to increases of $255.8 million from Search, $152.6 million from Angi Inc., $88.8 million from Dotdash Meredith and $53.8 million from Emerging & Other.
•The Search increase was primarily due to an increase of $240.9 million in traffic acquisition costs at Ask Media Group resulting from the increase in revenue.
•The Angi Inc. increase was due primarily to increases of $104.8 million from Services and $51.2 million from Roofing.
◦The Services increase was due primarily to organic growth resulting in increased payments to third-party professional service providers.
◦The Roofing increase was due to its acquisition on July 1, 2021.
•The Dotdash Meredith increase was due primarily to $63.6 million of expense from the inclusion of Meredith, and increases of $12.0 million in compensation expense related to increased headcount and $10.4 million in third-party content creation costs. The increased investment in third-party content creation costs is due primarily to contractors working on projects related to content updates and improvements, video content production, and writer and expert fees.
•The Emerging & Other increase was due primarily to $22.1 million in payments made to workers staffed by Bluecrew resulting from an increase in revenue, $16.2 million of expense from the inclusion of Lifecare, and $13.5 million and $8.8 million in production costs and participation payments, respectively, at IAC Films due to theatrical releases, partially offset by a decrease of $12.7 million at Care.com related to a change from gross to net revenue recognition for certain Care For Business contracts.
Selling and marketing expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Selling and marketing expense | $ | 1,925,750 | | | $ | 563,450 | | | 41 | % | | $ | 1,362,300 | | | $ | 196,844 | | | 17% | | $ | 1,165,456 | |
| As a percentage of revenue | 37% | | | | | | 37% | | | | | | 42% |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
Selling and marketing expense in 2022 increased from 2021 due to increases of $480.8 million from Dotdash Meredith, $37.1 million from Search, $29.4 million from Angi Inc., and $24.7 million from Emerging & Other.
•The Dotdash Meredith increase was due principally to an increase of $475.0 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year. Included in Meredith's expense is $16.6 million of restructuring costs primarily related to the reorganization of the Dotdash Meredith business described above under "Dotdash Meredith Restructuring Charges."
•The Search increase was due primarily to an increase of $60.1 million in online marketing at Ask Media Group, partially offset by a decrease of $24.1 million at Desktop. The increase at Ask Media Group was due primarily to increases in both search engine marketing and ad placement spend on social media sites. The decrease at Desktop was due to the elimination of all marketing of its B2C products beginning in early March 2021 due primarily to the Google policy changes in the fourth quarter of 2020 and the willingnessfirst quarter of consumers2021 described above under "Services Agreement with Google (the "Services Agreement").
•The Angi Inc. increase was due primarily to interact with other consumers, vendorsincreases of $19.0 million from Roofing, $13.6 million from Services and service providers face-to-face (and in turn, adversely affect demand$11.9 million from Ads and Leads, partially offset by a decrease of $4.9 million from Other (unallocated corporate costs).
◦The Roofing increase was due primarily to the inclusion of expense for the Company’s various products and services), the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations and the more limited will be the Company’s ability to try and make up for delayed or lost revenues.
When COVID-19 first impacted the Company's ANGI Homeservices businesstwelve months in the springcurrent year compared to six months in the prior year.
◦The Services increase was due primarily to increases in compensation expense of 2020, ANGI Homeservices experienced$19.4 million, outsourced personnel costs of $2.2 million and software maintenance costs of $1.6 million, partially offset by a declinedecrease of $9.5 million in demandadvertising expense. The increase in compensation expense was primarily due to higher headcount. The increase in outsourced personnel costs was primarily due to costs for improving the customer service experience. The increase in software maintenance cost was primarily due to general maintenance. The decrease in advertising expense was due primarily to decreases in service professional marketing and search engine marketing spend and was due primarily to high advertising costs in 2021 to promote Services.
◦The Ads and Leads increase was due primarily to increases in advertising expense of $20.9 million and software maintenance costs of $3.5 million, partially offset by a decrease of $10.3 million in compensation expense. The increase in advertising expense was due primarily to an increase of $23.3 million in online marketing spend due primarily to the continued brand integration initiative at the beginning of 2022 and increased costs to obtain service requests drivenlater in 2022. The increase in software maintenance costs was due primarily to general maintenance. The decrease in compensation is primarily due to lower headcount.
◦The Other (unallocated corporate costs) decrease of $4.9 million was due primarily to a decrease in lease expense of $5.4 million as a result of Angi Inc. repurposing and reducing its real estate footprint in 2021.
•The Emerging & Other increase was due primarily to increases of $10.0 million in compensation expense and $3.8 million in online marketing at Care.com, $5.2 million in marketing spend at IAC Films, $5.1 million in compensation expense and $3.6 million in online marketing at Vivian Health, partially offset by a decrease of $7.2 million in advertising expense at Mosaic Group. The increase in compensation expense at both Care.com and Vivian Health was due primarily to higher headcount. The increase in marketing spend at IAC Films was primarily related to Everything Everywhere All at Once. The increase in online marketing at Care.com was primarily due to efforts to increase their customer base.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
Selling and marketing expense in 2021 increased from 2020 due to increases of $121.1 million from Angi Inc., $65.7 million from Dotdash Meredith and $54.7 million from Emerging & Other, partially offset by a decrease of $44.2 million from Search.
•The Angi Inc. increase was due primarily to increases of $77.7 million from Ads and Leads, $21.7 million from Services, $14.0 million from Roofing and $8.9 million from Other (unallocated corporate expenses).
◦The Ads and Leads increase was due primarily to increases in advertising expense of $60.1 million and compensation expense of $27.8 million, partially offset by decreases in demandlease expense of $11.6 million. The increase in certain categoriesadvertising expense was due primarily to increases of jobs (particularly discretionary indoor projects). Toward the end of the spring of 2020, ANGI Homeservices experienced a rebound$49.6 million in service requests, exceeding pre-COVID-19 growth levels, driven by increased demand from homeowners who spent more time at home due to measures taken to reduce the spread of COVID-19. ANGI Homeservices continued to experience strong demand for home servicesonline marketing spend and $9.7 million in the second half of 2020. However, many service professionals' businesses have been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which has negatively impacted ANGI Homeservices' ability to monetize this increased level of service requests. Vimeo has seen strong revenue growth as the demand for communication via video has increased duetelevision spend. The increase in online marketing spend was attributable to the pandemic.brand integration initiative. The Search segment has experienced a declineincrease in revenue due,television spend in part,2021 reflects the normalization of spending levels as compared to the decrease in advertising ratescost cutting initiatives during 2020 due to the impact of COVID-19, whichCOVID-19. The increase in compensation expense was due primarily to increased commission expense. The decrease in rateslease expense was more significant earlier in the year.
In the quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its assets and identified the following impairments:
•a $212.0 million impairment relateddue primarily to the goodwillrepurposing of lease locations in 2021.
◦The Services increase was due primarily to increases in consulting fees of $9.1 million, compensation expense of $7.0 million and advertising expense of $4.1 million. The increase in consulting fees was due primarily to various sales initiatives. The increase in compensation expense was due to an increase in sales force headcount. The increase in advertising expense was primarily due to $3.9 million in online marketing spend attributable to the Desktop reporting unit;brand integration.
◦The Roofing increase was due to its acquisition on July 1, 2021.
◦The Other (unallocated corporate costs) increase was due primarily to an increase in lease expense of $8.0 million due to the repurposing of lease locations in 2021.
•a $21.4The Dotdash Meredith increase was due primarily to $45.8 million impairment related of expense from the inclusion of Meredith, and increases in online advertising expense of $11.4 million and compensation expense of $6.3 million. The increase in online advertising expense is due primarily to certain indefinite-lived intangible assets of the Desktop reporting unit;an increase relative to depressed levels in 2020 due to COVID-19. The increase in compensation expense was primarily due to higher headcount.
•a $51.5The Emerging & Other increase was due primarily to increases of $26.7 million impairmentin online marketing and television spend at Care.com, $7.3 million in television spend at Mosaic, $4.8 million in expense from the inclusion of certain equity securities without readily determinable fair values;Lifecare, and increases of $4.2 million and $2.3 million in compensation expense at Care.com and Vivian Health, respectively, each due primarily to higher headcount. The increase in online marketing and television spend at Care.com is due primarily to efforts to increase its customer base.
•The Search decrease was due primarily to a $7.5decrease in marketing of $73.7 million at Desktop as it substantially reduced marketing of its B2C products in January 2021 and the subsequent elimination of all marketing of its B2C products beginning in early March 2021 due primarily to the Google policy changes in the fourth quarter of 2020 and the first quarter of 2021 described above under "Services Agreement with Google (the "Services Agreement")," partially offset by an increase of $28.3 million in online marketing at Ask Media Group.
General and administrative expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| General and administrative expense | $ | 977,274 | | | $ | 179,826 | | | 23 | % | | $ | 797,448 | | | $ | 52,213 | | | 7% | | $ | 745,235 | |
| As a percentage of revenue | 19% | | | | | | 22% | | | | | | 27% |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
General and administrative expense in 2022 increased from 2021 due to increases of $125.6 million from Dotdash Meredith and $68.4 million from Angi Inc., partially offset by a decrease of $15.6 million from Corporate.
•The Dotdash Meredith increase was due primarily to an increase of $115.3 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, a $14.3 million impairment of a note receivableROU asset related to the consolidation of certain leased spaces following the Meredith acquisition, and an increase of $13.9 million in compensation expense, partially offset by a decrease of $20.3 million in professional fees at Dotdash. During 2022, Dotdash Meredith incurred $28.1 million in restructuring costs, including the $14.3 million impairment described above, related to the reorganization of Dotdash Meredith's business described above under "Dotdash Meredith Restructuring Charges" and $6.8 million in transaction-related costs, of which $5.7 million was incurred at Meredith, associated with its acquisition. The increase in compensation expense at Dotdash was due primarily to an increase in stock-based compensation expense. The decrease in professional fees at Dotdash was due to the inclusion in 2021 of $25.2 million of transaction-related costs in connection with the Meredith transaction. Expense in 2021 includes $53.3 million in transaction-related costs at Meredith associated with its acquisition, including charges related to double-trigger change in control payments.
•The Angi Inc. increase was due primarily to increases of $27.8 million from Services, $23.7 million from Ads and Leads, $16.2 million from Roofing and $9.3 million from Other (unallocated corporate costs), partially offset by a decrease of $8.6 million from International.
◦The Services increase was due primarily to an increase of $16.7 million in compensation expense, $8.8 million in legal expense and $2.2 million in software license and maintenance expense. The increase in compensation expense was due primarily to increases of $10.5 million in stock-based compensation expense resulting from management departures in 2022 and new awards granted in 2022, and $6.2 million in wage-related expenses due to higher headcount. The increase in legal expense was due primarily to accruals for certain legal matters in the fourth quarter of 2022. The increase in software license and maintenance expense is due to general maintenance.
◦The Ads and Leads increase was due primarily to increases of $16.4 million in the provision for credit losses, $4.3 million in outsourced personnel costs, $5.7 million in legal expense and $2.0 million in software and maintenance expense, partially offset by a decrease of $0.5 million in compensation expense. The increase in the provision for credit losses was due primarily to higher revenue. The increase in outsourced personnel costs was due primarily to the use of outsourced firms to support customer service needs. The increase in legal expense was due primarily to accruals for certain legal matters in the third and fourth quarters of 2022. The decrease in compensation expense was primarily due to a decrease of $5.1 million resulting from lower headcount, partially offset by an increase of $4.5 million in stock-based compensation.
◦The Roofing increase was due primarily to the inclusion of expense for twelve months in the current year compared to six months in the prior year.
◦The Other (unallocated corporate costs) increase was due primarily to an increase of $14.4 million in compensation expense, partially offset by a decrease of $7.3 million of impairment charges of ROU assets and related leasehold improvements and furniture and equipment. The increase in compensation expense was due primarily to an increase of $12.9 million in wage-related expense due to higher headcount and $1.6 million in stock-based compensation expense. The increase in stock-based compensation expense is the result of the reversal of previously recognized stock-based compensation as a result of the forfeiture of unvested awards due to management departures in 2021 and 2022, and new awards granted in 2022. The decrease in impairments of ROU assets and related leasehold improvements and furniture and equipment was due primarily to Angi Inc. reducing its real estate footprint in 2021.
◦The International decrease was due primarily to the inclusion in compensation expense, in 2021, of $7.0 million in charges related to the acquisition of the remaining interests in MyBuilder at a premium to fair value.
•The Corporate decrease was due primarily to a decrease of $10.3 million in compensation expense due primarily to a decrease in bonuses and payroll taxes, and the inclusion in 2021 of $6.2 million of transaction-related costs in connection with the Spin-off.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
General and administrative expense in 2021 increased from 2020 due to increases of $102.4 million from Dotdash Meredith, $33.1 million from Emerging & Other and $31.7 million from Angi Inc., partially offset by decreases of $108.0 million from Corporate and $7.0 million from Search.
•The Dotdash Meredith increase was due primarily to $75.0 million of expense from the inclusion of Meredith and $25.2 million in transaction-related costs at Dotdash related to the Meredith transaction. Included in Meredith's expense is $53.3 million in transaction-related costs associated with its acquisition, including charges related to double-trigger change in control payments.
•The Emerging & Other increase was due primarily to a change of $21.9 million in acquisition-related contingent consideration fair value adjustments (expense of $15.0 million in 2021 compared to income of $6.9 million in 2020) due to the amount of contingent consideration to be paid out in connection with a previous Mosaic Group acquisition, $11.4 million of expense from the inclusion of Lifecare, and an increase of $7.8 million in compensation expense at Care.com due primarily to an increase in headcount, partially offset by a decrease of $7.1 million in compensation expense at Mosaic Group.
•The Angi Inc. increase was due primarily to increases of $32.5 million from Ads and Leads, $16.2 million from Services, $10.8 million from Roofing, and $9.5 million from International, partially offset by a decrease of $37.3 million from Other (unallocated corporate costs).
◦The Ads and Leads increase was due primarily to increases in compensation expense of $10.4 million, outsourced personnel costs of $8.6 million, software license and maintenance expense of $5.7 million, legal expense of $3.5 million and recruiting fees of $2.5 million. The increase in compensation expense was due primarily to annual wage and headcount increases. The increase in outsourced personnel costs was due primarily to an increase in call volume related to its customer booking assistance function. The increase in software license and maintenance expense was due primarily to increased investment in software to support its customer services function.
◦The Services increase was due primarily to increases in the provision for credit losses of $7.8 million, outsourced personnel costs of $5.7 million and $2.9 million in legal expense. The increase in the provision for credit losses was primarily due to higher revenue as the provision for credit losses as a percentage of revenue remained relatively flat. The increase in outsourced personnel costs was due primarily to an increase in call volume related to its customer booking assistance function.
◦The Roofing increase was due to its acquisition on July 1, 2021.
◦The International increase was due primarily to increases of $6.1 million in compensation expense and $1.7 million in consulting fees. The increase in compensation expense was primarily due to $7.0 million in charges related to the acquisition of the remaining interests in MyBuilder at a premium to fair value, partially offset by severance costs recorded in the European business in 2020 associated with headcount reductions in France. The increase in consulting fees was related to corporate restructuring.
◦The Other (unallocated corporate costs) decrease was due primarily to a decrease in compensation expense of $53.3 million, partially offset by increases of $9.6 million in one-time costs related to Angi Inc. reducing its real estate footprint in 2021 and consulting fees of $1.5 million. The decrease in compensation expense was primarily due to a $50.6 million decrease in stock-based compensation expense. The decrease in stock-based compensation expense was due primarily to $30.8 million in stock appreciation rights expense recognized during the twelve months ended December 31, 2020, which was not incurred in 2021 as the awards became fully vested in 2020, and a warrantnet decrease of $7.7 million due to the reversal of previously recognized expense related to certain investees.unvested awards that were forfeited due to management departures in 2021, partially offset by the issuance of new equity awards since 2020. The real estate related costs are the result of impairments of ROU assets associated with office space Angi Inc. vacated.
In the quarter ended September 30, 2020, the Company reassessed the fair values •The Corporate decrease was due primarily to a decrease of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded impairments equal$56.7 million in stock-based compensation expense, a $25.0 million contribution to the remaining carrying value ofIAC Fellows endowment included in the goodwill of $53.2prior year period, a decrease in transaction-related costs ($19.7 million and $10.8$2.2 million related to the intangible assets.MTCH Separation and the Spin-off, respectively, in 2020 compared to $6.2 million in connection with the Spin-off in 2021) and the prior year period reflecting higher employer payroll taxes related to Match Group stock option exercises by IAC employees. The decrease in stock-based compensation expense is due primarily to the inclusion in 2020 of $54.8 million in modification charges related to the MTCH Separation and the forfeiture of certain equity awards in 2021, partially offset by the issuance of new equity awards since 2020.
•The Search decrease was due primarily to decreases of $5.8 million in compensation expense and $2.2 million in lease expense at Desktop. The decrease in compensation expense is primarily due to a reduction in headcount and the Company’sdecrease in lease expense is primarily due to the early termination of a lease agreement in 2020.
Product development expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Product development expense | $ | 332,873 | | | $ | 102,063 | | | 44 | % | | $ | 230,810 | | | $ | 45,475 | | | 25% | | $ | 185,335 | |
| As a percentage of revenue | 6% | | | | | | 6% | | | | | | 7% |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
Product development expense in 2022 increased from 2021 due to increases of $92.3 million from Dotdash Meredith and $12.6 million from Emerging & Other, partially offset by a decrease of $4.9 million from Search.
•The Dotdash Meredith increase was due primarily to an increase of $78.3 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, and an increase of $13.1 million in compensation expense at Dotdash due primarily to higher headcount.
•The Emerging & Other increase was due primarily to increases of $7.0 million and $5.9 million in compensation expense at Care.com and Vivian Health, respectively. The increase in compensation expense at Care.com was due to higher headcount. The increase in compensation expense at Vivian Health was due primarily to higher headcount and a $2.4 million charge related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with the equity raise in the second quarter of 2022.
•The Search decrease was due primarily to a decrease of $6.2 million in compensation expense due primarily to the reduction in headcount following the cessation of new B2C products described above under "Services Agreement with Google (the "Services Agreement")", partially offset by an increase of $2.1 million in outsourced personnel costs at Ask Media Group due to various product initiatives.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
Product development expense in 2021 increased from 2020 due to increases of $24.7 million from Emerging & Other and $19.6 million from Dotdash Meredith.
•The Emerging & Other increase was due primarily to increases of $8.4 million and $5.9 million in compensation expense and outsourced personnel costs, respectively, at Care.com, $4.5 million in expense from the inclusion of Lifecare, and $1.8 million in compensation expense at Vivian Health. The increase in compensation expense at both Care.com and Vivian Health is primarily due to increases in headcount. The increase in outsourced personnel costs at Care.com is primarily due to enhancing existing product offerings and developing new products.
•The Dotdash Meredith increase was due primarily to an increase of $10.6 million in compensation expense at Dotdash and $7.9 million of expense from the inclusion of Meredith. The increase in compensation expense is due to higher headcount to aid in new and enhanced user experiences on its websites.
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Depreciation | $ | 130,986 | | | $ | 55,971 | | | 75 | % | | $ | 75,015 | | | $ | 6,192 | | | 9% | | $ | 68,823 | |
| As a percentage of revenue | 3% | | | | | | 2% | | | | | | 2% |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
Depreciation in 2022 increased from 2021 due primarily to an increase of $28.3 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, an increase in expense of $19.0 million at Angi Inc. primarily related to the impairment of certain capitalized software projects that are no longer being utilized as Angi Inc. transitions away from certain business offerings in Services, and the impairment of leasehold improvements and furniture and equipment at Dotdash Meredith of $7.0 million related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring Charges."
For the year ended December 31, 2021 compared to the year ended December 31, 2020
Depreciation in 2021 increased from 2020 due primarily to the investments in Angi Inc.'s capitalized software and $3.9 million of expense from the inclusion of Meredith, partially offset by the inclusion in 2020 of write-offs of leasehold improvements as a result of early lease terminations at Desktop and Mosaic Group.
Operating (loss) income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| (Dollars in thousands) |
| Dotdash Meredith | | | | | | | | | | | | | |
| Digital | $ | (66,629) | | | $ | (140,609) | | | NM | | $ | 73,980 | | | $ | 23,739 | | | 47 | % | | $ | 50,241 | |
| Print | (54,448) | | | (47,921) | | | (734) | % | | (6,527) | | | (6,527) | | | N/A | | — | |
| Other | (67,014) | | | (6,737) | | | (11) | % | | (60,277) | | | (60,277) | | | N/A | | — | |
| Total Dotdash Meredith | (188,091) | | | (195,267) | | | NM | | 7,176 | | | (43,065) | | | (86) | % | | 50,241 | |
| Angi Inc. | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | |
| Ads and Leads | 85,593 | | | 20,108 | | | 31 | % | | 65,485 | | | (67,880) | | | (51) | % | | 133,365 | |
| Services | (95,166) | | | (31,182) | | | (49) | % | | (63,984) | | | (19,392) | | | (43) | % | | (44,592) | |
| Roofing | (50,685) | | | (42,089) | | | (490) | % | | (8,596) | | | (8,596) | | | N/A | | — | |
| Other | (61,794) | | | (5,598) | | | (10) | % | | (56,196) | | | 28,478 | | | 34 | % | | (84,674) | |
| Total Domestic | (122,052) | | | (58,761) | | | (93) | % | | (63,291) | | | (67,390) | | | NM | | 4,099 | |
| International | (4,253) | | | 8,969 | | | 68 | % | | (13,222) | | | (2,755) | | | (26) | % | | (10,467) | |
| Total Angi Inc. | (126,305) | | | (49,792) | | | (65) | % | | (76,513) | | | (70,145) | | | (1,102) | % | | (6,368) | |
| Search | 83,398 | | | (24,936) | | | (23) | % | | 108,334 | | | 357,045 | | | NM | | (248,711) | |
| Emerging & Other | (106,154) | | | (83,416) | | | (367) | % | | (22,738) | | | 48,158 | | | 68 | % | | (70,896) | |
| Corporate | (137,619) | | | 15,707 | | | 10 | % | | (153,326) | | | 108,603 | | | 41 | % | | (261,929) | |
| Total | $ | (474,771) | | | $ | (337,704) | | | (246) | % | | $ | (137,067) | | | $ | 400,596 | | | 75 | % | | $ | (537,663) | |
| | | | | | | | | | | | | |
| As a percentage of revenue | (9)% | | | | | | (4)% | | | | | | (19)% |
________________________
NM = Not meaningful.
For the year ended December 31, 2022 compared to the year ended December 31, 2021
Operating loss increased $337.7 million to $474.8 million, despite the increase of $92.3 million in Adjusted EBITDA, described below, due primarily to an increase of $232.9 million in amortization of intangibles, goodwill impairment charges of $112.8 million, and increases of $56.0 million in depreciation and $44.0 million in stock-based compensation expense, partially offset by a change in acquisition-related contingent consideration fair value estimatesadjustments (income of $0.6 million in 2022 compared to expense of $15.0 million in 2021). The increase in amortization of intangibles was due primarily to the acquisition of Meredith, partially offset by lower expense at Care.com due to certain intangible assets becoming fully amortized. The goodwill impairment charges relate to impairments of $86.7 million at Mosaic Group in the second quarter of 2022 and $26.0 million at Roofing in the fourth quarter of 2022. The goodwill impairment at Mosaic Group was a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. The goodwill impairment at Roofing is due to the business exiting certain markets and the projected reduction in future profits. The increase in depreciation was due primarily to the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, an increase in expense at Angi Inc. primarily related to the impairment of certain capitalized software projects that are no longer being utilized as Angi Inc. transitions away from certain business offerings in Services, and the impairment of leasehold improvements and furniture and equipment at Dotdash Meredith of $7.0 million related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring Charges." The increase in stock-based compensation expense was due primarily to the reversal of previously recognized stock-based compensation expense due to forfeitures from management departures in 2021, the acceleration of awards related to management departures in 2022 and new awards granted since the first quarter of 2022.
The aggregate carrying value of goodwill for which the most recent estimate of the excess of fair value over carrying value is less than 20% is the $153.6 million of goodwill at Mosaic Group. There is one indefinite-lived intangible asset at Dotdash Meredith Digital with a value of approximately $126.0 million for which the excess of fair value over carrying value is less than 20%.
At December 31, 2022, there was $322.4 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 4.5years.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
Operating loss declined $400.6 million from a loss of $537.7 million to a loss of $137.1 million due primarily to the inclusion in 2020 of a goodwill impairment of $265.1 million and $32.2 million in indefinite-lived intangible asset impairments at Search related to the Desktop business, a decrease of $109.5 million in stock-based compensation expense, a decrease of $19.8 million in amortization of intangibles, excluding the first$32.2 million Desktop impairment noted above, and third quartersan increase in Adjusted EBITDA of $2.0 million described below, partially offset by a change of $21.9 million in acquisition-related contingent consideration fair value adjustments (expense of $15.0 million in 2021 compared to income of $6.9 million in 2020) and an increase of $6.2 million in depreciation. The goodwill and the indefinite-lived intangible asset impairments in 2020 wasat the Desktop business were primarily due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to browser policy changes implemented by Google and other browsers. The effects of COVID-19 on monetization were an additional factor. Refer to "Services Agreement with Google" for additional information.
There were no additional impairments identified during the year ended December 31, 2020.
In addition, the United States, which represents 80% of the Company's revenue for the year ended December 31, 2020, experienced a significant resurgence of the coronavirus and with record levels of COVID-19 infections being reported during the fourth quarter of 2020 and continuing into the first quarter of 2021. Europe, which is the second largest market for the Company's products and services, has also seen a dramatic resurgence in COVID-19. This resurgence and the measures designed to curb its spread could materially and adversely affect our business, financial condition and results of operations.
Results of Operations for the Years Ended December 31, 2020 and 2019
The following discussion should be read in conjunction with Item 8—Consolidated and Combined Financial Statements and Supplementary Data. For a discussion regarding our financial condition and results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the annual audited combined financial statements of the Company and notes thereto filed on the Current Report on Form 8-K with the Securities Exchange Commission on October 5, 2020. Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| ANGI Homeservices | $ | 1,467,925 | | | $ | 141,720 | | | 11 | % | | $ | 1,326,205 | | | | | | | |
| Vimeo | 283,218 | | | 87,203 | | | 44 | % | | 196,015 | | | | | | | |
| Dotdash | 213,753 | | | 46,159 | | | 28 | % | | 167,594 | | | | | | | |
| Search | 613,274 | | | (128,910) | | | (17) | % | | 742,184 | | | | | | | |
| Emerging & Other | 469,759 | | | 195,652 | | | 71 | % | | 274,107 | | | | | | | |
| Inter-segment eliminations | (248) | | | 56 | | | 18 | % | | (304) | | | | | | | |
| Total | $ | 3,047,681 | | | $ | 341,880 | | | 13 | % | | $ | 2,705,801 | | | | | | | |
•ANGI revenue increased 11% to $1.5 billion driven by Marketplace Revenue growth of $138.7 million, or 14%, and an increase of $6.9 million, or 3%, in Advertising & Other Revenue, partially offset by a decline of $3.8 million, or 5%, at the European businesses. The increase in Marketplace Revenue was due primarily to an increase of 18% in Marketplace Service Requests to 32.4 million resulting in a 4% increase in Marketplace Monetized Transactions to 16.7 million, and an increase in revenue of $73.8 million due to the change to gross revenue reporting for Handy and HomeAdvisor’s pre-priced product offering, effective January 1, 2020. Advertising & Other Revenue increased due primarily to an increase in Angie's List revenue driven by an increase in Advertising SPs. The revenue decline at the European businesses was due primarily to the impact of COVID-19 and lower monetization from transitioning the business in France to a common European technology platform with the businesses in the Netherlands and Italy, which began in early February 2020, partially offset by the favorable impact of the weakening of the U.S. dollar relative to the EURO and British Pound.
•Vimeo revenue grew 44% to $283.2 million driven by a 26% increase in Average Subscribers to 1.4 million, a 14% increase in ARPU, and the contribution of Magisto. The growth in Subscribers is due to the increase in self-serve and enterprise customers as individuals, businesses and organizations accelerated their adoption of video to communicate due, in part, to the effects of COVID-19. ARPU increased as a greater percentage of both new and existing self-serve subscribers purchased, on average, higher-priced offerings that include features, such as additional storage and bandwidth, video creation and editing tools and live streaming capability. The growth in enterprise customers, whose average annual contract values are much greater, also contributed to ARPU growth. For the year ending December 31, 2020, the number of enterprise subscribers increased from nearly 2,100 to more than 3,800, and enterprise revenue, as a percentage of total revenue, increased from 17% to 23%. Revenue in 2019 included $2.3 million from the hardware business, which was sold in the first quarter of 2019.
•Dotdash revenue increased 28% to $213.8 million due to growth of 85% in Performance Marketing Revenue and 9% higher Display Advertising Revenue. The growth in Performance Marketing Revenue was due primarily to growth in both affiliate commerce commission revenue and performance marketing commission revenue due to increased online sales as a result of COVID-19. The higher Display Advertising Revenue was due to an increase in advertising sold through our sales team, partially offset by the impact of COVID-19.
•Search revenue decreased 17% to $613.3 million, due to aremaining decreaseof $139.6 million, or 44%, from Desktop, partially offset by an increase of $10.7 million, or 3% from Ask Media Group. The decrease in Desktop revenue was driven by lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to browser policy changes implemented by Google and other browsers, certain industry-wide policy changes implemented by Google, which became effective on July 1, 2019 and August 27, 2020, the impact of Google's
suspension of some of Desktop's products in the fourth quarter of 2020 and a decrease in advertising rates due to the impact of COVID-19. The increase in Ask Media Group revenue was due to growth in paid traffic.
•Emerging & Other revenue increased 71% to $469.8 million due primarily to the contributions of Care.com, acquired February 11, 2020, and Nursefly, acquired June 26, 2019, and an increase in revenue at Mosaic, partially offset by the sale of College Humor Media during the first quarter of 2020, and lower revenue at IAC Films.
Cost of revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Cost of revenue (exclusive of depreciation shown separately below) | $814,731 | | $214,491 | | 36% | | $600,240 | | | | | | |
| As a percentage of revenue | 27% | | | | | | 22% | | | | | | |
Cost of revenue in 2020 increased from 2019 due to increases of $126.8 million from ANGI, $67.7 million from Emerging & Other and $20.1 million from Vimeo.
•The ANGI increase was due primarily to the change from net to gross revenue reporting for Handy and HomeAdvisor's pre-priced product offering, effective January 1, 2020, as well as growth of the pre-priced product offering itself.
•The Emerging & Other increase was due primarily to $74.2 million of expense from the inclusion of Care.com, partially offset by a decrease of $14.1 million at College Humor Media due to its sale during the first quarter of 2020.
•The Vimeo increase was due primarily to an increase of $9.7 million in credit card processing fees, $2.3 million in in-app purchase fees paid to Google and Apple and an increase in outsourced personnel costs and compensation expense related to increased customer care personnel, partially offset by a decrease of $2.6 million in hosting fees and $1.4 million of product costs due to the sale of the hardware business during the first quarter of 2019. The increase in credit card processing fees and in-app purchase fees is due primarily to increases in subscriptions and video on-demand transactions. The decrease in hosting fees is due primarily to cost reduction initiatives and lower rates for storage and transcoding.
Selling and marketing expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Selling and marketing expense | $1,269,673 | | $67,490 | | 6% | | $1,202,183 | | | | | | |
| As a percentage of revenue | 42% | | | | | | 44% | | | | | | |
Selling and marketing expense in 2020 increased from 2019 due to increases of $62.6 million from Emerging & Other, $29.4 million from ANGI, $21.2 million from Vimeo and $7.0 million from Dotdash, partially offset by a decrease of $51.6 million from Search.
•The Emerging & Other increase was due primarily to $59.8 million of expense from the inclusion of Care.com and increases of $6.4 million and $2.4 million in advertising expense at Mosaic and Nursefly, respectively, partially offset by decreases of $4.7 million in compensation and $3.4 million in advertising expense at College Humor Media due to its sale during the first quarter of 2020.
•The ANGI increase was due primarily to increases in compensation expense of $21.6 million, outsourced personnel and consulting costs of $7.1 million and advertising expense of $3.3 million, partially offset by a decrease of $3.9 million in travel related expenses resulting from the impact of COVID-19. The increase in compensation expense was due primarily to increased commission expense and severance costs recorded in the third quarter of 2020 associated with headcount reductions in France. The increase in outsourced personnel and consulting costs was due primarily to various sales initiatives at Handy. Advertising expense increased due primarily to an increase in online marketing costs as the proportion of service requests from Google paid traffic increased. ANGI continues to benefit from the
search engine marketing strategy that was implemented in the second half of 2019, which focuses on the lifetime profitability rather than the cost of each service request. This increase in online marketing was partially offset by a decrease in television spend resulting from cost cutting initiatives due to the impact of COVID-19.
•The Vimeo increase was due primarily to increases in compensation expense of $12.5 million due, in part, to growth in the sales force for enterprise offerings and increased commission expense due to the increase in enterprise bookings, marketing of $5.3 million and software license and maintenance costs of $1.9 million.
•The Dotdash increase was due primarily to increases in compensation expense of $7.4 million, due, in part, to growth in the sales force, and advertising expense of $1.2 million, partially offset by a decrease of $1.3 million in travel related expenses resulting from the impact of COVID-19.
•The Search decrease was due primarily to a decrease in marketing of $52.0 million at Desktop as we mitigate the negative impact on revenue from the browser policy changes and COVID-19.
General and administrative expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| General and administrative expense | $792,254 | | $175,019 | | 28% | | $617,235 | | | | | | |
| As a percentage of revenue | 26% | | | | | | 23% | | | | | | |
General and administrative expense in 2020 increased from 2019 due to increases of $107.5 million from Corporate, $46.3 million from Emerging & Other and $25.8 million from ANGI.
•The Corporate increase was due primarily to an increase of $63.4 million in compensation expense driven by an increase of $45.9 million in stock-based compensation expense and an increase in employer taxes related to Match Group stock option exercises by IAC employees during the third and fourth quarters of 2020, $25.0 million related to the IAC Fellows Foundation endowment and higher professional fees, including increases of $11.8 million and $2.2 million in costs related to the MTCH Separation and the Spin-off, respectively. The increase in stock-based compensation is due primarily to a $55.1 million modification charge related to the MTCH Separation and the issuance of new equity awards since 2019, partially offset by the vesting of awards.
•The Emerging & Other increase was due primarily to $41.3 million of expense from the inclusion of Care.com and a decrease in income of $12.8 million in acquisition-related contingent consideration fair value adjustments (income of $6.9 million in 2020 compared to income of $19.7 million in 2019), partially offset by a decrease of $5.7 million at College Humor Media due to its sale during the first quarter of 2020. The income from acquisition-related contingent consideration fair value adjustments was due to the decrease in the expected amount of contingent consideration to be paid out in connection with a previous acquisition.
•The ANGI increase was due primarily to increases of $15.1 million in compensation expense, $14.0 million in the provision for credit losses, $3.3 million in outsourced personnel costs and $2.5 million in professional fees, partially offset by decreases of $3.6 million in travel related expenses resulting from the impact of COVID-19, $2.3 million in software license and maintenance costs and $1.2 million in non-payroll taxes. The increase in compensation expense is due primarily to an increase in stock-based compensation expense and severance costs recorded in the European business associated with headcount reductions in France. The increase in stock-based compensation expense is due primarily to the issuance of new equity awards since 2019, modification charges in 2020 and the reversal in the second half of 2019 of $7.3 million of expense related to certain performance-based awards that did not vest. The increase in the provision for credit losses is due to higher Marketplace Revenue, the impact from COVID-19 on expected credit losses and anticipated losses from Advertising SPs. The increase in outsourced personnel costs is due primarily to efforts to respond to an increase in call volume related to ANGI's customer service function. The increase in professional fees is due primarily to an increase in legal fees. The decrease in non-payroll taxes is due, in part, to a decrease in property taxes in North America and the digital services tax in Europe.
Product development expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Product development expense | $267,359 | | $73,902 | | 38% | | $193,457 | | | | | | |
| As a percentage of revenue | 9% | | | | | | 7% | | | | | | |
Product development expense in 2020 increased from 2019 due to increases of $41.3 million from Emerging & Other, $18.2 million from Vimeo and $10.5 million from Dotdash.
•The Emerging & Other increase was due primarily to $36.2 million of expense from the inclusion of Care.com and an increase of $4.1 million in compensation expense at Mosaic due primarily to increased headcount, partially offset by a decrease of $2.7 million at College Humor Media due to its sale during the first quarter of 2020.
•The Vimeo increase was due primarily to increases of $13.0 million in compensation expense due primarily to increased headcount due, in part, to the inclusion of Magisto, acquired May 28, 2019, $1.8 million in consulting costs and $1.8 million in software license and maintenance costs.
•The Dotdash increase was due primarily to an increase of $11.2 million in compensation expense due primarily to increased headcount and an increase in expense for third-party contractors.
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Depreciation | $69,283 | | $13,334 | | 24% | | $55,949 | | | | | | |
| As a percentage of revenue | 2% | | | | | | 2% | | | | | | |
Depreciation in 2020 increased from 2019 due primarily to the investments in capitalized software to support ANGI's products and services, partially offset by a decrease in leasehold improvements related to office space at ANGI.
Operating (loss) income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| (Dollars in thousands) | | | | | | |
| ANGI Homeservices | $ | (6,368) | | | $ | (45,013) | | | NM | | $ | 38,645 | | | | | | | |
| Vimeo | (26,392) | | | 25,529 | | | 49 | % | | (51,921) | | | | | | | |
| Dotdash | 50,241 | | | 21,220 | | | 73 | % | | 29,021 | | | | | | | |
| Search | (248,711) | | | (371,058) | | | NM | | 122,347 | | | | | | | |
| Emerging & Other | (70,896) | | | (49,106) | | | (225) | % | | (21,790) | | | | | | | |
| Corporate | (270,223) | | | (103,472) | | | (62) | % | | (166,751) | | | | | | | |
| Total | $ | (572,349) | | | $ | (521,900) | | | (1,035) | % | | $ | (50,449) | | | | | | | |
| | | | | | | | | | | | | |
| As a percentage of revenue | (19)% | | | | | | (2)% | | | | | | |
________________________
NM = Not meaningful.
Operating loss increased $521.9 million to a loss of $572.3 million due primarily to a goodwill impairment of $265.1 million and $32.2 million in indefinite-lived intangible asset impairments at Search related to the Desktop business, a decrease in Adjusted EBITDA of $113.3 million, described below, and increases of $62.9 million in stock-based compensation expense, $25.5 million in amortization of intangibles, excluding the Desktop impairment noted above, $13.3 million in
depreciation and a change of $12.8 million in acquisition-related contingent consideration fair value adjustments (income of $6.9 million in 2020 compared to income of $19.7 million in 2019). The overall increase in amortization of intangibles of $57.7$19.8 million was due principally to the inclusion incertain intangible assets becoming fully amortized during 2020, of indefinite-lived intangible asset impairments related to the Desktop business noted above,partially offset by an increase in amortization related to recentthe acquisitions (primarily Care.comof Meredith and Magisto) and a reduction in the estimated useful lives of certain intangible assets.Lifecare. The goodwill and the indefinite-lived intangible asset impairments are described above in "COVID-19 Update and Impairments". The increasedecrease in stock-based compensation expense was due primarily to athe inclusion in 2020 of $55.7 million in modification charge of $56.0 million relatedcharges related to the MTCH Separation, the forfeiture of certain equity awards in 2021 and stock appreciation rights expense recognized in 2020, partially offset by the issuance of new equity awards in 2020 and other modification charges in 2020, partially offset by the vesting of awards.since 2020. The increase in depreciation was due primarily to the investments in Angi Inc. capitalized software to support ANGI's products and services and leasehold improvements related to additional office space at ANGI.expense from the inclusion of Meredith.
The aggregate carrying value of goodwill for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately $759.5 million. There are no indefinite-lived intangible assets for which the most recent estimate of the excess fair value over carrying value is less than 20%.
At December 31, 2020, there was $398.3 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 6.2years.
Adjusted EBITDA
| | | Years Ended December 31, | | | Years Ended December 31, |
| | 2020 | | $ Change | | % Change | | 2019 | | | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) | | | (Dollars in thousands) |
| ANGI Homeservices | $ | 172,804 | | | $ | (29,493) | | | (15) | % | | $ | 202,297 | | | |
| Vimeo | (11,187) | | | 30,603 | | | 73 | % | | (41,790) | | | |
| Dotdash | 66,206 | | | 26,605 | | | 67 | % | | 39,601 | | | |
| Dotdash Meredith | | Dotdash Meredith | |
| Digital | | Digital | $ | 186,696 | | | $ | 95,517 | | | 105 | % | | $ | 91,179 | | | $ | 24,973 | | | 38 | % | | $ | 66,206 | |
| Print | | Print | 31,135 | | | 28,496 | | | 1,080 | % | | 2,639 | | | 2,639 | | | N/A | | — | |
| Other | | Other | (65,682) | | | (5,486) | | | (9) | % | | (60,196) | | | (60,196) | | | N/A | | — | |
| Total Dotdash Meredith | | Total Dotdash Meredith | 152,149 | | | 118,527 | | | 353 | % | | 33,622 | | | (32,584) | | | (49) | % | | 66,206 | |
| Angi Inc. | | Angi Inc. | |
| Domestic | | Domestic | |
| Ads and Leads | | Ads and Leads | 168,952 | | | 32,692 | | | 24 | % | | 136,260 | | | (94,537) | | | (41) | % | | 230,797 | |
| Services | | Services | (52,126) | | | (3,923) | | | (8) | % | | (48,203) | | | (18,950) | | | (65) | % | | (29,253) | |
| Roofing | | Roofing | (21,400) | | | (13,889) | | | (185) | % | | (7,511) | | | (7,511) | | | N/A | | — | |
| Other | | Other | (49,866) | | | (3,800) | | | (8) | % | | (46,066) | | | (22,196) | | | (93) | % | | (23,870) | |
| Total Domestic | | Total Domestic | 45,560 | | | 11,080 | | | 32 | % | | 34,480 | | | (143,194) | | | (81) | % | | 177,674 | |
| International | | International | (481) | | | 6,134 | | | 93 | % | | (6,615) | | | (1,745) | | | (36) | % | | (4,870) | |
| Total Angi Inc. | | Total Angi Inc. | 45,079 | | | 17,214 | | | 62 | % | | 27,865 | | | (144,939) | | | (84) | % | | 172,804 | |
| Search | Search | 51,344 | | | (72,819) | | | (59) | % | | 124,163 | | | Search | 83,486 | | | (24,895) | | | (23) | % | | 108,381 | | | 57,037 | | | 111 | % | | 51,344 | |
| Emerging & Other | Emerging & Other | (37,699) | | | (9,331) | | | (33) | % | | (28,368) | | | Emerging & Other | (1,643) | | | (35,026) | | | NM | | 33,383 | | | 71,082 | | | NM | | (37,699) | |
| Corporate | Corporate | (147,502) | | | (58,885) | | | (66) | % | | (88,617) | | | Corporate | (79,521) | | | 16,464 | | | 17 | % | | (95,985) | | | 51,448 | | | 35 | % | | (147,433) | |
| Total | Total | $ | 93,966 | | | $ | (113,320) | | | (55) | % | | $ | 207,286 | | | Total | $ | 199,550 | | | $ | 92,284 | | | 86 | % | | $ | 107,266 | | | $ | 2,044 | | | 2 | % | | $ | 105,222 | |
| | As a percentage of revenue | As a percentage of revenue | 3% | | 8% | | As a percentage of revenue | 4% | | 3% | | 4% |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
•ANGIDotdash Meredith Adjusted EBITDA decreased 15%increased 353% to $172.8$152.1 million, despitedue to higher revenue, and a decrease in transaction-related costs ($7.1 million in 2022 compared to $78.5 million in 2021, inclusive of costs related to change-in-control payments), partially offset by $80.2 million in restructuring charges associated with the Meredith acquisition described above under "Dotdash Meredith Restructuring Charges."
•Angi Inc. Adjusted EBITDA increased 62% to $45.1 million due primarily to an increase in cost of revenue, an increase in compensation expense due to increased commission expense$32.7 million from Ads and severance costs recorded in the third quarterLeads and a decrease of 2020 associated with headcount reductions in France and an increase of $14.0$6.1 million in the provision for creditInternational Adjusted EBITDA losses, due to higher Marketplace Revenue, the impactpartially offset by increased Adjusted EBITDA losses of $13.9 million from COVID-19 on expected credit lossesRoofing, $3.9 million from Services and anticipated losses on Angie’s List service professionals under contract for advertising.$3.8 million from Other (corporate unallocated costs).
•◦VimeoThe Ads and Leads Adjusted EBITDA loss decreased 73% to $11.2 million,increase was due primarily to higher revenue of $55.0 million, partially offset by increases in general and administrative expense of $23.7 million and selling and marketing of $11.9 million, which are described above.
◦The International Adjusted EBITDA loss decrease was due primarily to a decrease of $8.6 million in general and administrative expense, due to the inclusion in compensation expense in 2021 of $7.0 million in charges related to the acquisition of the remaining interests in MyBuilder at a premium to fair value.
◦The Services Adjusted EBITDA loss increase was due primarily to increases in general and administrative expense of $27.8 million and selling and marketing expense of $13.6 million, partially offset by higher compensationrevenue of $91.3 million.
◦The Roofing Adjusted EBITDA loss increase was due primarily to the inclusion of expense for twelve months in the current year compared to six months in the prior year, and to a lesser extent, higher selling and marketing and general and administrative expenses relative to 2021.
◦The Other (unallocated corporate costs) Adjusted EBITDA loss increased was due primarily to an increase in headcount general and increases of $11.9 million in credit card processing fees and in in-app purchase fees, higher marketing costs and costs related to the Spin-off.
•Dotdash Adjusted EBITDA increased 67% to $66.2 million due primarily to higher revenue, partially offset by higher compensationadministrative expense, an increase in expense for third-party contractors and an increase in the provision for credit losses due, in part, to the impact of COVID-19 on expected credit losses.which is described above.
•Search Adjusted EBITDA decreased 59%$24.9 million to $51.3$83.5 million due primarily to a decrease in Ask Media Group revenue partially offset byand an increase in online marketing and a decrease in marketingDesktop revenue and an increase in traffic acquisition costs as a result of $52.0 million at Desktop as we mitigatehigher revenue share rates resulting in higher expense compared to the negative impact on revenue from the browser policy changes and COVID-19.prior year.
•Emerging & Other Adjusted EBITDA loss increased $9.3decreased $35.0 million to a loss of $1.6 million due primarily to a $9.8 million charge at Vivian Health related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with the equity raise in the second quarter of 2022, lower profits at IAC Films and Mosaic Group and increased losses at Newco, Daily Beast and Bluecrew, which was sold on November 9, 2022, partially offset by higher profits at Care.com.
•Corporate Adjusted EBITDA loss decreased 17% to $79.5 million due primarily to a decrease in compensation expense due primarily to decreases in bonuses and payroll taxes and the inclusion in 2021 of $6.2 million of transaction-related costs in connection with the Spin-off.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
•Dotdash Meredith Adjusted EBITDA decreased 49% to $33.6 million, despite higher revenue, due primarily to $25.2 million in transaction-related costs in connection with the Meredith transaction, increases in compensation expense, advertising expense, and third-party content creation costs, and losses from Meredith due primarily to $53.3 million in transaction-related costs associated with its acquisition, including charges related to double-trigger change in control payments.
•Angi Inc. Adjusted EBITDA decreased 84% to $27.9 million due primarily to a decrease of $94.5 million from Ads and Leads, increased Adjusted EBITDA losses of $22.2 million, $19.0 million and $1.7 million from Other (unallocated corporate costs), Services and International, respectively, and $7.5 million in Adjusted EBITDA losses from Roofing.
◦Ads and Leads Adjusted EBITDA decreased 41% to $136.3 million despite higher revenue, due primarily to increases in selling and marketing expense, and general and administrative expense, which are described above.
◦The Other (unallocated corporate costs) Adjusted EBITDA loss increase was due primarily to $9.6 million in one-time costs related to Angi Inc. reducing its real estate footprint in 2021.
◦The Services Adjusted EBITDA loss increase was due primarily to an increase in advertising expense attributable to the brand integration initiative.
◦Roofing was acquired on July 1, 2021 and contributed Adjusted EBITDA losses of $7.5 million.
◦The International Adjusted EBITDA loss increase was due primarily to an increase in compensation expense resulting from $7.0 million in charges related to the acquisition of the remaining interests in MyBuilder at a premium to fair.
•Search Adjusted EBITDA increased 111% to $108.4 million due to an increase in Ask Media Group revenue and the decrease of $73.7 million in marketing at Desktop as it substantially reduced marketing of its B2C products in January 2021 and the subsequent elimination of all marketing of B2C products beginning in early March 2021 as a result of Google policy changes.
•Emerging & Other Adjusted EBITDA increased $71.1 million to $33.4 million from a loss of $37.7 million due primarily to increased profits at Care.com as 2020 included $34.0 million in transaction-related items from the Care.comits acquisition (including $17.3 million in deferred revenue write-offs and $16.7 million in transaction-related costs), and increasedprofits in the current year compared to losses in the prior year at IAC Films, Bluecrew and Nursefly, partially offset by lower losses at College Humor Media, due to its sale during the first quarter of 2020.Films.
•Corporate Adjusted EBITDA loss increased 66%decreased 35% to $147.5$96.0 million due primarily to the $25.0inclusion in 2020 of the $25.0 million contributioncontribution to the IAC Fellows Foundation, higher professional fees, including increasesendowment, of $11.8a decrease in transaction-related costs ($19.7 million and $2.2 million in costs relatedrelated to the MTCH Separation and the Spin-off, respectively, in 2020 compared to $6.2 million in connection with the Spin-off in 2021), and an increase in compensation expense driven primarily by increasedthe prior year period reflecting higher employer payroll taxes related to Match Group stock option exercises by IAC employees during the third and fourth quarters of 2020.employees.
Interest expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Interest expense | $16,166 | | $4,262 | | 36% | | $ | 11,904 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Interest expense | $ | 110,165 | | | $ | 75,901 | | | 222 | % | | $ | 34,264 | | | $ | 18,098 | | | 112% | | $ | 16,166 | |
For the year ended December 31, 2022 compared to the year ended December 31, 2021
Interest expense in 20202022 increased from 2021 due primarily to the Dotdash Meredith Term Loans incurred in December 2021, partially offset by the decrease resulting from the repayment of the ANGI Group Term Loan during the second quarter of 2021 and the write-off of deferred financing costs in 2021 associated with the termination of a bridge facility entered into by IAC in connection with the Meredith transaction.
For the year ended December 31, 2021 compared to the year ended December 31, 2020
Interest expense in 2021 increased from 2020 due primarily to the issuance of the ANGI Group Senior Notes in August 2020, the Dotdash Meredith Term Loans borrowings and commitment fees relating to the Dotdash Meredith Revolving Facility in December 2021, and the write-off of deferred financing costs as a result ofassociated with the termination of a bridge facility entered into by IAC in connection with the IAC Group $250 million revolving credit facility effective October 2, 2020, partially offsetMeredith transaction. Interest expense was further impacted by a decrease in interest expense on the ANGI Group Term Loan due to lower interest rates and the decrease in the average outstanding balance ofbecause the ANGI Group Term Loan compared towas repaid in its entirety during the prior year.second quarter of 2021.
Unrealized (loss) gain on investment in MGM Resorts International
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | $ Change | | % Change | | 2019 |
| | (Dollars in thousands) |
| Unrealized gain on investment in MGM Resorts International | $840,550 | | $840,550 | | NM | | $— |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Unrealized (loss) gain on investment in MGM Resorts International | $ | (723,515) | | | $ | (1,512,798) | | | NM | | $ | 789,283 | | | $ | (51,267) | | | (6) | % | | $ | 840,550 | |
The Company recognized an unrealized gain of $840.5 million on itsCompany's investment in MGM Resorts International ("MGM") during 2020.is accounted for as a marketable equity security and the unrealized loss in the year ended December 31, 2022 and the unrealized gains in the years ended December 31, 2021 and 2020, were due to changes in the price of MGM as reported on the New York Stock Exchange. In 2020, the Company purchased 59.0 million shares of MGM for $1.0 billion and, in the first and third quarters of 2022, the Company purchased additional shares totaling 5.7 million for $244.3 million.
Other (expense) income, net | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (Dollars in thousands) |
| | | | | |
Net periodic pension benefit costs, other than the service cost component(a) | $ | (206,422) | | | $ | (17,858) | | | $ | — | |
| Unrealized (decrease) increase in the estimated fair value of a warrant | (62,495) | | | 104,018 | | | (1,213) | |
| Unrealized (loss) gain related to marketable equity securities | (20,342) | | | 18,788 | | | — | |
Foreign exchange (losses) gains, net(b) | (8,503) | | | (13,636) | | | 674 | |
Net realized gain (loss) on sales of businesses, investments and upward (downward) adjustments to the carrying value of equity securities without readily determinable fair values(c)(d) | 59,299 | | | 18,874 | | | (40,050) | |
| Interest income | 24,916 | | | 1,351 | | | 7,177 | |
| Realized gain on the sale of a marketable equity security | — | | | 7,174 | | | — | |
Loss on extinguishment of debt(e) | — | | | (1,110) | | | — | |
| COVID-19 related impairments on a note receivable and a warrant related to certain investees | — | | | — | | | (7,517) | |
| Other | (4,238) | | | (5,747) | | | (1,632) | |
| Other (expense) income, net | $ | (217,785) | | | $ | 111,854 | | | $ | (42,561) | |
| | | | | |
| $ Change | $ | (329,639) | | | $ | 154,415 | | | |
| % Change | NM | | NM | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Other (expense) income, net | $(42,468) | | $(76,515) | | NM | | $34,047 | | | | | | |
Other expense,(a) Includes net in 2020 includes: $51.5pre-tax actuarial losses of $213.4 million in impairmentsand $7.1 million for the years ended December 31, 2022 and 2021, respectively, related to investmentsMeredith's funded pension plans in the U.K., consisting of the IPC Pension Scheme, and the U.S. See "Note 13—Pension and Postretirement Benefit Plans" for additional information.
(b) Includes $10.0 million in foreign exchange losses primarily related to the substantial liquidation of certain foreign subsidiaries in the year ended December 31, 2021.
(c) Includes a gain of approximately $132.2 million on the sale of BlueCrew in the year ended December 31, 2022. On November 9, 2022, the Company completed the sale of BlueCrew, which was included in the Emerging & Other segment, to EmployBridge, a provider of light industrial staffing solutions, for cash and stock with the Company becoming a minority shareholder in the combined company.
(d) Includes upward and downward adjustments to the carrying value of equity securities without readily determinable fair valuesvalues. For the years ended December 31, 2022, 2021 and $7.52020, the Company recorded net (downward) and upward adjustments of $(89.1) million, in impairments of a note receivable$8.9 million and a warrant$(51.5) million, respectively. Downward adjustments for the year ended December 31, 2020 related to certain investeesimpairments due to COVID-19.
(e) Represents the impactwrite-off of COVID-19; and $7.2 million of interest income.
Other income, net in 2019 includes: a $20.5 million gaindeferred debt issuance costs related to the sale of our investmentANGI Group Term Loan, which was repaid in Pinterest; $18.5 million in net upward adjustments related to investments in equity securities without readily determinable fair values; $15.2 million of interest income; a unrealized reduction of $9.1 million inits entirety during the estimated fair value of a warrant; a realized loss of $8.2 million related to the sale of Vimeo's hardware business in the firstsecond quarter of 2019; and a $1.8 million mark-to-market charge for an indemnification claim related to the Handy acquisition that was settled in ANGI shares during the first quarter of 2020.2021.
Income tax benefit (provision)
| | | | Years Ended December 31, | | | Years Ended December 31, |
| | | 2020 | | $ Change | | % Change | | 2019 | | | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | | (Dollars in thousands) | | | (Dollars in thousands) |
| Income tax benefit | $59,019 | | $(1,470) | | (2)% | | $60,489 | | |
| Income tax benefit (provision) | | Income tax benefit (provision) | $ | 331,087 | | | $ | 470,077 | | | NM | | $ | (138,990) | | | $ | (184,697) | | | NM | | $ | 45,707 | |
| Effective income tax rate | Effective income tax rate | NM | | NM | | Effective income tax rate | 22% | | 19% | | NM |
In 2022, the effective income tax rate was higher than the statutory rate of 21% due primarily to state taxes and research credits, offset by the non-deductible portion of the Mosaic Group goodwill impairment charge.
In 2021, the effective income tax rate was lower than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by state taxes, an increase in the valuation allowance on beginning-of-the-year deferred tax assets related to the Spin-off and non-deductible transaction-related items associated with the acquisition of Meredith.
In 2020, the income tax benefit was due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by the non-deductible portion of the Desktop impairment.
In 2019, the income tax benefit was due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, realization of certain deferred tax assets, and research credits.
Net (loss) earningsloss attributable to noncontrolling interests
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | | | | |
| | 2020 | | $ Change | | % Change | | 2019 | | | | | | |
| | (Dollars in thousands) | | | | | | |
| Net (loss) earnings attributable to noncontrolling interests | $ | (1,140) | | | $(10,428) | | (112)% | | $ | 9,288 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | $ Change | | % Change | | 2021 | | $ Change | | % Change | | 2020 |
| | (Dollars in thousands) |
| Net loss attributable to noncontrolling interests | $ | (22,285) | | | $ | (13,723) | | | 160 | % | | $ | (8,562) | | | $ | (7,422) | | | (651)% | | $ | (1,140) | |
Net (loss) earningsloss attributable to noncontrolling interests in 20202022, 2021 and 20192020 primarily represents the publicly-held interest in ANGI's earnings. Angi Inc.'s losses.
Net earningsloss attributable to noncontrolling interests in 20192022 and 2021 also includes a third partynoncontrolling interest in a subsidiary that held the gain on our investmentprimarily holds investments in Pinterest.equity securities. The subsidiary recorded net unrealized losses in 2022 and net realized gains in 2021.
PRINCIPLES OF FINANCIAL REPORTING
The Company reports Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles ("GAAP"). This measure is one of the primary metrics by which we evaluate the performance of our businesses, on whichand our internal budgets are based and by whichmay impact management is compensated.compensation. 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. This non-GAAP measure 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. The Company endeavors to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below.
Definition of Non-GAAP Measure
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") 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. We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.
The following table reconciles net (loss) earnings attributable to IAC shareholders to operating loss to Adjusted EBITDA: | | | | Years Ended December 31, | | | Years Ended December 31, |
| | | 2020 | | 2019 | | | 2022 | | 2021 | | 2020 |
| | | (In thousands) | | | (In thousands) |
| Net earnings attributable to IAC shareholders | $ | 269,726 | | | $ | 22,895 | | | |
| Net (loss) earnings attributable to IAC shareholders | | Net (loss) earnings attributable to IAC shareholders | $ | (1,170,170) | | | $ | 597,547 | | | $ | 269,726 | |
| Add back: | Add back: | | | Add back: | |
| Net (loss) earnings attributable to noncontrolling interests | (1,140) | | | 9,288 | | | |
| Income tax benefit | (59,019) | | | (60,489) | | | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | (22,285) | | | (8,562) | | | (1,140) | |
| (Earnings) loss from discontinued operations, net of taxes | | (Earnings) loss from discontinued operations, net of taxes | (2,694) | | | 1,831 | | | 21,281 | |
| Income tax (benefit) provision | | Income tax (benefit) provision | (331,087) | | | 138,990 | | | (45,707) | |
| Other expense (income), net | Other expense (income), net | 42,468 | | | (34,047) | | | Other expense (income), net | 217,785 | | | (111,854) | | | 42,561 | |
| Unrealized gain on investment in MGM Resorts International | (840,550) | | | — | | | |
| Unrealized loss (gain) on investment in MGM Resorts International | | Unrealized loss (gain) on investment in MGM Resorts International | 723,515 | | | (789,283) | | | (840,550) | |
| Interest expense | Interest expense | 16,166 | | | 11,904 | | | Interest expense | 110,165 | | | 34,264 | | | 16,166 | |
| Operating loss | Operating loss | (572,349) | | | (50,449) | | | Operating loss | (474,771) | | | (137,067) | | | (537,663) | |
| Add back: | Add back: | | | Add back: | |
| Stock-based compensation expense | Stock-based compensation expense | 197,220 | | | 134,338 | | | Stock-based compensation expense | 123,476 | | | 79,487 | | | 188,995 | |
| Depreciation | Depreciation | 69,283 | | | 55,949 | | | Depreciation | 130,986 | | | 75,015 | | | 68,823 | |
| Amortization of intangibles | Amortization of intangibles | 141,584 | | | 83,868 | | | Amortization of intangibles | 307,718 | | | 74,839 | | | 126,839 | |
| Acquisition-related contingent consideration fair value adjustments | Acquisition-related contingent consideration fair value adjustments | (6,918) | | | (19,738) | | | Acquisition-related contingent consideration fair value adjustments | (612) | | | 14,992 | | | (6,918) | |
| Goodwill impairment | Goodwill impairment | 265,146 | | | 3,318 | | | Goodwill impairment | 112,753 | | | — | | | 265,146 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 93,966 | | | $ | 207,286 | | | Adjusted EBITDA | $ | 199,550 | | | $ | 107,266 | | | $ | 105,222 | |
Non-Cash Expenses That Are Excluded Fromfrom Our Non-GAAP Measure
Stock-based compensation expense consists principally of expense associated with awards issued by certain subsidiaries of the Company and expense related to awards that were granted under various IAC stock and annual incentive plans.plans and expense related to awards issued by certain subsidiaries of the Company. These expenses are not paid in cash and we view the economic costs of stock-based awards to be the dilution to our share base; we also include the related shares in our fully diluted shares outstanding for GAAP earnings per share using the treasury stock method.The Company is currently settling all stock-based awards other than IAC denominated stock options on a net basis; IAC remits the required tax-withholding amounts for net-settled awards from its current funds.
Depreciation is a non-cash expense relating to our building, capitalized software, equipment, leasehold improvements and equipmentbuildings 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. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as advertiser relationships, technology, licensee relationships, trade names, content, service professional relationships, customer lists and user base, memberships, trade names and content,subscriber relationships, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that 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 impairments of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
Gains and losses recognized on changes in the fair value of contingent consideration arrangements are accounting adjustments to report contingent consideration liabilities at fair value. These adjustments can be highly variable and are excluded from our assessment of performance because they are considered non-operational in nature and, therefore, are not indicative of current or future performance or the ongoing cost of doing business.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Position | | | | | | | | | | | |
| December 31, |
| 2020 | | 2019 |
| (In thousands) |
| ANGI cash and cash equivalents and marketable debt securities: | | | |
| United States | $ | 793,679 | | | $ | 377,648 | |
| All other countries | 19,026 | | | 12,917 | |
| Total cash and cash equivalents | 812,705 | | | 390,565 | |
| Marketable debt securities (United States) | 49,995 | | | — | |
| Total ANGI cash and cash equivalents and marketable debt securities | 862,700 | | | 390,565 | |
| | | |
| IAC (excluding ANGI) cash and cash equivalents and marketable debt securities: | | | |
| United States | 2,573,422 | | | 392,521 | |
| All other countries | 90,061 | | | 56,710 | |
| Total cash and cash equivalents | 2,663,483 | | | 449,231 | |
| Marketable debt securities (United States) | 174,984 | | | — | |
| Total IAC (excluding ANGI) cash and cash equivalents and marketable debt securities | 2,838,467 | | | 449,231 | |
| | | |
| Total cash and cash equivalents and marketable debt securities | $ | 3,701,167 | | | $ | 839,796 | |
| | | |
| Long-term debt: | | | |
| ANGI Group Senior Notes | $ | 500,000 | | | $ | — | |
| ANGI Group Term Loan | 220,000 | | | 247,500 | |
| Total long-term debt | 720,000 | | | 247,500 | |
| Less: current portion of ANGI Group Term Loan | — | | | 13,750 | |
| Less: unamortized debt issuance costs | 7,723 | | | $ | 1,804 | |
| Total long-term debt, net | $ | 712,277 | | | $ | 231,946 | |
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
| Dotdash Meredith cash and cash equivalents: | | | |
| United States | $ | 109,000 | | | $ | 218,612 | |
| All other countries | 14,866 | | | 14,781 | |
| Total Dotdash Meredith cash and cash equivalents | 123,866 | | | 233,393 | |
| | | |
| Angi Inc. cash and cash equivalents: | | | |
| United States | 311,422 | | | 404,277 | |
| All other countries | 9,733 | | | 23,859 | |
| Total cash and cash equivalents | 321,155 | | | 428,136 | |
| | | |
| | | |
| | | |
| IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities: | | | |
| United States | 939,168 | | | 1,408,828 | |
| All other countries | 33,201 | | | 48,373 | |
| Total cash and cash equivalents | 972,369 | | | 1,457,201 | |
| Marketable securities (United States) | 239,373 | | | 19,788 | |
| Total IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities | 1,211,742 | | | 1,476,989 | |
| | | |
| Total cash and cash equivalents and marketable securities | $ | 1,656,763 | | | $ | 2,138,518 | |
| | | |
| Dotdash Meredith Debt: | | | |
| Dotdash Meredith Term Loan A | $ | 332,500 | | | $ | 350,000 | |
| Dotdash Meredith Term Loan B | 1,237,500 | | | 1,250,000 | |
| Total Dotdash Meredith long-term debt | 1,570,000 | | | 1,600,000 | |
| Less: current portion of Dotdash Meredith long-term debt | 30,000 | | | 30,000 | |
| Less: original issue discount | 5,310 | | | 6,176 | |
| Less: unamortized debt issuance costs | 10,215 | | | 12,139 | |
| Total Dotdash Meredith long-term debt, net | 1,524,475 | | | 1,551,685 | |
| | | |
| ANGI Group Debt: | | | |
| ANGI Group Senior Notes | 500,000 | | | 500,000 | |
| | | |
| | | |
| Less: unamortized debt issuance costs | 4,715 | | | 5,448 | |
| Total ANGI Group long-term debt, net | 495,285 | | | 494,552 | |
| | | |
| Total long-term debt, net | $ | 2,019,760 | | | $ | 2,046,237 | |
The Company's international cash can be repatriated without significant tax consequences. ForDuring the year endingended December 31, 2020, there was no2022, international cash repatriated to the U.S. was not material.
Cash Flow Information
In summary, IAC's cash flows are as follows: | | | | | | | | | | | | | |
| | Years Ended December 31, | | |
| | 2020 | | 2019 | | |
| | (In thousands) | | |
| Net cash provided by (used in): | | | | | |
| Operating activities | $ | 154,581 | | | $ | 251,800 | | | |
| Investing activities | $ | (1,872,141) | | | $ | (421,868) | | | |
| Financing activities | $ | 4,351,919 | | | $ | 124,086 | | | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Net cash (used in) provided by: | | | | | |
| Operating activities attributable to continuing operations | $ | (82,791) | | | $ | 118,900 | | | $ | 113,379 | |
| Investing activities attributable to continuing operations | $ | (494,808) | | | $ | (2,907,503) | | | $ | (1,872,183) | |
| Financing activities attributable to continuing operations | $ | (112,651) | | | $ | 1,115,737 | | | $ | 4,202,665 | |
Net cash provided by operating activities attributable to continuing operations consists of net earnings adjusted for non-cash items and the effect of changes in working capital and acquisition-related contingent consideration payments (to the extent greater than the liability initially recognized at the time of acquisition).capital. Non-cash adjustments include the unrealized loss (gain) on the investment in MGM, deferred income taxes, amortization of intangibles, goodwill impairment, pension and postretirement benefit expense, stock-based compensation expense, depreciation, provision for credit losses, unrealized decrease (increase) in the estimated fair value of a warrant, non-cash lease expense (including ROU asset impairments), and net (gains) losses on sales of businesses and investments in equity securities.
2022
Adjustments to net loss attributable to continuing operations consist primarily of an unrealized loss on the investment in MGM of $723.5 million, amortization of intangibles of $307.7 million, pension and postretirement benefit expense of $210.0 million, depreciation of $131.0 million, stock-based compensation expense of $123.5 million, provision of credit losses of $116.6 million, goodwill impairment of $112.8 million, non-cash lease expense (including ROU asset impairments) of $70.9 million and an unrealized decrease in the estimated fair value of a warrant of $62.5 million, partially offset by deferred taxes of $337.8 million and net gains on sales of businesses and investments in equity securities of $39.0 million. The decrease from changes in working capital include a decrease in accounts payable and other liabilities of $247.9 million, an increase in accounts receivable of $66.7 million, a decrease in operating lease liabilities of $63.8 million and a decrease in deferred revenue of $11.0 million. The decrease in accounts payable and other liabilities is due primarily to (i) a decrease in accrued employee compensation due, in part, to change-in-control payments, partially offset by an increase in restructuring charges, at Dotdash Meredith, (ii) a decrease in accrued traffic acquisition costs and related payables at Search, (iii) a decrease in accounts payable at Dotdash Meredith due primarily to timing of payments and lower spend due to the discontinuation of certain print publications, (iv) a payment of pre-acquisition income tax indemnification liabilities at Dotdash Meredith and (v) a decrease in customer deposit liabilities at Dotdash Meredith due, in part, to the discontinuation of certain print publications. The increase in accounts receivable is due primarily to revenue growth at Angi Inc., primarily attributable to Services, and an increase in revenue related to various production deals at IAC Films, partially offset by a decrease in revenue at Search and a decrease at Dotdash Meredith primarily due to the discontinuation of certain publications, reduced circulation of other publications and continued secular declines at Print and decreases in performance marketing and advertising revenue at Digital. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The decrease in deferred revenue is due primarily to timing of the utilization of services provided through Care for Business at Care.com, lower annual memberships at Angi Inc., primarily at Ads and Leads, and a decrease in Digital licensing contracts at Dotdash Meredith.
Net cash used in investing activities attributable to continuing operations includes $244.3 million for the purchase of 5.7 million additional shares of MGM, $233.9 million for the purchase of marketable debt securities and capital expenditures of $139.8 million primarily related to investments in capitalized software at Angi Inc., Care.com, and Dotdash Meredith, partially offset by net proceeds from the sale of certain businesses and investments of $90.8 million and a decrease in notes receivable of $19.5 million.
Net cash used in financing activities attributable to continuing operations includes the repurchase of 1.1 million shares of IAC common stock, on a settlement date basis, for $85.3 million at an average price of $77.44 per share, principal payments on Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B of $30.0 million, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $18.1 million, withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $8.8 million and the repurchase of 1.0 million shares of Angi Inc. Class A common stock, on a settlement date basis, for $8.1 million at an average price of $7.80 per share, partially offset by proceeds from the issuance of Vivian Health preferred shares, net of fees, of $34.7 million.
2021
Adjustments to net earnings attributable to continuing operations consist primarily of an unrealized gain on the investment in MGM goodwill impairments,of $789.3 million, an unrealized increase in the estimated fair value of a warrant of $104.0 million and net gains on sales of businesses and investments in equity securities of $44.8 million, partially offset by deferred taxes of $133.4 million, provision of credit losses of $89.9 million, stock-based compensation expense of $79.5 million, depreciation of $75.0 million, amortization of intangibles provision for credit losses, depreciation, deferred income taxes, net losses (gains) on equity securities,of $74.8 million, non-cash lease expense (including ROU asset impairments) of $35.7 million and net (gains) losses from the salepension and postretirement benefit expense of businesses.
2020
Adjustments to earnings consist primarily of $840.6 million of the unrealized gain on the investment in MGM and $31.9
million of deferred income taxes, partially offset by a $265.1 million goodwill impairment, $197.2 million of stock-based compensation expense, $141.6 million of amortization of intangibles, including impairments of $32.2 million, $80.8 million of provision for credit losses, $69.3 million of depreciation and $40.8 million of losses on equity securities, net, which includes $51.5 million of impairments of certain equity securities without readily determinable fair values.$18.2 million. The decrease from changes in working capital primarily consists of an increase in accounts receivable of $139.1$154.9 million and a decrease in income taxes payable and receivableoperating lease liabilities of $12.2$31.0 million, partially offset by an increase in accounts payable and other liabilities of $90.3 million and an increase in deferred revenue of $81.4$8.3 million. The increase in accounts receivable is due primarily to revenue growth at Angi Inc., primarily attributable to Services, and an increase at Search due primarily to revenue growth, partially offset by timing of cash receipts. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The increase in accounts payable and other liabilities is due primarily to increases in (i) accrued traffic acquisition costs and related payables at Search, (ii) accrued advertising and related payables at Angi Inc., (iii) accrued sales returns at Angi Inc., (iv) accrued professional fees at Dotdash Meredith, primarily related to transaction-related costs associated with the acquisition of Meredith, and (v) customer deposit liability due to the inclusion of Meredith, partially offset by a decrease in accrued compensation costs due primarily to a decrease in deferred payroll tax payments under the Coronavirus Aid, Relief, and Economic Security Act, and payments of cash bonuses. The increase in deferred revenue is due primarily to the growth in subscription sales at Care.com.
Net cash used in investing activities attributable to continuing operations includes cash used for acquisitions of $2.7 billion, principally related to the acquisitions of Meredith at Dotdash for $2.7 billion and Roofing at Angi Inc. for $25.4 million, the cash distribution related to the spin-off of Vimeo of $333.2 million, capital expenditures of $90.2 million primarily related to investments in capitalized software at Angi Inc. to support its products and services and payment of $12.7 million related to the purchase of a 50% interest in an aircraft at Corporate, and purchases of investments of $24.3 million, primarily related to Turo, partially offset by maturities of marketable debt securities of $225.0 million and net proceeds from the sale of businesses and investments of $16.5 million, primarily related to the sales of certain investments.
Net cash provided by financing activities attributable to continuing operations includes the borrowings of Dotdash Meredith Term Loans of $1.6 billion, partially offset by a prepayment of the ANGI Group Term Loan of $220.0 million, which otherwise would have matured on November 5, 2023, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $96.0 million, withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $61.9 million, the repurchase of 3.2 million shares of Angi Inc. Class A common stock, on a settlement date basis, for $35.4 million at an average price of $11.06 per share, the purchase of redeemable noncontrolling interests of $30.3 million, and debt issuance costs of $23.5 million, primarily related to the Dotdash Meredith Term Loans and Dotdash Meredith Revolving Facility.
2020
Adjustments to net earnings from continuing operations consist primarily of an unrealized gain on the investment in MGM of $840.6 million and deferred income taxes of $18.4 million, partially offset by goodwill impairment of $265.1 million, stock-based compensation expense of $189.0 million, amortization of intangibles of $126.8 million, including impairments of $32.2 million, provision for credit losses of $78.9 million, depreciation of $68.8 million, net losses on sales of businesses and investments in equity securities of $40.1 million, including $51.5 million of impairments of certain equity securities without readily determinable fair values, and non-cash lease expense (including ROU impairments) of $30.0 million. The decrease from changes in working capital primarily consists of an increase in accounts receivable of $128.6 million, a decrease in operating lease liabilities of $29.8 million, an increase in other assets of $23.4 million and a decrease in income taxes payable and receivable of $11.6 million, partially offset by an increase in accounts payable and other liabilities of $42.4 million and an increase in deferred revenue of $25.1 million. The increase in accounts receivable is primarily due to revenue growth at Angi Inc., Care.com, and Dotdash. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The increase in other assets is primarily due to increases in capitalized sales commissions at Angi Inc. and capitalized production costs of various production deals at IAC Films, partially offset by a decrease in capitalized downloadable search toolbar costs at Search. The decrease in income taxes payable and receivable is due primarily to the settlement of audits and 2020 income tax payments in excess of 2020 income tax accruals. The increase in accounts payable and other liabilities is primarily due to increases in: (i) accrued traffic acquisition costs at Search, (ii) accrued employee compensation due, in part to the deferral of payroll tax payments under the Coronavirus Aid, Relief, and Economic Security Act, partially offset by timing of payments of cash bonuses, (iii) accrued sales returns at Angi Inc., (iv) third-party accrued interest at Angi Inc. and (v) accrued advertising and related payables at Angi Inc. and Mosaic. The increase in deferred revenue is due primarily to growth in subscription sales at Vimeo and Care.com.
Net cash used in investing activities attributable to continuing operations includes $1.0 billion for the purchase of 59.0 million shares of MGM, cash used infor acquisitions and investments and acquisitions of $685.8$686.4 million, which is primarily related to the Care.com acquisition, purchases (net of maturities) of marketable debt securities of $174.8 million, and capital expenditures of $61.6$60.7 million, which is primarily related to investments in capitalized software at ANGIAngi Inc. to support their products and services, and leasehold improvements, partially offset by a decrease in notes receivable—related party of $54.8 million, and proceeds from the sale of businesses and investments of $26.3$26.1 million, which are primarily related to the sales of Dictionary and Electus in 2018, a portion of the proceeds of which were held in escrow and received in 2020, and the sales of certain investments.
Net cash provided by financing activities attributable to continuing operations includes cash transfers of $1.7 billion from Old IAC to the Company pursuant to the terms of the MTCH Separation $1.4of $1.7 billion of proceeds related to the sale of Old IAC Class M common stock,and cash merger consideration of $837.9 million paid by Old IAC in connection with the MTCH Separation, $500.0 millionproceeds related to the sale of Old IAC Class M common stock of $1.4 billion, and proceeds from the issuance of the ANGI Group Senior Notes and $149.6of $500.0 million, of net proceeds from the issuance of 8.7 million shares of Vimeo Class A common stock, partially offset by $85.1 million for withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled $64.1of $85.1 million, for withholding taxes paid on behalf of ANGIAngi Inc. employees for stock-based awards that were net settled $63.7of $64.1 million, for the repurchase of 8.5 million shares of ANGIAngi Inc. Class A common stock, on a settlement date basis, for $63.7 million at an average price of $7.47 per share, $27.5 million in principal payments on the ANGI Group Term Loan of $27.5 million, including prepayment of the $13.8 million of principal payments that were otherwise due in 2021, $6.5 million for debt issuance costs and $4.6of $6.5 million forand the purchase of redeemable noncontrolling interests.interests of $4.3 million.
2019
Adjustments to earnings consist primarily of $134.3 million of stock-based compensation expense, $83.9 million of amortization of intangibles, $65.7 million of provision for credit losses, and $55.9 million of depreciation, partially offset by $62.8 million of deferred income taxes and $41.4 million of net gains on equity securities. The deferred income tax benefit primarily relates to the net operating loss created by the exercise and vesting of stock-based awards and the realization of gains on certain equity securities. The decrease from changes in working capital primarily consists of an increase in accounts receivable of $73.6 million, partially offset by an increase in deferred revenue of $28.1 million and a decrease in other assets of $10.6 million. The increase in accounts receivable is primarily due to revenue growth at ANGI and Dotdash. The increase in deferred revenue is due primarily to growth in subscription sales at Vimeo and Mosaic Group. The decrease in other assets is due, in part, to a decrease in capitalized downloadable search toolbar costs at Search.
Net cash used in investing activities includes cash used for investments and acquisitions of $450.2 million, principally related to the investment in Turo and acquisitions of Magisto and Fixd Repair, capital expenditures of $97.9 million, primarily related to investments in the development of capitalized software at ANGI to support its products and services as well as leasehold improvements related to additional office space at ANGI, and the payment of a deposit of $23.0 million for an ownership interest in an aircraft at Corporate, and an increase in related party notes receivable of $54.8 million, partially offset by net proceeds from the sale of investments and businesses of $164.8 million, principally related to the sale of our investment in Pinterest and the proceeds received in 2019 related to the December 31, 2018 sale of Felix, and proceeds from maturities (net of purchases) of marketable debt securities of $25.0 million.Discontinued Operations
Net cash provided by financing activities includesdiscontinued operations in the years ended December 31, 2021 and 2020 of $319.2 million and $190.5 million, respectively, relates to the operations of Vimeo. The Company does not expect cash transfers of $263.3 millionflows from Old IAC pursuant to Old IAC's centrally managed U.S. treasury function, partially offset by $56.9 million fordiscontinued operations following the repurchase of 7.2 million shares of ANGI common stock, on a settlement date basis, at an average price of $7.90 per share, $35.3 million for withholding taxes paid on behalf of ANGI employees for stock-based awards that were net settled, $27.5 million for distributions to and purchases of noncontrolling interests, and $13.8 million in principal payments on ANGI debt.
Liquidity and Capital Resources
Financing Arrangements
Investment in MGM Resorts International
In connection with the MTCH Separation2020, the Company received $1.4 billion of proceeds related to the sale of Old IAC Class M common stock and cash merger consideration of $837.9 million paid by Old IAC.
On November 10, 2020, Vimeo raised $150 million of equity capital via the sale of 8.7purchased 59.0 million shares of Class A voting common stock atMGM for $1.0 billion and, in the first and third quarters of 2022, the Company purchased a pricetotal of $17.33 per share, based on a pre-money valuation of $2.75 billion. During November 2020, Vimeo paid a cash dividend of $0.22 per share of Class A voting common stock and Class B non-voting common stock to holders of record on November 5, 2020,5.7 million additional shares for approximately $31 million in aggregate. Of this amount, $30.7 million was paid to IAC. In January 2021, Vimeo raised $300 million of equity capital via$244.3 million. Following these purchases, the sale of 6.2Company owns 64.7 million shares, of Vimeo Class A voting common stock for $200 million, or $32.41 per share, atrepresenting a $5.2 billion pre-money valuation, and 2.8 million shares17.1% ownership interest in MGM as of Vimeo Class A voting common stock for $100 million, or $35.35 per share, at a $5.7 billion pre-money valuation. At December 31, 2020, Vimeo had $94.6 million of debt payable to IAC and $4.2 million of accrued interest, all of which were repaid by Vimeo in January 2021 from the proceeds of the January 2021 primary equity issuance described above.2022.
On August 20, 2020, ANGI Group issued $500 million of its ANGI Group Senior Notes due August 15, 2028. The proceeds from the offering are being used for general corporate purposes, which may include potential future acquisitions and return of capital.
The $250 million ANGI Group Revolving Facility expires on November 5, 2023. At December 31, 2020 and December 31, 2019, there were no outstanding borrowings under the ANGI Group Revolving Facility. The annual commitment fee on undrawn funds is currently 35 basis points and is based on ANGI Group's consolidated net leverage ratio most recently reported. Borrowings under the ANGI Group Revolving Facility bear interest, at ANGI Group's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined based on ANGI Group's consolidated net leverage ratio.
The ANGI Group Credit Agreement contains covenants that would limit ANGI Group's ability to pay dividends or make distributions in the event a default has occurred or if ANGI Group's consolidated net leverage ratio (as defined in the ANGI Group Credit Agreement) exceeds 4.25 to 1.0. There were no such limitations at December 31, 2020.
On February 12, 2021, Vimeo, Inc. entered into a five-year $100 million revolving credit facility (the "Vimeo Credit Facility"), which is secured by substantially all of its assets, subject to certain exceptions. Borrowings under the Vimeo Credit Facility bear interest, at Vimeo's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on Vimeo’s consolidated net leverage ratio. At closing, there were no borrowings under the Vimeo Credit Facility.
Share Repurchase Authorizations and Activity
On June 30, 2020,During the Board of Directors of the Company authorized repurchases up to 8.0year ended December 31, 2022, IAC repurchased 1.1 million shares of its common stock, which is equal to the numberon a trade date basis, at an average price of shares that were available under the$77.44 per share, or $85.3 million in aggregate. At December 31, 2022, IAC has 6.9 million shares remaining in its share repurchase authorization at Old IAC immediately prior to the MTCH Separation.authorization.
During the year ended December 31, 2020, ANGI2022, Angi Inc. repurchased 8.41.0 million shares of its Class A common stock, on a trade date basis, at an average price of $7.45$7.80 per share, or $62.6$8.1 million in aggregate. From January 1, 2021 through February 2, 2021, ANGI repurchased an additional 0.4 million shares at an average price of $11.85 per share, or $4.9 million in aggregate. ANGI had 18.9At December 31, 2022, Angi Inc. has 15.0 million shares remaining in its share repurchase authorization as of February 2, 2021.authorization.
IAC and ANGIAngi Inc. may purchase their shares and debt instruments over an indefinite period of time on the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
Outstanding Stock-based Awards
IAC and ANGIAngi Inc. may settle stock options, stock settled stock appreciation rights, restricted stock units ("RSUs") and RSUsrestricted stock on a gross or a net basis based upon factors deemed relevant at the time.To the extent that equity awards are settled on a net basis, the holders of the awards receive shares of IAC or ANGI,Angi Inc., as applicable, with a value equal to the fair value of the award on the vest date for RSUs and restricted stock and with a value equal to the intrinsic value of the award upon exercise for stock options or stock settled appreciation rights less, in each case, an amount equal to the required cash tax withholding payment, which will be paid by IAC or ANGI,Angi Inc., as applicable, on the employee's behalf.All awards other than IAC denominated stock options are being settled currently on a net basis.
Certain previously issued ANGI stock appreciation rights are settleable in either shares of ANGI common stock or shares of IAC common stock at IAC's option. If settled in IAC common stock, ANGI reimburses IAC in shares of its common stock.
The following table summarizes (i) the aggregate intrinsic value of ANGIIAC options, ANGIAngi Inc. options, Angi Inc. stock settled stock-appreciationstock appreciation rights, IAC and ANGIAngi Inc. non-publicly traded subsidiary denominated stock settled stock appreciation rights and (ii) the aggregate fair value (based on stock prices as of January 29, 2021)February 10, 2023) of IAC and ANGIAngi Inc. RSUs and IAC restricted stock outstanding as of that date; assuming these awards were net settled on that date, the withholding taxes that would be paid by the Company on behalf of employees upon exercise or vesting that would be payable (assuming these equity awards are net settled with a 50% tax rate), and the shares that would have been issued are as follows:
| | | Aggregate intrinsic value / fair value of awards outstanding | | Estimated withholding taxes payable on vested shares and shares that will vest by December 31, 2021 | | Estimated withholding taxes payable on shares that will vest after December 31, 2021 | | Estimated IAC shares to be issued | | Aggregate intrinsic value / fair value of awards outstanding | | Estimated withholding taxes payable on vested shares and shares that will vest by December 31, 2023 | | Estimated withholding taxes payable on shares that will vest after December 31, 2023 | | Estimated IAC shares to be issued |
| | (In thousands) | | (In thousands) |
| IAC | IAC | | IAC | |
Stock settled appreciation rights denominated in shares of certain non-publicly traded IAC subsidiaries other than ANGI subsidiaries(a)(b) | $ | 25,074 | | | $ | 8,733 | | | $ | 3,804 | | | 60 | | |
Stock settled stock appreciation rights denominated in shares of certain non-publicly traded IAC subsidiaries other than Angi Inc. subsidiaries (a) | | Stock settled stock appreciation rights denominated in shares of certain non-publicly traded IAC subsidiaries other than Angi Inc. subsidiaries (a) | $ | 33,007 | | | $ | 12,074 | | | $ | 4,430 | | | 318 | |
IAC denominated stock options(c)(b) | IAC denominated stock options(c)(b) | 737,940 | | | 368,970 | | | — | | | 1,757 | | IAC denominated stock options(c)(b) | 105,745 | | | 52,872 | | | — | | | 1,018 | |
IAC RSUs(d)(c) | IAC RSUs(d)(c) | 305,378 | | | 19,017 | | | 133,672 | | | 727 | | IAC RSUs(d)(c) | 74,037 | | | 109 | | | 35,757 | | | 735 | |
IAC restricted stock(e)(d) | IAC restricted stock(e)(d) | 414,867 | | | — | | | 207,433 | | | 988 | | IAC restricted stock(e)(d) | — | | | — | | | — | | | — | |
| Total IAC outstanding employee stock-based awards | Total IAC outstanding employee stock-based awards | 1,483,259 | | | 396,720 | | | 344,909 | | | 3,532 | | Total IAC outstanding employee stock-based awards | 212,789 | | | 65,055 | | | 40,187 | | | 2,071 | |
| | ANGI | | |
| ANGI stock appreciation rights | 92,126 | | | 46,063 | | | — | | | See footnote (g) below | |
Other ANGI equity awards(a)(f) | 162,150 | | | 18,388 | | | 62,687 | | | See footnote (g) below | |
| Total ANGI outstanding employee stock-based awards | 254,276 | | | 64,451 | | | 62,687 | | | |
| Angi Inc. | | Angi Inc. | |
| Angi Inc. RSUs | | Angi Inc. RSUs | 58,925 | | | 7,465 | | | 21,390 | | |
| Angi Inc. stock appreciation rights | | Angi Inc. stock appreciation rights | 80 | | | 40 | | | — | | | See footnote (f) below |
Other Angi Inc. equity awards (a)(e) | | Other Angi Inc. equity awards (a)(e) | 72 | | | 36 | | | — | | | See footnote (f) below |
| Total Angi Inc. outstanding employee stock-based awards | | Total Angi Inc. outstanding employee stock-based awards | 59,077 | | | 7,541 | | | 21,390 | | |
| Total outstanding employee stock-based awards | Total outstanding employee stock-based awards | $ | 1,737,535 | | | $ | 461,171 | | | $ | 407,596 | | | Total outstanding employee stock-based awards | $ | 271,866 | | | $ | 72,596 | | | $ | 61,577 | | |
_______________
(a) The number of shares ultimately needed to settle these awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant subsidiary.subsidiary at the time of exercise. In addition, the number of shares required to settle these awards will be impacted by movement in the stock price of IAC.
(b) Excludes the aggregate intrinsic value of Vimeo stock settled stock appreciation rights. The aggregate intrinsic value of outstanding awards as of January 29, 2021, assuming a per share price of $35.35, which is equal to the per share price of Vimeo based upon a $5.7 billion pre-money valuation, is $405.1 million. Of this amount, $122.8 million is attributable to currently vested awards. After the Spin-off, these awards will be settled in shares of SpinCo common stock. SpinCo management will haveCompany has the discretion to continue to net settle these awards net of withholding tax and exercise price (which is represented in the table above) or settle on a gross basis and require the award holder to pay its share of the withholding tax, which he or she may do so by selling SpinCo common shares. If Vimeo chooses to settle these awards on a net basis the withholding taxes payable by Vimeo on behalf of its employees upon net settlement would be $202.6 million, assuming a 50% withholding rate.
(c) The Company has the discretion to settle these awards net of withholding tax and exercise price or require the award holder to pay its share of the withholding tax, which he or she may do so by selling IAC common shares. Assuming all IAC stock options outstanding on January 29, 2021February 10, 2023 were settled on a gross basis, i.e., through the issuance of a number of IAC common shares equal to the number of stock options exercised, the Company would have issued3.92.8 millioncommon common shares and would have received $82.3received $39.3 million in cash proceeds.
Upon completion of the Spin-off, each option to purchase shares of IAC common stock will convert into an option to purchase shares of IAC common stock and an option to purchase shares of SpinCo common stock with adjustments to the number of shares subject to each option and the option exercise prices based on (i) the value of IAC common stock prior to the Spin-off and (ii) the value of IAC common stock and the value of SpinCo common stock after giving effect to the Spin-off. Based upon (i) the number of IAC options outstanding on January 29, 2021; (ii) the closing stock price of IAC on January 29, 2021 of $209.95 per share (iii) and the per share price of Vimeo common stock of $35.35 per share (from the equity raise in January 2021 at the $5.7 billion pre-money valuation), approximately $100 million of this withholding obligation would relate to SpinCo options that will be issued in the transaction. This estimate is preliminary and will ultimately depend upon (i) the number of IAC options outstanding immediately prior to the Spin-off; (ii) the value of IAC common stock prior to the Spin-off; and (iii) the value of IAC common stock and the value of SpinCo common stock after giving effect to the Spin-off.
(d)(c) Approximately 85%80% of the estimated withholding taxes payable on sharesRSUs that will vest after December 31, 20212023 is related to awards that are scheduled to cliff vest onin 2025, the five-year anniversary of the grant date in 2025.date.
(e)(d) On November 5, 2020, the Company granted 3.0 million shares of IAC restricted common stock to its CEO, that cliff vest on the ten-year anniversary of the grant date based on satisfaction of IAC's stock price targets and continued employment through the vesting date. The IAC stock price is currently below the minimum price threshold to earn the award.
(f)(e) Includes Angi Inc. stock options RSUs and subsidiary denominated equity.
(f) Pursuant to the employee matters agreement between IAC and ANGI,Angi Inc., certain stock appreciation rights granted prior to the closing of the CombinationAngi Inc. and equity awards denominated in shares of ANGI'sAngi Inc.'s subsidiaries may be settled in either shares of ANGIAngi Inc. common stock or IAC common stock. To the extent shares of IAC common stock are issued in settlement of these awards, ANGIAngi Inc. is obligated to reimburse IAC for the cost of those shares by issuing shares of ANGIAngi Inc. common stock.
CapitalContractual Obligations
The Company has material purchase obligations, which represent legally binding agreements to purchase goods and services that specify all significant terms. Future payments under these agreements at December 31, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of Commitment Expiration Per Period |
| | Less Than
1 Year | | 1-3
Years | | 3-5
Years | | More Than
5 Years | | Total
Amounts
Committed |
| | (In thousands) |
| Purchase obligations | $ | 114,607 | | | $ | 72,205 | | | $ | 113 | | | $ | — | | | $ | 186,925 | |
Purchase obligations include future payments of (i) $85.0 million related to a three-year cloud computing arrangement, with payments of $42.0 million expected to be made within the next twelve months and the remaining payments of approximately $43.0 million expected to be made by September 2024, (ii) $49.0 million related to advertising that will primarily run in 2023, (iii) $11.0 million related to office productivity and email tools, and (iv) $5.2 million related to research tools.
Capital Expenditures
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 20212023 capital expenditures are expected to be higherlower than 20202022 capital expenditures of $61.6$139.8 million by approximately 45% to 50% due, in part, to 55%, duelower capital expenditures related to the development of capitalized software to support productsat Angi Inc. and services at ANGICare.com.
Change-in-Control Payments
In December 2021, Dotdash Meredith recorded $60.1 million in change-in-control payments, which were triggered by the acquisition and the terms of certain former executives’ contracts. On July 1, 2022, Dotdash Meredith made $83.1 million in change-in-control payments, related towhich included amounts accrued in December 2021, as well as amounts previously accrued that became payable following the purchase of a 50% interestchange in an aircraft at Corporate,control. On October 3, 2022, Dotdash Meredith made the final payment for which is expected to be made$4.3 million in the third quarter of 2021.change-in-control payments.
Liquidity Assessment
AsOn a consolidated basis, the Company generated negative cash flows from operating activities attributable to continuing operations of $82.8 million for the year ended December 31, 2020,2022; excluding the negative cash flows from operating activities of $104.8 million generated by Dotdash Meredith and the positive cash flows from operating activities of $27.1 million generated by Angi Inc., the Company generated negative cash flows from operating activities of $5.0 million.
At December 31, 2022, the Company's consolidated cash, cash equivalents and marketable debt securities, was $3.7excluding MGM, were $1.7 billion, of which $862.7$321.2 million and $123.9 million was held by ANGI.Angi Inc. and Dotdash Meredith, respectively. The $720.0 million of the Company's consolidated debt includes approximately $1.6 billion, which is a liability of ANGI.Dotdash Meredith, and $500.0 million, which is a liability of ANGI Group, a subsidiary of Angi Inc. The Company generated $154.6 million of operating cash flowsDotdash Meredith Credit Agreement contains covenants that would limit Dotdash Meredith’s ability to pay dividends, incur incremental secured indebtedness, or make distributions or certain investments in the event a default has occurred or if Dotdash Meredith’s Consolidated Net Leverage Ratio, as defined in the Dotdash Meredith Credit Agreement, exceeds 4.0 to 1.0; this ratio was exceeded for the yeartest period ended December 31, 2020,2022. The Dotdash Meredith Credit Agreement also permits the Company to contribute, and the Company may contribute, cash to Dotdash Meredith to provide additional liquidity, including to ensure that Dotdash Meredith does not exceed certain Consolidated Net Leverage Ratios for any test period, as further defined in the Dotdash Meredith Credit Agreement. In connection with the capital contributions, Dotdash Meredith may make distributions to IAC in amounts not more than any such capital contributions, provided that no default has occurred and is continuing. Such capital contributions and subsequent distributions, if made, would impact the Consolidated Net Leverage Ratios of which $188.4 million was generated by ANGI. ANGIDotdash Meredith. Angi Inc. is a separate and distinct legal entityan independent public company with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, the Company cannot freely access the cash of ANGIAngi Inc. and its subsidiaries.
The Company's liquidity could be negatively affected by a decrease in demand for its products and services due to economic or other factors, including COVID-19.
The Company believes itsAngi Inc.'s and Dotdash Meredith's existing cash, cash equivalents marketable debt securities, and expected positive cash flows generated from operations and the Company's existing cash and cash equivalents, excluding Angi Inc. and Dotdash Meredith, will be sufficient to fund itstheir respective 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 due to COVID-19 or other factors. As described in the "COVID-19 Update and Impairments" section above, to date, the COVID-19 outbreak and measures designed to curb its spread have had an impact on certain of the Company's businesses. The longer the global outbreak and measures designed to curb the spread of the COVID-19 outbreak have adverse impacts on economic conditions generally, the greater the adverse impact is likely to be on the Company's business, financial condition and results of operations. The Company's capital structure could limit its ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures, debt service or other requirements; and (ii) use operating cash flow to make acquisitions or capital expenditures, or invest in other areas, such as developing business opportunities. The Company's ability to obtain additional financing could also be impacted by any disruptions in the financial markets caused by COVID-19 or otherwise.next twelve months. The Company may need to raise additional capital through future debt or equity financing to make additional acquisitions and investments. Additional financing may not be available on terms favorable to the Company, or at all.all, and may also be impacted by any disruptions in the financial markets. The indebtedness at Dotdash Meredith and Angi Inc. could further limit the Company's ability to raise additional financing.
CONTRACTUAL OBLIGATIONS
AS OF DECEMBER 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
Contractual Obligations(a) | Less Than
1 Year | | 1–3
Years | | 3–5
Years | | More Than
5 Years | | Total |
| | (In thousands) |
Long-term debt(b) | $ | 23,656 | | | $ | 267,414 | | | $ | 38,750 | | | $ | 558,125 | | | $ | 887,945 | |
Operating leases(c) | 38,767 | | | 75,130 | | | 61,947 | | | 227,409 | | | 403,253 | |
Purchase obligations(d) | 45,819 | | | 520 | | | — | | | — | | | 46,339 | |
| Total contractual obligations | $ | 108,242 | | | $ | 343,064 | | | $ | 100,697 | | | $ | 785,534 | | | $ | 1,337,537 | |
(b)Long-term debt at December 31, 2020 consists of $500.0 million of ANGI Group Senior Notes, which bear interest at a fixed rate of 3.875% and $220.0 million of the ANGI Group Term Loan, which bears interest at a variable rate. The ANGI Group Term Loan bore interest at LIBOR plus 2.00%, or 2.16% at December 31, 2020. The amount of interest ultimately paid on the variable rate debt may differ based on changes in interest rates. For additional information on long-term debt, see "Note 7—Long-term Debt" to the financial statements included in "Item 8—Consolidated and Combined Financial Statements and Supplementary Data."(c)The Company leases land, office space, data center facilities and equipment used in connection with operations under various operating leases, the majority of which contain escalation clauses. Operating lease obligations include legally binding minimum lease payments for leases signed but not yet commenced. The Company is also committed to pay a portion of the related operating expenses under certain lease agreements. These operating expenses are not included in the table above. For additional information on operating leases, see "Note 13—Leases" to the financial statements included in "Item 8—Consolidated and Combined Financial Statements and Supplementary Data."Off-Balance Sheet Arrangements
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The following disclosure is provided to supplement the descriptions of IAC's accounting policies contained in "Note 2—Summary of Significant Accounting Policies" in the accompanying notes to the financial statements included in "Item 8—Consolidated and Combined Financial Statements and Supplementary Data" in regard to significant areas of judgment. Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). These estimates, judgments and assumptions impact the reported amount of assets, liabilities, revenue and expenses and the related disclosure of assets and liabilities. Actual results could differ from these estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on our financial statements than others. What follows is a discussion of some of our more significant accounting policies and estimates. Business Combinations and Contingent Consideration Arrangements
Acquisitions, which are generally referred to in GAAP as business combinations, are an important part of the Company's growth strategy. The Company invested $684.6 million$2.7 billion and $196.6$685.2 million in acquisitions in the years ended December 31, 2021 and 2020, and 2019, respectively. There were no acquisitions made in the year ended December 31, 2022. The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill.
Management makes two critical determinations at the time of an acquisition: (1) the reporting unitunit(s) that will benefit from the acquisition and to which goodwill will be assigned and (2) the allocation of the purchase price of the acquired business to the assets acquired and the liabilities assumed based upon their fair values. The reporting unit determination is important beyond the initial allocation of purchase price because future impairment assessments of goodwill, as described below, are performed at the reporting unit level. Historically, when the Company’s acquisitions have been complementary to existing reporting units for example, the 2019 acquisition of Magisto by Vimeo, the goodwill is allocated to the applicablean existing reporting unit. Acquisitions within the Emerging & Other reportable segment, such as Care.com in 2020, and NurseFly in 2019, usually result in the creation of a new reporting unitsunit because they areit is a standalone businessesbusiness with unique product offerings, management or target markets, for example. The acquisition of Meredith closed on December 1, 2021 and the allocation of purchase price to the assets acquired and liabilities assumed, the determination of the reporting units and the allocation of goodwill to the reporting units were finalized during the fourth quarter of 2022. See "Note 3—Business Combinations" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data" for a description of the accounting for this business combination. The allocation of purchase price to the assets acquired and liabilities assumed is based upon their fair values and is complex because of the judgments involved in determining these values. The determination of purchase price and the fair value of monetary assets acquired and liabilities assumed is typically the least complex aspect of the Company’s accounting for business combinations due to management’s experience and/or the inherently lower level of judgment required. Due to the higher degree of complexity associated with the valuation of acquired intangible assets, the Company usually obtains the assistance of outside valuation experts in the allocation of purchase price to the identifiable intangible assets acquired, which can be both definite-lived, such as advertiser, licensee and subscriber relationships, certain acquired trade names and trademarks, digital content and acquired technology, customer and contractor relationships, or indefinite lived, such as certain acquired trade names and trademarks. While outside valuation experts may be used, management has the ultimate responsibility for the valuation methods, models and inputs used and the resulting purchase price allocation. The excess purchase price over the value of net tangible and identifiable intangible assets acquired is recorded as goodwill and is assigned to the reporting unit that isunit(s) expected to benefit from the business combination as of the acquisition date.
In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. The premise underlying the accounting for contingent consideration arrangements is that there are divergent views as to the acquired company’s valuation between the Company and the selling shareholders of the acquiree. Therefore, a model is developed with future payments of a portion of the purchase price linked to one or more financial (e.g., revenue and/or profit performance) and/or operating (e.g., number of subscribers) metrics that willmay be achieved over a specified time frame in the future based upon the performance of the business. In keeping with the accounting guidance for business combinations, each of these arrangements is initially recorded at its fair value at the time of the acquisition and the fair value is included in the aggregate purchase price. The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the financial statements. The number of scenarios used is typically greater for longer-term arrangements. The contingent consideration arrangements are reassessed and reflected at current fair values for each subsequent reporting period thereafter until settled. The changes in the remeasured fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in "General and administrative expense" in the statement of operations. Significant changes in the specified forecasted financial or operating metrics can result in a significantly higher or lower fair value measurement, which can result in volatility of general and administrative expense as the resulting remeasurement gains and losses are recorded.
Recoverability of Goodwill and Indefinite-Lived Intangible Assets
The carrying value of goodwill is $1.9$3.0 billion and $1.6$3.2 billion at December 31, 20202022 and 2019,2021, respectively. Indefinite-lived intangible assets, which consist of the Company's acquired trade names and trademarks, have a carrying value of $246.9$631.1 million and $225.3$679.1 million at December 31, 20202022 and 20192021, respectively.
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 indicate that it is more likely than not that the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset has declined below its carrying value. In performing its annual goodwill impairment assessment, the Company has the option under GAAP to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value; if the conclusion of the qualitative assessment is that there are no indicators of impairment, the Company does not perform a quantitative test, which would require a valuation of the reporting unit, as of October 1. GAAP provides a not all-inclusive set of examples of macroeconomic, industry, market and company specific factors for entities to consider in performing the qualitative assessment described above; management considers the factors it deems relevant in making its more likely than notmore-likely-than-not assessments. While the Company also has the option under GAAP to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent.
If the conclusion of our qualitative assessment is that there are indicators of impairment and a quantitative test is required, the annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of the Company's reporting unit that is being tested to its carrying value. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its estimated fair value, a goodwill impairment equal to the excess is recorded.
The Company’s annual assessment of the recovery of goodwill begins with management’s reassessment of its operating segments and reporting units. A reporting unit is an operating segment or one level below an operating segment, which is referred to as a component. This reassessment of reporting units is also made each time the Company changes its operating segments.segments to the extent that this also results in a change in reporting units. If the goodwill of a reporting unit is allocated to newly formed reporting units, the allocation is usually made to each reporting unit based upon their relative fair values.
In the fourth quarter of 2022, the Angi Inc. segment presentation was changed to reflect its four new operating segments, which now include (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (includes Europe and Canada). Goodwill was allocated to reflect the new segment presentation. The allocation of goodwill to Roofing and Canada reflects their respective historical carrying values because of the lack of operational integration with Angi North America; the allocation of the remaining goodwill to Ads and Leads and Services was based upon their relative fair values as of October 1, 2022.
As required, a quantitative assessment was performed and the goodwill of Angi Inc. reporting units was tested before and after the change in reporting units; this test resulted in an impairment of $26.0 million due to Roofing exiting certain markets and a projected reduction in future profits from the business which reduced its fair value.
For the Company's annual goodwill test at October 1, 2020,2022, a qualitative assessment of the ANGI, Vimeo,Dotdash Meredith Digital, Care.com Bluecrew and NurseflyVivian Health reporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units are described below:
•ANGI's October 1, 2020 market capitalization of $5.5 billion exceeded its carrying value by approximately $4.3 billion.
•The Company prepared valuations of the Vimeo, BluecrewDigital and NurseflyPrint reporting units within the Dotdash Meredith reportable segment (the Print reporting unit has no goodwill), the Care.com and the Vivian Health reporting units, which are primarily used in connection with the issuance and/or settlement of equity awards that are denominated in the equity of these businesses during the year ended December 31, 2020.2022. The valuations were prepared time proximate to, however, not as of, October 1, 2020.2022. The fair value of each of these businesses in these valuations was in excess of its October 1, 20202022 carrying value.
•The primary factors the Company considered in its qualitative assessment of the Care.com reporting unit were the strong forecasted operating performance of the Care.com reporting unit and the excess of estimated fair value based upon the purchase price at acquisition over the carrying value at October 1, 2020.
For the Company's annual goodwill test at October 1, 2020, the Company quantitatively tested the Mosaic Group reporting unit. The Company's quantitative test indicated that there was no impairment. The Company's Dotdash Meredith Print, Ask Media Group, Desktop, The Daily Beast, and IAC Films and Newco reporting units have no goodwill as of October 1, 2020.2022. On November 9, 2022, the Company completed the sale of Bluecrew at a value in excess of its carrying amount.
In the second quarter of 2022, the Company reassessed the fair value of the Mosaic Group reporting unit (included in the Emerging & Other segment) and recorded an impairment of $86.7 million as a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. The Company prepared a quantitative assessment as of October 1, 2022; this test resulted in no additional impairment as its carrying value approximates its fair value. Any subsequent declines in the fair value of Mosaic Group will result in additional goodwill impairment charges to the extent the carrying value exceeds the fair value.
The aggregate carrying value of goodwill for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately $759.5 million.the $153.6 million of goodwill at Mosaic Group.
The fair value of the Company's reporting units (except for ANGI described above) is determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. The Company uses the same approach in determining the fair value of its businesses in connection with its non-public subsidiary denominated stock-based compensation plans, which can be a significant factor in the decision to apply the qualitative assessment rather than a quantitative test. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the
Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reporting unit's current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in the quantitative test for determining the fair value of the Company's reporting units was 15.0% in 2020 (for the Mosaic Group reporting unit)unit were 16.0% and 12.5%15.0% in 2019 (for2022 and 2021, respectively. The discount rates used in the Desktopquantitative test for determining the fair value of the Ads and Leads, Services, Roofing, and International reporting unit).units in 2022 were 12.0%, 15.0%, 16.0%, and 18.5%, respectively. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors.
The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's 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, which 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 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's annual indefinite-lived impairment assessment ranged from 11.5%12.0% to 25.0%18.5% in 20202022 and 11.5%10.0% to 27.5%40.0% in 2019,2021, and the royalty rates used in both 2020 and 2019 ranged from 1.0% to 5.5%.8.0% in 2022 and 1.0% to 5.0% in 2021.
If the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment equal to the excess is recorded. There are nois one indefinite-lived intangible assetsasset at Dotdash Meredith Digital with a value of approximately $126.0 million for which the most recent estimateexcess of the excess fair value over carrying value is less than 20%.
The October 1, 2022 annual assessment of goodwill and indefinite-lived intangible assets did not identify any further impairments.
The October 1, 2021 annual assessment of goodwill and indefinite-lived intangible assets did not identify any impairments.
In the quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its reporting units and indefinite-lived intangible assets and identified impairments of $212.0 million and $21.4 million related to the goodwill and certain indefinite-lived intangible assets, respectively, of the Desktop reporting unit.
In the quarter ended September 30, 2020, the Company reassessed the fair values of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded impairments equal to the remaining carrying value of the goodwill of $53.2 million and $10.8 million related to the intangible assets. The reduction in the Company’s fair value estimates of the Desktop business in the first and third quarters of 2020 was primarily due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to policy changes implemented by Google and other browsers. The effects of COVID-19 on monetization were an additional factor.
The October 1, 2020 annual assessment of goodwill and indefinite-lived intangible assets did not identify any additionalfurther impairments.
The October 1, 2019 annual assessmentImpairment charges recorded on indefinite-lived intangibles are included in "Amortization of goodwill and indefinite-lived intangible assets identified a $3.3 million goodwill impairment charge and $0.7 million trade name impairment, both related tointangibles" in the College Humor Media business.accompanying statement of operations.
Recoverability and Estimated Useful Lives of Long-Lived Assets
We review the carrying value of all long-lived assets, comprising right-of-useROU assets, ("ROU assets"), building, capitalized software, equipment, leasehold improvements and equipment,buildings, and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. In addition, the Company reviews the useful lives of its long-lived assets whenever events or changes in circumstances indicate that these lives may be changed. The carrying value of these long-lived assets is $608.9 million$1.5 billion and $568.9 million$1.8 billion at December 31, 20202022 and 2019,2021, respectively.
Income Taxes
The Company was included within Old IAC’s tax group for purposes of federal and consolidated state income tax return filings through June 30, 2020, the date of the MTCH Separation. For periods prior thereto, the income tax benefit and/or provision was computed for the Company on an as if standalone, separate return basis and payments to and refunds from Old IAC for the Company’s share of Old IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying statement of cash flows.
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized. At December 31, 20202022 and 2019,2021, the balance of the Company's net deferred tax liability is $50.4$74.7 million and $44.3$383.2 million, respectively.
The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-notmore likely than not to be sustainable upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. At December 31, 20202022 and 2019,2021, the Company has unrecognized tax benefits, including interest and penalties, of $22.1$16.6 million and $20.3and $18.0 million, respectively. We consider many factors when evaluating and estimating our tax positions and unrecognized tax benefits, which may require periodic adjustment and which may not accurately anticipate actual outcomes. Although management currently believes changes to unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
The ultimate amount of deferred income tax assets realized and the amounts paid for deferred income tax liabilities and unrecognized tax benefits may vary from our estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.
The stock-based compensation expense reflected in our statementsCompany was included within Old IAC’s tax group for purposes of operations includes expense related to equity awards issued by certainfederal and consolidated state income tax return filings through June 30, 2020, the date of our subsidiaries (including awards assumed in acquisitions, including the Combination) and, forMTCH Separation. For periods prior thereto, the income tax benefit and/or provision was computed for the Company on an as if standalone, separate return basis and payments to the MTCH Separation, an allocation of expenseand refunds from Old IAC related to awards issued to the Company's employees that were granted under various Old IAC stock and annual incentive plans. The form of awards granted to the Company's employees are principally stock options, restricted stock units ("RSUs"), performance-based RSUs, market-based RSUs, and restricted stock.
The Company recorded stock-based compensation expense of $197.2 million and $134.3 million for the years ended December 31, 2020Company’s share of Old IAC’s consolidated federal and 2019, respectively. Included in stock-based compensation expensestate tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the year ended December 31, 2020 is the modification chargestatement of $56.0 million related to the MTCH Separation. Included in stock-based compensation expense for the years ended December 31, 2020 and 2019 is $28.2 million and $32.6 million, respectively, related to the modification of previously issued HomeAdvisor equity awards and Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certain converted equity awards resulting from the termination of Angie's List employees in connection with the Combination.cash flows.
Stock-Based Compensation
Stock-based compensation at the Company is complex due to our desire to attract, retain, inspire and reward our management team and employees at each of our subsidiaries, including those employed by recently acquired companies, by allowing them to benefit directly from the value they help to create. We accomplish these objectives, in part, by issuing equity awards denominated in the equity of our non-publicly subsidiaries as well as in IAC and ANGI.Angi Inc. We further refine this approach by tailoring certain equity awards to the applicable circumstances. For example, we issue certain equity awards for which vesting is linked to the achievement of a performance target such as revenue or profits; these awards are referred to as performance-based awards. In other cases, we link the vesting of equity awards to the achievement of a value target for a subsidiary or IAC or ANGI’sAngi Inc.'s stock price, as applicable; these awards are referred to as market-based awards. The nature and variety of these types of equity-based awards creates complexity in our determination of stock-based compensation expense.
In addition, acquisitions are an important part of the Company's growth strategy. These transactions may result in the modification of equity awards, which creates additional complexity and additional stock-based compensation expense. For example, the Combination, which is defined below, resulted in the conversion of previously issued HomeAdvisorHome Advisor and Angie’s List awards into ANGI HomeservicesAngi Inc. awards, and the recognition of additional stock-based compensation expense. In addition, our spin-offs and internal reorganizations can also lead to modifications of equity awards and result in additional complexity and stock-based compensation expense. For example, the MTCH Separation resulted in the conversion of Old IAC denominated stock options into stock options to purchase IAC common stock and stock options to purchase New Match common stock in a manner that
preserved the spread value of the stock options immediately before and immediately after the adjustment, and the recognition of additional stock-based compensation expense.
Finally, the means by which we settle our equity-based awards also introduces complexity into our financial reporting. We provide a path to liquidity by settling the non-public subsidiary denominated awards in IAC or ANGIAngi Inc. shares, as applicable. In addition, certain former ANGIAngi Inc. subsidiary denominated awards and ANGIAngi Inc. stock appreciation rights can be settled in IAC or ANGIAngi Inc. awards at the Company’s election. These features increase the complexity of our earnings per share calculations.
The Company estimatedstock-based compensation expense reflected in our statement of operations includes expense related to equity awards issued by certain of our subsidiaries (including awards assumed in acquisitions, including the fair valuetransaction resulting in the formation of stock optionsAngi Inc. in 2017, referred to as the "Combination") and, stock appreciation rights issued (including those modified in connection withfor periods prior to the MTCH Separation, an allocation of expense from Old IAC related to awards issued to the Company's employees that were granted under various Old IAC stock and annual incentive plans. New awards granted to the Company's Corporate employees and the Combination) using a Black-Scholes option pricing model and, for those with a market condition, a lattice model. Foremployees of Angi Inc. have been restricted stock options, including subsidiary denominated equity, the value of the stock option is measured at the grant date at fair value and expensed over the vesting term. The impact on stock-based compensation expense for the year ended December 31, 2020, assuming a 1% increase in the risk-free interest rate, a 10% increase in the volatility factor and a one-year increase in the weighted average expected term of the outstanding options would be an increase of $9.6 million, $18.8 million and $12.4 million, respectively. The Company also issues RSUs,units ("RSUs"), performance-based RSUs, market-based RSUs and restricted stock. stock since April 2018 and January 2018, respectively. For RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying common stock and expensed as stock-based compensation expense over the vesting term. For performance-based RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying common stock and expensed as stock-based compensation over the vesting term when the performance targets are considered probable of being achieved. For market-based RSUs, a lattice model is used to estimate the value of the awards. For IAC restricted stock, a lattice model iswas used to estimate the fair value of the award which is based on the satisfaction of IAC's stock price targets.
The principal form of equity awards to the employees and management of its non-publicly traded subsidiaries is stock settled stock appreciation rights that are denominated in the equity of the relevant subsidiary of the Company or Angi Inc., in the case of its International business, which are settleable in shares of the Company or Angi Inc. as applicable. The value of the 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 and these interests can have substantial value in the event of significant appreciation. The grant date value of these stock settled stock appreciation rights is measured at grant date, using a Black-Scholes option pricing model and, for those with a market condition, a lattice model, at fair value and is expensed over the vesting term.
The Company estimates the fair value of stock options upon issuance or modification (including those modified in connection with the MTCH Separation, the Spin-off and the Combination) using a Black-Scholes option pricing model and, for those with a market condition, a lattice model. No new stock options were issued by the Company in the years ended December 31, 2022, 2021 and 2020, respectively.
Investments in Equity Securities
The Company invests in equity securities as part of its investment strategy. Our equity securities, other than those of our consolidated subsidiaries and those accounted for under the equity method, are accounted for at fair value or under the measurement alternative of Financial Accounting Standards Board Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities, with any changes to fair value recognized within otherin "Other (expense) income, netnet" in the statement of operations each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer; fair value is generally determined based on a market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors we consider in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of our investments in equity securities, which require judgment and the use of estimates. When our assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge within otherin "Other (expense) income, net.net" in the statement of operations.
The carrying value of the Company’s equity securities without readily determinable fair values is $296.5$323.5 million and $348.0$324.6 million at December 31, 20202022 and 2019,2021, respectively, which is included in "Long-term investments" in the balance sheet. As described in the "COVID-19 Update and Impairments"Update" section, in the first quarter ofended March 31, 2020 the Company recognized unrealized impairments or downward adjustments of $51.5 million related to certain equity securities without readily determinable fair values.
DuringAt December 31, 2022, the secondCompany has two investments in marketable equity securities, other than the investment in MGM Resorts International ("MGM"). The Company had one investment in a marketable equity security at December 31, 2021. These marketable equity securities are carried at fair value following the investees’ initial public offerings ("IPO"). Prior to the IPOs, these investments were accounted for as equity securities without readily determinable fair values. The Company recorded net unrealized pre-tax losses of $20.3 million for these investments during the year ended December 31, 2022 and an unrealized pre-tax gain of $18.8 million for the year ended December 31, 2021 for the investment that went public in the third quartersquarter of 2021.The Company sold its shares in another marketable equity security in the third quarter of 2021 and recorded a realized gain of $7.2 million on the sale. The unrealized and realized pre-tax losses and gains related to these investments are included in "Other (expense) income, net" in the statement of operations.
In 2020, the Company purchased 59.0 million shares of MGM. AtMGM for $1.0 billion and, in the first and third quarters of 2022, the Company purchased additional shares totaling 5.7 million for $244.3 million. Following these purchases, the Company owns 64.7 million shares, representing a 17.1% ownership interest in MGM as of December 31, 2020 the Company's investment in MGM is $1.9 billion.2022. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange on that last trading day in the reporting period and any unrealized gains or losses are included in the statement of operations. For the yearyears ended December 31, 2022, 2021 and 2020, the Company recognizedrecorded an unrealized gainpre-tax loss of $723.5 million and unrealized pre-tax gains of $789.3 million and $840.5 million, respectively, on its investment in MGM.
The Company had an investment in Pinterest, which became a publicly-traded company incumulative unrealized net pre-tax gain through December 31, 2022 is $906.3 million. At December 31, 2022 and 2021, the second quartercarrying value of 2019. With effect from Pinterest's initial public offering, the Company's investment in MGM, which includes the cumulative unrealized pre-tax gains, was accounted for as a marketable security. Prior to this, the Company accounted for its investment in Pinterest as an equity security without a readily determinable fair value. During 2019, the Company recognized a gain of $20.5 million on the sale of its remaining shares of Pinterest. In addition, during 2019, IAC recognized $18.5 million in net upward adjustments related to equity securities without readily determinable fair values.$2.2 billion and $2.6 billion, respectively.
Recent Accounting Pronouncements
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Equity Price Risk
During the second and third quarters of 2020, the Company purchased 59.0 million shares of MGM. AsMGM for $1.0 billion and, in the first and third quarters of 2022, the Company purchased a total of 5.7 million additional shares for $244.3 million.
For the years ended December 31, 2022, 2021 and 2020, the Company recorded an unrealized pre-tax loss of $723.5 million and unrealized pre-tax gains of $789.3 million and $840.5 million, respectively, on its investment in MGM.
The cumulative unrealized net pre-tax gain through December 31, 2022 is $906.3 million. At December 31, 2022 and 2021, the carrying value of the Company's investment in MGM, which includes the cumulative unrealized pre-tax gains, was $2.2 billion and $2.6 billion, or approximately 21% and 22% of the Company’s consolidated total assets, respectively. A $2.00 increase or decrease in the share price of MGM would result in an unrealized gain or loss, respectively, of $129.4 million. At February 10, 2023, the carrying value of the Company's investment in MGM was $2.8 billion. The Company’s results of operations and financial condition canhave in the past been and may in the future be materially impacted by increases or decreases in the price of MGM common shares, which are traded on the New York Stock Exchange. The Company recorded: an unrealized pre-tax loss of $24.7 million in the second quarter of 2020; an unrealized pre-tax gain of $289.1 million in the third quarter of 2020; an unrealized pre-tax gain of $576.2 million in the fourth quarter of 2020; and an unrealized pre-tax gain of $840.5 million for the year ended December 31, 2020. At December 31, 2020, the carrying value of the Company's investment in MGM was $1.9 billion, which is approximately 20% of the Company’s consolidated total assets, and it is reflected as a long-term investment in the Company’s consolidated balance sheet.
Interest Rate Risk
The Company's exposure to risk for changes in interest rates relates primarily to the Company's long-term debt.
At December 31, 2020,2022, the principal amount of the Company's outstanding debt totals $720.0 million,$2.1 billion, of which $1.6 billion is the Dotdash Meredith Term Loans, which bear interest at a variable rate, and $500.0 million of which is the ANGI Group Senior Notes, which bearsbear interest at a fixed rate,rate.
During the year ended December 31, 2022, Adjusted Term SOFR for the Dotdash Meredith Term Loans increased an average of nearly 360 basis points relative to December 31, 2021. As a result of the increase in Adjusted Term SOFR during the year ended December 31, 2022, the interest expense on Dotdash Meredith Term Loans was $21.7 million higher as compared to what interest expense would have been if the Adjusted Term SOFR been unchanged during 2022. This impact was more limited than it might have been because the Adjusted Term SOFR was below the minimum of 0.50% for the Dotdash Meredith Term Loan B through May 2, 2022. At December 31, 2022, the outstanding balance of $1.2 billion related to the Dotdash Meredith Term Loan B bore interest at Adjusted SOFR, subject to a minimum of 0.50%, plus 4.00%, or 8.22%, and $220.0the outstanding balance of $332.5 million of which isrelated to the Dotdash Meredith Term Loan A bore interest at Adjusted Term SOFR plus 2.25%, or 5.91%. If Adjusted Term SOFR were to increase or decrease by 100 basis points, the annual interest expense on the Dotdash Meredith Term Loans would, respectively, increase or decrease by $15.8 million.
If market rates decline relative to interest rates on the ANGI Group Term Loan, which bears interest at a variable rate. If market rates decline,Senior Notes, the Company runs the risk that the related required interest payments of the ANGI Group Senior Notes will exceed those based on market rates. A 100-basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $32.3$23.3 million. Such potential increase or decrease in fair value is based on certain simplifying assumptions, including an immediate increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period. At December 31, 2020,period, nor changes in the outstanding balance of the ANGI Group Term Loan of $220.0 million bore interest at LIBOR plus 2.00%, or 2.16%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the ANGI Group Term Loan would increase or decrease by $2.2 million.credit profile.
Foreign Currency Exchange Risk
The Company has operations in certain foreign markets, primarily in various jurisdictions within the European Union and the United Kingdom. The Company has exposure to foreign currency exchange risk related to its foreign subsidiaries that transact business in a functional currency other than the U.S. dollar. As a result, as foreign currency exchange rates fluctuate, the translation of the statement of operations of the Company's international businesses into U.S. dollars affects year-over-year comparability of operating results.
In addition, certain of the Company’s U.S. operations have customers in international markets. International revenue, including revenue of our operations located outside the U.S., which is measured based upon where the customer is located, accounted for 20%8%, 22%,14% and 23%16% for the years ended December 31, 2020, 2019,2022, 2021 and 2018,2020, respectively.
The Company is also exposed to foreign currency transaction gains and losses to the extent it or its subsidiaries conduct transactions in and/or have assets and/or liabilities that are denominated in a currency other than the entity's functional currency. TheFor the years ended December 31, 2022, 2021 and 2020, the Company recorded foreign exchange losses of less than $0.1$8.5 million for the years ended December 31, 2020, 2019 and 2018.$13.6 million and gains of $0.7 million, respectively.
The Company's exposure to foreign currency exchange gains or losses have not been material to the Company; therefore, the Company has not hedged its foreign currency exposures. Any growth and expansion of our international operations 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 on our future results of operations.
Item 8. Consolidated and Combined Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of IAC/InterActiveCorpIAC Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated and combined balance sheet of IAC/InterActiveCorpIAC Inc. and subsidiaries (the Company) as of December 31, 20202022 and 2019,2021, the related consolidated and combined statements of operations, comprehensive operations, shareholders’ and parent’s equity and cash flows for each of the three years in the period ended December 31, 2020,2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated and combined financial statements”). In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20202022 and 2019,2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated and combined financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Business Combinations - ValuationAcquisition of Acquired Intangible AssetsMeredith Holdings Corporation |
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| Description of the Matter | DuringAs described in Note 3 to the year endedconsolidated and combined financial statements, on December 31, 2020,1, 2021 the Company completed business combinationsthe acquisition of Meredith Holdings Corporation (“Meredith”) in an all-cash transaction for total consideration, net of cash acquired, of $684.6 million.approximately $2.7 billion. As disclosed in Note 2 to the consolidated and combined financial statements, the purchase price of eachthe acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The Company completed the purchase accounting for the Meredith acquisition in the current period, which resulted in the recognition of material measurement period adjustments.
Auditing management’s assessment of the appropriateness of measurement period adjustments for the Meredith acquisition was challenging given the inherent judgements and estimates involved. Auditing the finalization of the allocation of the purchase price of business combinations required complex auditor judgment due to the significant measurement uncertainty in determining the fair value of the identifiable intangible assets acquired. In particular, the estimated fair value of the acquired identifiable intangible assets were sensitive to changes in assumptions including discount rates, revenue growth rates, royalty rates and the projected cash flow terminal growth rates. These assumptions relate to the future performance of the acquired businesses and are affected by such factors as expected future market or economic conditions.
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| How We Addressed the Matter in Our Audit | To testWe obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for the business combination. For example, we tested controls over the Company’s process to identify measurement period adjustments to the assets acquired and liabilities assumed, including the estimated fair value of the identifiableacquired intangible assets acquired, ourassets.
Our audit procedures included, among others, assessingvalidating that the completeness ofadjustments recorded to the identifiable intangible assets acquired, assessingclosing balance sheet were appropriately identified, recognized, and measured in accordance with ASC 805. For example, we assessed the valuation methodologies and testing the significant assumptions described above and underlying data used by the Company. For example, we compared the significant assumptions used by management related to the historical results of the acquired businesses as well as to current industry and economic trends. We performedidentified intangible assets, including performing sensitivity analyses of significant assumptions to evaluate the change in the fair value of the identifiable intangible assetsasset resulting from changes in the assumptions. In addition, weassumption. We involved an internal valuation specialistspecialists to assist in evaluating the methodologies used and the significant assumptions applied in developing the fair value estimates.estimates, including those relating to intangible assets.
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Stock-Based Compensation |
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Description of the Matter | During the year ended December 31, 2020, the Company recorded stock-based compensation expense of $197.2 million. As discussed in Note 11 to the consolidatedQuantitative Impairment Assessment for Mosaic Goodwill and combined financial statements, the Company issues various types of equity awards, including stock options, restricted stock units, performance-based stock units, market-based awards and equity instruments denominated in the shares of certain subsidiaries.
Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the prevalence of modifications, the subjectivity of assumptions used to value stock-based awards, the use of market-based vesting conditions and the existence of awards denominated in the shares of certain subsidiaries.
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How We Addressed the Matter in Our Audit | To test stock-based compensation expense, we performed audit procedures that included, among others, assessing the completeness of the awards granted and evaluating the methodologies and significant assumptions used to estimate the fair value of the awards. Our procedures also included, evaluating the key terms and conditions of awards granted to assess the accounting treatment for a sample of awards, testing the clerical accuracy of the calculation of the expense recorded and assessing the Company’s accounting for award modifications. Additionally, for certain awards issued by the Company, we involved our internal valuation specialists to assess the valuation methodologies and assumptions used in estimating the fair value of the awards.
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Goodwill - Quantitative Impairment Assessment |
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| Description of the Matter | As of December 31, 2020,2022, the Company’s goodwill balance was $1.9 billion.and indefinite-lived intangible asset balances were $3.0 billion and $631.1 million, respectively. As disclosed in Note 2 to the consolidated and combined financial statements, goodwill isand indefinite-lived intangible assets are assessed annually for impairment using either a qualitative or quantitative approach 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 an indefinite-lived intangible asset below its carrying value. Auditing management’s quantitative impairment teststest for goodwill and indefinite-lived intangible assets was challenging given the inherent judgements and estimates involved. Management’s quantitative impairment tests were complex and judgmental due to the measurement uncertainty in estimating the fair value of the reporting unitsunit for goodwill.goodwill and the fair value of indefinite-lived intangible assets. Specifically, the fair value estimate of the Company’s Mosaic reporting unit was sensitive to assumptions such as the discount rate, revenue growth rates and the projected cash flow terminal growth rate. The fair value estimates for Meredith’s indefinite-lived intangible assets were sensitive to assumptions such as discount rates, revenue growth rates, royalty rates and projected cash flow terminal growth rates. These assumptions are affected by factors such factors as expected future marketindustry or economic conditions.
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its goodwill and indefinite-lived intangible assets impairment review process. For example, we tested controls over management’s review of the significant assumptions used to estimate the fair values of the reporting unit for goodwill and the indefinite-lived intangible assets, including projected financial information.
To test the estimated fair value of the Mosaic reporting unit and Meredith’s indefinite-lived intangible assets, our audit procedures included, among others, assessing the methodologies and testing the significant assumptions described above and underlying data used by the Company. We evaluated the Company’s underlying forecast and budget information by comparing the significant assumptions to current industry and economic trends, changes in the Company’s business model and assessed the historical accuracy of management’s estimates. For example, we evaluated management’s forecasted revenue to identify, understand and evaluate changes as compared to historical results. We performed sensitivity analyses of significant assumptions to evaluate the change in the estimated fair value of the Mosaic reporting unit for goodwill and Meredith’s indefinite-lived intangible assets resulting from changes in the assumptions. In addition, we involved an internal valuation specialist to assist in evaluating the methodologies and significant assumptions applied in developing the fair value estimates.
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/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019.
New York, New York
February 17, 2021March 1, 2023
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEET | | | | December 31, | | December 31, |
| | | 2020 | | 2019 | | 2022 | | 2021 |
| | | (In thousands, except par value amounts) | | (In thousands, except par value amounts) |
| ASSETS | ASSETS | | ASSETS | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 3,476,188 | | | $ | 839,796 | | Cash and cash equivalents | $ | 1,417,390 | | | $ | 2,118,730 | |
| Marketable debt securities | 224,979 | | | — | | |
| Accounts receivable, net of allowance and reserves of $29,716 and $24,148 , respectively | 270,453 | | | 181,875 | | |
| Note receivable - related party | 0 | | | 55,251 | | |
| Marketable securities | | Marketable securities | 239,373 | | | 19,788 | |
| Accounts receivable, net | | Accounts receivable, net | 607,809 | | | 695,513 | |
| Other current assets | Other current assets | 147,630 | | | 152,334 | | Other current assets | 296,563 | | | 242,188 | |
| | Total current assets | Total current assets | 4,119,250 | | | 1,229,256 | | Total current assets | 2,561,135 | | | 3,076,219 | |
| | Building, capitalized software, leasehold improvements and equipment, net | 278,251 | | | 305,414 | | |
| Capitalized software, equipment, leasehold improvements, buildings and land, net | | Capitalized software, equipment, leasehold improvements, buildings and land, net | 510,614 | | | 570,525 | |
| Goodwill | Goodwill | 1,879,438 | | | 1,616,867 | | Goodwill | 3,030,168 | | | 3,226,610 | |
| Intangible assets, net of accumulated amortization | Intangible assets, net of accumulated amortization | 405,840 | | | 350,150 | | Intangible assets, net of accumulated amortization | 1,170,041 | | | 1,414,892 | |
| Investment in MGM Resorts International | Investment in MGM Resorts International | 1,860,158 | | | 0 | | Investment in MGM Resorts International | 2,170,182 | | | 2,649,442 | |
| Long-term investments | Long-term investments | 297,643 | | | 347,975 | | Long-term investments | 325,721 | | | 327,838 | |
| Other non-current assets | | Other non-current assets | 625,774 | | | 1,037,067 | |
| | Other non-current assets | 294,860 | | | 247,746 | | |
| TOTAL ASSETS | TOTAL ASSETS | $ | 9,135,440 | | | $ | 4,097,408 | | TOTAL ASSETS | $ | 10,393,635 | | | $ | 12,302,593 | |
| | LIABILITIES AND SHAREHOLDERS' AND PARENT'S EQUITY | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| LIABILITIES: | LIABILITIES: | | | | LIABILITIES: | | | |
| Current portion of long-term debt | Current portion of long-term debt | $ | 0 | | | $ | 13,750 | | Current portion of long-term debt | $ | 30,000 | | | $ | 30,000 | |
| Accounts payable, trade | Accounts payable, trade | 92,173 | | | 72,452 | | Accounts payable, trade | 133,105 | | | 203,173 | |
| Deferred revenue | Deferred revenue | 275,093 | | | 178,647 | | Deferred revenue | 157,124 | | | 165,451 | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 383,562 | | | 320,473 | | Accrued expenses and other current liabilities | 759,759 | | | 982,879 | |
| | Total current liabilities | Total current liabilities | 750,828 | | | 585,322 | | Total current liabilities | 1,079,988 | | | 1,381,503 | |
| | Long-term debt, net | Long-term debt, net | 712,277 | | | 231,946 | | Long-term debt, net | 2,019,760 | | | 2,046,237 | |
| Income taxes payable | 6,444 | | | 6,410 | | |
| | Deferred income taxes | Deferred income taxes | 52,593 | | | 44,459 | | Deferred income taxes | 76,276 | | | 385,890 | |
| Other long-term liabilities | Other long-term liabilities | 230,378 | | | 180,307 | | Other long-term liabilities | 617,842 | | | 721,262 | |
| | | Redeemable noncontrolling interests | Redeemable noncontrolling interests | 231,992 | | | 43,818 | | Redeemable noncontrolling interests | 27,235 | | | 18,741 | |
| | Commitments and contingencies | Commitments and contingencies | 0 | | 0 | Commitments and contingencies | |
| | SHAREHOLDERS' AND PARENT'S EQUITY: | | |
Common stock $.001 par value; authorized 1,600,000 shares; 82,976 shares issued and outstanding at December 31, 2020 | 83 | | | 0 | | |
Class B common stock $.001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at December 31, 2020 | 6 | | | 0 | | |
| SHAREHOLDERS' EQUITY: | | SHAREHOLDERS' EQUITY: | |
| Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,184 and 83,922 shares issued and 83,083 and 83,922 shares outstanding at December 31, 2022 and 2021, respectively | | Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,184 and 83,922 shares issued and 83,083 and 83,922 shares outstanding at December 31, 2022 and 2021, respectively | 8 | | | 8 | |
| Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at December 31, 2022 and 2021, respectively | | Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at December 31, 2022 and 2021, respectively | 1 | | | 1 | |
| Additional paid-in capital | Additional paid-in capital | 5,909,614 | | | — | | Additional paid-in capital | 6,295,080 | | | 6,265,669 | |
| Retained earnings | 694,042 | | | 0 | | |
| Invested capital | — | | | 2,547,251 | | |
| Accumulated other comprehensive loss | (6,170) | | | (12,226) | | |
| Total IAC shareholders' and parent's equity, respectively | 6,597,575 | | | 2,535,025 | | |
| (Accumulated deficit) retained earnings | | (Accumulated deficit) retained earnings | (265,019) | | | 905,151 | |
| Accumulated other comprehensive (loss) income | | Accumulated other comprehensive (loss) income | (13,133) | | | 4,397 | |
| Treasury stock, 1,101 shares at December 31, 2022 | | Treasury stock, 1,101 shares at December 31, 2022 | (85,323) | | | — | |
| Total IAC shareholders' equity | | Total IAC shareholders' equity | 5,931,614 | | | 7,175,226 | |
| Noncontrolling interests | Noncontrolling interests | 553,353 | | | 470,121 | | Noncontrolling interests | 640,920 | | | 573,734 | |
| Total shareholders' and parent's equity, respectively | 7,150,928 | | | 3,005,146 | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' AND PARENT'S EQUITY, RESPECTIVELY | $ | 9,135,440 | | | $ | 4,097,408 | | |
| Total shareholders' equity | | Total shareholders' equity | 6,572,534 | | | 7,748,960 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 10,393,635 | | | $ | 12,302,593 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2022 | | 2021 | | 2020 |
| | | (In thousands, except per share data) | | (In thousands, except per share data) |
| Revenue | Revenue | $ | 3,047,681 | | | $ | 2,705,801 | | | $ | 2,533,048 | | Revenue | $ | 5,235,280 | | | $ | 3,699,627 | | | $ | 2,764,536 | |
| Operating costs and expenses: | Operating costs and expenses: | | | | | | Operating costs and expenses: | | | | | |
| Cost of revenue (exclusive of depreciation shown separately below) | Cost of revenue (exclusive of depreciation shown separately below) | 814,731 | | | 600,240 | | | 501,152 | | Cost of revenue (exclusive of depreciation shown separately below) | 1,922,697 | | | 1,296,282 | | | 745,365 | |
| Selling and marketing expense | Selling and marketing expense | 1,269,673 | | | 1,202,183 | | | 1,099,487 | | Selling and marketing expense | 1,925,750 | | | 1,362,300 | | | 1,165,456 | |
| General and administrative expense | General and administrative expense | 792,254 | | | 617,235 | | | 569,802 | | General and administrative expense | 977,274 | | | 797,448 | | | 745,235 | |
| Product development expense | Product development expense | 267,359 | | | 193,457 | | | 177,298 | | Product development expense | 332,873 | | | 230,810 | | | 185,335 | |
| Depreciation | Depreciation | 69,283 | | | 55,949 | | | 42,393 | | Depreciation | 130,986 | | | 75,015 | | | 68,823 | |
| Amortization of intangibles | Amortization of intangibles | 141,584 | | | 83,868 | | | 107,081 | | Amortization of intangibles | 307,718 | | | 74,839 | | | 126,839 | |
| Goodwill impairment | Goodwill impairment | 265,146 | | | 3,318 | | | 0 | | Goodwill impairment | 112,753 | | | — | | | 265,146 | |
| Total operating costs and expenses | Total operating costs and expenses | 3,620,030 | | | 2,756,250 | | | 2,497,213 | | Total operating costs and expenses | 5,710,051 | | | 3,836,694 | | | 3,302,199 | |
| Operating (loss) income | (572,349) | | | (50,449) | | | 35,835 | | |
| Operating loss | | Operating loss | (474,771) | | | (137,067) | | | (537,663) | |
| Interest expense | Interest expense | (16,166) | | | (11,904) | | | (13,059) | | Interest expense | (110,165) | | | (34,264) | | | (16,166) | |
| Unrealized gain on investment in MGM Resorts International | 840,550 | | | 0 | | | 0 | | |
| Unrealized (loss) gain on investment in MGM Resorts International | | Unrealized (loss) gain on investment in MGM Resorts International | (723,515) | | | 789,283 | | | 840,550 | |
| Other (expense) income, net | Other (expense) income, net | (42,468) | | | 34,047 | | | 282,795 | | Other (expense) income, net | (217,785) | | | 111,854 | | | (42,561) | |
| Earnings (loss) before income taxes | 209,567 | | | (28,306) | | | 305,571 | | |
| (Loss) earnings from continuing operations before income taxes | | (Loss) earnings from continuing operations before income taxes | (1,526,236) | | | 729,806 | | | 244,160 | |
| Income tax benefit (provision) | Income tax benefit (provision) | 59,019 | | | 60,489 | | | (13,200) | | Income tax benefit (provision) | 331,087 | | | (138,990) | | | 45,707 | |
| Net earnings | 268,586 | | | 32,183 | | | 292,371 | | |
| Net loss (earnings) attributable to noncontrolling interests | 1,140 | | | (9,288) | | | (45,599) | | |
| Net earnings attributable to IAC shareholders | $ | 269,726 | | | $ | 22,895 | | | $ | 246,772 | | |
| Net (loss) earnings from continuing operations | | Net (loss) earnings from continuing operations | (1,195,149) | | | 590,816 | | | 289,867 | |
| Earnings (loss) from discontinued operations, net of taxes | | Earnings (loss) from discontinued operations, net of taxes | 2,694 | | | (1,831) | | | (21,281) | |
| Net (loss) earnings | | Net (loss) earnings | (1,192,455) | | | 588,985 | | | 268,586 | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | 22,285 | | | 8,562 | | | 1,140 | |
| Net (loss) earnings attributable to IAC shareholders | | Net (loss) earnings attributable to IAC shareholders | $ | (1,170,170) | | | $ | 597,547 | | | $ | 269,726 | |
| | Per share information attributable to IAC shareholders: | | | | | | |
| Basic earnings per share | $ | 3.16 | | | $ | 0.27 | | | $ | 2.90 | | |
| Diluted earnings per share | $ | 2.97 | | | $ | 0.27 | | | $ | 2.90 | | |
| Per share information from continuing operations: | | Per share information from continuing operations: | | | | | |
| Basic (loss) earnings per share | | Basic (loss) earnings per share | $ | (13.58) | | | $ | 6.72 | | | $ | 3.40 | |
| Diluted (loss) earnings per share | | Diluted (loss) earnings per share | $ | (13.58) | | | $ | 6.33 | | | $ | 3.20 | |
| | Per share information attributable to IAC Common Stock and Class B common stock shareholders: | | Per share information attributable to IAC Common Stock and Class B common stock shareholders: |
| Basic (loss) earnings per share | | Basic (loss) earnings per share | $ | (13.55) | | | $ | 6.70 | | | $ | 3.16 | |
| Diluted (loss) earnings per share | | Diluted (loss) earnings per share | $ | (13.55) | | | $ | 6.31 | | | $ | 2.97 | |
| | Stock-based compensation expense by function: | Stock-based compensation expense by function: | | Stock-based compensation expense by function: | |
| Cost of revenue | Cost of revenue | $ | 191 | | | $ | 74 | | | $ | 195 | | Cost of revenue | $ | 47 | | | $ | 57 | | | $ | 118 | |
| Selling and marketing expense | Selling and marketing expense | 5,869 | | | 5,185 | | | 4,345 | | Selling and marketing expense | 8,293 | | | 5,009 | | | 5,265 | |
| General and administrative expense | General and administrative expense | 182,068 | | | 118,709 | | | 132,180 | | General and administrative expense | 99,993 | | | 67,664 | | | 177,451 | |
| Product development expense | Product development expense | 9,092 | | | 10,370 | | | 11,685 | | Product development expense | 15,143 | | | 6,757 | | | 6,161 | |
| Total stock-based compensation expense | Total stock-based compensation expense | $ | 197,220 | | | $ | 134,338 | | | $ | 148,405 | | Total stock-based compensation expense | $ | 123,476 | | | $ | 79,487 | | | $ | 188,995 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE OPERATIONS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| (In thousands) |
| Net earnings | $ | 268,586 | | | $ | 32,183 | | | $ | 292,371 | |
| Other comprehensive income (loss), net of income taxes: | | | | | |
| Change in foreign currency translation adjustment | 7,810 | | | 311 | | | (6,444) | |
| Change in unrealized gains and losses on available-for-sale marketable debt securities | 2 | | | (3) | | | 3 | |
| Total other comprehensive income (loss), net of income taxes | 7,812 | | | 308 | | | (6,441) | |
| Comprehensive income, net of income taxes | 276,398 | | | 32,491 | | | 285,930 | |
| Components of comprehensive income attributable to noncontrolling interests: | | | | | |
| Net loss (earnings) attributable to noncontrolling interests | 1,140 | | | (9,288) | | | (45,599) | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | (1,718) | | | 26 | | | 1,416 | |
| Change in unrealized gains and losses of available-for-sale marketable debt securities attributable to noncontrolling interests | 0 | | | 1 | | | (1) | |
| Comprehensive income attributable to noncontrolling interests | (578) | | | (9,261) | | | (44,184) | |
| Comprehensive income attributable to IAC shareholders | $ | 275,820 | | | $ | 23,230 | | | $ | 241,746 | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
| Net (loss) earnings | $ | (1,192,455) | | | $ | 588,985 | | | $ | 268,586 | |
| Other comprehensive (loss) income, net of income taxes: | | | | | |
| Change in foreign currency translation adjustment | (18,829) | | | 10,466 | | | 7,810 | |
| Change in unrealized gains and losses on available-for-sale marketable debt securities | 53 | | | (2) | | | 2 | |
| Total other comprehensive (loss) income, net of income taxes | (18,776) | | | 10,464 | | | 7,812 | |
| Comprehensive (loss) income, net of income taxes | (1,211,231) | | | 599,449 | | | 276,398 | |
| Components of comprehensive loss (income) attributable to noncontrolling interests: | | | | | |
| Net loss attributable to noncontrolling interests | 22,285 | | | 8,562 | | | 1,140 | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | 1,235 | | | 93 | | | (1,718) | |
| | | | | |
| Comprehensive loss (income) attributable to noncontrolling interests | 23,520 | | | 8,655 | | | (578) | |
| Comprehensive (loss) income attributable to IAC shareholders | $ | (1,187,711) | | | $ | 608,104 | | | $ | 275,820 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' AND COMBINED STATEMENT OF PARENT'S EQUITY
Year Ended December 31, 20202022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | IAC Shareholders' Equity and Invested Capital | | |
| Redeemable
Noncontrolling
Interests | | | Common Stock, $0.001 par value | | Class B Common Stock, $0.001 par value | | Additional
Paid-in
Capital | | Retained Earnings | | Invested Capital | | Accumulated
Other
Comprehensive
(Loss) Income | | Total IAC
Shareholders'
Equity and Invested Capital | | Noncontrolling
Interests | | Total
Parent's / Shareholders'
Equity |
| | | $ | | Shares | | $ | | Shares | | | | | | |
| | | | (In thousands) |
| Balance as of December 31, 2019 | $ | 43,818 | | | | $ | 0 | | | 0 | | | $ | 0 | | | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2,547,251 | | | $ | (12,226) | | | $ | 2,535,025 | | | $ | 470,121 | | | $ | 3,005,146 | |
| Net (loss) earnings | (1,434) | | | | — | | | — | | | — | | | — | | | — | | | 694,042 | | | (424,316) | | | — | | | 269,726 | | | 294 | | | 270,020 | |
| Other comprehensive income, net of income taxes | 439 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,094 | | | 6,094 | | | 1,279 | | | 7,373 | |
| Stock-based compensation expense | 15 | | | | — | | | — | | | — | | | — | | | 40,870 | | | — | | | 72,891 | | | — | | | 113,761 | | | 85,267 | | | 199,028 | |
| Distribution to and purchase of noncontrolling interests | (3,515) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,115) | | | (1,115) | |
| Issuance of ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | (62,169) | | | — | | | 1,248 | | | (38) | | | (60,959) | | | (3,183) | | | (64,142) | |
| Purchase of ANGI Homeservices treasury stock | — | | | | — | | | — | | | — | | | — | | | (9,273) | | | — | | | (54,859) | | | — | | | (64,132) | | | — | | | (64,132) | |
| Proceeds from the sale of Old IAC Class M common stock from New Match | — | | | | — | | | — | | | — | | | — | | | 1,408,298 | | | — | | | — | | | — | | | 1,408,298 | | | — | | | 1,408,298 | |
| Net increase in Old IAC's investment in the Company prior to the MTCH Separation | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,685,995 | | | — | | | 1,685,995 | | | — | | | 1,685,995 | |
| Cash merger consideration paid by Old IAC | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 837,913 | | | — | | | 837,913 | | | — | | | 837,913 | |
| Capitalization as a result of the MTCH Separation | — | | | | 79 | | | 79,343 | | | 6 | | | 5,789 | | | 4,661,231 | | | — | | | (4,661,316) | | | — | | | — | | | — | | | 0 | |
| Noncontrolling interest created in an acquisition | 1,121 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Issuance of Vimeo common stock and creation of noncontrolling interest, net of fees | 8,299 | | | | — | | | — | | | — | | | — | | | 141,301 | | | — | | | — | | | — | | | 141,301 | | | — | | | 141,301 | |
| Adjustment of noncontrolling interests to fair value | 183,315 | | | | — | | | — | | | — | | | — | | | (178,508) | | | — | | | (4,807) | | | — | | | (183,315) | | | — | | | (183,315) | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 1 | | | 633 | | | — | | | — | | | (83,383) | | | — | | | — | | | — | | | (83,382) | | | — | | | (83,382) | |
| Issuance of restricted stock | — | | | | 3 | | | 3,000 | | | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | — | | | 0 | |
| Adjustment to the capitalization of tax accounts as a result of the MTCH Separation | — | | | | — | | | — | | | — | | | — | | | (8,259) | | | — | | | — | | | — | | | (8,259) | | | — | | | (8,259) | |
| Other | (66) | | | | — | | | — | | | — | | | — | | | (491) | | | — | | | — | | | — | | | (491) | | | 690 | | | 199 | |
| Balance as of December 31, 2020 | $ | 231,992 | | | | $ | 83 | | | 82,976 | | | $ | 6 | | | 5,789 | | | $ | 5,909,614 | | | $ | 694,042 | | | $ | 0 | | | $ | (6,170) | | | $ | 6,597,575 | | | $ | 553,353 | | | $ | 7,150,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redeemable
Noncontrolling
Interests | | | Common Stock, $0.0001 par value | | Class B Common Stock, $0.0001 par value | | | | | | Additional
Paid-in
Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated
Other
Comprehensive
Income (Loss) | | Treasury Stock | | Total IAC
Shareholders'
Equity | | Noncontrolling
Interests | | Total
Shareholders'
Equity |
| | | $ | | Shares | | $ | | Shares | | | | | | | | | | | | | | |
| | | | (In thousands) |
| Balance at December 31, 2021 | $ | 18,741 | | | | $ | 8 | | | 83,922 | | | $ | 1 | | | 5,789 | | | | | | | | | | | $ | 6,265,669 | | | $ | 905,151 | | | $ | 4,397 | | | $ | — | | | $ | 7,175,226 | | | $ | 573,734 | | | $ | 7,748,960 | |
| Net loss | (2,130) | | | | — | | | — | | | — | | | — | | | | | | | | | | | — | | | (1,170,170) | | | — | | | — | | | (1,170,170) | | | (20,155) | | | (1,190,325) | |
| Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | | | | | | | | | — | | | — | | | (17,541) | | | — | | | (17,541) | | | (1,235) | | | (18,776) | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | | | | | | | | | 70,808 | | | — | | | — | | | — | | | 70,808 | | | 55,891 | | | 126,699 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 262 | | | — | | | — | | | | | | | | | | | (16,905) | | | — | | | — | | | — | | | (16,905) | | | — | | | (16,905) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | | | | | | | | | (12,276) | | | — | | | 11 | | | — | | | (12,265) | | | 3,638 | | | (8,627) | |
| Purchase of IAC treasury stock | — | | | | — | | | — | | | — | | | — | | | | | | | | | | | — | | | — | | | — | | | (85,323) | | | (85,323) | | | — | | | (85,323) | |
| Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | | | | | | | | | (8,144) | | | — | | | — | | | — | | | (8,144) | | | — | | | (8,144) | |
| Distribution to and purchase of noncontrolling interests | (1,179) | | | | — | | | — | | | — | | | — | | | | | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjustment of noncontrolling interests to fair value | 24,229 | | | | — | | | — | | | — | | | — | | | | | | | | | | | (24,229) | | | — | | | — | | | — | | | (24,229) | | | — | | | (24,229) | |
| Issuance of Vivian Health preferred shares, net of fees, and the reclassification and creation of noncontrolling interest and subsequent adjustment to liquidation value | (11,782) | | | | — | | | — | | | — | | | — | | | | | | | | | | | 17,818 | | | — | | | — | | | — | | | 17,818 | | | 36,882 | | | 54,700 | |
| Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary | — | | | | — | | | — | | | — | | | — | | | | | | | | | | | 7,580 | | | — | | | — | | | — | | | 7,580 | | | (7,835) | | | (255) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | (644) | | | | — | | | — | | | — | | | — | | | | | | | | | | | (5,241) | | | — | | | — | | | — | | | (5,241) | | | — | | | (5,241) | |
| Balance at December 31, 2022 | $ | 27,235 | | | | $ | 8 | | | 84,184 | | | $ | 1 | | | 5,789 | | | | | | | | | | | $ | 6,295,080 | | | $ | (265,019) | | | $ | (13,133) | | | $ | (85,323) | | | $ | 5,931,614 | | | $ | 640,920 | | | $ | 6,572,534 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' AND COMBINED STATEMENT OF PARENT'S EQUITY
Years Ended December 31, 20192021 and 20182020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Old IAC Equity in | | | | |
| | | | IAC/InterActiveCorp | | | | |
| | | | | Invested Capital | | Accumulated
Other
Comprehensive
(Loss) Income | | | | | | |
| | Redeemable
Noncontrolling
Interests | | | | | Total IAC
Shareholders'
Equity | | Noncontrolling
Interests | | Total
Parent's
Equity |
| | | | | (In thousands) |
| Balance as of December 31, 2017 | $ | 36,811 | | | | $ | 2,007,443 | | | $ | (7,504) | | | $ | 1,999,939 | | | $ | 256,381 | | | $ | 2,256,320 | |
| Cumulative effect of adoption of ASU No. 2014-09 | — | | | | 36,927 | | | — | | | 36,927 | | | 3,410 | | | 40,337 | |
| Net earnings | 33,788 | | | | 246,772 | | | — | | | 246,772 | | | 11,811 | | | 258,583 | |
| Other comprehensive loss, net of income tax | (582) | | | | — | | | (5,026) | | | (5,026) | | | (833) | | | (5,859) | |
| Stock-based compensation expense | 1,138 | | | | 51,327 | | | — | | | 51,327 | | | 95,940 | | | 147,267 | |
| Distributions to and purchases of noncontrolling interests | (11,282) | | | | — | | | — | | | — | | | (1,236) | | | (1,236) | |
| Adjustment of redeemable noncontrolling interests to fair value | 6,640 | | | | (6,640) | | | — | | | (6,640) | | | — | | | (6,640) | |
| Issuance of ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 106,215 | | | (11) | | | 106,204 | | | 34,502 | | | 140,706 | |
| Noncontrolling interests created in acquisitions | 2,261 | | | | — | | | — | | | — | | | — | | | — | |
| Net decrease in Old IAC's investment in IAC Holdings, Inc. | — | | | | (145,461) | | | — | | | (145,461) | | | — | | | (145,461) | |
| Other | (3,087) | | | | 0 | | | — | | | 0 | | | 383 | | | 383 | |
| Balance as of December 31, 2018 | $ | 65,687 | | | | $ | 2,296,583 | | | $ | (12,541) | | | $ | 2,284,042 | | | $ | 400,358 | | | $ | 2,684,400 | |
| Net earnings | 3,168 | | | | 22,895 | | | — | | | 22,895 | | | 6,120 | | | 29,015 | |
| Other comprehensive income (loss), net of income tax | 39 | | | | — | | | 335 | | | 335 | | | (66) | | | 269 | |
| Stock-based compensation expense | 148 | | | | 65,893 | | | — | | | 65,893 | | | 65,815 | | | 131,708 | |
| Distributions to and purchases of redeemable noncontrolling interests | (40,432) | | | | — | | | — | | | — | | | — | | | — | |
| Adjustment of redeemable noncontrolling interests to fair value | 11,554 | | | | (11,554) | | | — | | | (11,554) | | | — | | | (11,554) | |
| Issuance of ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes | — | | | | (32,596) | | | (20) | | | (32,616) | | | (2,106) | | | (34,722) | |
| Purchase of ANGI Homeservices treasury stock | — | | | | (57,949) | | | — | | | (57,949) | | | — | | | (57,949) | |
| Noncontrolling interests created in acquisitions | 3,739 | | | | — | | | — | | | — | | | — | | | — | |
| Net increase in Old IAC's investment in IAC Holdings, Inc. | — | | | | 263,979 | | | — | | | 263,979 | | | — | | | 263,979 | |
| Other | (85) | | | | 0 | | | — | | | 0 | | | 0 | | | 0 | |
| Balance as of December 31, 2019 | $ | 43,818 | | | | $ | 2,547,251 | | | $ | (12,226) | | | $ | 2,535,025 | | | $ | 470,121 | | | $ | 3,005,146 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable
Noncontrolling
Interests | | | Common Stock, $.0001 par value | | Class B Common Stock, $.0001 par value | | Common Stock, $0.001 par value | | Class B Common Stock, $0.001 par value | | Additional Paid-in Capital | | Retained Earnings | | Invested Capital | | Accumulated
Other
Comprehensive
(Loss) Income | | Total IAC Shareholders' Equity and Invested Capital | | Noncontrolling
Interests | | Total Parent's / Shareholders' Equity |
| | | | $ | | Shares | | $ | | Shares | | $ | | Shares | | $ | | Shares | | |
| | | | | (In thousands) |
| Balance at December 31, 2019 | $ | 43,818 | | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | $ | — | | | $ | 2,547,251 | | | $ | (12,226) | | | $ | 2,535,025 | | | $ | 470,121 | | | $ | 3,005,146 | |
| Net (loss) earnings | (1,434) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 694,042 | | | (424,316) | | | — | | | 269,726 | | | 294 | | | 270,020 | |
| Other comprehensive income, net of income taxes | 439 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,094 | | | 6,094 | | | 1,279 | | | 7,373 | |
| Stock-based compensation expense | 15 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 40,870 | | | — | | | 72,891 | | | — | | | 113,761 | | | 85,267 | | | 199,028 | |
| Distribution to and purchase of noncontrolling interests | (3,515) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,115) | | | (1,115) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (62,169) | | | — | | | 1,248 | | | (38) | | | (60,959) | | | (3,183) | | | (64,142) | |
| Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9,273) | | | — | | | (54,859) | | | — | | | (64,132) | | | — | | | (64,132) | |
| Proceeds from the sale of Old IAC Class M common stock from New Match | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,408,298 | | | — | | | — | | | — | | | 1,408,298 | | | — | | | 1,408,298 | |
| Net increase in Old IAC's investment in the Company prior to the MTCH Separation | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,685,995 | | | — | | | 1,685,995 | | | — | | | 1,685,995 | |
| Cash merger consideration paid by Old IAC | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 837,913 | | | — | | | 837,913 | | | — | | | 837,913 | |
| Capitalization as a result of the MTCH Separation | — | | | | — | | | — | | | — | | | — | | | 79 | | | 79,343 | | | 6 | | | 5,789 | | | 4,661,231 | | | — | | | (4,661,316) | | | — | | | — | | | — | | | — | |
| Noncontrolling interest created in an acquisition | 1,121 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Issuance of Vimeo common stock and creation of noncontrolling interest, net of fees | 8,299 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 141,301 | | | — | | | — | | | — | | | 141,301 | | | — | | | 141,301 | |
| Adjustment of noncontrolling interests to fair value | 183,315 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (178,508) | | | — | | | (4,807) | | | — | | | (183,315) | | | — | | | (183,315) | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | 1 | | | 633 | | | — | | | — | | | (83,383) | | | — | | | — | | | — | | | (83,382) | | | — | | | (83,382) | |
| Issuance of restricted stock | — | | | | — | | | — | | | — | | | — | | | 3 | | | 3,000 | | | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjustment to the capitalization of tax accounts as a result of the MTCH Separation | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,259) | | | — | | | — | | | — | | | (8,259) | | | — | | | (8,259) | |
| Other | (66) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (491) | | | — | | | — | | | — | | | (491) | | | 690 | | | 199 | |
| Balance at December 31, 2020 | $ | 231,992 | | | | $ | — | | | — | | | $ | — | | | — | | | $ | 83 | | | 82,976 | | | $ | 6 | | | 5,789 | | | $ | 5,909,614 | | | $ | 694,042 | | | $ | — | | | $ | (6,170) | | | $ | 6,597,575 | | | $ | 553,353 | | | $ | 7,150,928 | |
| Net earnings (loss) | 1,732 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 597,547 | | | — | | | — | | | 597,547 | | | (10,294) | | | 587,253 | |
| Other comprehensive income (loss), net of income taxes | 515 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 10,519 | | | 10,519 | | | (608) | | | 9,911 | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 59,283 | | | — | | | — | | | — | | | 59,283 | | | 33,057 | | | 92,340 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 564 | | | — | | | — | | | — | | | 382 | | | — | | | — | | | (98,691) | | | — | | | — | | | — | | | (98,691) | | | — | | | (98,691) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (59,619) | | | — | | | — | | | 10 | | | (59,609) | | | (1,614) | | | (61,223) | |
| Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (35,959) | | | — | | | — | | | — | | | (35,959) | | | — | | | (35,959) | |
| Issuance of Vimeo common stock and creation of noncontrolling interest, net of fees | 40,785 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 258,965 | | | — | | | — | | | — | | | 258,965 | | | — | | | 258,965 | |
| Distribution to and purchase of noncontrolling interests | (29,769) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (570) | | | (570) | |
| Adjustment of noncontrolling interests to fair value | 777,688 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (777,688) | | | — | | | — | | | — | | | (777,688) | | | — | | | (777,688) | |
| Recapitalization of IAC upon Vimeo spin-off | — | | | | 8 | | | 83,358 | | | 1 | | | 5,789 | | | (83) | | | (83,358) | | | (6) | | | (5,789) | | | 80 | | | — | | | — | | — | — | | | — | | | — | | | — | |
| Spin-off IAC's investment in Vimeo | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (38) | | | (386,438) | | | — | | — | 38 | | | (386,438) | | | — | | | (386,438) | |
| Elimination of Vimeo's noncontrolling interests | (1,002,324) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,002,324 | | | — | | | — | | | — | | | 1,002,324 | | | — | | | 1,002,324 | |
| Change in the MTCH Separation tax account distribution | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,640 | | | — | | | — | | | — | | | 7,640 | | | — | | | 7,640 | |
| Other | (1,878) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (242) | | | — | | | — | | | — | | | (242) | | | 410 | | | 168 | |
| Balance at December 31, 2021 | $ | 18,741 | | | | $ | 8 | | | 83,922 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,265,669 | | | $ | 905,151 | | | $ | — | | | $ | 4,397 | | | $ | 7,175,226 | | | $ | 573,734 | | | $ | 7,748,960 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2018 | | 2022 | | 2021 | | 2020 |
| | | (In thousands) | | (In thousands) |
| Cash flows from operating activities: | | | | | | |
| Net earnings | $ | 268,586 | | | $ | 32,183 | | | $ | 292,371 | | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | |
| Cash flows from operating activities attributable to continuing operations: | | Cash flows from operating activities attributable to continuing operations: | |
| Net (loss) earnings | | Net (loss) earnings | $ | (1,192,455) | | | $ | 588,985 | | | $ | 268,586 | |
| Less: Earnings (loss) from discontinued operations, net of tax | | Less: Earnings (loss) from discontinued operations, net of tax | 2,694 | | | (1,831) | | | (21,281) | |
| Net (loss) earnings attributable to continuing operations | | Net (loss) earnings attributable to continuing operations | (1,195,149) | | | 590,816 | | | 289,867 | |
| Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities attributable to continuing operations: | | Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities attributable to continuing operations: | | | | | |
| Stock-based compensation expense | Stock-based compensation expense | 197,220 | | | 134,338 | | | 148,405 | | Stock-based compensation expense | 123,476 | | | 79,487 | | | 188,995 | |
| Amortization of intangibles | Amortization of intangibles | 141,584 | | | 83,868 | | | 107,081 | | Amortization of intangibles | 307,718 | | | 74,839 | | | 126,839 | |
| Depreciation | Depreciation | 69,283 | | | 55,949 | | | 42,393 | | Depreciation | 130,986 | | | 75,015 | | | 68,823 | |
| Provision for credit losses | Provision for credit losses | 80,765 | | | 65,723 | | | 48,362 | | Provision for credit losses | 116,553 | | | 89,893 | | | 78,931 | |
| Goodwill impairment | Goodwill impairment | 265,146 | | | 3,318 | | | 0 | | Goodwill impairment | 112,753 | | | — | | | 265,146 | |
| Deferred income taxes | Deferred income taxes | (31,920) | | | (62,770) | | | 8,765 | | Deferred income taxes | (337,758) | | | 133,377 | | | (18,356) | |
| Unrealized gain on investment in MGM Resorts International | (840,550) | | | 0 | | | 0 | | |
| Losses (gains) on long-term investments in equity securities, net | 40,824 | | | (41,385) | | | (153,429) | | |
| (Gains) losses from the sale of businesses, net | (1,061) | | | 8,239 | | | (121,312) | | |
| Unrealized loss (gain) on investment in MGM Resorts International | | Unrealized loss (gain) on investment in MGM Resorts International | 723,515 | | | (789,283) | | | (840,550) | |
| (Gains) losses on sales of businesses and investments in equity securities, net | | (Gains) losses on sales of businesses and investments in equity securities, net | (38,956) | | | (44,835) | | | 40,051 | |
| Unrealized decrease (increase) in the estimated fair value of a warrant | | Unrealized decrease (increase) in the estimated fair value of a warrant | 62,495 | | | (104,018) | | | 3,219 | |
| Non-cash lease expense (including right-of-use asset impairments) | | Non-cash lease expense (including right-of-use asset impairments) | 70,922 | | | 35,737 | | | 30,026 | |
| Pension and postretirement benefit expense | | Pension and postretirement benefit expense | 209,991 | | | 18,212 | | | — | |
| Other adjustments, net | Other adjustments, net | 26,986 | | | 6,085 | | | 2,410 | | Other adjustments, net | 17,963 | | | 45,302 | | | 6,214 | |
| Changes in assets and liabilities, net of effects of acquisitions and dispositions: | Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | | | | Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | | | |
| Accounts receivable | Accounts receivable | (139,116) | | | (73,574) | | | (52,131) | | Accounts receivable | (66,706) | | | (154,887) | | | (128,600) | |
| Other assets | Other assets | (4,002) | | | 10,605 | | | (29,802) | | Other assets | 8,920 | | | 4,185 | | | (23,367) | |
| Operating lease liabilities | | Operating lease liabilities | (63,843) | | | (30,995) | | | (29,841) | |
| Accounts payable and other liabilities | Accounts payable and other liabilities | 11,566 | | | 889 | | | 35,611 | | Accounts payable and other liabilities | (247,912) | | | 90,265 | | | 42,422 | |
| Income taxes payable and receivable | Income taxes payable and receivable | (12,161) | | | 196 | | | 4,302 | | Income taxes payable and receivable | (6,739) | | | (2,506) | | | (11,580) | |
| Deferred revenue | Deferred revenue | 81,431 | | | 28,136 | | | 36,409 | | Deferred revenue | (11,020) | | | 8,296 | | | 25,140 | |
| Net cash provided by operating activities | 154,581 | | | 251,800 | | | 369,435 | | |
| Cash flows from investing activities: | | | | | | |
| Net cash (used in) provided by operating activities attributable to continuing operations | | Net cash (used in) provided by operating activities attributable to continuing operations | (82,791) | | | 118,900 | | | 113,379 | |
| Cash flows from investing activities attributable to continuing operations: | | Cash flows from investing activities attributable to continuing operations: | | | | | |
| Acquisitions, net of cash acquired | Acquisitions, net of cash acquired | (684,618) | | | (196,578) | | | (65,632) | | Acquisitions, net of cash acquired | — | | | (2,699,643) | | | (685,216) | |
| Capital expenditures | Capital expenditures | (61,570) | | | (97,898) | | | (54,680) | | Capital expenditures | (139,753) | | | (90,210) | | | (60,726) | |
| Proceeds from maturities of marketable debt securities | Proceeds from maturities of marketable debt securities | 475,000 | | | 25,000 | | | 35,000 | | Proceeds from maturities of marketable debt securities | — | | | 225,000 | | | 475,000 | |
| Purchases of marketable debt securities | Purchases of marketable debt securities | (649,828) | | | — | | | (59,671) | | Purchases of marketable debt securities | (233,928) | | | — | | | (649,828) | |
| Cash distribution related to the spin-off of IAC's investment in Vimeo | | Cash distribution related to the spin-off of IAC's investment in Vimeo | — | | | (333,184) | | | — | |
| Net proceeds from the sale of businesses and investments | Net proceeds from the sale of businesses and investments | 26,343 | | | 164,828 | | | 136,311 | | Net proceeds from the sale of businesses and investments | 90,767 | | | 16,451 | | | 26,055 | |
| Purchases of investment in MGM Resorts International | Purchases of investment in MGM Resorts International | (1,019,608) | | | 0 | | | 0 | | Purchases of investment in MGM Resorts International | (244,256) | | | — | | | (1,019,608) | |
| Purchases of investments | Purchases of investments | (1,152) | | | (253,663) | | | (49,180) | | Purchases of investments | (3,036) | | | (24,290) | | | (1,152) | |
| Decrease (increase) in notes receivable - related party | 54,828 | | | (54,828) | | | 0 | | |
| Decrease in notes receivable | | Decrease in notes receivable | 19,497 | | | — | | | — | |
| Decrease in notes receivable—related party | | Decrease in notes receivable—related party | — | | | — | | | 54,828 | |
| Other, net | Other, net | (11,536) | | | (8,729) | | | 13,170 | | Other, net | 15,901 | | | (1,627) | | | (11,536) | |
| Net cash used in investing activities | (1,872,141) | | | (421,868) | | | (44,682) | | |
| Cash flows from financing activities: | | | | | | |
| Net cash used in investing activities attributable to continuing operations | | Net cash used in investing activities attributable to continuing operations | (494,808) | | | (2,907,503) | | | (1,872,183) | |
| Cash flows from financing activities attributable to continuing operations: | | Cash flows from financing activities attributable to continuing operations: | | | | | |
| Principal payments on Dotdash Meredith Term Loans | | Principal payments on Dotdash Meredith Term Loans | (30,000) | | | — | | | — | |
| Proceeds from the issuance of Dotdash Meredith Term Loans | | Proceeds from the issuance of Dotdash Meredith Term Loans | — | | | 1,600,000 | | | — | |
| Proceeds from the issuance of ANGI Group Senior Notes | Proceeds from the issuance of ANGI Group Senior Notes | 500,000 | | | 0 | | | 0 | | Proceeds from the issuance of ANGI Group Senior Notes | — | | | — | | | 500,000 | |
| Principal payments on ANGI Group Term Loan | Principal payments on ANGI Group Term Loan | (27,500) | | | (13,750) | | | (13,750) | | Principal payments on ANGI Group Term Loan | — | | | (220,000) | | | (27,500) | |
| Proceeds from issuance of related-party debt | 0 | | | 0 | | | 2,500 | | |
| Principal payments on related-party debt | 0 | | | (2,500) | | | 0 | | |
| | Debt issuance costs | Debt issuance costs | (6,484) | | | 0 | | | (3,709) | | Debt issuance costs | (785) | | | (23,548) | | | (6,484) | |
| Proceeds from issuance of Vimeo common stock, net of fees | 149,600 | | | 0 | | | 0 | | |
| Proceeds from the issuance of Vivian Health preferred shares, net of fees | | Proceeds from the issuance of Vivian Health preferred shares, net of fees | 34,700 | | | — | | | — | |
| Purchase of IAC treasury stock | | Purchase of IAC treasury stock | (85,323) | | | — | | | — | |
| Purchase of Angi Inc. treasury stock | | Purchase of Angi Inc. treasury stock | (8,144) | | | (35,403) | | | (63,674) | |
| Proceeds from the exercise of IAC stock options | | Proceeds from the exercise of IAC stock options | — | | | 1,496 | | | — | |
| | Purchase of ANGI Homeservices treasury stock | (63,674) | | | (56,905) | | | 0 | | |
| Proceeds from the exercise of ANGI Homeservices stock options | 0 | | | 573 | | | 4,693 | | |
| Withholding taxes paid on behalf of IAC employees on net settled stock-based awards | Withholding taxes paid on behalf of IAC employees on net settled stock-based awards | (85,103) | | | 0 | | | 0 | | Withholding taxes paid on behalf of IAC employees on net settled stock-based awards | (18,068) | | | (95,983) | | | (85,103) | |
| Withholding taxes paid on behalf of ANGI Homeservices employees on net settled stock-based awards | (64,079) | | | (35,284) | | | (29,844) | | |
| Distributions to and purchases of noncontrolling interests | (4,626) | | | (27,534) | | | (12,518) | | |
| Withholding taxes paid on behalf of Angi Inc. employees on net settled stock-based awards | | Withholding taxes paid on behalf of Angi Inc. employees on net settled stock-based awards | (8,827) | | | (61,908) | | | (64,079) | |
| Purchase of noncontrolling interests | | Purchase of noncontrolling interests | (1,179) | | | (30,339) | | | (4,280) | |
| Cash merger consideration paid by Old IAC in connection with the MTCH Separation | Cash merger consideration paid by Old IAC in connection with the MTCH Separation | 837,913 | | | 0 | | | 0 | | Cash merger consideration paid by Old IAC in connection with the MTCH Separation | — | | | — | | | 837,913 | |
| Transfers from Old IAC for periods prior to the MTCH Separation | Transfers from Old IAC for periods prior to the MTCH Separation | 1,706,479 | | | 263,281 | | | (144,069) | | Transfers from Old IAC for periods prior to the MTCH Separation | — | | | — | | | 1,706,479 | |
| Proceeds from the sale of Old IAC Class M common stock | Proceeds from the sale of Old IAC Class M common stock | 1,408,298 | | | 0 | | | 0 | | Proceeds from the sale of Old IAC Class M common stock | — | | | — | | | 1,408,298 | |
| Other, net | Other, net | 1,095 | | | (3,795) | | | (1,041) | | Other, net | 4,975 | | | (18,578) | | | 1,095 | |
| Net cash provided by (used in) financing activities | 4,351,919 | | | 124,086 | | | (197,738) | | |
| Total cash provided (used) | 2,634,359 | | | (45,982) | | | 127,015 | | |
| Net cash (used in) provided by financing activities attributable to continuing operations | | Net cash (used in) provided by financing activities attributable to continuing operations | (112,651) | | | 1,115,737 | | | 4,202,665 | |
| Total cash (used in) provided by continuing operations | | Total cash (used in) provided by continuing operations | (690,250) | | | (1,672,866) | | | 2,443,861 | |
| Net cash provided by operating activities attributable to discontinued operations | | Net cash provided by operating activities attributable to discontinued operations | — | | | 18,053 | | | 41,202 | |
| Net cash provided by investing activities attributable to discontinued operations | | Net cash provided by investing activities attributable to discontinued operations | — | | | 7,602 | | | 42 | |
| Net cash provided by financing activities attributable to discontinued operations | | Net cash provided by financing activities attributable to discontinued operations | — | | | 293,577 | | | 149,254 | |
| Total cash provided by discontinued operations | | Total cash provided by discontinued operations | — | | | 319,232 | | | 190,498 | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | Effect of exchange rate changes on cash and cash equivalents and restricted cash | 2,019 | | | (122) | | | (118) | | Effect of exchange rate changes on cash and cash equivalents and restricted cash | (5,545) | | | (1,612) | | | 2,019 | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 2,636,378 | | | (46,104) | | | 126,897 | | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | | Net (decrease) increase in cash and cash equivalents and restricted cash | (695,795) | | | (1,355,246) | | | 2,636,378 | |
| Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 840,732 | | | 886,836 | | | 759,939 | | Cash and cash equivalents and restricted cash at beginning of period | 2,121,864 | | | 3,477,110 | | | 840,732 | |
| Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 3,477,110 | | | $ | 840,732 | | | $ | 886,836 | | Cash and cash equivalents and restricted cash at end of period | $ | 1,426,069 | | | $ | 2,121,864 | | | $ | 3,477,110 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION
Company overview
IAC today is comprised of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, as well as others ranging from early stage to established businesses.
As used herein, “IAC,” the “Company,” “we,” “our,” “us” and other similar terms refer to IAC Inc. (formerly known as IAC/InterActiveCorp) and its subsidiaries (unless the context requires otherwise).
Dotdash Meredith
On December 1, 2021, Dotdash Media Inc. (formerly known as About Inc., and referred to herein as "Dotdash"), a wholly-owned subsidiary of IAC, completed the acquisition of Meredith Holdings Corporation ("Meredith"), the former subsidiary of Meredith Corporation, comprising its digital and magazine businesses and its corporate operations. The parent of the combined entity is Dotdash Meredith, Inc. ("Dotdash Meredith"). See “Note 3—Business Combinations” for a description of the acquisition of Meredith. Dotdash Meredith is one of the largest digital and print publishers in America. From mobile to magazines, nearly 200 million people trust us to help them make decisions, take action, and find inspiration. Dotdash Meredith's over 40 iconic brands include PEOPLE, Better Homes & Gardens, Verywell, FOOD & WINE, The Spruce, Allrecipes, Byrdie, REAL SIMPLE, Investopedia, and Southern Living.
Dotdash Meredith has two operating segments: (i) Digital, which includes its digital, mobile and licensing operations; and (ii) Print, which includes its magazine subscription and newsstand operations.
Angi Inc.
Angi Inc., formerly ANGI Homeservices Inc., is a publicly traded company that connects quality home service professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping. During the year ended December 31, 2022, over 220,000 domestic service professionals actively sought consumer leads, completed jobs, or advertised work through Angi Inc. platforms. Additionally, consumers turned to at least one Angi Inc. business to find a service professional for approximately 29 million projects during the year ended December 31, 2022. At December 31, 2022, IAC’s economic interest and voting interest in Angi Inc. were 84.1% and 98.1%, respectively.
In the fourth quarter of 2022, the Angi Inc. segment presentation was changed to reflect its four operating segments, which now include (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (includes Europe and Canada), and operates under multiple brands including Angi, HomeAdvisor, Handy, Total Home Roofing and Angi Roofing. Angi Inc.'s financial information for prior periods has been recast to conform to the current period presentation. Roofing, includes the business Angi Inc. acquired on July 1, 2021 known as Total Home Roofing. Ads and Leads provides service professionals the capability to engage with potential customers, including quoting, invoicing and payment services, and provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals nationwide for home repair, maintenance and improvement projects. Services consumers can request household services directly through the Angi Inc. platform and Angi Inc. fulfills the request through the use of independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. The matching and pre-priced booking services and related tools and directories are provided to consumers free of charge. Roofing provides roof replacement and repair services through its wholly-owned subsidiary Angi Roofing, LLC business.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Search
The Search segment consists of Ask Media Group and the Desktop business. Ask Media Group is a collection of websites providing general search services and information. The Desktop business includes our direct-to-consumer downloadable desktop applications and our business-to-business partnership operations. Ask Media Group’s websites include, among others: Ask.com, a search site with a variety of fresh and contemporary content (celebrities, culture, entertainment, travel and general knowledge); Reference.com, a search and general knowledge content site that provides content across select vertical categories (history, business and finance and geography, among other verticals); Consumersearch.com, a search and content website that provides content designed to simplify the product research process; and Shopping.net, a vertical shopping search site, each of which contains a mix of search services and/or content targeted to various user or segment demographics.
Emerging & Other
Our Emerging & Other segment primarily includes:
•Care.com, a leading online destination for families to connect with caregivers for their children, aging parents, pets and homes and for caregivers to connect with families seeking care services. Care.com’s brands include Care For Business, Care.com offerings to enterprises, and HomePay. Care.com acquired Lifecare, a leading provider of family care benefits, on October 27, 2020;
•Mosaic Group, a leading developer and provider of global subscription mobile applications. Mosaic Group has a portfolio of some of the largest and most popular applications in the following verticals: Communications (RoboKiller, TapeACall, Trapcall), Language (iTranslate, Speak & Translate), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero) and Lifestyle(Blossom, Pixomatic); and, for periods prior to its sale on July 12, 2022, Daily Burn;
•Vivian Health, a platform to efficiently connect healthcare professionals with job opportunities;
•The Daily Beast, a website dedicated to news, commentary, culture and entertainment that publishes original reporting and opinion from its roster of full-time journalists and contributors;
•IAC Films, a provider of production and producer services for feature films, primarily for initial sale and distribution through theatrical releases and video-on-demand services in the United States ("U.S.") and internationally;
•Newco, IAC’s incubator platform, which currently spans healthcare, social gaming, home services and consumer marketplaces; and
•Bluecrew, a technology driven staffing platform exclusively for flexible W-2 work, which was sold on November 9, 2022.
Vimeo Spin-off:
On May 25, 2021, IAC completed the spin-off of its full stake in Vimeo, Inc. (formerly Vimeo Holdings, Inc. ("Vimeo")) to IAC shareholders (which we refer to as the “Spin-off”). Following the Spin-off, Vimeo became an independent, separately traded public company. Therefore, Vimeo is presented as a discontinued operation within the Company's financial statements for all periods. See “Note 16—Discontinued Operations” for additional details.
MTCH Separation:
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
On December 19, 2019, IAC/InterActiveCorp ("Old IAC") entered into a Transaction Agreement (as amended, as of April 28, 2020 and June 22, 2020, the "Transaction Agreement") with Match Group, Inc. ("Old MTCH"), IAC Holdings, Inc. ("New IAC" or the "Company"), a direct wholly ownedwholly-owned subsidiary of Old IAC, and Valentine Merger Sub LLC, an indirect wholly ownedwholly-owned subsidiary of Old IAC. On June 30, 2020, the businesses of Old MTCH were separated from the remaining businesses of Old IAC through a series of transactions that resulted in the pre-transaction stockholders of Old IAC owning shares in two, separate public companies—(1) Old IAC, which was renamed Match Group, Inc. ("New Match") and which owns the businesses of Old MTCH and certain Old IAC financing subsidiaries, and (2) New IAC, which was renamed IAC/InterActiveCorp, and which owns Old IAC's other businesses—and the pre-transaction stockholders of Old MTCH (other than Old IAC) owning shares in New Match. This transaction is referred to as the "MTCH Separation".
Spin-off:
On December 22, 2020, IAC announced that its Board of Directors approved a plan to spin-off its full stake in Vimeo to IAC shareholders. IAC's Vimeo business will be separated from the remaining businesses of IAC through a series of transactions (which we refer to as the “Spin-off”) that, if completed in their entirety, will result in the transfer of IAC's Vimeo business to Vimeo Holdings, Inc. ("SpinCo"), a newly formed subsidiary of IAC, with SpinCo becoming an independent, separately traded public company through a spin-off from IAC, and Vimeo, the IAC subsidiary that currently holds the Vimeo business, becoming a wholly-owned subsidiary of SpinCo. The proposed transaction is subject to a number of conditions including final approval by IAC's Board of Directors, approval of the separation proposal by IAC stockholders, and other customary conditions and approvals and is expected to close in the second quarter of 2021.
Company overview
The Company operates Vimeo, Dotdash and Care.com, among many other online businesses, and has majority ownership of ANGI Homeservices, which operates HomeAdvisor, Angie’s List and Handy.
ANGI Homeservices
Our ANGI Homeservices segment includes the North American (United States and Canada) and European businesses and operations of ANGI Homeservices Inc. ("ANGI"). On September 29, 2017, the Company's HomeAdvisor business and Angie's List Inc. ("Angie's List") combined under a new publicly traded company called ANGI Homeservices Inc. (the "Combination"). At December 31, 2020, IAC’s economic interest and voting interest in ANGI were 84.3% and 98.2%, respectively.
ANGI Homeservices Inc. connects quality home service professionals across 500 different categories, from repairing and remodeling to cleaning and landscaping, with consumers. Over 240,000 domestic service professionals actively sought consumer matches, completed jobs or advertised work through ANGI Homeservices' platforms and consumers turn to at least one of our brands to find a professional for approximately 32 million projects during the year ended December 31, 2020. ANGI has established category-transforming products with brands such as HomeAdvisor, Angie’s List and Handy.
ANGI's Handy business is a leading platform in the United States for connecting individuals looking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals. ANGI also owns and operates mHelpDesk, a provider of cloud-based field service software for small to mid-size businesses. Prior to its sale on December 31, 2018, ANGI also operated Felix, a pay-per-call advertising service business. In addition to its market-leading U.S. operations, ANGI owns leading home services online marketplaces in France (Travaux), Germany (MyHammer), Netherlands (Werkspot), United Kingdom (MyBuilder Limited or "MyBuilder,Separation." which we acquired a controlling interest in on March 24, 2017), Canada (HomeStars Inc. or "HomeStars," which we acquired a controlling interest in on February 8, 2017) and Italy (Instapro), as well as operations in Austria (MyHammer).
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Vimeo
Vimeo operates a cloud-based software platform for professionals, teams and organizations to create, collaborate and communicate with video. Vimeo’s all-in-one software solution makes video easier and more effective than ever before, offering the full range of video tools through a recurring software-as-a-service ("SaaS" model) that enables subscribers to create, stream, host, distribute, market, monetize and analyze videos online and across devices. At December 31, 2020, IAC held 89.7% of Vimeo's Class A Voting common stock and 97.6% of Vimeo's Class B Non-Voting common stock, or 93.2% of Vimeo's total outstanding capital stock.
Vimeo previously sold live streaming devices and accessories through its hardware business, prior to the sale of this business on March 29, 2019. Vimeo retained rights in the hardware business to participate in and receive distributions in the event of positive cash flows or proceeds from the sale of the business. On May 28, 2019, Vimeo purchased certain assets and assumed certain liabilities relating to the Magisto video creation app from Magisto, Ltd. (this transaction is referred herein to as the acquisition of Magisto).
Dotdash
Dotdash is a portfolio of digital publishing brands that collectively provide expert information and inspiration in select vertical content categories. Through our brands, Dotdash provides original and engaging digital content in a variety of formats, including articles, illustrations, videos and images.
Search
The Search segment consists of Ask Media Group and the Desktop business. Ask Media Group is a collection of websites providing general search services, and to a lesser extent, content that help users find the information they need. Through the Desktop business, we are a leading provider of global, advertising-driven desktop applications. We own and operate a portfolio of desktop browser applications that provide users with access to a wide variety of online content, tools and services. We provide users who download our desktop browser applications with new tab search services, as well as the option of default browser search services. We distribute our desktop browser applications to consumers free of charge on an opt-in basis directly through direct-to-consumer (primarily Chrome Web Store) and partnership distribution channels.
Emerging & Other
Our Emerging & Other segment primarily includes:
•Mosaic Group, a leading developer and provider of global subscription mobile applications. Mosaic Group has a portfolio of some of the largest and most popular applications including:
◦iTranslate, which develops and distributes some of the world's most downloaded mobile translation applications, enabling users to read, write, speak and learn foreign languages anywhere in the world, acquired in March 2018.
◦TelTech, which develops and distributes unique and innovative mobile communications applications that help protect consumer privacy, acquired in October 2018.
◦Daily Burn, a health and fitness business, which provides streaming fitness and workout videos across a variety of platforms (including mobile, web and other Internet-enabled television platforms).
•Care.com, the leading online destination for families to easily connect with caregivers for their children, aging parents, pets and homes and for a wide variety of caregivers to easily connect with families, which we acquired on February 11, 2020;
•Bluecrew, a technology driven staffing platform exclusively for flexible W-2 work, which we acquired a controlling interest in on February 26, 2018;
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
•The Daily Beast, a website dedicated to news, commentary, culture and entertainment that publishes original reporting and opinion from its roster of full-time journalists and contributors;
•NurseFly, a platform to efficiently connect healthcare professionals with job opportunities, which we acquired a controlling interest in on June 26, 2019;
•IAC Films, a provider of production and producer services for feature films, primarily for initial sale and distribution through theatrical releases and video-on-demand services in the United States and internationally; and
•For periods prior to their sales:
◦College Humor Media, a provider of digital content, including its subscription only property, Dropout.tv, sold March 16, 2020.
◦CityGrid, an advertising network that integrated local content and advertising for distribution to affiliated and third-party publishers across web and mobile platforms, sold December 31, 2018.
◦Dictionary.com, an online and mobile dictionary and thesaurus service, sold November 13, 2018.
◦Electus, including Notional, a provider of production and producer services for both unscripted and scripted television and digital content, primarily for initial sale and distribution in the United States, sold October 29, 2018.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Combination
As used herein, "IAC," "the Company," "we," "our" or "us" and similar terms refer to IAC/InterActiveCorp and its subsidiaries (unless the context requires otherwise).
The Company prepares its consolidated and combined financial statements (collectively referred to herein as "financial statements") in accordance with U.S. generally accepted accounting principles ("GAAP").
The Company's financial statements were prepared on a consolidated basis beginning June 30, 2020 and on a combined basis for periods prior thereto. The difference in presentation is due to the fact that the final steps of the legal reorganization, including the contribution to New IAC of all the entities that comprise the Company prior tofollowing the MTCH Separation, were not completed until June 30, 2020. The preparation of the financial statements on a combined basis for periods prior to June 30, 2020 allows for the financial statements to be presented on a consistent basis for all periods presented.
The historical combined financial statements of the Company have been derived from the historical accounting records of Old IAC. The combined financial statements reflect the historical financial position, results of operations and cash flows of the entities comprising the Company since their respective dates of acquisition by Old IAC and the allocation to the Company of certain Old IAC corporate expenses based on the historical accounting records of Old IAC through June 30, 2020. The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. For the purpose of the combined financial statements, income taxes have been computed as if the entities comprising the Company filed tax returns on a standalone, separate basis for periods prior to the MTCH Separation.
All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) the Company and (ii) Old IAC and its subsidiaries for periods prior to the MTCH Separation arewere considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the statement of cash flows as a financing activity and in the balance sheetstatement of parent's equity as “Invested capital.”
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
In management's opinion, the assumptions underlying the historical financial statements of the Company, including the basis on which the expenses have been allocated from Old IAC, are reasonable. However, the allocations may not reflect the expenses that the Company would have incurred as an independent, stand-alone company for the periods presented.
COVID-19 Update and Impairments
The impact onCOVID-19 pandemic and the various responses to it created significant volatility, uncertainty and economic disruption. Recently there has been a return to normal societal interactions, including the way the Company operates its businesses.
Angi Inc.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
As previously disclosed, the impact of COVID-19 initially resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While Angi Inc. experienced a rebound in service requests from mid-2020 through early 2021, service requests started to decline in May 2021 and have continued to decline during 2022 due, in part, to COVID-19 measures that were more widely in place in prior periods. Angi Inc.'s ability to monetize service requests rebounded modestly in the second half of 2021 and the first half of 2022; however, that improved monetization plateaued in the third quarter of 2022 and is now in line with monetization rates experienced pre-COVID-19.
Dotdash Meredith
Digital advertising and performance marketing revenue at Dotdash, excluding Meredith, declined in 2022, compared to 2021 due in part to lower traffic to its sites compared to prior year COVID-19 outbreak, whichtraffic highs. Post-acquisition, Meredith has been declaredexperienced a "pandemic" bysimilar impact to its digital advertising revenue.
Search
In the World Health Organization, has been varied. quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were a contributing indicator of possible impairment for certain of its assets and identified impairments at the Desktop reporting unit of $212.0 million and $21.4 million related to goodwill and certain indefinite-lived intangible assets, respectively.
In the quarter ended September 30, 2020, the Company recorded additional impairments of $53.2 million and $10.8 million related to the goodwill and intangible assets, respectively, of the Desktop reporting unit. These impairments were due, in part, to the effects of COVID-19 on monetization. Refer to "Services Agreement with Google (the "Services Agreement")" below for additional information.
Other
In addition to the impairments at Search, in the quarter ended March 31, 2020, the Company identified impairments of $51.5 million of certain equity securities without readily determinable fair values, and $7.5 million of a note receivable and a warrant related to certain investees as a result of the effects of COVID-19.
Future Outlook
The extent to which developments related to the COVID-19 outbreakpandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the speedcontinuing spread of contagion,COVID-19, the developmentseverity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and implementation of effective preventative measuresattitudes toward receiving them, materials and possible treatments,supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to the COVID-19 outbreak. The longer the global outbreak and measures designed to curb the spread of the virus continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for the Company’s various products and services), the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations and the more limited will be the Company’s ability to try and make up for delayed or lost revenues.
When COVID-19 first impacted the Company's ANGI Homeservices business in the spring of 2020, ANGI Homeservices experienced a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). Toward the end of the spring of 2020, ANGI Homeservices experienced a rebound in service requests, exceeding pre-COVID-19 growth levels, driven by increased demand from homeowners who spent more time at home due to measures taken to reduce the spread of COVID-19. ANGI Homeservices continued to experience strong demand for home services in the second half of 2020. However, many service professionals' businesses have been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which has negatively impacted ANGI Homeservices' ability to monetize this increased level of service requests. Vimeo has seen strong revenue growth as the demand for communication via video has increased due to the pandemic. The Search segment has experienced a decline in revenue due, in part, to the decrease in advertising rates due to the impact of COVID-19, which decrease in rates was more significant earlier in the year.
In the quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its assets and identified the following impairments:
•a $212.0 million impairment related to the goodwill of the Desktop reporting unit;
•a $21.4 million impairment related to certain indefinite-lived intangible assets of the Desktop reporting unit;
•a $51.5 million impairment of certain equity securities without readily determinable fair values; and
•a $7.5 million impairment of a note receivable and a warrant related to certain investees.
In the quarter ended September 30, 2020, the Company reassessed the fair values of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded impairments equal to the remaining carrying value of the goodwill of $53.2 million and $10.8 million related to the intangible assets. The reduction in the Company’s fair value estimates of the Desktop business in the first and third quarters of 2020 was primarily due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to browser policy changes implemented by Google and other browsers.The effects of COVID-19 on monetization were an additional factor. Refer to "Certain Risks and Concentrations—Services Agreement with Google" for additional information.
There were no additional impairments identified during the year ended December 31, 2020.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
In addition, the United States, which represents 80% of the Company's revenue for the year ended December 31, 2020, experienced a significant resurgence of the coronavirus and with record levels of COVID-19 infections being reported during the fourth quarter of 2020 and continuing into the first quarter of 2021. Europe, which is the second largest market for the Company's products and services, has also seen a dramatic resurgence in COVID-19. This resurgence and the measures designed to curb its spread could materially and adversely affect our business, financial condition and results of operations.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its financial statements in accordance with GAAP. These estimates, judgments and assumptions impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of assets and liabilities. Actual results could differ from these estimates.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
On an ongoing basis, the Company evaluates its estimates, judgments and assumptions, including those related to: the fair values of cash equivalents and marketable debt and equity securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses; the determination of revenue reserves; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the carrying value of right-of-use assets ("ROU assets"); the useful lives and recoverability of building, capitalized software, equipment, leasehold improvements and equipmentbuildings and definite-lived intangible assets; the fair value of assets acquired and liabilities assumed as a result of acquisitions and the allocation of purchase price thereto; the recoverability of goodwill and indefinite-lived intangible assets; the fair value of equity securities without readily determinable fair values; contingencies; the fair value of acquisition-related contingent consideration arrangements; unrecognized tax benefits; the valuation allowance for deferred income tax assets; pension and postretirement benefit expenses, including actuarial assumptions regarding discount rates, expected returns on plan assets, inflation and healthcare costs; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates, judgments and assumptions on historical experience, its forecasts and budgets and other factors that the Company considers relevant.
Accounting for Investments in Equity Securities
Investments in equity securities, other than those of the Company's consolidated subsidiaries and those accounted for under the equity method, if applicable, are accounted for at fair value or under the measurement alternative of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, with any changes to fair value recognized within other (expense) income, net each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer; value is generally determined based on a market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors the Company considers in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of its investments in equity securities, which require judgment and the use of estimates. When the Company's assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge within other (expense) income, net. See "Note 6 - Financial Instruments and Fair Value Measurements" for additional information on the impairments of certain equity securities without readily determinable fair values recorded during the year ended December 31, 2020.In the event the Company has investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee, but does not have a controlling financial interest, are accounted for using the equity method and are included in "Long-term investments" in the accompanying balance sheet. At December 31, 2020, the Company has 1 investment accounted for using the equity method. At December 31, 2019, the Company did 0t have any investments accounted for using the equity method.
Revenue Recognition
The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is
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probable. Revenue is recognized when control of the promised services or goods is transferred to ourthe Company’s customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.
The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, effective January 1, 2018 using the modified retrospective transition method for open contracts as of the date of initial application. The cumulative effect to the Company's retained earnings at January 1, 2018 was an increase of $40.3 million, of which $3.4 million was related to the noncontrolling interest in ANGI; the adjustment to retained earnings was principally related to the Company’s ANGI segment and the Desktop business.
•Within ANGI, the effect of the adoption of ASU No. 2014-09 was that commissions paid to employees pursuant to certain sales incentive programs, which represent the incremental direct costs of obtaining a service professional contract, are now capitalized and amortized over the estimated life of a service professional (also referred to as the estimated customer relationship period). These costs were expensed as incurred prior to January 1, 2018. The cumulative effect of the adoption of ASU No. 2014-09 was the establishment of a current and non-current asset for capitalized sales commissions of $29.7 million and $4.2 million, respectively, and a related deferred tax liability of $8.0 million, resulting in a net increase to retained earnings of $25.9 million on January 1, 2018.
•Within the Desktop business, the primary effect of the adoption of ASU No. 2014-09 was to accelerate the recognition of the portion of the revenue of certain desktop applications sold by SlimWare that qualify as functional intellectual property ("functional IP") under ASU No. 2014-09. This revenue was previously deferred and recognized over the applicable subscription term. The cumulative effect of the adoption of ASU No. 2014-09 for SlimWare was a reduction in deferred revenue of $20.3 million and the establishment of a deferred tax liability of $4.9 million, resulting in a net increase to retained earnings of $15.5 million on January 1, 2018.
0TransactionTransaction Price
The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for its services or goods, including amounts that are variable. Contracts may include sales incentives, such as volume discounts or rebates, which are accounted for as variable consideration when estimating the transaction price. The Company also maintains a liability for potential future refunds and customer credits, which is recorded as a reduction of revenue. All estimates of variable consideration are based upon historical experience and customer trends. The Company determines the total transaction price, including an estimate of any variable consideration, at contract inception and reassesses this estimate each reporting period.
The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.
For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASU No. 2014-09, applicable to such contracts and does not consider the time value of money.
Arrangements with Multiple Performance Obligations
The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers, which are directly observable or based on an estimate if not directly observable. For our multiple performance obligation arrangements that include functional intellectual property ("IP"), which comprise the downloadable apps
Practical Expedients and software of the Desktop business, the Company uses a residual approach to determine standalone selling prices for the functional IP.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs and mobile app store fees, meet the requirements to be capitalized as a cost of obtaining a contract. Commissions paid to employees pursuant to certain sales incentive programs are amortized over the estimated customer relationship period. The Company calculates the estimated customer relationship period as the average customer life, which is
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)Exemptions
based on historical data. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. For sales incentive programs where the customer relationship period iscontracts that have an original duration of one year or less, the Company has electeduses the practical expedient available under Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, applicable to expensesuch contracts and does not consider the coststime value of money.
In addition, as incurred. The Company generally capitalizes and amortizes mobile app store fees over the term of the applicable subscription.
During the years ended December 31, 2020, 2019 and 2018, the Company recognized expense of $109.0 million, $99.8 million and $70.6 million related to the amortization of these costs. The current contract asset balances are $61.5 million, $43.1 million and $40.6 million at December 31, 2020, 2019 and 2018, respectively. The non-current contract asset balances are $9.3 million, $6.2 million and $4.5 million at December 31, 2020, 2019 and 2018, respectively. The current and non-current contract assets are included in "Other current assets" and "Other non-current assets," respectively, in the accompanying balance sheet.
Performance Obligations
As permitted under the practical expedient available under ASU No. 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is tied to sales-based or usage-based royalties, allocated entirely to unsatisfied performance obligations, or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which it has the right to invoice for services performed.
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Costs to Obtain a Contract with a Customer
The Company uses a portfolio approach to assess the accounting treatment of the incremental costs to obtain a contract with a customer. The Company recognizes an asset if we expect to recover those costs. To the extent that these costs are capitalized, the resultant asset is amortized on a systematic basis consistent with the pattern of the transfer of the services to which the asset relates. The Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs and mobile app store fees, meet the requirements to be capitalized as a cost of obtaining a contract.
Commissions Paid to Employees Pursuant to Sales Incentive Programs
The Company has determined that commissions paid to employees pursuant to certain sales incentive programs meet the requirements to be capitalized as the incremental costs to obtain a contract with a customer. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. Capitalized commissions paid to employees pursuant to these sales incentive programs are amortized over the estimated customer relationship period and are included in "Selling and marketing expense" in the statement of operations. The Company calculates the anticipated customer relationship period as the average customer life, which is based on historical data.
For sales incentive programs where the anticipated customer relationship period is one year or less, the Company has elected the practical expedient to expense the commissions as incurred. Effective October 1, 2022, the Ads business, within Angi Inc., elected to expense commissions upon review of the duration of the related customer relationship periods which have been determined to be less than a year.
App Store Fees
The Company pays fees to the Apple App Store and the Google Play Store for the distribution of our paid mobile apps. The Company capitalizes and amortizes mobile app store fees related to subscriptions over the term of the applicable subscription. The amortization of mobile app store fees is included in "Cost of revenue" in the statement of operations.
The following table presents the capitalized costs to obtain a contract with a customer for the years ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2022 | | 2021 |
| Sales Commissions | | | | App Store Fees | | Total | | Sales Commissions | | | | App Store Fees | | Total |
| (In thousands) |
| Current | $ | 39,590 | | | | | $ | 8,266 | | | $ | 47,856 | | | $ | 39,669 | | | | | $ | 9,023 | | | $ | 48,692 | |
| Non-current | 5,667 | | | | | — | | | 5,667 | | | 6,086 | | | | | — | | | 6,086 | |
| Total | $ | 45,257 | | | | | $ | 8,266 | | | $ | 53,523 | | | $ | 45,755 | | | | | $ | 9,023 | | | $ | 54,778 | |
During the years ended December 31, 2022, 2021 and 2020, the Company recognized expense of $95.5 million, $125.9 million and $101.3 million, respectively, related to the amortization of capitalized costs to obtain a contract with a customer.
The current and non-current capitalized costs to obtain a contract with a customer are included in "Other current assets" and "Other non-current assets," respectively, in the balance sheet.
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Commissions Paid to Third-Party Agent Sales of Magazine Subscriptions
Dotdash Meredith uses third-party agents to obtain certain subscribers. The agents are paid a commission, which can be as much as the subscription price charged to the subscriber. Dotdash Meredith subscriptions do not have substantive termination penalties; therefore, the contract term is determined on an issue-by-issue basis. Accordingly, these commissions do not qualify for capitalization because there is no contract with a customer until a copy is served to a customer; therefore, these costs are expensed when the publication is sent to the customer. Dotdash Meredith recognizes a liability to the extent the commission is refundable to the third-party agent. Dotdash Meredith expenses additional amounts paid to agents (such as per subscriber bounties) to acquire subscribers as incurred. Expenses related to third-party agent sales of magazine subscriptions are included in "Selling and marketing expense" in the statement of operations.
Dotdash Meredith
Dotdash Meredith revenue consists of digital and print revenue. Digital revenue consists principally of advertising, performance marketing and licensing and other revenue. Print revenue consists principally of subscription, advertising, projects and other, newsstand, and performance marketing revenue.
Digital
Advertising
Advertising revenue is generated primarily derivedthrough digital advertisements sold by Dotdash Meredith's sales team directly to the advertisers or through advertising agencies and through programmatic advertising networks. Performance obligations consist of delivering advertisements with a promised number of actions related to the ads, such as impressions or clicks, or displaying advertisements for an agreed upon amount of time. The price is determined by an agreed-upon pricing model such as CPM (cost-per-1,000 impressions), CPC (cost-per-click) or flat fees.
The Company recognizes revenue over time as performance obligations are satisfied. Revenue is recognized using an output method based on actions delivered or time elapsed depending on the nature of the performance obligation. The Company considers the right to receive consideration from a customer to correspond directly with the value to the customer of our performance completed to date. The customer is invoiced in the month following the month that the advertisements are delivered.
Performance Marketing
Performance marketing revenue includes commissions generated through affiliate commerce, affinity marketing and performance marketing channels. Affiliate commerce and performance marketing commission revenue is generated when Dotdash Meredith brands refer consumers to commerce partner websites resulting in a purchase or transaction. Performance marketing and affiliate commerce partners are invoiced monthly.
Affinity marketing programs are arrangements where Dotdash Meredith acts as an agent for both Dotdash Meredith and third-party publishers to market and place magazine subscriptions online. Commissions are earned when a subscriber name has been provided to the publisher and any free trial period is completed. Dotdash Meredith net settles with the third-party publishers monthly.
Licensing and Other Revenue
Licensing revenue includes symbolic licenses, which include direct-to-retail product partnerships based on Dotdash Meredith's brands, and functional licenses, which consist of certain content licensing agreements. Revenues from symbolic licenses are in the form of a royalty based on the sale or usage of the branded product, which is recognized over time when the sale or use occurs. Generally, revenues are accrued based on estimated sales and adjusted as actual sales are reported by partners. These adjustments are typically recorded within three months of the initial estimates and have not been material. Minimum guarantees, if applicable, are generally recognized as revenue over the term of the applicable contract.
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Revenue from functional licenses is recognized as Dotdash Meredith's content is delivered or access to the content is granted. Revenue from functional licenses is recognized at a point-in-time when access to the completed content is granted to the partner.
Print
Subscription Revenue
Subscription revenue relates to the sale of Dotdash Meredith print magazines. Subscriptions do not have substantive termination penalties; therefore, the contract term is determined on an issue-by-issue basis. Most of the Dotdash Meredith’s subscription sales are prepaid at the time of order and may be canceled at any time for a refund of the pro rata portion of the initial subscription. Accordingly, amounts received from prepaid subscriptions are recorded as a customer deposit liability rather than as deferred revenue. The delivery of each issue is determined to be a distinct performance obligation that is satisfied; revenue is recognized when the publication is sent to the customer.
Advertising
Advertising revenue relates to the sale of advertising in magazines directly to advertisers or through advertising agencies. Revenue is recognized on the magazine issue’s on-sale date, which is the date the magazine is published. The customer is invoiced, net of agency commissions, once the advertisements are published under normal industry trade terms.
Project and Other Revenue
Project and other revenue relates to other revenue streams that are primarily project based and may relate to any one or combination of the following activities: audience targeted advertising, custom publishing, content strategy and development, email marketing, social media, database marketing and search engine optimization. Depending on the contractual arrangement, revenue is recognized either as the purchased advertising is run on third-party platforms, or over the contractual period as the products do not have an alternate use to the Company or its other clients. Payment terms vary based on the nature of the contract.
Newsstand Revenue
Newsstand revenue is related to single copy magazines or bundles of single copy magazines sold to wholesalers for resale on newsstands. Publications sold to magazine wholesalers are sold with the right to receive credit from Dotdash Meredith for magazines returned to the wholesaler by retailers. Revenue is recognized on the issue's on-sale date as the date aligns most closely with the date that control is transferred to the customer. Wholesalers are invoiced a percentage of estimated final sales the month after the issue’s initial on-sale date. Generally, the previously estimated revenue is adjusted based upon the final sales, which occur when the final amounts are settled under normal industry terms.
Performance Marketing
Performance marketing principally consists of affinity marketing revenue through which Dotdash Meredith places magazine subscriptions for third-party publishers. Dotdash Meredith net settles with these third parties monthly.
Angi Inc.
Ads and Leads Revenue
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Primarily reflects domestic ads and leads revenue, including consumer connection revenue which comprises fees paid by HomeAdvisor service professionals for consumer matches, (regardless of whether the service professional ultimately provides the requested service) and revenue from completed jobs sourced through the HomeAdvisorservice professionals under contract for advertising and Handy platforms.membership subscription revenue from service professionals and consumers. Consumer connection revenue varies based upon several factors, including the service requested, product experience offered, and geographic location of service. The Company’s consumer connection revenue is generated and recognized when an in-network service professional is delivered a consumer match or when a job sourced through the HomeAdvisor and Handy platforms are completed. Consumer connection revenue is generally billed one week following a consumer match, with payment due upon receipt of invoice or collected wheninvoice. Angi Inc. maintains a consumer schedules a job through the HomeAdvisor and Handy platforms. The Company maintains revenue reservesliability for potential credits forissued to services provided by Handy service professionals to consumers.
ANGI revenueproviders. Revenue is also derived from (i) sales of time-based website, mobile and call center advertising to service professionals, (ii) HomeAdvisor service professional membership subscription fees, (iii) membership subscription fees from consumers and (iv) service warranty subscription and other services. Angie's ListAngi Inc. service professionals generally pay for advertisements in advance on a monthly or annual basis at the option of the service professional, with the average advertising contract term being approximately one year. Angie's ListAngi website, mobile and call center advertising revenue is recognized ratably over the contract term. Revenue from the sale of advertising in the Angie’s List Magazineis recognized in the period in which the publication is distributed. Service professional membership subscription revenue is initially deferred upon receipt of payment and is recognized using the straight-line method over the applicable subscription period, which is typically one year. Angie's ListAngi Inc. prepaid consumer membership subscription fees are recognized as revenue using the straight-line method over the term of the applicable subscription period, which is typically one year.
PriorPrimarily reflects domestic revenue from pre-priced offerings by which the consumer requests services through Services platforms and Angi Inc. engages a service professional to perform the service. Consumers are billed when a job is scheduled through the Services platform. Billing practices are governed by the contract terms of each project as negotiated with the consumer. Billings do not necessarily correlate with revenue recognized over time as this is based on the timing of when the consumer receives the promised services.
From January 1, 2020 ANGI's Handy businessthrough December 31, 2022, Services recorded revenue on a netgross basis. Effective January 1, 2020, ANGI2023, Angi Inc. modified the HandyServices terms and conditions so that Handy,the service professional, rather than the service professional,Angi Inc., has the contractual relationship with the consumer to deliver the service and Handy, rather thanAngi Inc.'s performance obligation to the consumer has the contractual relationshipis to connect them with the service professional. Consumers request services and pay for such services directly through the Handy platform and then Handy fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. This change in contractual terms requires grossnet revenue accounting treatment effective January 1, 2020. Also,2023. There is no impact to operating income or Adjusted EBITDA.
Roofing Revenue
Primarily reflects revenue from the roof replacement business offering by which the consumer purchases services directly from the Roofing business and Angi Inc. then engages a service professional to perform the service. Consumers typically pay when a job is completed and revenue is recognized based on the Company's progress in satisfying the caseroofing service.
International Revenue
Primarily reflects revenue generated within the International segment (comprised of certain tasks, HomeAdvisor provides a pre-priced product offering, pursuant to which consumers can request services through a HomeAdvisor platformbusinesses in Europe and pay HomeAdvisorCanada), including consumer connection revenue for the services directly. HomeAdvisor then fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. Revenueconsumer matches and membership subscription revenue from HomeAdvisor’s pre-priced product offering is also recorded on a gross basis effective January 1, 2020. The change to gross revenue reporting for Handyservice professionals and HomeAdvisor’sconsumers.
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
pre-priced product offering, effective January 1, 2020, resulted in an increase in revenue of $73.8 million during the year ended December 31, 2020.
Vimeo
Vimeo revenue is derived primarily from annual and monthly SaaS subscription fees paid by subscribers for self-serve and enterprise subscription plans. Subscription revenue is recognized over the terms of the applicable subscription period, which range from one month to three years. The most common subscription is an annual subscription.
Dotdash
Dotdash revenue consists principally of display advertising revenue and performance marketing revenue. Display advertising revenue is generated primarily through digital display advertisements sold directly by our sales team and through programmatic advertising networks. Performance marketing revenue includes affiliate commerce and performance marketing commissions. Affiliate commerce commission revenue is generated when Dotdash refers users to commerce partner websites resulting in a purchase or transaction. Performance marketing commissions are generated on a cost-per-click or cost-per-action basis.
Search
Ask Media Group revenue consists principallyprimarily of advertising revenue generated principally through the display of paid listings in response to search queries, as well as from display advertisements appearing alongside content on its various websites and, to a lesser extent, affiliate commerce commission revenue. Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites. The majority of the paid listings displayed by Ask Media Group is supplied to us by Google Inc. ("Google"(“Google”) pursuant to our services agreement with Google. Pursuant to this agreement, Ask Media Group businesses 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 clickprice-per-click basis and when a user submits a search query through an Ask Media Group business and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing and shares a portion of the fee charged to the advertiser with the Ask Media Group business. The Company recognizes paid listing revenue from Google when it delivers the user'suser’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.
Revenue from display advertising is generated through advertisements sold through programmatic advertising networks. Affiliate commerce commission revenue is generated when an Ask Media Group property refers users to commerce partner websites resulting in a purchase or transaction.
Desktop revenue largely consists of advertising revenue generated principally through the display of paid listings in response to search queries. The majority of the paid listings displayed are supplied to us by Google in the manner, and pursuant to the services agreement with Google, described above. Fees related to display advertisements are recognized when an advertisement is displayed. To a lesser extent, Desktop revenue also includes fees paid by subscribers for downloadable desktop applications as well as display advertisements. Fees related tofor subscription downloadable desktop applications are generally recognized over the term of the applicable subscription period, which is primarily one or two years. Fees related to display advertisements are recognized when an advertisement is displayed.monthly.
Emerging & Other
Care.com generates revenue primarily through subscription fees from families and caregivers for its suite of products and services, as well as through annual contracts with employers who provide access to Care.com’s suite of products and services as an employee benefit and through contracts with businesses that recruit employees through its platform.
Mosaic Group revenue consists primarily of fees paid by subscribers for downloadable mobile applications distributed through the Apple App Store and Google Play Store and fees received directly from consumers, as well as display advertisements. Fees related to subscription downloadable mobile applications are initially deferred and generally recognized either over the term of the subscription period, which is up to one year, for those applications that must be connected to our servers to function, or at the time of the
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
sale when the software license is delivered. Fees related to display advertisements are recognized when an advertisement is displayed.
Care.com generates revenue primarily through subscription fees from families and caregivers for its suite of products and services, as well as through annual contracts with corporate employers who provide access to Care.com's suite of products and services as an employee benefit and through contracts with businesses that recruit employees through its platform.
Bluecrew revenue consists of service revenue, which is generated through staffing workers and recognized as control of the promised services is transferred to our customers.
The Daily Beast revenue consists of advertising revenue, which is generated primarily through display advertisements (sold directly and through programmatic ad sales), and to a lesser extent, affiliate commerce commission revenue.
NurseFlyVivian Health revenue consists of subscription revenue, which is generated through recruiting agencies that seek access to qualified healthcare professionals and is recognized at the earlier of the full delivery of the promised services or over the length of the subscription period.
The Daily Beast revenue consists of advertising revenue, which is generated primarily through display advertisements (sold directly and through programmatic advertising networks), and to a lesser extent, subscription revenue and affiliate commerce commission revenue. The performance obligations, timing of customer payments, and methods of revenue recognition are generally consistent with action-based advertising and time-based advertising revenue, as described above.
Revenue of IAC Films and College Humor Media, which was sold in the first quarter of 2020, is generated primarily through media production and distribution and advertising.distribution. Production revenue is recognized when control is transferred to the customer to broadcast or exhibit,exhibit.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Sold on November 9, 2022, Bluecrew revenue consisted of service revenue, which was generated through staffing workers and advertising revenue is recognized when an advertisement is displayed or overas control of the advertising period.promised services was transferred to our customers.
Accounts Receivables, Net of the Allowance for Credit Losses and Revenue Reserves
Accounts receivable include amounts billed and currently due from customers. The allowance for credit losses is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the specific customer’s ability to pay its obligation and any other forward-looking data regarding customers' ability to pay which may bethat is available. The time between the Company issuance of an invoice and payment due date is not significant; customerCustomer payments that are not collected in advance of the transfer of promised services or goods are generally due no later than 30 days from invoice date. The Company also maintains allowances to reserve for potential credits issued to consumers or otherdate, with the exception of invoices at Dotdash Meredith, which vary by revenue adjustments. The amounts of these reserves are based primarily upon historical experience.
Credit Losses and Revenue Reserve
The following table presents the changes in the allowance for credit losses for the year ended December 31, 2020:
| | | | | |
| December 31, 2020 |
| (In thousands) |
Balance at January 1 | $ | 20,257 | |
Current period provision for credit losses | 80,765 | |
Write-offs charged against the allowance | (75,815) | |
Recoveries collected | 2,447 | |
Balance at December 31 | $ | 27,654 | |
The revenue reserve was $2.1 million and $3.9 million at December 31, 2020 and 2019, respectively. The total allowance for credit losses and revenue reserve was $29.7 million and $24.1 millionstream as of December 31, 2020 and 2019, respectively.described above.
Deferred Revenue
Deferred revenue consists of payments that are received or are contractually due in advance of the Company's performance.Company’s performance obligation. The Company’s deferred revenue is reported on a contract by contractcontract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the remaining term of the applicable subscription period or expected completion of its performance obligation is one year or less. The current and non-current deferred revenue balances are $178.6were $157.1 million and
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
$1.3 $0.2 million, respectively, at December 31, 20192022, and $150.1$165.5 million and $1.7$0.4 million, respectively, at December 31, 2018.2021. Included in the current deferred revenue balance at December 31, 2021 is $22.9 million related to Meredith, acquired December 1, 2021. During the year ended December 31, 2019,2022, the Company recognized $146.5$152.0 million of revenue that was included in the deferred revenue balance as ofat December 31, 2018.2021. In addition to the revenue recognized, $7.3 million of the December 31, 2021 deferred revenue balance was reclassified to other balance sheet accounts and $1.1 million related to a business that was sold in 2022. During the year ended December 31, 2020,2021, the Company recognized $170.7$132.2 million of revenue that was included in the deferred revenue balance as ofat December 31, 2019.2020. The current and non-current deferred revenue balances are $275.1were $137.7 million and $1.5$0.7 million, respectively, at December 31, 2020. Non-current deferred revenue is included in "Other“Other long-term liabilities"liabilities” in the accompanying balance sheet.
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase. Domestically, cash equivalents primarily consist of AAA rated government money market funds and treasury discount notes and time deposits.notes. Internationally, cash equivalents primarily consist of AAA rated government money market funds and time deposits.
Accounting for Investments in Debt Securities
TheAt times 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. Marketable debt securities are adjusted to fair value each quarter, and the unrealized gains and losses, net of tax, are included in accumulated other comprehensive income (loss) as a separate component of shareholders'shareholders’ equity. The specific-identification method is used to determine the cost of debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss) into earnings. The Company also invests in non-marketable debt securities as part of its investment strategy. We review our debt securities for impairment each reporting period. The Company recognizes an unrealized loss on debt securities in net earnings when the impairment is determined to be other-than-temporary. Factors we consider in making such determination include the duration, severity and reason for the decline in value and the potential recovery and our intent to sell the debt security. We also consider whether we will be required to sell the security before recovery of its amortized cost basis and whether the amortized cost basis cannot be recovered because of credit losses. If an impairment is considered to be other-than-temporary, the debt security will be written down to its fair value and the loss will be recognized within other"Other (expense) income, net.net" in the statement of operations. At December 31, 20202022 marketable debt securities consist of treasury discount notes.notes of $235.1 million. There were 0no marketable debt securities at December 31, 2019.2021.
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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Certain Risks and Concentrations—Concentrations
Services Agreement with Google (the "Services Agreement")
A meaningful portionThe Company and Google are parties to an amended Services Agreement which expires on March 31, 2024 and provides for an automatic renewal for an additional one-year period absent a notice of the Company's revenue (and a substantial portion of IAC’s net cashnon-renewal from operations that it can freely access) is attributable to the Services Agreement. In addition, theeither party on or before March 31, 2023. The Company earns certain other advertising revenue from Google that is not attributable to the Services Agreement. A meaningful portion of the Company’s net cash from operating activities attributable to continuing operations that it can freely access is attributable to revenue earned pursuant to the Services Agreement and other revenue earned from Google.
For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, total revenue earned from Google was $556.4$701.5 million, $733.5$755.1 million and $825.2$556.1 million, respectively, representing 18%13%, 27%,20% and 33%20%, respectively, of the Company's total revenue. The related accounts receivable totaled $61.9 million and $53.0 million at December 31, 2020 and 2019, respectively.
The total revenue earned from the Services Agreement for the years ended December 31, 2022, 2021 and 2020, 2019 and 2018, was $498.3$514.8 million, $677.0$661.3 million and $765.6$498.3 million, respectively, representing 16%10%, 25%18% and 30%18%, respectively, of the Company's total revenue. The related accounts receivable totaled $74.1 million and $89.1 million at December 31, 2022 and 2021, respectively.
The revenue attributable to the Services Agreement is earned by Ask Media Group and the Desktop business, and Ask Media Group, both withinwhich comprise the Search segment. For the years ended December 31, 2020, 20192022, 2021 and 2018,2020, revenue earned from the Services Agreement was $153.5$424.3 million, $291.1$542.1 million and $426.5$344.8 million, respectively, within Ask Media Group, and $90.5 million, $119.1 million and $153.5 million, respectively, within the Desktop business and $344.8 million, $385.9 million and $339.0 million, respectively, within Ask Media Group.business.
The Services Agreement expires on March 31, 2023; provided that during each September, either party may, after discussion with the other party, terminate the Services Agreement, effective on September 30 of the year following the year such notice is given. Neither party gave notice to the other party to terminate the Services Agreement pursuant to this provision in September 2020. The Services Agreement requires that the Company comply with certain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice. These updates may be
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specific to the Services Agreement or could be more general and thereby impact the Company as well as other companies. These policy and guideline updates have in the past and could in the future require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which have been and could be costly to address or negatively impact revenue and have had or otherwiseand in the future could have an adverse effect on our financial condition and results of operations. As described below, Google has made changes to the policies under the Services Agreement and has also made industry-wide changes that have negatively impacted the Desktop business and itbusiness-to-consumer (“B2C”) business. Google may do somake changes in the future.future that could impact the revenue earned from Google, including under the Services Agreement.
Certain industry-wide policy changes became effective on July 1, 2019 and August 27, 2020. These industry-wide changes, combined with other changes toincreased enforcement of policies under the Services Agreement, during the second half of 2019, have had a negative impact on the historical and expected future results of operations of the DesktopB2C business. In addition, at multiple times duringDuring the fourth quarter of 2020, Google suspended services with respect to some of IAC'sB2C’s products and may do so with respect to other products in the future. The DesktopAs a result, the B2C business elected to modify certain marketing strategies in early January 2021. Subsequently, Google informed us of another policy change in the first quarter of 2021 that became effective on May 10, 2021. We anticipated that this Google policy change would eliminate our ability to successfully introduce and market new B2C products that would be profitable. Therefore, we undertook cost reduction measures and effectively eliminated all marketing of B2C products beginning in March 2021. This elimination of marketing positively impacted profitability starting in the second quarter of 2021 because revenue from B2C products is expectedearned over multiple periods beyond just the period in which the initial marketing is incurred. Following the cessation of the introduction of new products in March 2021, the B2C revenue stream relates solely to further reduce the then existing installed base of products. We expect future revenue and profitabilityprofits of the DesktopB2C business in 2021.to decline significantly.
The reduction in revenue and profitability was the primary factor in the goodwill and indefinite-lived intangible asset impairments related to the Desktop business recorded inDuring the year ended December 31, 2020, the Company reassessed the fair values of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded goodwill and intangible asset impairments of $265.1 million and $32.2 million, respectively. The impactreduction in the Company’s fair value estimates was due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to policy changes implemented by Google and other browsers. The effects of COVD-19 wasCOVID-19 on monetization were an additional factor.
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Credit Risk
Financial instruments, which potentially subject theThe Company to concentration ofhas counterparty credit risk consist primarily ofexposure to the private limited life insurance company, which issued the annuity contracts held by the IPC Pension Scheme. In addition, cash and cash equivalents. Cash and cash equivalents are maintained with financial institutions and are in excess of any applicable third-party insurance limits, such as the Federal Deposit Insurance Corporation insurance limits.and the Securities Investor Protection Corporation.
Other Risks
The Company is subject to certain risks and concentrations including dependence on third-party technology providers and exposure to risks associated with online commerce security and credit card fraud.security.
Building, Capitalized Software, Equipment, Leasehold Improvements, Buildings and EquipmentLand
Building, capitalizedCapitalized software, equipment, leasehold improvements, buildings and equipmentland are recorded at cost.cost or at fair value to the extent acquired in a business combination. Repairs and maintenance costs are expensed as incurred. Amortization of leasehold improvements, which is included within depreciation withinin "Depreciation" in the statement of operations, and depreciation isare computed using the straight-line method over the estimated useful lives of the assets, or, in the case of leasehold improvements, the lease term, if shorter.
| | | | | |
| Asset Category | Estimated
Useful Lives |
Buildings and leasehold improvements | 3 to 39 Years |
| Capitalized software and computer equipment | 2 to 3 Years |
| Furniture and other equipment | 3 to 12 Years |
| Buildings and leasehold improvements | 3 to 39 Years |
The Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software and compensation for personnel directly associated with the development of the software. Capitalization of such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended purpose. The net book value of capitalized internal use software is $68.0$155.7 million and $56.3$131.6 million at December 31, 20202022 and 2019,2021, respectively.
For the year ended December 31, 2022, the net book value of capitalized internal use software at Dotdash Meredith decreased $26.7 million as a result of the reclassification of acquired capitalized software to definitive intangible assets in connection with the completion of purchase accounting related to the acquisition of Meredith during the fourth quarter of 2022. See "Note 3—Business Combination" for further discussion of the purchase accounting for the Meredith acquisition. In addition, in the fourth quarter of 2022, Angi Inc. recognized a write-off of $15.5 million related to capitalized software for projects discontinued. Business Combinations and Contingent Consideration Arrangements
The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The Company usually obtains the assistance of outside valuation experts to assist in the allocation of purchase price to the identifiable intangible assets acquired. While outside valuation experts may be used, management has
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ultimate responsibility for the valuation methods, models and inputs used and the resulting purchase price allocation. The excess purchase price over the value of net tangible and identifiable intangible assets acquired is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit from the business combination as of the acquisition date.
The acquisition of Meredith closed on December 1, 2021 and the allocation of purchase price to the assets acquired and liabilities assumed, the determination of the reporting units and the allocation of goodwill to the reporting units were finalized during the fourth quarter of 2022. See "Note 3—Business Combinations" for a description of the accounting for this business combination.
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In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. Each of these arrangements is initially recorded at its fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled. Generally, our contingent consideration arrangements are based upon financial performance and/or operating metric targets. The Company generally determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the financial statements. Significant changes in the specified forecasted earningsfinancial or operating metrics wouldcan result in a significantly higher or lower fair value measurement. The changes in the remeasured fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in "General and administrative expense" in the accompanying statement of operations. See "Note 6—Financial Instruments and Fair Value Measurements" for a discussion of contingent consideration arrangements. Goodwill and Indefinite-Lived Intangible Assets
Dotdash Meredith's operating segments and reporting units are Digital and Print. Angi Inc.'s Ads and Leads, Services, Roofing and International are separate operating segments and reporting units. Ask Media Group and Desktop are separate reporting units within the Search reportable segment. Within the Company's Emerging & Other reportable segment, Mosaic Group, Care.com, Bluecrew, prior to its sale on November 9, 2022, Vivian Health, The Daily Beast, IAC Films, and Newco are separate operating segments and reporting units. Goodwill is tested for impairment at the reporting unit level. The Company's Dotdash Meredith Print, Ask Media Group, Desktop, The Daily Beast, IAC Films and Newco reporting units have no goodwill as of October 1, 2022. On November 9, 2022, the Company completed the sale of Bluecrew at a value in excess of its carrying amount. See "Note 11—Segment Information" for additional information regarding the Company's method of determining operating and reportable segments. The Company assesses goodwill and indefinite-lived intangible assets, which are certain trade names and trademarks, for impairment annually at 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.
When the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit's goodwill is necessary; otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined. If the carrying value of the reporting unit exceeds its estimated fair value, a goodwill impairment equal to the excess is recorded.
In the fourth quarter of 2022, the Angi Inc. segment presentation was changed to reflect its four new operating segments, which now include (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (includes Europe and Canada). Goodwill was allocated to reflect the new segment presentation. The allocation of goodwill to Roofing and Canada reflects their respective historical carrying values because of the lack of operational integration with Angi North America; the allocation of the remaining goodwill to Ads and Leads and Services was based upon their relative fair values as of October 1, 2022.
As required, a quantitative assessment was performed and the goodwill of Angi Inc. reporting units was tested before and after the change in reporting units; this test resulted in an impairment of $26.0 million due to Roofing exiting certain markets and a projected reduction in future profits from the business, which reduced its fair value.
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For the Company's annual goodwill test at October 1, 2020,2022, a qualitative assessment of the ANGI, Vimeo,Dotdash Meredith Digital, Care.com Bluecrew and NurseflyVivian Health reporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units are described below:
•ANGI's October 1, 2020 market capitalization of $5.5 billion exceeded its carrying value by approximately $4.3 billion.
•The Company prepared valuations of the Vimeo, BluecrewDigital and NurseflyPrint reporting units within the Dotdash Meredith reportable segment (the Print reporting unit has no goodwill), the Care.com and the Vivian Health reporting units, which are primarily used in connection with the issuance and/or settlement of equity awards that are denominated in the equity of these businesses during the year ended December 31, 2020.2022. The valuations were prepared time proximate to, however, not as of, October 1, 2020.2022. The fair value of each of these businesses in these valuations was in excess of its October 1, 20202022 carrying value.
•The primary factorsIn the second quarter of 2022, the Company considered in its qualitative assessment ofreassessed the Care.com reporting unit were the strong forecasted operating performance of the Care.com reporting unit and the excess of estimated fair value based upon the purchase price at acquisition over the carrying value at October 1, 2020.
For the Company's annual goodwill test at October 1, 2020, the Company quantitatively testedof the Mosaic Group reporting unit.unit (included in the Emerging & Other segment) and recorded an impairment of $86.7 million as a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. The Company'sCompany prepared a quantitative test indicated that there was no impairment. The Company's Dotdash, Ask Media Group, Desktop, The Daily Beast and IAC Films reporting units have no goodwillassessment as of October 1, 2020.2022; this test resulted in no additional impairment as its carrying value approximates its fair value. Any subsequent declines in the fair value of Mosaic Group will result in additional goodwill impairment charges to the extent the carrying value exceeds the fair value.
The aggregate carrying value of goodwill for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately $759.5 million.the $153.6 million of goodwill at Mosaic Group.
The fair value of the Company's reporting units (except for ANGI described above) is determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an
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interim basis or annual basis as of October 1 each year. The Company uses the same approach in determining the fair value of its businesses in connection with its non-public subsidiary denominated stock-based compensation plans, which can be a significant factor in the decision to apply the qualitative assessment rather than a quantitative test. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reporting unit's current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in the quantitative test for determining the fair value of the Company's Mosaic Group reporting unit were 16.0% and 15.0% in 2022 and 2021, respectively. The discount rates used in the quantitative test for determining the fair value of the Ads and Leads, Services, Roofing and International reporting units wasin 2022 were 12.0%, 15.0% in 2020 (for the Mosaic reporting unit), 16.0% and 12.5% in 2019 (for the Desktop reporting unit).18.5%, respectively. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer groupgroup of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors.
While the Company has the option to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's 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, which 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 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's annual indefinite-lived impairment assessment ranged from 11.5%12.0% to 25.0%18.5% in 20202022 and 11.5%10.0% to 27.5%40.0% in 2019,2021, and the royalty rates used in both 2020 and 2019 ranged from 1.0% to 5.5%.8.0% in 2022 and 1.0% to 5.0% in 2021.
If the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value, an impairmenti mpairment equal to the excess is recorded. There are nois one indefinite-lived intangible assetsasset at Dotdash Meredith Digital with a value of approximately $126.0 million for which the most recent estimateexcess of the excess fair value over carrying value is less than 20%.
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I
n
The October 1, 2022 annual assessment of goodwill and indefinite-lived intangible assets did not identify any further impairments.
The October 1, 2021 annual assessment of goodwill and indefinite-lived intangible assets did not identify any impairments.
In the quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its reporting units and indefinite-lived intangible assets and identified impairments of $212.0 million and $21.4 million related to the goodwill and certain indefinite-lived intangible assets, respectively, of the Desktop reporting unit.
In the quarter ended September 30, 2020, the Company reassessed the fair values of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded impairments equal to the remaining carrying value of the goodwill of $53.2 million and $10.8 million related to the intangible assets. The reduction in the Company’s fair value estimates of the Desktop business in the first and third quarters of 2020 was primarily due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to policy changes implemented by Google and other browsers. The effects of COVID-19 on monetization were an additional factor.
The October 1, 2020 annual assessment of goodwill and indefinite-lived intangible assets did not identify any additionalfurther impairments.
The October 1, 2019 annual assessment of goodwill andImpairment charges recorded on indefinite-lived intangible assets identified a $3.3 million goodwill impairment charge and $0.7 million trade name impairment both related to the College Humor Media business.
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The October 1, 2018 annual assessment of goodwill did not identify any impairments. The 2018 annual assessment of indefinite-lived intangible assets identified impairment charges of $27.7 million and $1.1 million related to certain Desktop and College Humor Media indefinite-lived trade names, respectively. The indefinite-lived intangible asset impairment charge at Desktop was due to Google's policy changes related to its Chrome browser which became effective on September 12, 2018 and have negatively impacted the distribution of the Company's B2C downloadable desktop products. The impairment charge related to the B2C trade name was identified in the Company’s IAC's annual impairment assessment as of October 1, 2018 and reflects the projected reduction in profits and revenues and the resultant reduction in the assumed royalty rate from these policy changes. The impairment chargesintangibles are included in "Amortization of intangibles" in the accompanying statement of operations.
The Company’s operating segments are ANGI, Vimeo, Dotdash and Search, which are also reportable segments, and within its Emerging & Other reportable segment, Mosaic Group, Care.com, Bluecrew, Nursefly, The Daily Beast and IAC Films. The Company’s reporting units are consistent with its operating segments, with the exception of Desktop and Ask Media Group, which are separate reporting units within the Search operating segment. Goodwill is tested for impairment at the reporting unit level. See "Note 12—Segment Information" for additional information regarding the Company's method of determining operating and reportable segments.Long-Lived Assets and Intangible Assets with Definite Lives
Long-lived assets, which consist of ROU assets, building, capitalized software, equipment, leasehold improvements and equipment,buildings and intangible assets with definite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. During the year ended December 31, 2022, the Company recorded impairment charges of $14.3 million of an ROU asset and $7.0 million of the related leasehold improvements and furniture and equipment. See "Note 5—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-in-Control Payments" for additional information. Amortization of definite-lived intangible assets is computed either on a straight-line basis or is based on the pattern in which the economic benefits of the asset are expected to be realized. Accounting for Investments in Equity Securities
The Company's equity securities, other than those of its consolidated subsidiaries and those accounted for under the equity method, are accounted for at fair value or under the measurement alternative of ASU No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities, with any changes to fair value recognized in "Other income (expense), net" in the statement of operations each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer; fair value is generally determined based on a market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors the Company considers in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of its investments in equity securities, which require judgment and the use of estimates. When the Company's assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge in "Other income (expense), net" in the statement of operations.
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The Company accounts for investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee, but does not have a controlling financial interest, using the equity method. At December 31, 2022 and 2021, the Company had one investment accounted for using the equity method, which is included in "Long-term investments" in the balance sheet.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. See "Note 6—Financial Instruments and Fair Value Measurements" for a discussion of fair value measurements made using Level 3 inputs.The Company's non-financial assets, such as goodwill, intangible assets, ROU assets and property and equipment are adjusted to fair value only when an impairment is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
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Advertising Costs
Advertising costs are expensed in the period incurred (when the advertisement first runs for production costs that are initially capitalized) and represent online marketing, including fees paid to search engines, social media sites and third parties that distribute our B2C downloadable applications, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the brands within our ANGI segment. Advertising expense is $862.2 million, $855.2 million and $798.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The Company capitalizes and amortizes the costs associated with certain distribution arrangements that require us to pay a fee per access point delivered. These access points are generally in the form of downloadable applications associated with our direct-to consumer operations. These fees are amortized over the estimated useful lives of the access points to the extent the Company can reasonably estimate a probable future economic benefit and the period over which such benefit will be realized (generally 18 months). Otherwise, the fees are charged to expense as incurred.
Legal Costs
Legal costs are expensed as incurred.
Income Taxes
The Company was included within Old IAC’s tax group for purposes of federal and consolidated state income tax return filings through June 30, 2020, the date of the MTCH Separation. For periods prior thereto, the income tax benefit and/or provision was computed for the Company on an as if standalone, separate return basis and payments to and refunds from Old IAC for the Company’s share of Old IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying statement of cash flows.
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense.
The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.
Earnings Per Share
Basic earnings per share is computed by dividing net earnings attributable to IAC shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company. For periods prior to the MTCH Separation, the Company calculated basic and diluted earnings per share using the shares issued on June 30, 2020, the date of the MTCH Separation. See "Note 10—Earnings Per Share" for additional information on dilutive securities.Foreign Currency Translation and Transaction Gains and Losses
The financial position and operating results of foreign entities whose primary economic environment is based on their local currency are consolidated using the local currency as the functional currency. These local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses of these operations
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are translated at average rates of exchange during the period. Translation gains and losses are included in accumulated other comprehensive income as a component of shareholders' and parent's equity. Transaction gains and losses resulting from assets and liabilities denominated in a currency other than the functional currency are included in the statement of operations as a component of other (expense) income, net. See "Note 17—Financial Statement Details" for additional information regarding foreign currency exchange gains and losses.Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive income (loss) into earnings. During the years ended December 31, 2020 and 2018, a gain of $0.1 million and a loss of $0.1 million, respectively, were reclassified into earning, and were included in "Other (expense) income, net" in the accompanying statement of operations. There were 0 such gains or losses for the year ended December 31, 2019.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite service period. See "Note 11—Stock-based Compensation" for a discussion of the Company's stock-based compensation plans.Redeemable Noncontrolling Interests
Noncontrolling interests in the subsidiaries of the Company are ordinarily reported on the balance sheet within shareholders' equity, separately from the Company's equity. However, securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of shareholders' equity. Accordingly, all noncontrolling interests that are redeemable at the option of the holder are presented outside of shareholders' and parents' equity in the accompanying balance sheet.
In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively. The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. These put and call arrangements become exercisable by the Company and the counter-party at various dates in the future. NaN of these arrangements was exercised during both of the years ended December 31, 2020 and 2019 and 2 of these arrangements were exercised during the year ended December 31, 2018. These put arrangements are exercisable by the counter-party outside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital or invested capital. During the years ended December 31, 2020, 2019 and 2018, the Company recorded adjustments of $183.3 million, $11.6 million and $6.6 million, respectively, to increase these interests to fair value. Fair value determinations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flow projections.
Recent Accounting Pronouncements
Accounting Pronouncements Adopted by IAC
ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
The Company adopted ASU No. 2016-13effective January 1, 2020. ASU No. 2016-13 replaces the “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. The Company adopted ASU No. 2016-13 using the modified retrospective approach and there was no cumulative effect arising from the adoption. The adoption of ASU No. 2016-13 did not have a material impact on the Company's financial statements.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
The Company adopted ASU No. 2019-12 effective January 1, 2020, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes,and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within ASU No. 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted ASU No. 2019-12 on January 1, 2020 using the modified retrospective basis for those amendments that are not applied on a prospective basis. The adoption of ASU No. 2019-12 did not have a material impact on the Company's financial statements.
Accounting Pronouncements Not Yet Adopted by IAC
There are no recently issued accounting pronouncements that have not yet been adopted that are expected to have a material effect on the results of operations, financial condition or cash flows of the Company.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 3—INCOME TAXES
The Company was included within Old IAC’s tax group for purposes of federal and consolidated state income tax return filings through June 30, 2020, the date of the MTCH Separation. For periods prior thereto, the income tax benefit and/or provision were computed for the Company on an as if standalone, separate return basis and payments to and refunds from Old IAC for the Company’s share of Old IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying statement of cash flows.
U.S. and foreign earnings (loss) before income taxes and noncontrolling interests are as follows:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| U.S. | $ | 197,545 | | | $ | (74,360) | | | $ | 269,267 | |
| Foreign | 12,022 | | | 46,054 | | | 36,304 | |
| Total | $ | 209,567 | | | $ | (28,306) | | | $ | 305,571 | |
The components of the income tax (benefit) provision are as follows:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Current income tax (benefit) provision: | | | | | |
| Federal | $ | (29,176) | | | $ | (1,117) | | | $ | (1,187) | |
| State | 2,253 | | | 197 | | | 1,514 | |
| Foreign | (176) | | | 3,201 | | | 4,108 | |
| Current income tax (benefit) provision | (27,099) | | | 2,281 | | | 4,435 | |
| | | | | |
| Deferred income tax (benefit) provision: | | | | | |
| Federal | (20,054) | | | (51,952) | | | 20,156 | |
| State | (7,726) | | | (10,645) | | | (7,272) | |
| Foreign | (4,140) | | | (173) | | | (4,119) | |
| Deferred income tax (benefit) provision | (31,920) | | | (62,770) | | | 8,765 | |
| Income tax (benefit) provision | $ | (59,019) | | | $ | (60,489) | | | $ | 13,200 | |
The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Deferred tax assets: | | | |
| Net operating loss carryforwards | $ | 404,807 | | | $ | 201,766 | |
| Stock-based compensation | 44,926 | | | 62,566 | |
| Long-term lease liabilities | 58,800 | | | 42,486 | |
| Tax credit carryforwards | 48,936 | | | 38,066 | |
| Accrued expenses | 20,490 | | | 12,911 | |
| Other | 34,024 | | | 21,039 | |
| Total deferred tax assets | 611,983 | | | 378,834 | |
| Less: valuation allowance | (113,684) | | | (92,990) | |
| Net deferred tax assets | 498,299 | | | 285,844 | |
| | | |
| Deferred tax liabilities: | | | |
| Investment in subsidiaries | (242,537) | | | (240,420) | |
| Investment in MGM Resorts International | (197,998) | | | — | |
| Right-of-use assets | (43,418) | | | (29,654) | |
| Intangible assets | (30,094) | | | (28,488) | |
| Other | (34,639) | | | (31,534) | |
| Total deferred tax liabilities | (548,686) | | | (330,096) | |
| Net deferred tax liabilities | $ | (50,387) | | | $ | (44,252) | |
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
As a result of the MTCH Separation, the Company's net deferred tax liability was adjusted via invested capital for tax attributes allocated to it from Old IAC's consolidated federal and state tax filings. The allocation of tax attributes that was recorded as of June 30, 2020 was preliminary. Any subsequent adjustment to allocated tax attributes will be recorded as an adjustment to deferred taxes and additional paid-in capital. This adjustment is expected to be made in the fourth quarter of 2021 following the filing of income tax returns for the year ended December 31, 2020.
At December 31, 2020, the Company had federal and state net operating losses ("NOLs") of $1.3 billion and $840.4 million, respectively, available to offset future income. Of these federal NOLs, $843.5 million can be carried forward indefinitely and $484.1 million, if not utilized, will expire at various times between 2024 and 2036. The state NOLs, if not utilized, will expire at various times between 2022 and 2040. Federal and state NOLs of $833.3 million and $543.8 million, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the IRC, separate return limitations, and applicable law. At December 31, 2020, the Company had foreign NOLs of $442.2 million available to offset future income. Of these foreign NOLs, $401.8 million can be carried forward indefinitely and $40.4 million, if not utilized, will expire at various times between 2021 and 2040. During 2020, the Company recognized tax benefits related to NOLs of $240.3 million. Included in this amount is $32.1 million of tax benefits of acquired attributes, which was recorded as a reduction to goodwill.
At December 31, 2020, the Company had tax credit carryforwards of $66.2 million. Of this amount, $51.6 million relates to credits for research activities, $12.7 million relates to credits for foreign taxes, and $1.9 million relates to various other credits. Of these credit carryforwards, $11.5 million can be carried forward indefinitely and $54.7 million, if not utilized, will expire between 2021 and 2040.
The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience. At December 31, 2020, the Company had a U.S. gross deferred tax asset of $489.8 million that the Company expects to fully utilize on a more likely than not basis.
During 2020, the Company's valuation allowance increased by $20.7 million primarily due to an increase in foreign NOLs and the impairments of certain equity securities without readily determinable fair values. At December 31, 2020, the Company had a valuation allowance of $113.7 million related to the portion of tax loss carryforwards, foreign tax credits and other items for which it is more likely than not that the tax benefit will not be realized.
A reconciliation of the income tax (benefit)/provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Income tax provision (benefit) at the federal statutory rate of 21% | $ | 44,009 | | | $ | (5,944) | | | $ | 64,170 | |
| State income taxes, net of effect of federal tax benefit | 15,936 | | | (277) | | | 5,188 | |
| Stock-based compensation | (167,998) | | | (56,871) | | | (39,326) | |
| Non-deductible goodwill impairment | 53,012 | | | 0 | | | 0 | |
| Non-deductible executive compensation | 14,219 | | | 7,409 | | | 2,983 | |
| Change in valuation allowance on capital losses | 11,385 | | | (5,815) | | | (1,280) | |
| Research credit | (7,407) | | | (5,105) | | | (3,167) | |
| Amortizable tax basis related to intercompany transaction | (7,044) | | | 0 | | | 0 | |
| Non-deductible expenses | 6,556 | | | 5,460 | | | 1,727 | |
| Change in judgement on beginning of the year valuation allowance | (3,544) | | | — | | | — | |
| Net adjustment related to the reconciliation of income tax provision accruals to tax returns | (2,591) | | | 138 | | | 42 | |
| Deferred tax adjustment for enacted changes in tax laws and rates | (14,579) | | | (687) | | | (13,646) | |
| Other, net | (973) | | | 1,203 | | | (3,491) | |
| Income tax (benefit) provision | $ | (59,019) | | | $ | (60,489) | | | $ | 13,200 | |
A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:
| | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Balance at January 1 | $ | 18,060 | | | $ | 15,451 | | | $ | 14,528 | |
| Additions based on tax positions related to the current year | 3,977 | | | 2,781 | | | 1,455 | |
| Settlements | (4,309) | | | — | | | — | |
| Additions for tax positions of prior years | 2,781 | | | 238 | | | 235 | |
| Expiration of applicable statutes of limitations | (351) | | | (410) | | | (767) | |
| Balance at December 31 | $ | 20,158 | | | $ | 18,060 | | | $ | 15,451 | |
The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company and consolidated tax returns with Old IAC and will be under audit for its tax returns filed on a standalone basis following the MTCH Separation. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service ("IRS") has substantially completed its audit of Old IAC’s federal income tax returns for the years ended December 31, 2010 through 2016, which includes the operations of the Company. The IRS began its audit of the year ended December 31, 2017 in the second quarter of 2020. The statute of limitations for the years 2010 through 2012 and for the years 2013 through 2017 have been extended to May 31, 2021 and December 31, 2021, respectively. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from the examination of prior year tax returns. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At December 31, 2020 and 2019, accruals for interest and penalties are not material.
At December 31, 2020 and 2019, unrecognized tax benefits, including interest and penalties, were $22.1 million and $20.3 million, respectively. Included in unrecognized tax benefits at December 31, 2019 is $11.6 million for tax positions included in Old IAC's consolidated tax return filings. If unrecognized tax benefits at December 31, 2020 are subsequently recognized, $20.4 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2019 was $18.9 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $6.1 million by December 31, 2021, due to expirations of statutes of limitations or other settlements; all of which would reduce the income tax provision.
At December 31, 2020, all of the Company's international cash can be repatriated without any significant tax consequences.
NOTE 4—BUSINESS COMBINATION
On February 11, 2020, the Company acquired 100% of Care.com, a leading global platform for finding and managing family care, for a total purchase price of $626.9 million, which includes cash consideration of $587.0 million paid by the Company and the settlement of all outstanding vested employee equity awards for $40.0 million paid by Care.com prior to the completion of the acquisition. The Company's purchase accounting is not yet complete and will be finalized in the first quarter of 2021; the determination of the fair value of certain contingent liabilities and acquired tax attributes is preliminary and subject to revision. During the fourth quarter of 2020, the Company completed a preliminary assessment of net operating losses acquired. As a result, the Company revised the purchase price allocation by increasing the fair value of deferred tax assets by $32.1 million and decreasing goodwill by $32.1 million.
The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
| | | | | |
| Care.com |
| (In thousands) |
Cash and cash equivalents | $ | 57,702 | |
Short-term investments | 20,000 | |
Accounts receivable | 20,213 | |
Other current assets | 7,479 | |
Property and equipment | 2,894 | |
Goodwill | 404,313 | |
Intangible assets | 116,800 | |
Deferred income taxes | 32,112 | |
Other non-current assets | 30,444 | |
Total assets | 691,957 | |
Deferred revenue | (13,422) | |
Other current liabilities | (39,698) | |
Deferred income taxes | (25,824) | |
Other non-current liabilities | (26,039) | |
Net assets acquired | $ | 586,974 | |
The Company acquired Care.com because it is complementary to other marketplace businesses of IAC. The purchase price was based on the expected financial performance of Care.com, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
| | | | | | | | | | | |
| Care.com |
| (In thousands) | | Useful Life
(Years) |
| Indefinite-lived trade name and trademarks | $ | 59,300 | | | Indefinite |
| Developed technology | 21,200 | | | 2 |
| Customer relationships | 35,500 | | | 2 - 5 |
| Provider relationships | 800 | | | 4 |
| Total identifiable intangible assets acquired | $ | 116,800 | | | |
Accounts receivable, other current assets, other non-current assets, other current liabilities and other non-current liabilities of Care.com were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis. The fair values of the trade name and developed technology were determined using an income approach that utilized the relief from royalty methodology. The fair values of customer relationships and provider relationships were determined using an income approach that utilized the excess earnings methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
The financial results of Care.com are included in the Company's financial statements, within the Emerging & Other segment, beginning February 11, 2020. For the year ended December 31, 2020, the Company included $182.4 million of revenue and $31.4 million of net loss in its statement of operations related to Care.com. For the year ended December 31, 2020, the net loss of Care.com reflects a reduction in revenue of $17.3 million due to the write-off of deferred revenue due to purchase accounting fair value adjustments and $16.7 million in transaction-related costs, including severance.
Unaudited pro forma financial information
The unaudited pro forma financial information in the table below presents the results of the Company and Care.com as if this acquisition had occurred on January 1, 2019. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisition occurred on January 1, 2019. For the year ended December 31, 2020, pro forma adjustments include a reduction in transaction related costs (including stock-based compensation expense related to the acceleration of vesting of outstanding employee equity awards) of $72.8 million because they are one-time in nature and will not have a continuing impact on operations and an increase in revenue of $17.1 million related to deferred revenue written off as a part of the acquisition. For the year ended December 31, 2019, pro forma adjustments include an increase in amortization of intangibles of $25.9 million and a decrease in revenue of $11.1 million related to the deferred revenue written off as a part of the acquisition.
| | | | | | | | | | | |
| | Years Ended December 31, |
| 2020 | | 2019 |
| | (In thousands, except per share data) |
| Revenue | $ | 3,090,779 | | | $ | 2,904,243 | |
| Net earnings (loss) attributable to IAC shareholders | $ | 296,933 | | | $ | (16,926) | |
| Basic earnings (loss) per share attributable to IAC shareholders | $ | 3.48 | | | $ | (0.20) | |
| Diluted earnings (loss) per share attributable to IAC shareholders | $ | 3.26 | | | $ | (0.20) | |
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 5—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net are as follows:
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Goodwill | $ | 1,879,438 | | | $ | 1,616,867 | |
| Intangible assets with indefinite lives | 246,913 | | | 225,296 | |
| Intangible assets with definite lives, net of accumulated amortization | 158,927 | | | 124,854 | |
| Total goodwill and intangible assets, net | $ | 2,285,278 | | | $ | 1,967,017 | |
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at
December 31, 2019 | | Additions | | (Deductions) | | Impairment | | Foreign
Exchange
Translation | | Balance at
December 31, 2020 |
| | (In thousands) |
| ANGI Homeservices | $ | 884,296 | | | $ | 2,665 | | | $ | 0 | | | $ | 0 | | | $ | 5,172 | | | $ | 892,133 | |
| Vimeo | 219,374 | | | 0 | | | (38) | | | 0 | | | 0 | | | 219,336 | |
| Search | 265,146 | | | 0 | | | 0 | | | (265,146) | | | 0 | | | 0 | |
| Emerging & Other | 248,051 | | | 519,405 | | | 0 | | | 0 | | | 513 | | | 767,969 | |
| Total | $ | 1,616,867 | | | $ | 522,070 | | | $ | (38) | | | $ | (265,146) | | | $ | 5,685 | | | $ | 1,879,438 | |
Additions are primarily related to the acquisitions of Care.com (included in the Emerging & Other segment) and LifeCare (acquired by Care.com in October 2020).
In the quarter ended March 31, 2020, the Company determined that the effects of COVID-19 were an indicator of possible impairment for certain of its reporting units and indefinite-lived intangible assets and identified a $212.0 million impairment related to the goodwill of the Desktop reporting unit and a $21.4 million impairment related to certain indefinite-lived intangible assets of the Desktop reporting unit.
In the quarter ended September 30, 2020, the Company reassessed the fair values of the Desktop reporting unit and the related indefinite-lived intangible assets and recorded impairments equal to the remaining carrying value of the goodwill of $53.2 million and $10.8 million related to the intangible assets.
The reduction in the Company’s fair value estimates of the Desktop business in the first and third quarters of 2020 was primarily due to lower consumer queries, increasing challenges in monetization and the reduced ability to market profitably due to policy changes implemented by Google and other browsers. The effects of COVID-19 on monetization were an additional factor.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at
December 31, 2018 | | Additions | | (Deductions) | | Impairment | | Foreign
Exchange
Translation | | Balance at
December 31, 2019 |
| | (In thousands) |
| ANGI Homeservices | $ | 895,071 | | | $ | 18,326 | | | $ | (29,293) | | | $ | 0 | | | $ | 192 | | | $ | 884,296 | |
| Vimeo | 77,152 | | | 142,222 | | | 0 | | | 0 | | | 0 | | | 219,374 | |
| Search | 265,146 | | | 0 | | | 0 | | | 0 | | | 0 | | | 265,146 | |
| Emerging & Other | 246,748 | | | 4,765 | | | 0 | | | (3,318) | | | (144) | | | 248,051 | |
| Total | $ | 1,484,117 | | | $ | 165,313 | | | $ | (29,293) | | | $ | (3,318) | | | $ | 48 | | | $ | 1,616,867 | |
Additions primarily relate to the acquisitions of Magisto (included in the Vimeo segment) and Fixd Repair (included in the ANGI Homeservices segment). Deductions primarily relate to tax benefits of acquired attributes related to the acquisition of Handy (included in the ANGI Homeservices segment). During the fourth quarter of 2019, the Company recorded an impairment of $3.3 million related to the goodwill of the College Humor Media business (included in the Emerging & Other Segment), which was sold on March 16, 2020.
The December 31, 2020 goodwill balances reflect accumulated impairment losses of $981.3 million and $198.3 million at Search and Dotdash, respectively. The December 31, 2019 goodwill balances reflect accumulated impairment losses of $716.2 million and $198.3 million at Search and Dotdash, respectively, and $14.9 million related to College Humor Media (included in the Emerging & Other segment).As a result of the impairments that were recorded prior to January 1, 2019, the Dotdash reportable segment has no goodwill.
At December 31, 2020 and 2019, intangible assets with definite lives are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net | | Weighted-Average
Useful Life
(Years) |
| | (In thousands) | | |
| Technology | $ | 167,997 | | | $ | (102,355) | | | $ | 65,642 | | | 4.1 |
| Service professional relationships | 97,960 | | | (97,312) | | | 648 | | | 3.0 |
| Customer lists and user base | 91,887 | | | (33,864) | | | 58,023 | | | 4.0 |
| Trade names | 53,383 | | | (19,227) | | | 34,156 | | | 6.6 |
| Memberships | 15,900 | | | (15,900) | | | — | | | 3.0 |
| Other | 10,439 | | | (9,981) | | | 458 | | | 3.4 |
| Total | $ | 437,566 | | | $ | (278,639) | | | $ | 158,927 | | | 4.1 |
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net | | Weighted-Average
Useful Life
(Years) |
| | (In thousands) | | |
| Technology | $ | 143,255 | | | $ | (73,483) | | | $ | 69,772 | | | 4.5 |
| Service professional relationships | 99,651 | | | (76,445) | | | 23,206 | | | 2.9 |
| Customer lists and user base | 44,286 | | | (24,226) | | | 20,060 | | | 3.3 |
| Trade names | 12,777 | | | (8,082) | | | 4,695 | | | 3.5 |
| Memberships | 15,900 | | | (11,940) | | | 3,960 | | | 3.0 |
| Other | 10,439 | | | (7,278) | | | 3,161 | | | 3.4 |
| Total | $ | 326,308 | | | $ | (201,454) | | | $ | 124,854 | | | 3.7 |
At December 31, 2020, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:
| | | | | |
| Years Ending December 31, | (In thousands) |
| 2021 | $ | 62,600 | |
| 2022 | 37,982 | |
| 2023 | 23,209 | |
| 2024 | 11,292 | |
| 2025 | 9,040 | |
| Thereafter | 14,804 | |
| Total | $ | 158,927 | |
NOTE 6—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Debt Securities
At December 31, 2020, current available-for-sale marketable debt securities are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair Value |
| (In thousands) |
| Treasury discount notes | $ | 224,976 | | | $ | 3 | | | $ | 0 | | | $ | 224,979 | |
| Total available-for-sale marketable debt securities | $ | 224,976 | | | $ | 3 | | | $ | 0 | | | $ | 224,979 | |
The Company did 0t hold any marketable debt securities at December 31, 2019.
The contractual maturities of debt securities classified as current available-for-sale at December 31, 2020 are within one year. There are 0 investments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of December 31, 2020.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Investment in MGM Resorts International
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Investment in MGM Resorts International ("MGM") | $ | 1,860,158 | | | $ | 0 | |
During the year ended December 31, 2020, the Company purchased 59.0 million shares of MGM. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange and any unrealized gains or losses are included in the accompanying statement of operations. For the year ended December 31, 2020, the Company recognized an unrealized gain of $840.5 million on its investment in MGM.
Long-term Investments
Long-term investments consist of:
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Equity securities without readily determinable fair values | $ | 296,491 | | | $ | 347,975 | |
| Equity method investment | 1,152 | | | 0 | |
| Total long-term investments | $ | 297,643 | | | $ | 347,975 | |
Equity Securities without Readily Determinable Fair Values
During the first quarter of 2020, the Company recorded unrealized impairments of $51.5 million related to certain equity securities without readily determinable fair values due to the impact of COVID-19. All gains and losses on equity securities without readily determinable fair values, realized and unrealized, are recognized in "Other (expense) income, net" in the accompanying statement of operations.
The following table presents a summary of unrealized gains and losses recorded in other (expense) income, net, as adjustments to the carrying value of equity securities without readily determinable fair values held as of December 31, 2020 and 2019.
| | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 |
| (In thousands) |
| Upward adjustments (gross unrealized gains) | $ | — | | | $ | 19,698 | |
| Downward adjustments including impairments (gross unrealized losses) | (51,484) | | | (1,193) | |
| Total | $ | (51,484) | | | $ | 18,505 | |
The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at December 31, 2020 were $19.7 million and $43.5 million, respectively.
Realized and unrealized gains and losses for the Company's marketable equity securities and investments without readily determinable fair values for the years ended December 31, 2020 and 2019 are as follows:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| (In thousands) |
| Realized gains, net, for equity securities sold | $ | 2,161 | | | $ | 22,880 | | | $ | 27,366 | |
| Unrealized gains, net, on equity securities held | 797,565 | | | 18,505 | | | 126,063 | |
| Total gains recognized, net | $ | 799,726 | | | $ | 41,385 | | | $ | 153,429 | |
Equity Method Investment
During the fourth quarter of 2020, the Company acquired 0.3 million common shares of Turo Inc. ("Turo"), a peer-to-peer car sharing marketplace, for approximately $1.1 million, which is accounted for under the equity method of accounting on a one quarter lag, given the Company's preexisting ownership interest of approximately 26.8% on a fully diluted basis in the form of preferred shares, which are not common stock equivalents.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. See "Note 6—Financial Instruments and Fair Value Measurements" for a discussion of fair value measurements made using Level 3 inputs. Assets measured at fair value on a nonrecurring basis
The Company's non-financial assets, such as goodwill, intangible assets, ROU assets and capitalized software, equipment, leasehold improvements and buildings, are adjusted to fair value only when an impairment is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs. Refer to "Goodwill and Indefinite-Lived Intangible Assets" for a description of the Angi Roofing and Mosaic Group goodwill impairment charges recorded in the fourth and second quarters of 2022, respectively.
Advertising Costs
Advertising costs are expensed in the period incurred (when the advertisement first runs for production costs that are initially capitalized) and represent online marketing, including fees paid to search engines, social media sites and third parties that distribute our B2C downloadable applications, which ceased beginning in March 2021, offline marketing, which is primarily television advertising, partner-related payments to those who direct traffic to the brands within our Angi Inc. segment, and direct-mail costs for magazine subscription acquisition efforts within our Dotdash Meredith segment. Advertising expense is $1.0 billion, $877.0 million and $796.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Legal Costs
Legal costs are expensed as incurred.
Original Issue Discount, Debt Issuance Costs and Deferred Financing Costs
Costs incurred to obtain financing are deferred and amortized to "Interest expense" in the statement of operations over the related financing period using the effective interest method. The Company records debt issuance costs as a direct reduction of the carrying value of the related debt. Financing costs related to the undrawn revolving credit facility are included in "Other non-current assets" in the balance sheet.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Income Taxes
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, for uncertain tax positions as a component of income tax expense. The Company elects to recognize the tax on Global Intangible Low-Taxed Income as a period expense in the period the tax is incurred.
The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustainable upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.
The Company was included within Old IAC’s tax group for purposes of federal and consolidated state income tax return filings through June 30, 2020, the date of the MTCH Separation. For periods prior thereto, the income tax benefit and/or provision was computed for the Company on an as if standalone, separate return basis and payments to and refunds from Old IAC for the Company’s share of Old IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the statement of cash flows.
Pensions and Postretirement Benefits
In connection with the acquisition of Meredith, the Company assumed the obligations under its pension plans. Pension benefits for the domestic plans are generally based on formulas that reflect pay credits allocated to participants’ accounts based on years of benefit service and annual pensionable earnings. The domestic plans are frozen with respect to new participants and the qualified plan was terminated effective December 31, 2022, and therefore, will have no future service costs. There were no active participants in the international plans so there are no future service cost for the international plans.
The Company utilizes a mark-to-market approach to account for pension and postretirement benefits. Under this approach, the Company recognizes changes in the fair value of plan assets and actuarial gains or losses in the fourth quarter of each fiscal year or whenever a plan is required to be remeasured. Events requiring a plan remeasurement are recognized in the quarter in which the remeasurement event occurs. The remaining components of pension and other postretirement plan net periodic benefit costs are recorded on a quarterly basis.
The discount rates utilized for the domestic plans and unqualified (unfunded) United Kingdom ("U.K.") plan was based on the investment yields of high-quality corporate bonds available in the marketplace with maturities equal to projected cash flows of future benefit payments as of the measurement date. Following the annuity contract transaction in the U.K. described in "Note 13—Pension and Postretirement Benefit Plans," the approach for setting the discount rate for the IPC Pension Scheme was changed from a high-quality corporate bond basis to an effective insurance settlement rate, using the estimated discount rates inherent in the annuity contracts at each measurement date. This approach is consistent with the determination of the discount rate under the prior annuity contract entered into in May 2020. The Company does not expect future contributions to be made into these plans as a result of the annuity contract entered into with a private limited life insurance company related to the qualified international pension plan and the determination to freeze and terminate the qualified domestic pension plan. The Company's non-qualified plans are funded as payments, which can include the purchase of annuity contracts, are made. In addition, the Company provides health care and life insurance benefits for certain employees upon their retirement, the expected costs of which are accrued over the periods that the employees render services and are funded as claims are paid. See "Note 13—Pension and Postretirement Benefit Plans" for additional information.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Earnings Per Share
Basic net earnings (loss) per share ("EPS") is computed by dividing net earnings (loss) attributable to holders of IAC common stock and Class B common stock by the weighted-average number of shares of common stock and Class B common stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company. Undistributed earnings allocated to the participating security is subtracted from earnings in determining earnings attributable to holders of IAC common stock and Class B common stock for EPS. See "Note 15—(Loss) Earnings Per Share" for additional information on dilutive securities. Foreign Currency Translation and Transaction Gains and Losses
The financial position and operating results of foreign entities whose primary economic environment is based on their local currency are consolidated using the local currency as the functional currency. These local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses of these operations are translated at average rates of exchange during the period. Translation gains and losses are included in accumulated other comprehensive income as a component of shareholders' and parent's equity. Transaction gains and losses resulting from assets and liabilities denominated in a currency other than the functional currency are included in the statement of operations as a component of "Other (expense) income, net". See "Note 17—Financial Statement Details" for additional information regarding foreign currency exchange gains and losses. Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive income (loss) into earnings. During the years ended December 31, 2022, 2021 and 2020, losses of less than $0.1 million and $10.0 million and gains of $0.1 million, respectively, were reclassified into earnings and included in "Other (expense) income, net" in the statement of operations.
Stock-Based Compensation
Stock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite service period. See "Note 12—Stock-Based Compensation" for a discussion of the Company's stock-based compensation plans. Redeemable Noncontrolling Interests
Noncontrolling interests in the subsidiaries of the Company are ordinarily reported on the balance sheet within shareholders' equity, separately from the Company's equity. However, securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of shareholders' equity. Accordingly, all noncontrolling interests that are redeemable at the option of the holder are presented outside of shareholders' and parent's equity in the balance sheet.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively. The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. These put and call arrangements become exercisable by the Company and the counterparty at various dates in the future. There were no arrangements exercised during the year ended December 31, 2022. Two of these arrangements were exercised during the year ended December 31, 2021 and one of these arrangements was exercised during the year ended December 31, 2020. These put arrangements are exercisable by the counterparty outside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital or invested capital. During the years ended December 31, 2022, 2021 and 2020, the Company recorded adjustments of $24.2 million, $777.7 million and $183.3 million, respectively (of which $777.3 million and $171.0 million were related to Vimeo during 2021 and 2020, respectively), to increase these interests to fair value. Fair value determinations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flow projections.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that are expected to have a material effect on the results of operations, financial condition or cash flows of the Company.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 3—BUSINESS COMBINATIONS
Dotdash Meredith
On December 1, 2021, Dotdash acquired Meredith under the terms of an agreement (the "Merger Agreement") dated as of October 6, 2021. At the effective time of the merger, each outstanding share of common stock of Meredith (other than certain excluded shares) was converted into the right to receive $42.18 in cash. Pursuant to the Merger Agreement, Meredith equity awards were cancelled, and in exchange each holder received such holder’s portion of the merger consideration as set forth in the Merger Agreement, less the per share exercise price in the case of stock options. The Company accounted for this acquisition as a business combination under the acquisition method of accounting. The Company completed the purchase accounting for the Meredith acquisition during the fourth quarter of 2022.
The total purchase price was calculated and allocated as follows:
| | | | | |
| Meredith |
| (In thousands) |
| Common stock of Meredith | $ | 1,931,376 | |
| Cash payment used to settle a portion of Meredith debt | 625,000 | |
| Cash settlement of all outstanding vested equity awards and deferred compensation | 130,089 | |
| Total purchase price | $ | 2,686,465 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
| | | | | |
| Meredith |
| (In thousands) |
| Cash and cash equivalents | $ | 12,436 | |
| Accounts receivable | 334,891 | |
| Other current assets | 123,081 | |
| Leasehold improvements, equipment, buildings, land and capitalized software | 258,197 | |
| Goodwill | 1,513,824 | |
| Intangible assets | 1,175,459 | |
| Other non-current assets | 676,777 | |
| Total assets | 4,094,665 | |
| Customer deposit liability | (144,136) | |
| Other current liabilities | (435,268) | |
| Deferred income taxes | (268,999) | |
| Other non-current liabilities | (559,797) | |
| Net assets acquired | $ | 2,686,465 | |
The Company acquired Meredith because it is complementary to Dotdash. The purchase was based on the expected future financial performance of Meredith under Dotdash leadership, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill. The purchase price attributed to goodwill is not tax deductible.
The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
| | | | | | | | | | | |
| Meredith |
| (In thousands) | | Useful Life
(Years) |
| Indefinite-lived trade names and trademarks | $ | 388,550 | | | Indefinite-lived |
| Advertiser relationships | 297,000 | | | 5 |
| Licensee relationships | 171,000 | | | 3-6 |
| Digital content | 96,200 | | | 2-3 |
| Trade name and trademarks | 80,500 | | | 1-29(a) |
| Subscriber relationships | 76,009 | | | 1-2 |
| Developed technology | 66,200 | | | 2-3 |
| Total identifiable intangible assets acquired | $ | 1,175,459 | | | |
_____________________
(a) Approximately $19 million of the total trade names and trademarks represents digital trade names and trademarks that Dotdash Meredith has the contractual right to use for 29 years. The remaining definite-lived trade names and trademarks have an estimated useful life that range from 1 to 5 years.
Accounts receivable, other current assets, leasehold improvements, equipment, buildings, land and capitalized software, other non-current assets, customer deposit liability, other current liabilities, and other non-current liabilities of Meredith were reviewed and adjusted to their fair values at the date of acquisition, as necessary. Accounts receivable was adjusted for $3.4 million of gross contractual amounts that were not collected. Contingencies, including indemnification liabilities related to pre-acquisition income tax and non-income tax liabilities, of $60.0 million are included in net assets acquired. The fair value of contingencies represents an estimate of amounts to be paid and an assessment of probability.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The fair values of trade names and trademarks were determined using an income approach that utilized a relief from royalty methodology. The fair values of advertiser, licensee and subscriber relationships were determined using an income approach that utilized an excess earnings methodology. The fair values of digital content and developed technology were determined using a cost to replace methodology. The valuations of these intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates.
Care.com
On February 11, 2020, the Company acquired Care.com, a leading online destination for families to easily connect with caregivers, for a total purchase price of $626.9 million, which includes cash consideration of $587.0 million paid by the Company and the settlement of all outstanding vested employee equity awards for $40.0 million paid by Care.com prior to the completion of the acquisition. The Company completed the purchase accounting for the Care.com acquisition during the first quarter of 2021.
Unaudited pro forma financial information
The unaudited pro forma financial information in the table below presents the results of the Company, Meredith, and Care.com, as if these acquisitions had occurred on January 1, 2020 and January 1, 2019, respectively. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had these acquisitions occurred on the aforementioned dates. For the years ended December 31, 2021 and 2020, pro forma adjustments include an increase in amortization expense of $135.9 million and $149.5 million, respectively, related to intangible asset adjustments in purchase accounting. To present transaction-related costs in the beginning of the earliest comparative period presented, pro forma adjustments include a reduction in transaction-related costs of $130.8 million for the year ended December 31, 2021.
| | | | | | | | |
| Years Ended December 31, |
| | 2021 | 2020 |
| | (In thousands, except per share data) |
| Revenue | $ | 5,599,334 | | $ | 4,840,324 | |
| Net earnings (loss) from continuing operations | $ | 650,189 | | $ | (85,372) | |
| Basic earnings (loss) per share from continuing operations | $ | 7.39 | | $ | (0.99) | |
| Diluted earnings (loss) per share from continuing operations | $ | 6.95 | | $ | (0.99) | |
| Net earnings (loss) attributable to IAC shareholders | $ | 656,920 | | $ | (100,847) | |
| Basic earnings (loss) per share attributable to IAC shareholders | $ | 7.36 | | $ | (1.18) | |
| Diluted earnings (loss) per share attributable to IAC shareholders | $ | 6.93 | | $ | (1.18) | |
NOTE 4—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net are as follows:
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Goodwill | $ | 3,030,168 | | | $ | 3,226,610 | |
| Intangible assets with indefinite lives | 631,097 | | | 679,149 | |
| Intangible assets with definite lives, net of accumulated amortization | 538,944 | | | 735,743 | |
| Total goodwill and intangible assets, net | $ | 4,200,209 | | | $ | 4,641,502 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2021 | | | | Deductions | | Reporting Unit Allocation Adjustment | | Impairment | | Foreign Exchange Translation | | Balance at December 31, 2022 |
| | (In thousands) |
| Dotdash Meredith | | | | | | | | | | | | | |
| Digital | $ | 1,567,843 | | | | | $ | (70,201) | | | — | | | — | | | $ | — | | | $ | 1,497,642 | |
| Total Dotdash Meredith | 1,567,843 | | | | | (70,201) | | | — | | | — | | | — | | | 1,497,642 | |
| | | | | | | | | | | | | |
| Angi Inc. | | | | | | | | | | | | | |
| Angi Inc. | 916,375 | | | | | (816) | | | (903,469) | | | — | | | (12,090) | | | — | |
| Ads and Leads | — | | | | | — | | | 761,571 | | | — | | | — | | | 761,571 | |
| Services | — | | | | | — | | | 51,095 | | | — | | | — | | | 51,095 | |
| Roofing | — | | | | | — | | | 26,005 | | | (26,005) | | | — | | | — | |
| International | — | | | | | — | | | 64,798 | | | — | | | 5,821 | | | 70,619 | |
| Total Angi Inc. | 916,375 | | | | | (816) | | | — | | | (26,005) | | | (6,269) | | | 883,285 | |
| | | | | | | | | | | | | |
| Emerging & Other | 742,392 | | | | | (6,403) | | | — | | | (86,748) | | | — | | | 649,241 | |
| Total | $ | 3,226,610 | | | | | $ | (77,420) | | | $ | — | | | $ | (112,753) | | | $ | (6,269) | | | $ | 3,030,168 | |
Deductions at Dotdash Meredith are primarily due to adjustments to the fair values of certain assets acquired and liabilities assumed related to Meredith, acquired by Dotdash on December 1, 2021, and the sale of a business at Dotdash Meredith. Deductions at Angi Inc. are due to working capital adjustments recorded in the second quarter of 2022 related to Total Home Roofing (“Roofing”), acquired on July 1, 2021. Deductions at the Emerging & Other segment are due to the sales of Bluecrew and the Daily Burn business at Mosaic Group.
In the fourth quarter of 2022, the Angi Inc. segment presentation was changed to reflect its four new operating segments, which now include (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (includes Europe and Canada). Goodwill was allocated to reflect the new segment presentation. The allocation of goodwill to Roofing and Canada reflects their respective historical carrying values because of the lack of operational integration with Angi North America; the allocation of the remaining goodwill to Ads and Leads and Services was based upon their relative fair values as of October 1, 2022.
As required, the goodwill of Angi Inc. reporting units was tested before and after the change in reporting units; this test resulted in an impairment of $26.0 million due to Roofing exiting certain markets and a projected reduction in future profits from the business, which reduced its fair value.
In the second quarter of 2022, the Company reassessed the fair value of the Mosaic Group reporting unit (included in the Emerging & Other segment) and recorded an impairment of $86.7 million as a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | | Additions | | Deductions | | | | Foreign Exchange Translation | | Balance at December 31, 2021 |
| | (In thousands) |
| Dotdash Meredith | | | | | | | | | | | |
| Digital | $ | — | | | $ | 1,567,843 | | | $ | — | | | | | $ | — | | | $ | 1,567,843 | |
| Total Dotdash Meredith | — | | | 1,567,843 | | | — | | | | | — | | | 1,567,843 | |
| | | | | | | | | | | |
| Angi Inc. | 892,133 | | | 26,822 | | | — | | | | | (2,580) | | | 916,375 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Emerging & Other | 767,969 | | | — | | | (25,376) | | | | | (201) | | | 742,392 | |
| Total | $ | 1,660,102 | | | $ | 1,594,665 | | | $ | (25,376) | | | | | $ | (2,781) | | | $ | 3,226,610 | |
Additions relate to the acquisitions of Meredith at Dotdash Meredith and Roofing at Angi Inc. Deductions are primarily related to the allocation of acquired attributes related to the acquisition of Care.com (included in the Emerging & Other segment).
The December 31, 2022 and 2021 goodwill balance reflects accumulated impairment losses of $981.3 million and $198.3 million at Search and Dotdash Meredith, respectively. The December 31, 2022 goodwill balance also reflects an impairment loss of $86.7 million at Mosaic Group (included in the Emerging & Other segment) and $26.0 million at Angi Inc. As a result of impairments recorded in 2020, the Search reportable segment has no goodwill.
At December 31, 2022 and 2021, intangible assets with definite lives are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net | | Weighted-Average
Useful Life |
| | (In thousands) | | (Years) |
| Advertiser relationships | $ | 297,000 | | | $ | (87,199) | | | $ | 209,801 | | | 5.0 |
| Technology | 198,224 | | | (171,660) | | | 26,564 | | | 3.5 |
| Licensee relationships | 171,000 | | | (45,152) | | | 125,848 | | | 4.9 |
| Trade names | 120,711 | | | (37,677) | | | 83,034 | | | 9.2 |
| Content | 106,639 | | | (61,407) | | | 45,232 | | | 2.9 |
| Service professional relationships | 97,658 | | | (97,537) | | | 121 | | | 3.0 |
| Customer lists and user base | 68,575 | | | (41,868) | | | 26,707 | | | 6.4 |
| Subscriber relationships | 61,200 | | | (39,563) | | | 21,637 | | | 1.9 |
| Total | $ | 1,121,007 | | | $ | (582,063) | | | $ | 538,944 | | | 4.7 |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net | | Weighted-Average
Useful Life |
| | (In thousands) | | (Years) |
| Advertiser relationships | $ | 334,000 | | | $ | (6,386) | | | $ | 327,614 | | | 5.2 |
| Technology | 133,318 | | | (106,415) | | | 26,903 | | | 4.2 |
| Licensee relationships | 150,000 | | | (2,923) | | | 147,077 | | | 4.9 |
| Trade names | 145,598 | | | (18,224) | | | 127,374 | | | 5.1 |
| Content | 10,439 | | | (10,439) | | | — | | | 3.4 |
| Service professional relationships | 98,789 | | | (97,877) | | | 912 | | | 3.0 |
| Customer lists and user base | 68,730 | | | (32,606) | | | 36,124 | | | 6.4 |
| Subscriber relationships | 73,700 | | | (3,961) | | | 69,739 | | | 2.0 |
| Total | $ | 1,014,574 | | | $ | (278,831) | | | $ | 735,743 | | | 4.6 |
At December 31, 2022, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:
| | | | | |
| Years Ending December 31, | (In thousands) |
| 2023 | $ | 208,245 | |
| 2024 | 133,884 | |
| 2025 | 84,476 | |
| 2026 | 69,057 | |
| 2027 | 15,142 | |
| Thereafter | 28,140 | |
| Total | $ | 538,944 | |
NOTE 5—DOTDASH MEREDITH RESTRUCTURING CHARGES, TRANSACTION-RELATED EXPENSES AND CHANGE-IN-CONTROL PAYMENTS
Restructuring Charges
In the first quarter of 2022, Dotdash Meredith announced its plans to discontinue certain print publications and the shutdown of PeopleTV to focus the portfolio and further enable investments toward digital growth. Dotdash Meredith also announced a voluntary retirement program in the first quarter of 2022 for employees who met certain age and service requirements. In addition, actions were taken to improve efficiencies in 2022 following the Meredith acquisition, including vacating leased office space.
In December 2022, Dotdash Meredith management committed to a reduction in force plan to better align its cost structure given the difficult market and current economic uncertainty. Dotdash Meredith announced the plan in late January 2023, which resulted in $17.5 million of expense for the year ended December 31, 2022; the related accrual is reflected in the December 31, 2022 balance sheet.
For the year ended December 31, 2022, the Company incurred a total of $80.2 million of restructuring charges, including $55.9 million of severance and related costs. The restructuring charges for the year ended December 31, 2022 include $21.3 million of impairment charges related to the consolidation of certain leased spaces following the Meredith acquisition, consisting of impairments of $14.3 million and $7.0 million of a ROU asset and related leasehold improvements and furniture and equipment, respectively, which are included in "General and administrative expense" and "Depreciation," respectively, in the statement of operations.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The costs are allocated as follows in the statement of operations:
| | | | | |
| December 31, 2022 |
| (In thousands) |
| Cost of revenue | $ | 24,527 | |
| Selling and marketing expense | 17,174 | |
| General and administrative expense | 28,096 | |
| Product development expense | 3,435 | |
| Depreciation | 7,006 | |
| Total | $ | 80,238 | |
A summary of the costs incurred and payments made during the year ended December 31, 2022 and related accruals as of December 31, 2022 are presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Digital | | Print | | Other (a) | | Total |
| | (In thousands) |
| Restructuring charges | | | | | | | |
| Costs incurred | $ | 39,225 | | | $ | 33,432 | | | $ | 7,581 | | | $ | 80,238 | |
| Payments | (6,966) | | | (20,952) | | | (3,192) | | | (31,110) | |
Non-cash (b) | (21,309) | | | (425) | | | — | | | (21,734) | |
| Restructuring accruals as of December 31, 2022 | $ | 10,950 | | | $ | 12,055 | | | $ | 4,389 | | | $ | 27,394 | |
_____________________
(a) Other comprises unallocated corporate expenses, which are corporate overhead expenses not attributable to the Digital or Print segments.
(b) Includes $21.3 million impairment of ROU assets, leasehold improvements and furniture and equipment and $0.4 million related to the write-off of inventory.
Dotdash Meredithanticipates the estimated remaining costs associated with the 2022 restructuring events will be approximately $0.3 million, which primarily relate to unallocated corporate overhead, and together with the $27.4 million accrued as of December 31, 2022, will be paid by December 31, 2023 from existing cash on hand. The remaining costs are related to the voluntary retirement program.
Transaction-Related Expenses
For the years ended December 31, 2022 and 2021, Dotdash Meredith incurred $7.1 million and $30.2 million, respectively, of transaction-related expenses related to the acquisition of Meredith, other than costs related to change-in-control payments.
Change-in-Control Payments
In December 2021, Dotdash Meredith recorded $60.1 million in change-in-control payments, which were triggered by the acquisition and the terms of certain former executives’ contracts. On July 1, 2022, Dotdash Meredith made $83.1 million in change-in-control payments, which included amounts accrued in December 2021, as well as amounts previously accrued that became payable following the change-in-control. On October 3, 2022, Dotdash Meredith made the final $4.3 million in change-in-control payments.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 6—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Securities
At December 31, 2022 and 2021, the fair value of marketable securities are as follows:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| (In thousands) |
| Marketable equity securities | $ | 4,317 | | | $ | 19,788 | |
| Available for sale marketable debt securities | 235,056 | | | — | |
| Total marketable securities | $ | 239,373 | | | $ | 19,788 | |
At December 31, 2022, the Company has two investments in marketable equity securities, other than the investment in MGM Resorts International ("MGM"). The Company had one investment in a marketable equity security at December 31, 2021. These marketable equity securities are carried at fair value following the investees’ initial public offerings ("IPO"). Prior to the IPOs, these investments were accounted for as equity securities without readily determinable fair values. The Company recorded net unrealized pre-tax losses of $20.3 million for these investments during the year ended December 31, 2022. For the investment held at the end of 2021 the Company recorded an unrealized pre-tax gain of $18.8 million for the year ended December 31, 2021.The Company sold its shares in another marketable equity security in the third quarter of 2021 and recorded a realized gain of $7.2 million on the sale. The unrealized and realized pre-tax losses and gains related to these investments are included in "Other (expense) income, net" in the statement of operations.
At December 31, 2022, current available-for-sale marketable debt securities are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair Value |
| (In thousands) |
| Treasury discount notes | $ | 234,987 | | | $ | 75 | | | $ | (6) | | | $ | 235,056 | |
| Total available-for-sale marketable debt securities | $ | 234,987 | | | $ | 75 | | | $ | (6) | | | $ | 235,056 | |
The contractual maturities of debt securities classified as current available-for-sale at December 31, 2022 were within one year. There were no investments in available-for-sale marketable debt securities that had been in a continuous unrealized loss position for longer than twelve months at December 31, 2022.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Investment in MGM Resorts International
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Investment in MGM Resorts International | $ | 2,170,182 | | | $ | 2,649,442 | |
In 2020, the Company purchased 59.0 million shares of MGM for $1.0 billion and, in the first and third quarters of 2022, the Company purchased additional shares totaling 5.7 million for $244.3 million. Following these purchases, the Company owns 64.7 million shares, representing a 17.1% ownership interest in MGM as of December 31, 2022. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange on the last trading day in the reporting period and any unrealized gains or losses are included in the statement of operations. For the years ended December 31, 2022, 2021 and 2020, the Company recorded an unrealized pre-tax loss of $723.5 million and unrealized pre-tax gains of $789.3 million and $840.5 million, respectively, on its investment in MGM. The cumulative unrealized net pre-tax gain through December 31, 2022 is $906.3 million. A $2.00 increase or decrease in the share price of MGM would result in an unrealized gain or loss, respectively, of $129.4 million. At February 10, 2023, the carrying value of the Company's investment in MGM was $2.8 billion.
Long-term Investments
Long-term investments consist of:
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Equity securities without readily determinable fair values | $ | 323,530 | | | $ | 324,649 | |
| Equity method investment | 2,191 | | | 3,189 | |
| Total long-term investments | $ | 325,721 | | | $ | 327,838 | |
Equity Securities without Readily Determinable Fair Values
The following table presents a summary of unrealized pre-tax gains and losses recorded in "Other (expense) income, net" in the statement of operations as adjustments to the carrying value of equity securities without readily determinable fair values held at December 31, 2022 and 2021.
| | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 |
| (In thousands) |
| Upward adjustments (gross unrealized pre-tax gains) | $ | 8,245 | | | $ | 8,992 | |
| Downward adjustments including impairments (gross unrealized pre-tax losses) | (97,382) | | | (100) | |
| Total | $ | (89,137) | | | $ | 8,892 | |
The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at December 31, 2022 were $36.9 million and $136.0 million, respectively.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Realized and unrealized pre-tax gains and losses for the Company's investments without readily determinable fair values for the years ended December 31, 2022, 2021 and 2020 are as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands) |
| Realized pre-tax gains, net, for equity securities sold | $ | 12,434 | | | $ | 5,773 | | | $ | 1,873 | |
| Unrealized pre-tax (losses) gains, net, on equity securities held | (89,137) | | | 8,892 | | | 797,565 | |
| Total pre-tax (losses) gains, net recognized | $ | (76,703) | | | $ | 14,665 | | | $ | 799,438 | |
All pre-tax gains and losses on equity securities without readily determinable fair values, realized and unrealized, are recognized in "Other (expense) income, net" in the statement of operations.
Equity Method Investment
The Company owns common shares of Turo Inc. ("Turo"), a peer-to-peer car sharing marketplace. This investment is accounted for under the equity method of accounting given the Company's ownership interest at December 31, 2022 of approximately 26.6% on a fully diluted basis in the form of preferred shares, which are not common stock equivalents. The Company accounts for the equity earnings (losses) for this investment on a one quarter lag. These equity earnings (losses) were immaterial.
Fair Value Measurements
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| Quoted Market Prices for Identical Assets in Active Markets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) | | Total
Fair Value
Measurements |
| (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 862,829 | | | $ | — | | | $ | — | | | $ | 862,829 | |
| Treasury discount notes | — | | | 137,219 | | | — | | | 137,219 | |
| Time deposits | — | | | 16,018 | | | — | | | 16,018 | |
| Marketable securities: | | | | | | | |
| Marketable equity securities | 4,317 | | | — | | | — | | | 4,317 | |
| Treasury discount notes | — | | | 235,056 | | | — | | | 235,056 | |
| Investment in MGM | 2,170,182 | | | — | | | — | | | 2,170,182 | |
| Other non-current assets: | | | | | | | |
| Warrant | — | | | — | | | 46,799 | | | 46,799 | |
| Total | $ | 3,037,328 | | | $ | 388,293 | | | $ | 46,799 | | | $ | 3,472,420 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements |
| (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 1,874,091 | | | $ | 0 | | | $ | 0 | | | $ | 1,874,091 | |
| Treasury discount notes | 0 | | | 1,224,966 | | | 0 | | | 1,224,966 | |
| Time deposits | 0 | | | 3,265 | | | 0 | | | 3,265 | |
| Marketable debt securities: | | | | | | | |
| Treasury discount notes | 0 | | | 224,979 | | | 0 | | | 224,979 | |
| Investment in MGM Resorts International | 1,860,158 | | | 0 | | | 0 | | | 1,860,158 | |
| Other non-current assets: | | | | | | | |
| Warrant | 0 | | | 0 | | | 5,276 | | | 5,276 | |
| Total | $ | 3,734,249 | | | $ | 1,453,210 | | | $ | 5,276 | | | $ | 5,192,735 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Contingent consideration arrangement | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | | |
| | | | | | | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | December 31, 2019 | | December 31, 2021 |
| | | Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements | | Quoted Market Prices for Identical Assets in Active Markets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) | | Total
Fair Value
Measurements |
| | | (In thousands) | | (In thousands) |
| Assets: | Assets: | | | | | | | | Assets: | |
| Cash equivalents: | Cash equivalents: | | | | | | | | Cash equivalents: | |
| Money market funds | Money market funds | $ | 699,589 | | | $ | 0 | | | $ | 0 | | | $ | 699,589 | | Money market funds | $ | 1,660,921 | | | $ | — | | | $ | — | | | $ | 1,660,921 | |
| | Time deposits | Time deposits | 0 | | | 23,075 | | | 0 | | | 23,075 | | Time deposits | — | | | 6,057 | | | — | | | 6,057 | |
| Marketable equity security | | Marketable equity security | 19,788 | | | — | | | — | | | 19,788 | |
| Investment in MGM | | Investment in MGM | 2,649,442 | | | — | | | — | | | 2,649,442 | |
| Other non-current assets: | Other non-current assets: | | | | | | | Other non-current assets: | |
| Warrant | Warrant | 0 | | | 0 | | | 8,495 | | | 8,495 | | Warrant | — | | | — | | | 109,294 | | | 109,294 | |
| Total | Total | $ | 699,589 | | | $ | 23,075 | | | $ | 8,495 | | | $ | 731,159 | | Total | $ | 4,330,151 | | | $ | 6,057 | | | $ | 109,294 | | | $ | 4,445,502 | |
| | Liabilities: | Liabilities: | | Liabilities: | |
| Contingent consideration arrangement | $ | 0 | | | $ | 0 | | | $ | (6,918) | | | $ | (6,918) | | |
| Contingent consideration arrangements | | Contingent consideration arrangements | $ | — | | | $ | — | | | $ | (612) | | | $ | (612) | |
The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
| | | | Years Ended December 31, | | Years Ended December 31, |
| | | 2020 | | 2019 | | 2022 | | 2021 |
| | Warrant | | Contingent
Consideration
Arrangements | | Warrant | | Contingent
Consideration
Arrangement | | Warrant | | Contingent
Consideration
Arrangements | | Warrant | | Contingent
Consideration
Arrangements |
| | | (In thousands) | | (In thousands) |
| Balance at January 1 | Balance at January 1 | $ | 8,495 | | | $ | (6,918) | | | $ | 0 | | | $ | (26,657) | | Balance at January 1 | $ | 109,294 | | | $ | (612) | | | $ | 5,276 | | | $ | — | |
| Fair value at date of acquisition | Fair value at date of acquisition | 0 | | | (1,000) | | | 17,618 | | | 0 | | Fair value at date of acquisition | — | | | — | | | — | | | (620) | |
| Total net (losses) gains: | Total net (losses) gains: | | Total net (losses) gains: | |
| Included in earnings: | | |
| Fair value adjustments | (3,219) | | | 6,918 | | | (9,123) | | | 19,739 | | |
| Fair value adjustments included in earnings | | Fair value adjustments included in earnings | (62,495) | | | 612 | | | 104,018 | | | (14,992) | |
| Settlements | Settlements | 0 | | | 1,000 | | | 0 | | | 0 | | Settlements | — | | | — | | | — | | | 15,000 | |
| Balance at December 31 | Balance at December 31 | $ | 5,276 | | | $ | 0 | | | $ | 8,495 | | | $ | (6,918) | | Balance at December 31 | $ | 46,799 | | | $ | — | | | $ | 109,294 | | | $ | (612) | |
Warrant
InAs part of the third quarter of 2019, the Company made a $250 millionCompany's investment in Turo preferred shares. As part of its investment,shares, the Company received a warrant that is net settleable at the Company's option and is recorded at fair value each reporting period with any change included in "Other (expense) income, net" in the accompanying statement of operations. The warrant is measured using significant unobservable inputs and is classified in the fair value hierarchy table as Level 3. The warrant is included in "Other non-current assets" in the accompanying balance sheet.
Contingent consideration arrangement
At December 31, 2020, the Company has one outstanding contingent consideration arrangement related to a business acquisition. The maximum contingent payments related to this arrangement for periods subsequent to December 31, 2020, which is the end of the most recent measurement period, is $15.0 million. At December 31, 2020, the Company does not expect to make any payments related to this contingent consideration arrangement. In connection with the Care.com acquisition on February 11, 2020, the Company assumed a contingent consideration arrangement liability of $1.0 million, which was subsequently paid and settled during the first quarter of 2020.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Generally, ourContingent Consideration Arrangements
At December 31, 2022, the Company has no remaining contingent consideration arrangements are based upon financial performance and/or operating metric targets andoutstanding. At December 31, 2021, the Company generally determines the fair value of thehad two outstanding contingent consideration arrangements by using probability-weighted analysesrelated to determineprior business combinations. During the amountsthird quarter of 2021, the Company recorded a $15.0 million loss related to one contingent consideration arrangement, which was subsequently paid during the fourth quarter of 2021. In connection with the Meredith acquisition on December 1, 2021, the Company assumed a contingent consideration arrangement liability of $0.6 million, which was written off during the first quarter of 2022 due to a change in estimate of the gross liability and, if the arrangements are initially long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligationsrelated to determine the net amount reflected in the financial statements.
The fair value of contingent consideration arrangements is sensitive to changes in the expected achievement of the applicable targets and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, including the accretion of the discount, if applicable, and changes are recognized in "General and administrative expense" in the accompanying statement of operations. There is 0 contingent consideration liability outstanding at December 31, 2020.this arrangement. The contingent consideration arrangement liability at December 31, 2019 includes a non-current portion of $6.9 million and,2021 is included in “Other long-term liabilities”"Accrued expenses and other current liabilities" in the accompanying balance sheet.
Financial instruments measured at fair value only for disclosure purposes
The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:
| | | | December 31, 2020 | | December 31, 2019 | | December 31, 2022 | | December 31, 2021 |
| | | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value |
| | | (In thousands) | | (In thousands) |
| Notes receivable—related party, current | $ | 0 | | | $ | 0 | | | $ | 55,251 | | | $ | 55,251 | | |
| Current portion of long-term debt | Current portion of long-term debt | $ | 0 | | | $ | 0 | | | $ | (13,750) | | | $ | (13,681) | | Current portion of long-term debt | $ | (30,000) | | | $ | (26,700) | | | $ | (30,000) | | | $ | (29,550) | |
Long-term debt, net(a) | Long-term debt, net(a) | $ | (712,277) | | | $ | (725,700) | | | $ | (231,946) | | | $ | (232,581) | | Long-term debt, net(a) | $ | (2,019,760) | | | $ | (1,708,413) | | | $ | (2,046,237) | | | $ | (2,061,450) | |
______________________________________
(a) At December 31, 20202022 and 2019,2021, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $7.7$20.2 million and $1.8$23.8 million, respectively.
At December 31, 20202022 and 2019,2021, the fair value of long-term debt, including the current portion, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.
NOTE 7—LONG-TERM DEBTLEASES
Long-term debt consists of:The Company leases office space, land, data center facilities and equipment used in connection with its operations under various operating leases, the majority of which contain escalation clauses.
| | | | | | | | | | | |
| December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| 3.875% ANGI Group Senior Notes due August 15, 2028 ("ANGI Group Senior Notes"); interest payable each February 15 and August 15, commencing February 15, 2021 | $ | 500,000 | | | $ | 0 | |
| ANGI Group Term Loan due November 5, 2023 ("ANGI Group Term Loan") | 220,000 | | | 247,500 | |
| Total long-term debt | 720,000 | | | 247,500 | |
| Less: current portion of ANGI Group Term Loan | 0 | | | 13,750 | |
| Less: unamortized debt issuance costs | 7,723 | | | 1,804 | |
| Total long-term debt, net | $ | 712,277 | | | $ | 231,946 | |
Variable lease payments consist primarily of common area maintenance, utilities and taxes, which are not included in the recognition of ROU assets and related lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents the balances of ROU assets and lease liabilities within the balance sheet:
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | | December 31, |
| Leases | | Balance Sheet Classification | | 2022 | | 2021 |
| | | | (In thousands) |
| Assets: | | | | | | |
ROU assets(a) | | Other non-current assets | | $ | 428,160 | | | $ | 498,337 | |
| | | | | | |
| Liabilities: | | | | | | |
| Current lease liabilities | | Accrued expenses and other current liabilities | | $ | 67,192 | | | $ | 63,521 | |
| Long-term lease liabilities | | Other long-term liabilities | | 518,851 | | | 578,272 | |
Total lease liabilities(a) | | | | $ | 586,043 | | | $ | 641,793 | |
_____________________
(a) The December 31, 2022 balances include ROU assets and lease liabilities of $323.3 million and $408.7 million, respectively, related to the acquisition of Meredith, which reflect $4.3 million downward and $7.1 million upward purchase accounting adjustments, respectively, that were completed during 2022. The December 31, 2021 balances include provisional ROU assets and lease liabilities of $358.6 million and $434.8 million, respectively, related to the acquisition of Meredith.
The following table presents the net lease expense within the statement of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Years Ended December 31, |
| Lease Expense | | Statement of Operations Classification | | 2022 | | 2021 | | 2020 |
| | | | (In thousands) |
| Fixed lease expense | | Cost of revenue | | $ | 1,283 | | | $ | 1,707 | | | $ | 2,183 | |
| Fixed lease expense | | Selling and marketing expense | | 6,229 | | | 9,443 | | | 12,591 | |
| Fixed lease expense | | General and administrative expense | | 61,886 | | | 31,165 | | | 22,221 | |
| Fixed lease expense | | Product development expense | | 999 | | | 1,756 | | | 3,016 | |
Total fixed lease expense(b) | | | | 70,397 | | | 44,071 | | | 40,011 | |
| | | | | | | | |
| Variable lease expense | | Selling and marketing expense | | 199 | | | 1,087 | | | 2,314 | |
| Variable lease expense | | General and administrative expense | | 16,406 | | | 8,176 | | | 7,314 | |
| Variable lease expense | | Product development expense | | 89 | | | 639 | | | 934 | |
| Total variable lease expense | | | | 16,694 | | | 9,902 | | | 10,562 | |
| Net lease expense | | | | $ | 87,091 | | | $ | 53,973 | | | $ | 50,573 | |
_____________________
(b) Includes (i) short-term lease expense of $4.0 million, $1.4 million and $2.5 million, (ii) lease impairment charges of $2.3 million, $10.5 million and $5.8 million, (iii) sublease income of $17.1 million, $6.7 million and $5.3 million and (iv) gains (losses) on termination of leases of $3.3 million, $(0.1) million and $(1.3) million for the years ended December 31, 2022, 2021 and 2020, respectively. During the year ended December 31, 2022, the Company recorded $14.3 million of impairment charges related to the consolidation of certain leased spaces following the Meredith acquisition, which is included in "General and administrative expense" in the statement of operations as a restructuring charge. See "Note 5—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-in-Control Payments" for additional information.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Maturities of lease liabilities at December 31, 2022(c) are summarized below:
| | | | | | | | |
| Years Ended December 31, | | In thousands |
| 2023 | | $ | 94,270 | |
| 2024 | | 92,476 | |
| 2025 | | 87,409 | |
| 2026 | | 82,927 | |
| 2027 | | 68,637 | |
| Thereafter | | 405,633 | |
| Total | | 831,352 | |
| Less: Interest | | 245,309 | |
| Present value of lease liabilities | | $ | 586,043 | |
_____________________
(c) Lease payments exclude $4.8 million of legally binding minimum lease payments for leases signed but not yet commenced.
The following are the weighted average assumptions used for lease term and discount rate:
| | | | | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Remaining lease term | | 11.4 years | | 11.8 years |
| Discount rate | | 5.22 | % | | 5.54 | % |
The following is the supplemental cash flow information:
| | | | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Other Information: | | | | | | |
ROU assets obtained in exchange for lease liabilities (d) | | $ | 16,716 | | | $ | 442,205 | | | $ | 80,314 | |
| Cash paid for amounts included in the measurement of lease liabilities | | $ | 93,864 | | | $ | 44,659 | | | $ | 41,377 | |
_____________________
(d) December 31, 2021 includes $437.7 million related to Meredith as of the date of its acquisition, which was adjusted upward by $7.1 million for purchase accounting adjustments during 2022.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 8—LONG-TERM DEBT
Long-term debt consists of:
| | | | | | | | | | | |
| December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Dotdash Meredith Debt | | | |
| Dotdash Meredith Term Loan A ("Dotdash Meredith Term Loan A") due December 1, 2026 | $ | 332,500 | | | $ | 350,000 | |
| Dotdash Meredith Term Loan B ("Dotdash Meredith Term Loan B") due December 1, 2028 | 1,237,500 | | | 1,250,000 | |
| Total Dotdash Meredith long-term debt | 1,570,000 | | | 1,600,000 | |
| Less: current portion of Dotdash Meredith long-term debt | 30,000 | | | 30,000 | |
| Less: original issue discount | 5,310 | | | 6,176 | |
| Less: unamortized debt issuance costs | 10,215 | | | 12,139 | |
| Total Dotdash Meredith long-term debt, net | 1,524,475 | | | 1,551,685 | |
| | | |
| ANGI Group Debt | | | |
| 3.875% ANGI Group Senior Notes due August 15, 2028 ("ANGI Group Senior Notes"); interest payable each February 15 and August 15 | 500,000 | | | 500,000 | |
| | | |
| Less: unamortized debt issuance costs | 4,715 | | | 5,448 | |
| Total ANGI Group long-term debt, net | 495,285 | | | 494,552 | |
| | | |
| Total long-term debt, net | $ | 2,019,760 | | | $ | 2,046,237 | |
Dotdash Meredith Term Loans and Dotdash Meredith Revolving Facility
On December 1, 2021, Dotdash Meredith entered into a credit agreement ("Dotdash Meredith Credit Agreement"), which provides for (i) the five-year $350 million Dotdash Meredith Term Loan A, (ii) the seven-year $1.25 billion Dotdash Meredith Term Loan B (and together with Dotdash Meredith Term Loan A, the "Dotdash Meredith Term Loans") and (iii) a five-year $150 million revolving credit facility ("Dotdash Meredith Revolving Facility"). The proceeds of the Dotdash Meredith Term Loans were used to fund a portion of the purchase price for the acquisition of Meredith and pay related fees and expenses. The Dotdash Meredith Term Loan A bears interest at an adjusted term secured overnight financing rate ("Adjusted Term SOFR") as defined in the Dotdash Meredith Credit Agreement plus an applicable margin depending on Dotdash Meredith's most recently reported consolidated net leverage ratio, as defined in the Dotdash Meredith Credit Agreement. At December 31, 2022 and 2021, the Dotdash Meredith Term Loan A bore interest at Adjusted Term SOFR plus 2.25% and 2.00%, or 5.91% and 2.15%, respectively, and the Dotdash Meredith Term Loan B bore interest at Adjusted Term SOFR, subject to a minimum of 0.50% plus 4.00%, or 8.22% and 4.50%, respectively. Interest payments are due at least quarterly through the terms of the Dotdash Meredith Term Loans.
The Dotdash Meredith Term Loan A requires quarterly principal payments of approximately $4.4 million through December 31, 2024, $8.8 million through December 31, 2025 and approximately $13.1 million thereafter through maturity. The Dotdash Meredith Term Loan B requires quarterly payments of $3.1 million through maturity. Commencing with the delivery of the financial statements for the period ended December 31, 2022, the Dotdash Meredith Term Loan B may require additional annual principal payments as part of an excess cash flow sweep provision, the amount of which, in part, is governed by the applicable net leverage ratio. No such payment is currently expected related to the period ended December 31, 2022.
There were no outstanding borrowings under the Dotdash Meredith Revolving Facility at December 31, 2022 and 2021. The annual commitment fee on undrawn funds is based on Dotdash Meredith's consolidated net leverage ratio, as defined in the Dotdash Meredith Credit Agreement, most recently reported and was 40 and 35 basis points at December 31, 2022 and 2021, respectively. Any borrowings under the Dotdash Meredith Revolving Facility would bear interest, at Dotdash Meredith's option, at either a base rate or term benchmark rate, plus an applicable margin, which is based on Dotdash Meredith's consolidated net leverage ratio.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
As of the last day of any calendar quarter, if either (i) $1.00 or more of loans under the Dotdash Meredith Revolving Facility or Dotdash Meredith Term Loan A are outstanding, or (ii) the outstanding face amount of undrawn letters of credit, other than cash collateralized letters of credit at 102% of face value, exceeds $25 million, subject to certain increases for qualifying material acquisitions, then Dotdash Meredith will not permit the consolidated net leverage ratio, which ratio permits netting of up to $250 million in cash and cash equivalents, as of the last day of such quarter to exceed 5.5 to 1.0. The Dotdash Meredith Credit Agreement also contains covenants that would limit Dotdash Meredith’s ability to pay dividends, incur incremental secured indebtedness, or make distributions or certain investments in the event a default has occurred or if Dotdash Meredith’s consolidated net leverage ratio exceeds 4.0 to 1.0, subject to certain available amounts as defined in the Dotdash Meredith Credit Agreement. This ratio was exceeded for the test period ended December 31, 2022. The Dotdash Meredith Credit Agreement also permits the Company to contribute, and the Company may contribute, cash to Dotdash Meredith to provide additional liquidity, including to ensure that Dotdash Meredith does not exceed certain Consolidated Net Leverage Ratios for any test period, as further defined in the Dotdash Meredith Credit Agreement. In connection with the capital contributions, Dotdash Meredith may make distributions to IAC in amounts not more than any such capital contributions, provided that no default has occurred and is continuing. Such capital contributions and subsequent distributions, if made, would impact the Consolidated Net Leverage Ratios of Dotdash Meredith.
The obligations under the Dotdash Meredith Credit Agreement are guaranteed by certain of Dotdash Meredith's wholly-owned subsidiaries, and are secured by substantially all of the assets of Dotdash Meredith and certain of its subsidiaries.
ANGI Group Senior NotesDebt
On August 20, 2020, ANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of ANGI, issued $500 million in aggregate principal amount of theThe ANGI Group Senior Notes the proceeds of which are intended for general corporate purposes, including potential future acquisitions and return of capital.were issued on August 20, 2020. At any time prior to August 15, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at the redemption prices set forth below, plus accrued and unpaid interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on August 15 of the years indicated below:
| | | | | |
| Year | Percentage |
| 2023 | 101.938 | % |
| 2024 | 100.969 | % |
| 2025 and thereafter | 100.000 | % |
The indenture governing the ANGI Group Senior Notes contains a covenant that would limit ANGI Group’s ability to incur liens for borrowed money in the event a default has occurred or ANGI Group’s secured leverage ratio (asexceeds 3.75 to 1.0 provided that ANGI Group is permitted to incur such liens under certain permitted credit facilities indebtedness notwithstanding the ratio, all as defined in the indenture) exceeds 3.75 to 1.0.indenture. At December 31, 2020, there were no limitations pursuant thereto.
ANGI Group Term Loan and ANGI Group Revolving Facility
ANGI was a party to a credit agreement that terminates on November 5, 2021. The credit agreement governs the ANGI Group Term Loan and revolving credit facility (the "ANGI Group Revolving Facility"), which are collectively referred to as the ANGI Group Credit Agreement. On August 12, 2020, ANGI Group entered into a joinder agreement with ANGI, the other subsidiaries of ANGI that are party to the credit agreement, and each of the other loan parties to the credit agreement, pursuant to which, ANGI Group became the successor borrower under the credit agreement and ANGI Homeservices Inc.'s obligations thereunder were terminated. In addition, on August 12, 2020, the definition of "Permitted Unsecured Ratio Debt" in the credit agreement was amended to remove the requirement that guarantees of certain indebtedness of the borrower be subordinated to the guarantees under the credit agreement.
The outstanding balance of the ANGI Group Term Loan was $220.0 million and $247.5 million, at December 31, 2020 and 2019, respectively. There are quarterly principal payments of $3.4 million through December 31, 2021, $6.9 million for the one-year period ending December 31, 2022, and $10.3 million through maturity of the loan when the final amount of $161.6 million is due. Additionally, interest payments are due at least quarterly through the term of the loan. In December 2020, ANGI Group prepaid its required quarterly principal payments for the year ending December 31, 2021 in the aggregate amount of $13.8 million. At December 31, 2020 and 2019, the ANGI Group Term Loan bore interest at LIBOR plus 2.00%, or 2.16% and 1.50% or 3.25%, respectively. The spread over LIBOR is subject to change in future periods based on ANGI Group's consolidated net leverage ratio.
The ANGI Group Credit Agreement requires ANGI Group to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0. The ANGI Group Credit Agreement also contains covenants that would limit ANGI Group's ability to pay dividends or make distributions in the event a default has occurred or ANGI Group's consolidated net leverage ratio exceeds 4.25 to 1.0. At December 31, 2020, there were no limitations pursuant thereto.
The $250 million ANGI Group Revolving Facility, expireswhich otherwise would have expired on November 5, 2023. At December 31, 2020 and 2019, there2023, was terminated effective August 3, 2021. No amounts were 0 outstanding borrowings under the ANGI Group Revolving Facility. The annual commitment fee on undrawn funds is based on ANGI Group's consolidated net leverage ratio most recently reported and was 35 and 25 basis points at December 31, 2020 and 2019, respectively. Any future borrowingsever drawn under the ANGI Group Revolving Facility would bear interest, atprior to its termination.
During 2021, ANGI Group's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is based on ANGI Group's consolidated net leverage ratio. The financial and other covenants areGroup prepaid the same as those forremaining balance of $220.0 million of the ANGI Group Term Loan.Loan principal, which otherwise would have matured on November 5, 2023.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The ANGI Group Senior Notes, ANGI Group Term Loan and ANGI Group Revolving Facility are guaranteed by certain of ANGI Group's wholly-owned material domestic subsidiaries and ANGI Group’s obligations under the ANGI Group Term Loan and the ANGI Group Revolving Facility are secured by substantially all assets of ANGI Group and the guarantors, subject to certain exceptions. The ANGI Group Term Loan and outstanding borrowings, if any, under the ANGI Group Revolving Facility rank equally with each other, and have priority over the ANGI Group Senior Notes to the extent of the value of the assets securing the borrowings under the ANGI Group Credit Agreement.
Long-term Debt Maturities:
Long-term debt maturities as ofat December 31, 20202022 are summarized in the table below:
| | Years Ending December 31, | Years Ending December 31, | (In thousands) | Years Ending December 31, | (In thousands) |
| | 2022 | $ | 27,500 | | |
| 2023 | 2023 | 192,500 | | 2023 | $ | 30,000 | |
| 2024 | | 2024 | 30,000 | |
| 2025 | | 2025 | 47,500 | |
| 2026 | | 2026 | 275,000 | |
| 2027 | | 2027 | 12,500 | |
| 2028 | 2028 | 500,000 | | 2028 | 1,675,000 | |
| Total | Total | 720,000 | | Total | 2,070,000 | |
| | Less: current portion of long-term debt | | Less: current portion of long-term debt | 30,000 | |
| Less: unamortized original issue discount | | Less: unamortized original issue discount | 5,310 | |
| Less: unamortized debt issuance costs | Less: unamortized debt issuance costs | 7,723 | | Less: unamortized debt issuance costs | 14,930 | |
| Total long-term debt, net | Total long-term debt, net | $ | 712,277 | | Total long-term debt, net | $ | 2,019,760 | |
NOTE 8—9—SHAREHOLDERS' EQUITY
Description of Common Stock and Class B Convertible Common Stock
Except as described herein, shares of IAC common stock and IAC Class B common stock are identical.
Each holderThe holders of shares of IAC common stock and IAC Class B common stock vote together as a single class with respect to matters that may be submitted to a vote or for the consent of IAC's shareholders generally, including the election of directors. In connection with any such vote, each holder of IAC common stock is entitled to 1one vote for each share of IAC common stock held and each holder of IAC Class B common stock is entitled to 10ten votes for each share of IAC Class B common stock held. Notwithstanding the foregoing, the holders of shares of IAC common stock, acting as a single class, are entitled to elect 25% of the total number of IAC's directors, and, in the event that 25% of the total number of directors shall result in a fraction of a director, then the holders of shares of IAC common stock, acting as a single class, are entitled to elect the next higher whole number of IAC's directors. In addition, Delaware law requires that certain matters be approved by the holders of shares of IAC common stock or holders of IAC Class B common stock voting as a separate class.
Shares of IAC Class B common stock are convertible into shares of IAC common stock at the option of the holder thereof, at any time, on a share-for-share basis. Such conversion ratio will in all events be equitably preserved in the event of any recapitalization of IAC by means of a stock dividend on, or a stock split or combination of, outstanding shares of IAC common stock or IAC Class B common stock, or in the event of any merger, consolidation or other reorganization of IAC with another corporation. Upon the conversion of shares of IAC Class B common stock into shares of IAC common stock, those shares of IAC Class B common stock will be retired and will not be subject to reissue. Shares of IAC common stock are not convertible into shares of IAC Class B common stock.
The holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, share for share, such dividends as may be declared by IAC's Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution, distribution of assets or winding-up of IAC, the holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, share for share, all the assets of IAC available for distribution to its stockholders, after the rights of the holders of any IAC preferred stock have been satisfied.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Equity Transactions related to the Spin-Off
In connection with the Spin-Off, IAC amended its certificate of incorporation to provide for the following:
•the reclassification of each share of IAC par value $0.001 common stock into (i) one share of IAC par value $0.0001 common stock and (ii) 1/100th of a share of IAC par value $0.01 Series 1 mandatorily exchangeable preferred stock that was automatically exchanged for 1.6235 shares of Vimeo common stock and then immediately retired; and
•the reclassification of each share of IAC par value $0.001 Class B common stock into (i) one share of IAC par value $0.0001 Class B common stock and (ii) 1/100th of a share of IAC par value $0.01 Series 2 mandatorily exchangeable preferred stock that was automatically exchanged for 1.6235 shares of Vimeo Class B common stock and then immediately retired.
Common Stock Repurchases
On June 30, 2020, the Board of Directors of the Company authorized repurchases up to 8.0 million shares of common stock, which is equal tostock. During the number of shares that were available under the repurchase authorization at Old IAC immediately
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
prior to the MTCH Separation. For the period subsequent to the MTCH Separation throughyear ended December 31, 2020 there we no repurchases2022, IAC repurchased 1.1 million of IACits common stock.stock, on a trade date basis, at an average price of $77.44 per share, or $85.3 million in aggregate. At December 31, 2022, the Company has 6.9 million shares remaining in its share repurchase authorization.
NOTE 9—10—ACCUMULATED OTHER COMPREHENSIVE LOSS(LOSS) INCOME
The following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated other comprehensive loss(loss) income into earnings:
| | | Year Ended December 31, 2020 | | Year Ended December 31, 2022 |
| | Foreign Currency Translation Adjustment | | Unrealized Gains On Available-For-Sale Marketable Debt Securities | | Accumulated Other Comprehensive (Loss) Income | | Foreign Currency Translation Adjustment | | Unrealized Gains On Available-For-Sale Marketable Debt Securities | | Accumulated Other Comprehensive Income (Loss) |
| | | (In thousands) | | (In thousands) |
| Balance at January 1 | Balance at January 1 | $ | (12,226) | | | $ | 0 | | | $ | (12,226) | | Balance at January 1 | $ | 4,397 | | | $ | — | | | $ | 4,397 | |
| Other comprehensive income before reclassifications | 6,236 | | | 2 | | | 6,238 | | |
| Other comprehensive (loss) income before reclassifications | | Other comprehensive (loss) income before reclassifications | (17,636) | | | 53 | | | (17,583) | |
| Amounts reclassified to earnings | Amounts reclassified to earnings | (144) | | | 0 | | | (144) | | Amounts reclassified to earnings | 42 | | | — | | | 42 | |
| Net current period other comprehensive income | 6,092 | | | 2 | | | 6,094 | | |
| Accumulated other comprehensive income allocated to noncontrolling interests during the period | (38) | | | 0 | | | (38) | | |
| Net current period other comprehensive (loss) income | | Net current period other comprehensive (loss) income | (17,594) | | | 53 | | | (17,541) | |
| Accumulated other comprehensive loss allocated to noncontrolling interests during the period | | Accumulated other comprehensive loss allocated to noncontrolling interests during the period | 11 | | | — | | | 11 | |
| Balance at December 31 | Balance at December 31 | $ | (6,172) | | | $ | 2 | | | $ | (6,170) | | Balance at December 31 | $ | (13,186) | | | $ | 53 | | | $ | (13,133) | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Foreign Currency Translation Adjustment | | Unrealized Gains On Available-For-Sale Marketable Debt Securities | | Accumulated Other Comprehensive (Loss) Income |
| | (In thousands) |
| Balance at January 1 | $ | (12,543) | | | $ | 2 | | | $ | (12,541) | |
| Other comprehensive income (loss) | 337 | | | (2) | | | 335 | |
| Net current period other comprehensive income (loss) | 337 | | | (2) | | | 335 | |
| Accumulated other comprehensive income allocated to noncontrolling interests during the period | (20) | | | 0 | | | (20) | |
| Balance at December 31 | $ | (12,226) | | | $ | 0 | | | $ | (12,226) | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| Foreign Currency Translation Adjustment | | Unrealized Gains On Available-For-Sale Marketable Debt Securities | | Accumulated Other Comprehensive Loss |
| | (In thousands) |
| Balance at January 1 | $ | (7,504) | | | $ | 0 | | | $ | (7,504) | |
| Other comprehensive (loss) income before reclassifications | (4,976) | | | 2 | | | (4,974) | |
| Amounts reclassified to earnings | (52) | | | 0 | | | (52) | |
| Net current period other comprehensive (loss) income | (5,028) | | | 2 | | | (5,026) | |
| Accumulated other comprehensive income allocated to noncontrolling interests during the period | (11) | | | 0 | | | (11) | |
| Balance at December 31 | $ | (12,543) | | | $ | 2 | | | $ | (12,541) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| Foreign Currency Translation Adjustment | | Unrealized Gains (Losses) On Available-For-Sale Marketable Debt Securities | | Accumulated Other Comprehensive (Loss) Income |
| | (In thousands) |
| Balance at January 1 | $ | (6,172) | | | $ | 2 | | | $ | (6,170) | |
| Other comprehensive income (loss) before reclassifications | 527 | | | (2) | | | 525 | |
| Amounts reclassified to earnings | 10,032 | | | — | | | 10,032 | |
| Net current period other comprehensive income (loss) | 10,559 | | | (2) | | | 10,557 | |
| Accumulated other comprehensive loss allocated to noncontrolling interests during the period | 10 | | | — | | | 10 | |
| Balance at December 31 | $ | 4,397 | | | $ | — | | | $ | 4,397 | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| Foreign Currency Translation Adjustment | | Unrealized Gains On Available-For-Sale Marketable Debt Securities | | Accumulated Other Comprehensive (Loss) Income |
| | (In thousands) |
| Balance at January 1 | $ | (12,226) | | | $ | — | | | $ | (12,226) | |
| Other comprehensive income before reclassifications | 6,236 | | | 2 | | | 6,238 | |
| Amounts reclassified to earnings | (144) | | | — | | | (144) | |
| Net current period other comprehensive income | 6,092 | | | 2 | | | 6,094 | |
| Accumulated other comprehensive income allocated to noncontrolling interests during the period | (38) | | | — | | | (38) | |
| Balance at December 31 | $ | (6,172) | | | $ | 2 | | | $ | (6,170) | |
The amounts reclassified out of foreign currency translation adjustment into earnings for the years ended December 31, 20202022, 2021 and 20182020 relate to the substantial liquidation of certain international subsidiaries.
At December 31, 2022 there was less than $0.1 million of income tax provision on the accumulated other comprehensive (loss) income related to net unrealized gains on available-for-sale marketable debt securities. At December 31, 2021 and 2020, there was no income tax benefit or provision on the accumulated other comprehensive (loss) income.
NOTE 11—SEGMENT INFORMATION
The overall concept that the Company employs in determining its operating segments is to present the financial information in a manner consistent with the chief operating decision maker's view of the businesses. In addition, we consider how the businesses are organized as to segment management and the focus of the businesses with regards to the types of services or products offered or the target market. Operating segments are combined for reporting purposes if they meet certain aggregation criteria, such as the Search segment, which principally relate to the similarity of their economic characteristics, or, in the case of the Emerging & Other reportable segment, do not meet the quantitative thresholds that require presentation as separate reportable segments.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
At December 31, 2020, 2019 and 2018, there was 0 tax benefit of provision on the accumulated other comprehensive loss.The following table presents revenue by reportable segment:
NOTE 10—EARNINGS PER SHARE | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Revenue: | | | | | |
| Dotdash Meredith | | | | | |
| Digital | $ | 931,482 | | | $ | 367,134 | | | $ | 213,753 | |
| Print | 1,026,128 | | | 92,002 | | | — | |
Intersegment eliminations(a) | (22,911) | | | (2,863) | | | — | |
| Total Dotdash Meredith | 1,934,699 | | | 456,273 | | | 213,753 | |
| Angi Inc. | | | | | |
| Domestic | | | | | |
| Ads and Leads | 1,282,061 | | | 1,227,074 | | | 1,218,755 | |
| Services | 381,256 | | | 289,948 | | | 162,539 | |
| Roofing | 137,509 | | | 68,028 | | | — | |
Intersegment eliminations(b) | (10,340) | | | (1,907) | | | — | |
| Total Domestic | 1,790,486 | | | 1,583,143 | | | 1,381,294 | |
| International | 101,038 | | | 102,295 | | | 86,631 | |
| Total Angi Inc. | 1,891,524 | | | 1,685,438 | | | 1,467,925 | |
| Search | 731,431 | | | 873,346 | | | 613,274 | |
| Emerging & Other | 685,956 | | | 685,175 | | | 469,759 | |
| Intersegment eliminations | (8,330) | | | (605) | | | (175) | |
| Total | $ | 5,235,280 | | | $ | 3,699,627 | | | $ | 2,764,536 | |
The following table sets forthpresents the computation of basic and diluted earnings per share attributable to IAC shareholders:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | | | | | |
| Net earnings | $ | 268,586 | | | $ | 268,586 | | | $ | 32,183 | | | $ | 32,183 | | | $ | 292,371 | | | $ | 292,371 | |
| Net loss (earnings) attributable to noncontrolling interests | 1,140 | | | 1,140 | | | (9,288) | | | (9,288) | | | (45,599) | | | (45,599) | |
Impact from public subsidiaries' dilutive securities(a) | — | | | 71 | | | — | | | 0 | | | — | | | 0 | |
| Net earnings attributable to IAC shareholders | $ | 269,726 | | | $ | 269,797 | | | $ | 22,895 | | | $ | 22,895 | | | $ | 246,772 | | | $ | 246,772 | |
| | | | | | | | | | | |
| Denominator: | | | | | | | | | | | |
Weighted average basic shares outstanding(b) | 85,355 | | | 85,355 | | | 85,132 | | | 85,132 | | | 85,132 | | | 85,132 | |
Dilutive securities(a) (c) (d) (e) | — | | | 5,593 | | | — | | | 0 | | | — | | | 0 | |
Denominator for earnings per share—weighted average shares(a) (c) (d) (e) | 85,355 | | | 90,948 | | | 85,132 | | | 85,132 | | | 85,132 | | | 85,132 | |
| | | | | | | | | | | |
| Earnings per share attributable to IAC shareholders: |
| Earnings per share | $ | 3.16 | | | $ | 2.97 | | | $ | 0.27 | | | $ | 0.27 | | | $ | 2.90 | | | $ | 2.90 | |
(a) IAC has the option to settle certain ANGI stock-based awards in its shares. For the year ended December 31, 2020, it is more dilutive for IAC to settle these ANGI equity awards.
(b) On November 5, 2020, the Company granted 3,000,000 shares of IAC restricted common stock to its Chief Executive Officer ("CEO"), that cliff vest on the ten-year anniversaryrevenue of the grant dateCompany's segments disaggregated by type of service:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Dotdash Meredith | | | | | |
| Digital: | | | | | |
| Advertising revenue | $ | 621,714 | | | $ | 236,660 | | | $ | 137,455 | |
| Performance marketing revenue | 198,441 | | | 116,195 | | | 76,298 | |
| Licensing and other revenue | 111,327 | | | 14,279 | | | — | |
| Total digital revenue | 931,482 | | | 367,134 | | | 213,753 | |
| Print: | | | | | |
| Subscription revenue | 422,700 | | | 34,634 | | | — | |
| Advertising revenue | 260,282 | | | 13,678 | | | — | |
| Project and other revenue | 154,807 | | | 16,414 | | | — | |
| Newsstand revenue | 132,855 | | | 19,183 | | | — | |
| Performance marketing revenue | 55,484 | | | 8,093 | | | — | |
| Total print revenue | 1,026,128 | | | 92,002 | | | — | |
Intersegment eliminations(a) | (22,911) | | | (2,863) | | | — | |
| Total Dotdash Meredith revenue | $ | 1,934,699 | | | $ | 456,273 | | | $ | 213,753 | |
| | | | | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| (a) Intersegment eliminations primarily related to Digital performance marketing commissions earned for the placement of magazine subscriptions for Print. |
| | | | | |
| Angi Inc. | | | | | |
| Domestic | | | | | |
| Ads and Leads: | | | | | |
| Consumer connection revenue | $ | 954,735 | | | $ | 898,422 | | | $ | 899,175 | |
| Advertising revenue | 265,466 | | | 252,206 | | | 226,505 | |
| Membership subscription revenue | 60,411 | | | 68,062 | | | 74,073 | |
| Other revenue | 1,449 | | | 8,384 | | | 19,002 | |
| Total Ads and Leads revenue | 1,282,061 | | | 1,227,074 | | | 1,218,755 | |
| Services revenue | 381,256 | | | 289,948 | | | 162,539 | |
| Roofing revenue | 137,509 | | | 68,028 | | | — | |
Intersegment eliminations(b) | (10,340) | | | (1,907) | | | — | |
| Total Domestic revenue | 1,790,486 | | | 1,583,143 | | | 1,381,294 | |
| International | | | | | |
| Consumer connection revenue | 71,851 | | | 68,686 | | | 57,692 | |
| Service professional membership subscription revenue | 28,192 | | | 32,367 | | | 27,225 | |
| Advertising and other revenue | 995 | | | 1,242 | | | 1,714 | |
| Total International revenue | 101,038 | | | 102,295 | | | 86,631 | |
| Total Angi Inc. revenue | $ | 1,891,524 | | | $ | 1,685,438 | | | $ | 1,467,925 | |
| | | | | |
(b) Intersegment eliminations related to Ads and Leads revenue earned from the sale of leads to Roofing. |
|
| Search | | | | | |
| Advertising revenue: | | | | | |
| Google advertising revenue | $ | 525,987 | | | $ | 675,892 | | | $ | 506,077 | |
| Non-Google advertising revenue | 200,435 | | | 183,427 | | | 90,286 | |
| Total advertising revenue | 726,422 | | | 859,319 | | | 596,363 | |
| Other revenue | 5,009 | | | 14,027 | | | 16,911 | |
| Total Search revenue | $ | 731,431 | | | $ | 873,346 | | | $ | 613,274 | |
| | | | | |
| Emerging & Other | | | | | |
| Subscription revenue | $ | 368,401 | | | $ | 367,159 | | | $ | 303,482 | |
| Marketplace revenue | 261,314 | | | 243,970 | | | 138,863 | |
| Media production and distribution revenue | 31,555 | | | 44,517 | | | 3,585 | |
| Advertising revenue: | | | | | |
| Non-Google advertising revenue | 16,057 | | | 19,047 | | | 16,236 | |
| Google advertising revenue | 2,192 | | | 2,981 | | | 3,130 | |
| Total advertising revenue | 18,249 | | | 22,028 | | | 19,366 | |
| Service and other revenue | 6,437 | | | 7,501 | | | 4,463 | |
| Total Emerging & Other revenue | $ | 685,956 | | | $ | 685,175 | | | $ | 469,759 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Revenue by geography is based on satisfactionwhere the customer is located. Geographic information about revenue and long-lived assets is presented below:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Revenue: | | | | | |
| United States | $ | 4,837,367 | | | $ | 3,184,653 | | | $ | 2,309,504 | |
| All other countries | 397,913 | | | 514,974 | | | 455,032 | |
| Total | $ | 5,235,280 | | | $ | 3,699,627 | | | $ | 2,764,536 | |
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Long-lived assets (excluding goodwill, intangible assets and ROU assets): | | | |
| United States | $ | 502,977 | | | $ | 562,628 | |
| All other countries | 7,637 | | | 7,897 | |
| Total | $ | 510,614 | | | $ | 570,525 | |
The following tables present operating income (loss) and Adjusted EBITDA by reportable segment:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Operating (loss) income: | | | | | |
| Dotdash Meredith | | | | | |
| Digital | $ | (66,629) | | | $ | 73,980 | | | $ | 50,241 | |
| Print | (54,448) | | | (6,527) | | | — | |
Other(c) | (67,014) | | | (60,277) | | | — | |
Total Dotdash Meredith(d) | (188,091) | | | 7,176 | | | 50,241 | |
| Angi Inc. | | | | | |
| Ads and Leads | 85,593 | | | 65,485 | | | 133,365 | |
| Services | (95,166) | | | (63,984) | | | (44,592) | |
| Roofing | (50,685) | | | (8,596) | | | — | |
Other(c) | (61,794) | | | (56,196) | | | (84,674) | |
| International | (4,253) | | | (13,222) | | | (10,467) | |
| Total Angi Inc. | (126,305) | | | (76,513) | | | (6,368) | |
| Search | 83,398 | | | 108,334 | | | (248,711) | |
| Emerging & Other | (106,154) | | | (22,738) | | | (70,896) | |
| Corporate | (137,619) | | | (153,326) | | | (261,929) | |
| Total | $ | (474,771) | | | $ | (137,067) | | | $ | (537,663) | |
_____________________
(c) Other comprises unallocated corporate expenses.
(d) Dotdash Meredith includes restructuring charges of IAC's stock price targets and continued employment through the vesting date. These shares are included in common stock outstanding at December 31, 2020 on the balance sheet, however, are excluded from weighted average basic shares outstanding in the table above in calculating earnings per share$80.2 million for the year ended December 31, 2020.2022, which include $7.0 million of impairment charges included in "Depreciation" in the statement of operations. The years ended December 31, 2022 and 2021 also include transaction-related expenses of $7.1 million and $30.2 million, respectively, related to the acquisition of Meredith. See "Note 5—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-in-Control Payments" for additional information.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
Adjusted EBITDA:(e) | | | | | |
Dotdash Meredith(f) | | | | | |
| Digital | $ | 186,696 | | | $ | 91,179 | | | $ | 66,206 | |
| Print | $ | 31,135 | | | $ | 2,639 | | | $ | — | |
Other(c) | $ | (65,682) | | | $ | (60,196) | | | $ | — | |
| Angi Inc. | | | | | |
| Ads and Leads | $ | 168,952 | | | $ | 136,260 | | | $ | 230,797 | |
| Services | $ | (52,126) | | | $ | (48,203) | | | $ | (29,253) | |
| Roofing | $ | (21,400) | | | $ | (7,511) | | | $ | — | |
Other(c) | $ | (49,866) | | | $ | (46,066) | | | $ | (23,870) | |
| International | $ | (481) | | | $ | (6,615) | | | $ | (4,870) | |
| Search | $ | 83,486 | | | $ | 108,381 | | | $ | 51,344 | |
| Emerging & Other | $ | (1,643) | | | $ | 33,383 | | | $ | (37,699) | |
| Corporate | $ | (79,521) | | | $ | (95,985) | | | $ | (147,433) | |
_____________________
(e) The Company's primary financial measure and GAAP segment measure is Adjusted EBITDA, which is defined as operating income: excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercisefair value of stock options and subsidiary denominated equity, vestingcontingent consideration arrangements.
(f) Dotdash Meredith includes restructuring charges of restricted common stock, restricted stock units ("RSUs") and market-based awards ("MSUs"). For$73.2 million for the year ended December 31, 2020, 3.12022. The years ended December 31, 2022 and 2021 also include transaction-related expenses of $7.1 million potentially dilutive securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
(d) The Company computed basic and diluted earnings per share for periods prior$30.2 million, respectively, related to the MTCH Separation using the shares issued on June 30, 2020 in connection with the MTCH Separation.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following tables reconcile operating (loss) income for the Company's reportable segments and net earnings attributable to IAC shareholders to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2022 |
| | Operating (Loss) Income(d) | | Stock-Based
Compensation
Expense | | Depreciation(g) | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | Goodwill Impairment | | Adjusted EBITDA(e)(f) |
| | (In thousands) |
| Dotdash Meredith | | | | | | | | | | | | | |
| Digital | $ | (66,629) | | | $ | 20,596 | | | $ | 27,569 | | | $ | 205,772 | | | $ | (612) | | | $ | — | | | $ | 186,696 | |
| Print | (54,448) | | | $ | 1,023 | | | $ | 12,620 | | | $ | 71,940 | | | $ | — | | | $ | — | | | $ | 31,135 | |
Other(c) | (67,014) | | | $ | 136 | | | $ | 1,196 | | | $ | — | | | $ | — | | | $ | — | | | $ | (65,682) | |
| Angi Inc. | | | | | | | | | | | | | |
| Ads and Leads | 85,593 | | | $ | 19,972 | | | $ | 52,737 | | | $ | 10,650 | | | $ | — | | | $ | — | | | $ | 168,952 | |
| Services | (95,166) | | | $ | 18,012 | | | $ | 21,904 | | | $ | 3,124 | | | $ | — | | | $ | — | | | $ | (52,126) | |
| Roofing | (50,685) | | | $ | 1,866 | | | $ | 747 | | | $ | 667 | | | $ | — | | | $ | 26,005 | | | $ | (21,400) | |
Other(c) | (61,794) | | | $ | 11,928 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (49,866) | |
| International | (4,253) | | | $ | 890 | | | $ | 2,882 | | | $ | — | | | $ | — | | | $ | — | | | $ | (481) | |
| Search | 83,398 | | | $ | — | | | $ | 88 | | | $ | — | | | $ | — | | | $ | — | | | $ | 83,486 | |
| Emerging & Other | (106,154) | | | $ | 507 | | | $ | 1,691 | | | $ | 15,565 | | | $ | — | | | $ | 86,748 | | | $ | (1,643) | |
Corporate (g) | (137,619) | | | $ | 48,546 | | | $ | 9,552 | | | $ | — | | | $ | — | | | $ | — | | | $ | (79,521) | |
| Total | (474,771) | | | | | | | | | | | | | |
| Interest expense | (110,165) | | | | | | | | | | | | | |
| Unrealized loss on investment in MGM | (723,515) | | | | | | | | | | | | | |
| Other expense, net | (217,785) | | | | | | | | | | | | | |
| Loss from continuing operations before income taxes | (1,526,236) | | | | | | | | | | | | | |
| Income tax benefit | 331,087 | | | | | | | | | | | | | |
| Net loss from continuing operations | (1,195,149) | | | | | | | | | | | | | |
| Earnings from discontinued operations, net of tax | 2,694 | | | | | | | | | | | | | |
| Net loss | (1,192,455) | | | | | | | | | | | | | |
| Net loss attributable to noncontrolling interests | 22,285 | | | | | | | | | | | | | |
| Net loss attributable to IAC shareholders | $ | (1,170,170) | | | | | | | | | | | | | |
_____________________
(g) Includes stock-based compensation expense for stock-based awards granted to employees of Corporate, Search and all Emerging & Other businesses other than Vivian Health.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2021 |
| | Operating Income (Loss)(d) | | Stock-Based Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Arrangements | | | | Adjusted EBITDA(e) |
| | (In thousands) |
| Dotdash Meredith | | | | | | | | | | | | | |
| Digital | $ | 73,980 | | | $ | 1,438 | | | $ | 4,257 | | | $ | 11,512 | | | $ | (8) | | | | | $ | 91,179 | |
| Print | (6,527) | | | $ | — | | | $ | 1,827 | | | $ | 7,339 | | | $ | — | | | | | $ | 2,639 | |
Other(c) | (60,277) | | | $ | — | | | $ | 81 | | | $ | — | | | $ | — | | | | | $ | (60,196) | |
| Angi Inc. | | | | | | | | | | | | | |
| Ads and Leads | 65,485 | | | $ | 12,722 | | | $ | 46,025 | | | $ | 12,028 | | | $ | — | | | | | $ | 136,260 | |
| Services | (63,984) | | | $ | 4,672 | | | $ | 7,049 | | | $ | 4,060 | | | $ | — | | | | | $ | (48,203) | |
| Roofing | (8,596) | | | $ | 531 | | | $ | 221 | | | $ | 333 | | | $ | — | | | | | $ | (7,511) | |
Other(c) | (56,196) | | | $ | 10,121 | | | $ | — | | | $ | 9 | | | $ | — | | | | | $ | (46,066) | |
| International | (13,222) | | | $ | 656 | | | $ | 5,951 | | | $ | — | | | $ | — | | | | | $ | (6,615) | |
| Search | 108,334 | | | $ | — | | | $ | 47 | | | $ | — | | | $ | — | | | | | $ | 108,381 | |
| Emerging & Other | (22,738) | | | $ | 101 | | | $ | 1,462 | | | $ | 39,558 | | | $ | 15,000 | | | | | $ | 33,383 | |
Corporate (g) | (153,326) | | | $ | 49,246 | | | $ | 8,095 | | | $ | — | | | $ | — | | | | | $ | (95,985) | |
| Total | (137,067) | | | | | | | | | | | | | |
| Interest expense | (34,264) | | | | | | | | | | | | | |
| Unrealized gain on investment in MGM | 789,283 | | | | | | | | | | | | | |
| Other income, net | 111,854 | | | | | | | | | | | | | |
| Earnings from continuing operations before income taxes | 729,806 | | | | | | | | | | | | | |
| Income tax provision | (138,990) | | | | | | | | | | | | | |
| Net earnings from continuing operations | 590,816 | | | | | | | | | | | | | |
| Loss from discontinued operations, net of tax | (1,831) | | | | | | | | | | | | | |
| Net earnings | 588,985 | | | | | | | | | | | | | |
| Net loss attributable to noncontrolling interests | 8,562 | | | | | | | | | | | | | |
| Net earnings attributable to IAC shareholders | $ | 597,547 | | | | | | | | | | | | | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2020 |
| | Operating
Income
(Loss) | | Stock-Based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | Goodwill Impairment | | Adjusted EBITDA(e) |
| | (In thousands) |
| Dotdash Meredith | $ | 50,241 | | | $ | — | | | $ | 1,794 | | | $ | 14,171 | | | $ | — | | | $ | — | | | $ | 66,206 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Angi Inc. | | | | | | | | | | | | | |
| Ads and Leads | 133,365 | | | $ | 14,241 | | | $ | 44,748 | | | $ | 38,443 | | | $ | — | | | $ | — | | | $ | 230,797 | |
| Services | (44,592) | | | $ | 7,601 | | | $ | 3,638 | | | $ | 4,100 | | | $ | — | | | $ | — | | | $ | (29,253) | |
| Roofing | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Other(c) | (84,674) | | | $ | 60,752 | | | $ | — | | | $ | 52 | | | $ | — | | | $ | — | | | $ | (23,870) | |
| International | (10,467) | | | $ | 1,055 | | | $ | 4,235 | | | $ | 307 | | | $ | — | | | $ | — | | | $ | (4,870) | |
| Search | (248,711) | | | $ | — | | | $ | 2,709 | | | $ | 32,200 | | | $ | — | | | $ | 265,146 | | | $ | 51,344 | |
| Emerging & Other | (70,896) | | | $ | 100 | | | $ | 2,449 | | | $ | 37,566 | | | $ | (6,918) | | | $ | — | | | $ | (37,699) | |
Corporate (g) | (261,929) | | | $ | 105,246 | | | $ | 9,250 | | | $ | — | | | $ | — | | | $ | — | | | $ | (147,433) | |
| Total | (537,663) | | | | | | | | | | | | | |
| Interest expense | (16,166) | | | | | | | | | | | | | |
| Unrealized gain on investment in MGM | 840,550 | | | | | | | | | | | | | |
| Other expense, net | (42,561) | | | | | | | | | | | | | |
| Earnings from continuing operations before income taxes | 244,160 | | | | | | | | | | | | | |
| Income tax benefit | 45,707 | | | | | | | | | | | | | |
| Net earnings from continuing operations | 289,867 | | | | | | | | | | | | | |
| Loss from discontinued operations, net of tax | (21,281) | | | | | | | | | | | | | |
| Net earnings | 268,586 | | | | | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | 1,140 | | | | | | | | | | | | | |
| Net earnings attributable to IAC shareholders | $ | 269,726 | | | | | | | | | | | | | |
The following table presents capital expenditures by reportable segment:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Capital expenditures: | | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Dotdash Meredith | $ | 12,885 | | | $ | 4,823 | | | $ | 5,445 | |
| Angi Inc. | 116,352 | | | 70,215 | | | 52,488 | |
| Search | 17 | | | 178 | | | 47 | |
| Emerging & Other | 10,109 | | | 894 | | | 1,363 | |
| Corporate | 390 | | | 14,100 | | | 1,383 | |
| Total | $ | 139,753 | | | $ | 90,210 | | | $ | 60,726 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 12—STOCK-BASED COMPENSATION
IAC currently has one active plan (the "Plan") under which stock-based awards denominated in shares of or stock-based awards settleable in IAC common stock have been and may be granted. This Plan was an Old IAC plan and was adopted by the Company and became effective upon the consummation of the MTCH Separation. The Plan has a stated term of ten years. The Plan does not specify grant dates or vesting schedules of awards as those determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee"). Each grant agreement reflects the vesting schedule for that grant as determined by the Committee. There are also outstanding stock-based awards that were granted under older plans that have since expired or been discontinued. The Plan provides for grants of stock options to acquire shares of IAC common stock (the exercise price of stock options granted will not be less than the market price of the Company's common stock on the grant date), RSUs denominated in shares of IAC restricted common stock, including those that may be linked to the achievement of the Company's stock price, known as market-based awards ("MSUs") and those that may be linked to the achievement of a performance target, known as performance-based awards ("PSUs"), restricted stock, as well as other equity awards, including those denominated or settleable in IAC shares. The Plan authorizes the Company to grant awards to its CEOemployees, officers, directors and equity instruments denominated in theconsultants. At December 31, 2022, there are 31.4 million IAC common shares of certain subsidiaries.stock reserved for future issuance under this plan.
NOTE 11—STOCK-BASED COMPENSATION
IAC Denominated Stock-based Awards
IAC currently has 1 active plan under which stock-based awards denominated in shares of IAC common stock have been and may be granted. There are also outstanding stock-based awards that were granted under older plans that have since expired or been discontinued. The active plan provides for grants of stock options to acquire shares of IAC common stock, RSUs denominated in shares of IAC common stock, including those that may be linked to the achievement of the Company's stock price, known as market-based awards ("MSUs") and those that may be linked to the achievement of a performance target,
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
known as performance-based awards ("PSUs"), restricted stock, as well as other equity awards. The plan authorizes the Company to grant awards to its employees, officers, directors and consultants. At December 31, 2020, there are 31.1 million shares of stock reserved for future issuance under this plan. This number reflects an adjustment to the number of shares originally authorized under the plan made in connection with the MTCH Separation and pursuant to the plan terms.
This plan was an Old IAC plan and was adopted by the Company and became effective upon the consummation of the MTCH Separation. The plan has a stated term of ten years and provides that the exercise price of stock options granted will not be less than the market price of the Company's common stock on the grant date. The plan does not specify grant dates or vesting schedules of awards as those determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee"). Each grant agreement reflects the vesting schedule for that particular grant as determined by the Committee. RSU awards currently outstanding generally cliff-vest after a five-year period, vest in equal annual installments over a four-year period or cliff-vest after a three-year period in each case, from the grant date. All outstanding stock options are fully vested. There are 0 MSU or PSU awards currently outstanding at December 31, 2020. The restricted stock award currently outstanding cliff vest on the ten-year anniversary of the November 5, 2020 grant date based on the satisfaction of IAC stock price targets and continued employment through the vesting date.
The amount of stock-based compensation expense recognized in the statement of operations is net of estimated forfeitures. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate. The expense ultimately recorded is for the awards that vest. At December 31, 2020, there is $398.3 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 6.2 years.
The total income tax benefit recognized in the accompanying statement of operations for the years ended December 31, 2020, 2019 and 2018 related to all stock-based compensation is $204.3 million, $82.4 million and $80.7 million, respectively.
The aggregate income tax benefit recognized related to the exercise of stock options for the years ended December 31, 2020, 2019 and 2018, is $170.1 million, $64.2 million, and $63.6 million, respectively. As the Company is currently in a NOL position, there will be some delay in the timing of the realization of the cash benefit of the income tax deductions related to stock-based compensation because it will be dependent upon the amount and timing of future taxable income and the timing of estimated income tax payments.
IAC Restricted Common Stock
On November 5, 2020, the Company entered into a new, ten-year employment agreement and a Restricted Stock Agreement ("RSA Agreement") with Joseph Levin, IAC's Chief Executive Officer.Officer ("CEO"). The RSA Agreement provides for a grant of 3,000,000 shares of IAC restricted common stock that cliff vest on the ten-year anniversary of the grant date based on satisfaction of IAC's stock price targets and Mr. Levin's continued employment through the vesting date.
Mr. Levin may request an extension of the measurement and vesting period from 10 to 12 years and IAC will consider the request in light of the circumstances.
Mr. Levin may elect to accelerate vesting of the IAC restricted shares, effective on the 6th, 7th, 8th, or 9th anniversary of the grant date, in which case performance will be measured through such date, and Mr. Levin will receive a pro-rated portion of the award (based on the years elapsed from the grant date) and any remaining shares will be forfeited. The applicable stock price goals are proportionately lower on the earlier vesting dates.
The value of the restricted common stock grant was estimated using a lattice model that incorporates a Monte Carlo simulation of IAC's stock price. The fair value of the restricted common stock grant on November 5, 2020 was $61.06 per share. The total grant date fair value of the award was $183.2 million.
In connection with the Spin-off, pursuant to the RSA Agreement, the stock price targets of the IAC restricted stock award were adjusted to reflect the effect of the Spin-off and Vimeo entered into a separate restricted stock agreement granting Mr. Levin shares of Vimeo common stock subject to the same terms and conditions of the RSA Agreement except for the stock price targets for each respective award. The total fair value of the modified IAC restricted stock award and the new Vimeo restricted stock award was $228.3 million, of which $141.1 million was allocated to the IAC restricted stock award and $87.3 million was allocated to the Vimeo restricted stock award. Both awards were estimated using a lattice model that incorporated a Monte Carlo simulation of IAC's and Vimeo's stock price on the modification date. In connection with the modified IAC restricted stock award, $10.1 million of expense had previously been recorded prior to the Spin-off and $131.0 million of expense is to be recognized over the remaining vesting period. At December 31, 2022, there is $108.7 million of unrecognized compensation cost that is left to be recognized related to this award.
IAC Restricted Stock Units
RSU awards currently outstanding generally cliff-vest after a five-year period from the grant date. There are no MSU or PSU awards outstanding at December 31, 2022 and Market-based Stock Units2021.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
RSUs and MSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of IAC common stock and with the value of each RSU equal to the fair value of IAC common stock at the date of grant.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The value of each MSU is estimated using a lattice model that incorporates a Monte Carlo simulation of IAC's stock price. Each RSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. The vesting of MSUs is tied to the stock price of IAC. For RSU grants, the expense is measured at the grant date as the fair value of IAC common stock and expensed as stock-based compensation over the vesting term. MSU grants are expensed over the shorter of the vesting period or the derived service period.
Unvested RSUs and MSUs outstanding at December 31, 20202022 and changes during the period ended December 31, 20202022 are as follows:
| | | | RSUs | | MSUs | | RSUs |
| | | Number
of Shares | | Weighted
Average
Grant Date
Fair Value | | Number
of Shares | | Weighted
Average
Grant Date
Fair Value | | Number
of Shares | | Weighted
Average
Grant Date
Fair Value |
| | | (Shares in thousands) | | (Shares in thousands) |
| Unvested on June 30, 2020, the date of the MTCH Separation | 421 | | | $ | 48.13 | | | 347 | | | $ | 44.76 | | |
| Unvested at January 1 | | Unvested at January 1 | 1,546 | | | $ | 80.38 | |
| Granted | Granted | 1,121 | | | 128.82 | | | 0 | | | 0 | | Granted | 280 | | | 114.27 | |
| Vested | Vested | (26) | | | 64.52 | | | (347) | | | 44.76 | | Vested | (284) | | | 44.87 | |
| Forfeited | Forfeited | (13) | | | 94.17 | | | — | | | — | | Forfeited | (84) | | | 77.27 | |
| Unvested at December 31, 2020 | 1,503 | | | $ | 107.62 | | | 0 | | | $ | 0 | | |
| | Unvested at December 31 | | Unvested at December 31 | 1,458 | | | $ | 93.29 | |
In connection with the MTCH Separation, Old IAC's RSUs were converted into IAC RSUs in a manner that preserved their fair value immediately before and immediately after the conversion. These equityRSU awards are settled on a net basis, with the award holder entitled to receive IAC shares equal to the number of RSUs vesting less a number of shares with a value equal to the required cash tax withholding payment, which will be paid by the Company. The number of IAC common shares that would be required to net settle RSUs outstanding at January 29, 2021February 10, 2023 is 0.7 million shares.shares. In addition, withholding taxes, which will be paid by the Company on behalf of the employees upon vest,vesting, would have been $152.7been $35.9 million at January 29, 2021,February 10, 2023, assuming a 50% withholding rate.
The weighted average fair value of RSUs granted subsequent tofor the years ended December 31, 2022 and 2021 and for the period from the MTCH Separation through December 31, 2020, based on market prices of IAC's common stock on the grant date, was $128.82. There were 0 MSUs granted subsequent to the MTCH Separation through December 31, 2020.$114.27, $171.53 and $128.82, respectively.
The total fair value of RSUs and MSUs that vested subsequent tofor the years ended December 31, 2022 and 2021 and for the period from the MTCH Separation through December 31, 2020 was $12.7 million, $15.9 million and $3.8 million, andrespectively. During 2020, all outstanding MSUs vested. The total fair value of MSUs that vested for the period from the MTCH Separation through December 31, 2020 was $43.6 million.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
IAC Stock Options
All outstanding stock options are fully vested.
Stock options outstanding at December 31, 20202022 and changes during the period ended December 31, 20202022 are as follows:
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Shares | | Weighted
Average
Exercise
Price | | Weighted
Average
Remaining
Contractual
Term in Years | | Aggregate
Intrinsic
Value |
| | (Shares and intrinsic value in thousands) |
| Old IAC options converted into IAC options on June 30, 2020, the date of the MTCH Separation | 4,498 | | | $ | 20.08 | | | | | |
| Granted | 0 | | | 0 | | | | | |
| Exercised | (587) | | | 13.46 | | | | | |
| Forfeited | 0 | | | 0 | | | | | |
| Expired | (2) | | | 14.05 | | | | | |
| Options outstanding at December 31, 2020 | 3,909 | | | $ | 21.08 | | | 4.9 | | $ | 657,704 | |
| Options exercisable | 3,909 | | | $ | 21.08 | | | 4.9 | | $ | 657,704 | |
In connection with the MTCH Separation, Old IAC denominated stock options were converted into stock options to purchase IAC common stock and stock options to purchase New Match common stock in a manner that preserved the spread value of the stock options immediately before and immediately after the adjustment, with the allocation between the two stock options based on the value of a share of IAC common stock relative to the value of a share of New Match common stock multiplied by the transaction exchange ratio of 2.1584. | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Shares | | Weighted
Average
Exercise
Price | | Weighted
Average
Remaining
Contractual
Term in Years | | Aggregate
Intrinsic
Value |
| | (Shares and intrinsic value in thousands) |
| Options Outstanding at January 1 | 2,896 | | | $ | 13.98 | | | | | |
| Granted | — | | | — | | | | | |
| Exercised | (74) | | | 11.51 | | | | | |
| Forfeited | — | | | — | | | | | |
| Expired | — | | | — | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Options Outstanding at December 31 | 2,822 | | | $ | 14.05 | | | 2.7 | | $ | 85,661 | |
| Options exercisable | 2,822 | | | $ | 14.05 | | | 2.7 | | $ | 85,661 | |
The aggregate intrinsic value in the table above represents the difference between IAC's closing stock price on the last trading day of 20202022 and the exercise price, multiplied by the number of in-the-money options that would have been exercised had all option holders exercised their options on December 31, 2020.2022. The total intrinsic value of IAC stock options exercised subsequent toduring the years ended December 31, 2022 and 2021 and for the period from the MTCH Separation through December 31, 2020 iswas $3.4 million, $135.1 million and $74.8 million.million, respectively.
The following table summarizes the information about stock options outstanding and exercisable at December 31, 2020:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Options Outstanding | | Options Exercisable |
| Range of Exercise Prices | Outstanding at
December 31,
2020 | | Weighted-
Average
Remaining
Contractual
Life in Years | | Weighted-
Average
Exercise
Price | | Exercisable at
December 31,
2020 | | Weighted-
Average
Remaining
Contractual
Life in Years | | Weighted-
Average
Exercise
Price |
| | (Shares in thousands) |
| Less than $20.00 | 1,060 | | | 4.7 | | $ | 14.21 | | | 1,060 | | | 4.7 | | $ | 14.21 | |
| $20.01 to $30.00 | 2,765 | | | 4.9 | | 22.96 | | | 2,765 | | | 4.9 | | 22.96 | |
| $30.01 to $40.00 | 4 | | | 6.6 | | 31.82 | | | 4 | | | 6.6 | | 31.82 | |
| $40.01 to $50.00 | 80 | | | 7.2 | | 46.61 | | | 80 | | | 7.2 | | 46.61 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| 3,909 | | | 4.9 | | $ | 21.08 | | | 3,909 | | | 4.9 | | $ | 21.08 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Options Outstanding | | Options Exercisable |
| Range of Exercise Prices | Outstanding at December 31, 2022 | | Weighted- Average Remaining Contractual Life in Years | | Weighted- Average Exercise Price | | Exercisable at December 31, 2022 | | Weighted- Average Remaining Contractual Life in Years | | Weighted- Average Exercise Price |
| | (Shares in thousands) |
| Less than $10.00 | 529 | | | 2.7 | | $ | 8.54 | | | 529 | | | 2.7 | | $ | 8.54 | |
| $10.01 to $15.00 | 691 | | | 2.2 | | 13.62 | | | 691 | | | 2.2 | | 13.62 | |
| $15.01 to $20.00 | 1,598 | | | 2.9 | | 16.04 | | | 1,598 | | | 2.9 | | 16.04 | |
| Greater than $20.01 | 4 | | | 4.6 | | 21.17 | | | 4 | | | 4.6 | | 21.17 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| 2,822 | | | 2.7 | | $ | 14.05 | | | 2,822 | | | 2.7 | | $ | 14.05 | |
The fair value of stock option awards, with the exception of market-based awards, is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions, including expected volatility, risk-free interest rate and expected term.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The Company has the discretion to settle IAC stock options net of withholding tax and exercise price or require the award holder to pay its share of the withholding tax, which he or she may do so by selling IAC common shares. The aggregate intrinsic value of IAC's stock options outstanding as of January 29, 2021, is $737.9February 10, 2023, is $105.7 million. Assuming all stock options outstanding on January 29, 2021February 10, 2023 were net settled on that date, the Company would have issued 1.8issued 1.0 million common shares and would have remitted $369.0remitted $52.9 million in cash for withholding taxes (assuming a 50% withholding rate). Assuming all stock options outstanding on January 29, 2021February 10, 2023 were settled through the issuance of a number of IAC common shares equal to the
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
number of stock options exercised, the Company would have issued 3.9issued 2.8 million commoncommon shares and would have received $82.3received $39.3 million in cash proceeds.
Stock-based Awards Denominated in the Shares of Certain Subsidiaries
Non-publicly-tradedNon-publicly traded Subsidiaries
The following description excludes awards denominated in ANGIAngi Inc. shares.
The Company has granted stock settled stock appreciation rights to employees and management that are denominated in the equity of certain non-publicly traded subsidiaries of the Company. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. The value of the 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 fair value of these interest is generally determined by negotiation or arbitration when settled,the Board of Directors of the applicable subsidiary, which will occur at various dates through 2026.2029. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IAC common shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment, which will be paid by the Company. The number of IAC common shares ultimately needed to settle these awards may vary significantly from the estimated number below 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 expense associated with these equity awards is initially measured at fair value at the grant date and is expensed as stock-based compensation over the vesting term. The number of IAC common shares that would be required to settle these interests at current estimated fair values, including vested and unvested interests, at January 29, 2021February 10, 2023 is 0.1 0.3 million shares.shares. Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $12.5been $16.5 million aat t January 29, 2021,February 10, 2023, assuming a 50% withholding rate. Excluded from these amounts are awards related to Vimeo, for which the aggregate intrinsic value of outstanding Vimeo awards as of January 29, 2021, assuming a per share price of $35.35, which is equal to the per share price of Vimeo based upon a $5.7 billion pre-money valuation, is $405.1 million. Withholding taxes would have been $202.6 million at January 29, 2021, assuming a 50% withholding rate. If the Spin-off is completed, these awards will be settled in shares of SpinCo common stock.SpinCo management will have the discretion to continue to net settle these awards, or require the award holder to pay its share of the withholding tax, which he or she may do so by selling SpinCo common shares.
ANGIAngi Inc.
ANGIAngi Inc. currently settles all of its equity awards on a net basis. Certain ANGIAngi Inc. stock appreciation rights issued prior to the Combinationtransaction resulting in formation of Angi Inc. in 2017 (the "Combination") are settleable in either shares of ANGIAngi Inc. common stock or shares of IAC common stock at IAC's option. If settled in IAC common stock, ANGIAngi Inc. reimburses IAC in shares of its common stock. The aggregate intrinsic value of these awards outstanding at January 29, 2021February 10, 2023 is $92.1 million,$0.1 million; assuming these awards were net settled on that date, the withholding taxes that would be payable by ANGIAngi Inc. are $46.1less than $0.1 million, assuming a 50% withholding rate, and ANGIAngi Inc. would have issued 3.3less than 0.1 million shares. Certain equity awards denominated in shares of ANGI'sAngi Inc.'s subsidiaries may be settled in either shares of ANGIAngi Inc. common stock or IAC common stock at IAC's option. To the extent shares of IAC common stock are issued in settlement of these awards, ANGIAngi Inc. is obligated to reimburse IAC for the cost of those shares by issuing shares of ANGIAngi Inc. common stock. The aggregate intrinsic value of all other ANGIAngi Inc. equity awards, including stock options, RSUs and subsidiary denominated equity at January 29, 2021 February 10, 2023 is $162.2$59.0 million; assuming these awards were net settled on that date, the withholding taxes that would be payable by Angi Inc. on behalf of the employees are $81.1$28.9 million, assuming a 50% withholding rate, and ANGIAngi Inc. would have issued iss5.8ued 10.4 million shares shares of its common stock.
Modification of awards
During 2020, the Company modified certain equity awards in connection with the MTCH Separation and recognized a modification charge of $56.9$56.6 million, of which $56.0$55.7 million was recognized as stock-based compensation expense in the year ended December 31, 2020 and the remaining charge will berelated to the modified awards was recognized over the vesting period of the modified awards.2021 and 2022. In addition, certain other equity awards were modified during 2020 resulting in modification charges of $20.5 million in the aggregate, all of which was recorded in 2020 and $14.1 million of which was recorded by ANGI.Angi Inc.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
During 2019, certain equity awards were modified resulting in modification charges of $13.1 million.
During 2018, certain equity awards were modified resulting in modification charges of $11.8 million, of which $3.9 million was recorded by ANGI.
In connection with the Combination, in 2017, the previously issued HomeAdvisor (US) stock appreciation rights were converted into ANGIAngi Inc. equity awards resulting in a modification charge of $217.7 million of which $21.1 million, $29.0$0.9 million and $56.9$21.1 million were recognized as stock-based compensation expense in the years ended December 31, 2021 and 2020, 2019,respectively.
Forfeitures and 2018 respectively.Unrecognized Compensation Cost
The amount of stock-based compensation expense recognized in the statement of operations is net of estimated forfeitures. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate. The expense ultimately recorded is for the awards that vest. At December 31, 2020, there2022, there is $0.9$322.4 million of expense remainingunrecognized compensation cost, net of estimated forfeitures, related to this modification that willall equity-based awards, which is expected to be recognized over the remaining vestinga weighted average period of approximately 4.5 years.
Tax Benefits
The total income tax benefit recognized in the modified awards.statement of operations for the years ended December 31, 2022, 2021 and 2020 related to all stock-based compensation expense is $20.0 million, $101.8 million and $198.3 million, respectively.
The aggregate income tax benefit recognized related to the exercise of stock options for the years ended December 31, 2022, 2021 and 2020, is $1.7 million, $81.0 million, and $165.8 million, respectively. There may be some delay in the timing of the realization of the cash benefit of the income tax deductions related to stock-based compensation because it will be dependent upon the amount and timing of future taxable income and the timing of estimated income tax payments.
NOTE 12—SEGMENT INFORMATION13—PENSION AND POSTRETIREMENT BENEFIT PLANS
The overall concept thatPension and Postretirement Plans
In connection with the acquisition of Meredith, the Company employsassumed the obligations under Meredith’s various pension plans. The plans include U.S. noncontributory pension plans that cover substantially all employees who were employed by Meredith prior to January 1, 2018. There are two international pension plans in determining its operating segments isthe U.K., including the IPC Pension Scheme ("IPC Plan"); the international plans have no active participants. The two U.S. and two U.K. plans consist of a qualified (funded) plan and a nonqualified (unfunded) plan in each country. These plans provide participants with retirement benefits in accordance with benefit provision formulas. The nonqualified pension plans provide retirement benefits to presentcertain highly compensated employees. The Company also assumed Meredith's defined healthcare and life insurance plans that provide benefits to eligible employees upon their retirement.
On July 28, 2022, following approval by the financialtrustees of the IPC Plan, the IPC Plan entered into an annuity contract with a private limited life insurance company covering all IPC Plan participants who were not covered by an annuity contract entered into in May 2020. The annuity contracts are designed to provide payments equal to all future designated contractual benefit payments to covered participants until the annuity contracts are settled. The value of the annuity contracts and the liabilities with respect to participants are expected to match (i.e., the full benefits have been annuitized). The Company remains responsible for paying pension benefits to the IPC Pension Scheme participants. While the Company currently does not expect to be required to make additional contributions to the IPC Pension Scheme, this may change based upon future events or as additional information becomes available.
On September 13, 2022, the board of directors of Meredith voted unanimously to freeze and terminate the U.S. funded pension plan effective December 31, 2022. All participants in a manner consistent with: howthis plan on the chief operating decision maker viewstermination date continue as participants in the businesses.plan with respect to their accrued benefits until their accrued benefits are distributed to them or their beneficiaries. In addition, we consider how the businesses are organized asparticipant's covered compensation was frozen effective December 31, 2022. Participants will no longer receive a benefit credit under the plan, but participants will continue to segment management andreceive interest credits pursuant to the focusterms of the businesses with regardsplan. The Company does not expect to have to make any contributions to the types of services or products offered or the target market. Operating segments are combined for reporting purposes if they meet certain aggregation criteria, which principally relate to the similarity of their economic characteristics, which is the case for the Desktop and Ask Media Group operating segmentsplan in the Search reportable segment, or, in the case of the Emerging & Other reportable segment, do not meet the quantitative thresholds that require presentation as separate reportable segments.
The following table presents revenue by reportable segment:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Revenue: | | | | | |
| ANGI Homeservices | $ | 1,467,925 | | | $ | 1,326,205 | | | $ | 1,132,241 | |
| Vimeo | 283,218 | | | 196,015 | | | 159,641 | |
| Dotdash | 213,753 | | | 167,594 | | | 130,991 | |
| Search | 613,274 | | | 742,184 | | | 823,950 | |
| Emerging & Other | 469,759 | | | 274,107 | | | 286,586 | |
| Inter-segment eliminations | (248) | | | (304) | | | (361) | |
| Total | $ | 3,047,681 | | | $ | 2,705,801 | | | $ | 2,533,048 | |
The following table presents the revenue of the Company's segments disaggregated by type of service:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| ANGI Homeservices | | | | | |
| Marketplace: | | | | | |
Consumer connection revenue (a) | $ | 1,054,660 | | | $ | 913,533 | | | $ | 704,341 | |
| Service professional membership subscription revenue | 50,975 | | | 63,872 | | | 66,214 | |
| Other revenue | 25,685 | | | 15,263 | | | 3,940 | |
| Total Marketplace revenue | 1,131,320 | | | 992,668 | | | 774,495 | |
Advertising and other revenue (b) | 264,108 | | | 257,224 | | | 287,676 | |
| Total North America revenue | 1,395,428 | | | 1,249,892 | | | 1,062,171 | |
Consumer connection revenue (c) | 57,692 | | | 59,611 | | | 50,913 | |
| Service professional membership subscription revenue | 13,091 | | | 14,231 | | | 17,362 | |
| Advertising and other revenue | 1,714 | | | 2,471 | | | 1,795 | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Total Europe revenue | 72,497 | | | 76,313 | | | 70,070 | |
| Total ANGI Homeservices revenue | $ | 1,467,925 | | | $ | 1,326,205 | | | $ | 1,132,241 | |
| | | | | |
(a) Includes fees paid by service professionals for consumer matches and revenue from pre-priced jobs sourced through the HomeAdvisor and Handy platforms. |
(b) Includes Angie's List revenue from service professionals under contract for advertising and Angie's List membership subscription fees from consumers, as well as revenue from mHelpDesk, HomeStars, and Felix. Felix was sold on December 31, 2018 and its revenue for the year ended December 31, 2018 was $36.9 million. |
(c) Includes fees paid by service professionals for consumer matches. |
| | | | | |
| Vimeo | | | | | |
| Platform revenue | $ | 283,218 | | | $ | 193,736 | | | $ | 146,665 | |
| Hardware revenue | 0 | | | 2,279 | | | 12,976 | |
| Total Vimeo revenue | $ | 283,218 | | | $ | 196,015 | | | $ | 159,641 | |
| | | | | |
| Dotdash | | | | | |
| Display advertising revenue | $ | 137,455 | | | $ | 126,350 | | | $ | 103,704 | |
| Performance marketing revenue | 76,298 | | | 41,244 | | | 27,287 | |
| Total Dotdash revenue | $ | 213,753 | | | $ | 167,594 | | | $ | 130,991 | |
| | | | | |
| Search | | | | | |
| Advertising revenue: | | | | | |
| Google advertising revenue | $ | 506,077 | | | $ | 678,438 | | | $ | 770,494 | |
| Non-Google advertising revenue | 90,286 | | | 47,583 | | | 31,975 | |
| Total advertising revenue | 596,363 | | | 726,021 | | | 802,469 | |
| Other revenue | 16,911 | | | 16,163 | | | 21,481 | |
| Total Search revenue | $ | 613,274 | | | $ | 742,184 | | | $ | 823,950 | |
| | | | | |
| Emerging & Other | | | | | |
| Subscription revenue | $ | 303,482 | | | $ | 194,362 | | | $ | 102,592 | |
| Marketplace revenue | 138,726 | | | 38,950 | | | 19,665 | |
| Advertising revenue: | | | | | |
| Non-Google advertising revenue | 16,236 | | | 23,372 | | | 64,319 | |
| Google advertising revenue | 3,130 | | | 4,486 | | | 14,393 | |
| Total advertising revenue | 19,366 | | | 27,858 | | | 78,712 | |
| Service revenue | 4,410 | | | 3,881 | | | 22,142 | |
| Media production and distribution revenue | 3,585 | | | 8,897 | | | 61,717 | |
| Other revenue | 190 | | | 159 | | | 1,758 | |
| Total Emerging & Other revenue | $ | 469,759 | | | $ | 274,107 | | | $ | 286,586 | |
Change in Net Assets/Liabilities
Thefollowingtablespresentchangesin,andcomponentsof,the Company's netassets/liabilitiesforpensionandotherpostretirementbenefits:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| | Pension | | Postretirement | | Pension | | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| | (In thousands) |
| Change in benefit obligation | | | | | | | | | | | |
| Benefit obligation, beginning of year | $ | 166,800 | | | $ | 790,663 | | | $ | 10,808 | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | |
Acquisition and related fair value adjustments (a) | 23,345 | | | — | | | — | | | 154,920 | | | 850,774 | | | 10,923 | |
| Service cost | 3,562 | | | — | | | 7 | | | 368 | | | — | | | 1 | |
| Interest cost | 4,372 | | | 15,014 | | | 262 | | | 224 | | | 981 | | | 22 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net actuarial gain | (7,262) | | | (210,284) | | | (3,717) | | | (158) | | | (54,660) | | | (132) | |
| Benefits paid (including lump sums) | (9,105) | | | (15,521) | | | 150 | | | (339) | | | (1,529) | | | (6) | |
| Settlements | (96,100) | | | (34,374) | | | (3,037) | | | — | | | (9,361) | | | — | |
| Curtailment gain | (3,060) | | | — | | | — | | | — | | | — | | | — | |
| Contractual termination benefits | — | | | — | | | — | | | 11,785 | | | — | | | — | |
Plan transfer (b) | (9,564) | | | — | | | — | | | — | | | — | | | — | |
| Foreign currency exchange rate impact | — | | | (77,669) | | | — | | | — | | | 4,458 | | | — | |
| Benefit obligation, end of year | $ | 72,988 | | | $ | 467,829 | | | $ | 4,473 | | | $ | 166,800 | | | $ | 790,663 | | | $ | 10,808 | |
| Change in plan assets | | | | | | | | | | | |
| Fair value of plan assets, beginning of year | $ | 132,326 | | | $ | 1,015,274 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | |
Acquisition and related fair value adjustments (a) | 18,596 | | | — | | | — | | | 129,765 | | | 1,053,902 | | | — | |
| Actual return on plan assets | (12,657) | | | (397,417) | | | — | | | 2,886 | | | (62,744) | | | — | |
| Employer contributions | 44,221 | | | 122 | | | — | | | 14 | | | 29,229 | | | 6 | |
| | | | | | | | | | | |
| Benefits paid (including lump sums) | (9,105) | | | (15,521) | | | — | | | (339) | | | (1,529) | | | (6) | |
| Settlements | (95,182) | | | (34,374) | | | — | | | — | | | (9,361) | | | — | |
| | | | | | | | | | | |
| Foreign currency exchange rate impact | — | | | (100,193) | | | — | | | — | | | 5,777 | | | — | |
| Fair value of plan assets, end of year | $ | 78,199 | | | $ | 467,891 | | | $ | — | | | $ | 132,326 | | | $ | 1,015,274 | | | $ | — | |
| Over (under) funded status, end of year | $ | 5,211 | | | $ | 62 | | | $ | (4,473) | | | $ | (34,474) | | | $ | 224,611 | | | $ | (10,808) | |
_____________________
(a) All pension and postretirement plans were acquired with the acquisition of Meredith on December 1, 2021. The purchase accounting for the acquisition of Meredith was completed in the fourth quarter of 2022.
(b) Obligations and assets associated with certain former Meredith Corporation employees were transferred during 2022 to the third-party that purchased the entity on December 1, 2021.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Revenue
Benefits paid directly from Dotdash Meredith assets are included both in employer contributions and benefits paid.
Domestic Plans
The acquisition of Meredith triggered settlement of the entire benefit obligation of one of the two unfunded plans. This plan was paid out in its entirety as was a substantial portion of the benefit obligations of the other unfunded plan. These payments are included in the $96.1 million of settlements in the table above and resulted in the overall increase in the funded status of the domestic pension plans. See "Note 5—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-in-Control Payments" for additional information on the change-in-control payments. For the funded plan, higher interest rates and losses on equity securities led to a decrease in plan assets; and the higher interest rates reduced plan obligations. The gains realized on the plan's obligation did not offset the loss on assets, resulting in an overall loss for the year ended December 31, 2022. Additionally, the funded plan realized a curtailment gain as a result of the benefit freeze of the plan discussed above, but this gain was nearly offset by geographya loss realized for the measurement of the plan on a termination basis. The net actuarial gain included in the change in benefit obligation for the domestic postretirement plans for the year ended December 31, 2022 is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:result of demographic shifts in the covered participants. | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Revenue: | | | | | |
| United States | $ | 2,449,257 | | | $ | 2,097,743 | | | $ | 1,951,957 | |
| All other countries | 598,424 | | | 608,058 | | | 581,091 | |
| Total | $ | 3,047,681 | | | $ | 2,705,801 | | | $ | 2,533,048 | |
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Long-lived assets (excluding goodwill, intangible assets and ROU assets): | | | |
| United States | $ | 266,169 | | | $ | 297,433 | |
| All other countries | 12,082 | | | 7,981 | |
| Total | $ | 278,251 | | | $ | 305,414 | |
The following tables present operating income (loss) and Adjusted EBITDAinternational pension plans primarily consist of the IPC Plan. The overall decline in the funded status of the plan during the year was due to the impact of higher interest rates with the decline in the value of assets exceeding the benefit of the reduction in the plan obligation, resulting in an overall loss for the year ended December 31, 2022.
The net actuarial gain included in the change in benefit obligation for the international pension plans for the year ended December 31, 2021, is primarily a result of the increase in the discount rate used at December 31, 2021, as compared to December 1, 2021, as well as a slight decrease in the inflation assumptions over the same period, partially offset by reportable segment:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Operating (loss) income: | | | | | |
| ANGI Homeservices | $ | (6,368) | | | $ | 38,645 | | | $ | 63,906 | |
| Vimeo | (26,392) | | | (51,921) | | | (35,594) | |
| Dotdash | 50,241 | | | 29,021 | | | 18,778 | |
| Search | (248,711) | | | 122,347 | | | 151,425 | |
| Emerging & Other | (70,896) | | | (21,790) | | | (26,627) | |
| Corporate | (270,223) | | | (166,751) | | | (136,053) | |
| Total | $ | (572,349) | | | $ | (50,449) | | | $ | 35,835 | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
Adjusted EBITDA:(d) | | | | | |
| ANGI Homeservices | $ | 172,804 | | | $ | 202,297 | | | $ | 247,506 | |
| Vimeo | $ | (11,187) | | | $ | (41,790) | | | $ | (28,045) | |
| Dotdash | $ | 66,206 | | | $ | 39,601 | | | $ | 21,384 | |
| Search | $ | 51,344 | | | $ | 124,163 | | | $ | 182,905 | |
| Emerging & Other | $ | (37,699) | | | $ | (28,368) | | | $ | (14,889) | |
| Corporate | $ | (147,502) | | | $ | (88,617) | | | $ | (74,011) | |
(d) The Company's primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consistingexperience losses due to certain plan participants electing a full settlement of (i) amortization of intangible assets and impairments of goodwill andtheir benefit obligation under an ongoing enhanced transfer value exercise.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between the Company's performance and that of its competitors. The above items are excluded from the Company's Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.Balance Sheet Classification
The following tables reconcile operating (loss) incomeamounts are recognized in the December 31, 2022 and 2021 balance sheet, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| | Pension | | Postretirement | | Pension | | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| | (In thousands) |
| Other non-current assets | | | | | | | | | | | |
| Prepaid benefit cost | $ | 9,561 | | | $ | 4,358 | | | $ | — | | | $ | 24,318 | | | $ | 231,791 | | | $ | — | |
| Accrued expenses and other current liabilities | | | | | | | | | | | |
| Accrued benefit liability | (698) | | | (127) | | | (475) | | | (52,523) | | | — | | | (1,146) | |
| Other long-term liabilities | | | | | | | | | | | |
| Accrued benefit liability | (3,652) | | | (4,169) | | | (3,998) | | | (6,269) | | | (7,180) | | | (9,662) | |
| Net amount recognized | $ | 5,211 | | | $ | 62 | | | $ | (4,473) | | | $ | (34,474) | | | $ | 224,611 | | | $ | (10,808) | |
The accumulated benefit obligation for the Company's reportable segmentsdomestic defined benefit pension plans was $72.5 million and net earnings attributable to IAC shareholders to Adjusted EBITDA:$159.2 million at December 31, 2022 and 2021, respectively. The accumulated benefit obligation for the international defined benefit pension plans was $467.8 million and $790.7 million at December 31, 2022 and 2021, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2020 |
| | Operating
(Loss)
Income | | Stock-Based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | Goodwill Impairment | | Adjusted EBITDA |
| | (In thousands) |
| ANGI Homeservices | $ | (6,368) | | | $ | 83,649 | | | $ | 52,621 | | | $ | 42,902 | | | $ | 0 | | | $ | 0 | | | $ | 172,804 | |
| Vimeo | (26,392) | | | $ | 0 | | | $ | 460 | | | $ | 14,745 | | | $ | 0 | | | $ | 0 | | | $ | (11,187) | |
| Dotdash | 50,241 | | | $ | 0 | | | $ | 1,794 | | | $ | 14,171 | | | $ | 0 | | | $ | 0 | | | $ | 66,206 | |
| Search | (248,711) | | | $ | 0 | | | $ | 2,709 | | | $ | 32,200 | | | $ | 0 | | | $ | 265,146 | | | $ | 51,344 | |
| Emerging & Other | (70,896) | | | $ | 100 | | | $ | 2,449 | | | $ | 37,566 | | | $ | (6,918) | | | $ | 0 | | | $ | (37,699) | |
| Corporate | (270,223) | | | $ | 113,471 | | | $ | 9,250 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | (147,502) | |
| Total | (572,349) | | | | | | | | | | | | | |
| Interest expense | (16,166) | | | | | | | | | | | | | |
| Unrealized gain on investment in MGM Resorts International | 840,550 | | | | | | | | | | | | | |
| Other expense, net | (42,468) | | | | | | | | | | | | | |
| Earnings before income taxes | 209,567 | | | | | | | | | | | | | |
| Income tax benefit | 59,019 | | | | | | | | | | | | | |
| Net earnings | 268,586 | | | | | | | | | | | | | |
| Net loss attributable to noncontrolling interests | 1,140 | | | | | | | | | | | | | |
| Net earnings attributable to IAC shareholders | $ | 269,726 | | | | | | | | | | | | | |
The following table provides information about pension plans with projected benefit obligations and accumulated benefit obligations in excess of plan assets:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| Domestic | | International | | Domestic | | International |
| | (In thousands) |
| Projected benefit obligation | $ | 4,350 | | | $ | 4,296 | | | $ | 58,789 | | | $ | 7,179 | |
| Accumulated benefit obligation | $ | 3,831 | | | $ | 4,296 | | | $ | 57,669 | | | $ | 7,179 | |
| Fair value of plan assets | $ | — | | | $ | — | | | $ | — | | | $ | — | |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2019 |
| | Operating
Income
(Loss) | | Stock-based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Arrangements | | Goodwill Impairment | | Adjusted
EBITDA |
| | (In thousands) |
| ANGI Homeservices | $ | 38,645 | | | $ | 68,255 | | | $ | 39,915 | | | $ | 55,482 | | | $ | 0 | | | $ | 0 | | | $ | 202,297 | |
| Vimeo | (51,921) | | | $ | 0 | | | $ | 478 | | | $ | 9,653 | | | $ | 0 | | | $ | 0 | | | $ | (41,790) | |
| Dotdash | 29,021 | | | $ | 0 | | | $ | 974 | | | $ | 9,606 | | | $ | 0 | | | $ | 0 | | | $ | 39,601 | |
| Search | 122,347 | | | $ | 0 | | | $ | 1,816 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 124,163 | |
| Emerging & Other | (21,790) | | | $ | 0 | | | $ | 715 | | | $ | 9,127 | | | $ | (19,738) | | | $ | 3,318 | | | $ | (28,368) | |
| Corporate | (166,751) | | | $ | 66,083 | | | $ | 12,051 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | (88,617) | |
| Total | (50,449) | | | | | | | | | | | | | |
| Interest expense | (11,904) | | | | | | | | | | | | | |
| Other income, net | 34,047 | | | | | | | | | | | | | |
| Loss before income taxes | (28,306) | | | | | | | | | | | | | |
| Income tax benefit | 60,489 | | | | | | | | | | | | | |
| Net earnings | 32,183 | | | | | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (9,288) | | | | | | | | | | | | | |
| Net earnings attributable to IAC shareholders | $ | 22,895 | | | | | | | | | | | | | |
The components of net periodic benefit cost (credit) recognized in the statement of operations were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| | Pension | Postretirement | | Pension | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| (In thousands) |
| Service cost | $ | 3,562 | | | $ | — | | | $ | 7 | | | $ | 368 | | | $ | — | | | $ | 1 | |
| Interest cost | 4,372 | | | 15,014 | | | 262 | | | 224 | | | 981 | | | 22 | |
| Expected return on plan assets | (2,748) | | | (16,857) | | | — | | | (564) | | | (1,640) | | | — | |
| | | | | | | | | | | |
| Actuarial loss (gain) recognition | 8,154 | | | 208,957 | | | (3,717) | | | (2,480) | | | 9,724 | | | (132) | |
| Settlement | (918) | | | — | | | (3,037) | | | — | | | — | | | — | |
| Contractual termination benefits | — | | | — | | | — | | | 11,785 | | | — | | | — | |
| Curtailment gain | (3,060) | | | — | | | — | | | — | | | — | | | — | |
| Net periodic benefit cost (credit) | $ | 9,362 | | | $ | 207,114 | | | $ | (6,485) | | | $ | 9,333 | | | $ | 9,065 | | | $ | (109) | |
The actuarial loss recognition on the international plans is the result of the decrease in the net asset position due to higher interest rates described above. The curtailment gain and settlement loss on the domestic pension and postretirement plans were triggered by the freeze and termination events described above.
The contractual termination benefit charges for the domestic plans in 2021 were related to change-in-control agreements for six executives. The change-in-control payments were triggered by IAC's acquisition of Meredith. The employment agreements for the covered executives provided for immediate vesting in any unvested benefits, as well as an additional three years of continued service, age and pay credit in each of the pension plans in which they were participants. These payments are further discussed in "Note 5—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-in-Control Payments." The components of net periodic benefit cost (credit), other than the service cost component, are included in "Other (expense) income, net" in the statement of operations.
Assumptions
Benefit obligations were determined using the following weighted average assumptions:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| | Pension | Postretirement | | Pension | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| Weighted average assumptions | | | | | | | | | | | |
| Discount rate | 5.41 | % | | 4.13 | % | | 5.46 | % | | 2.04 | % | | 1.67 | % | | 2.61 | % |
| Rate of compensation increase | 2.99 | % | | N/A | | 3.50 | % | | 2.95 | % | | N/A | | 3.50 | % |
| Cash balance interest rate credit | 2.39 | % | | N/A | | N/A | | 2.13 | % | | N/A | | N/A |
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2018 |
| | Operating
Income
(Loss) | | Stock-Based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | Adjusted EBITDA |
| | (In thousands) |
| ANGI Homeservices | $ | 63,906 | | | $ | 97,078 | | | $ | 24,310 | | | $ | 62,212 | | | $ | 0 | | | $ | 247,506 | |
| Vimeo | (35,594) | | | $ | 0 | | | $ | 1,200 | | | $ | 6,349 | | | $ | 0 | | | $ | (28,045) | |
| Dotdash | 18,778 | | | $ | 0 | | | $ | 969 | | | $ | 1,637 | | | $ | 0 | | | $ | 21,384 | |
| Search | 151,425 | | | $ | 0 | | | $ | 3,311 | | | $ | 28,169 | | | $ | 0 | | | $ | 182,905 | |
| Emerging & Other | (26,627) | | | $ | 919 | | | $ | 969 | | | $ | 8,714 | | | $ | 1,136 | | | $ | (14,889) | |
| Corporate | (136,053) | | | $ | 50,408 | | | $ | 11,634 | | | $ | 0 | | | $ | 0 | | | $ | (74,011) | |
| Total | 35,835 | | | | | | | | | | | |
| Interest expense | (13,059) | | | | | | | | | | | |
| Other income, net | 282,795 | | | | | | | | | | | |
| Earnings before income taxes | 305,571 | | | | | | | | | | | |
| Income tax provision | (13,200) | | | | | | | | | | | |
| Net earnings | 292,371 | | | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (45,599) | | | | | | | | | | | |
| Net earnings attributable to IAC shareholders | $ | 246,772 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| | Pension | | Postretirement | | Pension | | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| Weighted average assumptions | | | | | | | | | | | |
| Discount rate | 3.28 | % | | 1.67 | % | | 2.61 | % | | 2.02 | % | | 1.40 | % | | 2.52 | % |
| Expected return on plan assets | 2.80 | % | | 1.90 | % | | N/A | | 6.00 | % | | 1.90 | % | | N/A |
| Rate of compensation increase | 2.95 | % | | N/A | | 3.50 | % | | 2.90 | % | | N/A | | 3.50 | % |
| Cash balance interest credit rate | 3.65 | % | | N/A | | N/A | | 2.04 | % | | N/A | | N/A |
The following table presents capital expenditures by reportable segment:assumed healthcare trend rates used to measure the expected cost of benefits were as follows:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Capital expenditures: | | | | | |
| ANGI Homeservices | $ | 52,488 | | | $ | 68,804 | | | $ | 46,976 | |
| Vimeo | 844 | | | 2,801 | | | 209 | |
| Dotdash | 5,445 | | | — | | | 102 | |
| Search | 47 | | | 43 | | | 479 | |
| Emerging & Other | 1,363 | | | 387 | | | 751 | |
| Corporate | 1,383 | | | 25,863 | | | 6,163 | |
| Total | $ | 61,570 | | | $ | 97,898 | | | $ | 54,680 | |
| | | | | | | | | | | |
| Postretirement |
| 2022 | | 2021 |
| Assumed healthcare cost trend rate | | | |
| Rate of increase in healthcare cost levels | | | |
| Initial level | 6.25 | % | | 6.50 | % |
| Ultimate level | 5.00 | % | | 5.00 | % |
| Years to ultimate level | 5 | | 6 |
NOTE 13—LEASES
Since the Company utilizes the mark-to-market approach to account for pension and postretirement benefits, the expected long-term rate of return on assets has no effect on the overall amount of net periodic benefit cost (credit) recorded for the year. For 2023, the expectation for the U.K. annuity contracts represents the implied yields for those contracts, while for the domestic plan it represents the expected yield on the short-term fixed income securities held.
The Company leases land, office space, data center facilitiesvalue (market-related value) of plan assets is multiplied by the expected long-term rate of return on assets to compute the expected return on plan assets, a component of net periodic pension cost. The market-related value of plan assets is fair value.
Plan Assets
The targeted and equipment used in connection with its operations under various operating leases, the majority of which contain escalation clauses.
ROU assets representweighted average asset allocations by asset category for investments held by the Company’s right to usepension plans are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2022 | | Year Ended December 31, 2021 |
| | Domestic Allocation | | International Allocation | | Domestic Allocation | | International Allocation |
| Target | | Actual | | Target | | Actual | | Target | | Actual | | Target | | Actual |
| Equity securities | —% | | —% | | —% | | —% | | 62% | | 63% | | 1% | | 2% |
| Fixed income securities | —% | | —% | | —% | | —% | | 38% | | 36% | | 63% | | 63% |
Other securities (b) | 100% | | 100% | | 100% | | 100% | | —% | | 1% | | 36% | | 35% |
| Total | 100% | | 100% | | 100% | | 100% | | 100% | | 100% | | 100% | | 100% |
_____________________
(b) Other primarily includes cash and cash equivalents in the underlying assets forU.S. and insurance annuity contracts in the lease term and lease liabilities represent the present value of the Company’s obligation to make payments arising from these leases. ROU assets and related lease liabilities are based on the present value of fixed lease payments over the lease term using the Company's and its publicly-tradedU.K.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
subsidiary's respective incremental borrowing rates onDue to the lease commencement date or January 1, 2019 for leasesdecision to freeze and terminate the U.S. funded pension plan, the plan fiduciaries shifted the investment strategy to seek to preserve capital to protect the strong funded status, manage liquidity to align with potential benefit commencements and optimize yield to take advantage of the rising interest rate environment. The plan adopted a fixed income ladder investment strategy through which most of the plan assets are invested in U.S. Treasury securities of various maturities and a money market fund that commenced priorinvests mostly in U.S. Treasury securities. The objectives of the investment strategy are to that date. The Company combinesminimize default and price risk of the lease and non-lease components of lease payments in determining ROUplan assets, and related lease liabilities. If the lease includes one or more options to extend the termliquidity risk of the lease,plan. Prior to the renewal option is considereddetermination to freeze and terminate the plan, the Company’s investment policy was to seek to maximize investment returns while balancing the Company’s tolerance for risk. The plan fiduciaries of the U.S. funded pension plan oversaw the investment allocation process by selecting investment managers, setting long-term strategic targets and monitoring asset allocations. The investment portfolio contained a diversified blend of equity and fixed-income investments, and equity investments were diversified across domestic and international stocks and between growth and value stocks and small and large capitalizations.
Prior to the purchase of the second annuity contract in the lease term if it is reasonably certainthird quarter of 2022, the Company will exercise the option(s). Lease expense is recognized on a straight-line basis over the termtrustees of the lease. As permitted by ASC 842, leases with an initial term of twelve months or less ("short-term leases") are not recorded on the accompanying balance sheet.
Variable lease payments consist primarily of common area maintenance, utilities and taxes, which are not includedIPC Pension Scheme defined benefit pension plan in the recognitionU.K delegated the day-to-day investment decisions of ROUthe IPC Plan to a large international fiduciary manager and utilized a separate investment consultant to monitor and evaluate the investment performance of the fiduciary manager. The investment objective of the IPC Plan was to invest the assets prudently to fully fund the IPC Plan over time. As a result of the insurance annuity transaction almost all of the remaining plan assets were converted into the insurance annuity and related lease liabilities. The Company’s lease agreements do not contain any material residualthe trustees no longer required the fiduciary manager to make investment decisions.
Fair value guarantees or material restrictive covenants.
| | | | | | | | | | | | | | | | | | | | |
| | | | December 31, |
| Leases | | Balance Sheet Classification | | 2020 | | 2019 |
| | | | (In thousands) |
| Assets: | | | | | | |
| Right-of-use assets | | Other non-current assets | | $ | 171,741 | | | $ | 138,608 | |
| | | | | | |
| Liabilities: | | | | | | |
| Current lease liabilities | | Accrued expenses and other current liabilities | | $ | 27,785 | | | $ | 23,188 | |
| Long-term lease liabilities | | Other long-term liabilities | | 206,389 | | | 168,321 | |
| Total lease liabilities | | | | $ | 234,174 | | | $ | 191,509 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | December 31, |
| Lease Expense | | Income Statement Classification | | 2020 | | 2019 |
| | | | (In thousands) |
| Fixed lease expense | | Cost of revenue | | $ | 2,214 | | | $ | 547 | |
| Fixed lease expense | | Selling and marketing expense | | 12,779 | | | 10,613 | |
| Fixed lease expense | | General and administrative expense | | 21,433 | | | 17,751 | |
| Fixed lease expense | | Product development expense | | 3,456 | | | 1,502 | |
Total fixed lease expense(a) | | | | 39,882 | | | 30,413 | |
| Variable lease expense | | Cost of revenue | | 0 | | | 83 | |
| Variable lease expense | | Selling and marketing expense | | 2,314 | | | 1,573 | |
| Variable lease expense | | General and administrative expense | | 7,452 | | | 5,729 | |
| Variable lease expense | | Product development expense | | 939 | | | 391 | |
| Total variable lease expense | | | | 10,705 | | | 7,776 | |
| Net lease expense | | | | $ | 50,587 | | | $ | 38,189 | |
_____________________
(a) Includes approximately $5.8 million and $4.9 million of lease impairment charges, $2.8 million and $2.2 million of short-term lease expense, and $5.3 million and $7.6 million of sublease income,measurements for the years endedU.S. funded pension plan assets were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Quoted Market
Prices for Identical Assets in Active Markets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements |
| | (In thousands) |
| | | | | | | |
| Cash and cash equivalents | $ | 78,199 | | | $ | — | | | $ | — | | | $ | 78,199 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Quoted Market
Prices for Identical Assets in Active Markets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements |
| | (In thousands) |
| Investments in registered investment companies | | | | | | | |
| Equity | $ | 65,982 | | | $ | 17,866 | | | $ | — | | | $ | 83,848 | |
| Fixed income | 7,442 | | | 39,148 | | | — | | | 46,590 | |
| Pooled separate accounts | — | | | 1,888 | | | — | | | 1,888 | |
| Total assets at fair value | $ | 73,424 | | | $ | 58,902 | | | $ | — | | | $ | 132,326 | |
Equity securities did not include any IAC common stock at December 31, 2020 and 2019, respectively.2021.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Maturities of lease liabilitiesFair value measurements for the international pension plan assets were as offollows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Quoted Market
Prices for Identical Assets in Active Markets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements |
| | (In thousands) |
| Cash and cash equivalents | $ | 7,613 | | | $ | — | | | $ | — | | | $ | 7,613 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Insurance annuity contracts | — | | | — | | | 460,278 | | | 460,278 | |
| Total assets at fair value | $ | 7,613 | | | $ | — | | | $ | 460,278 | | | $ | 467,891 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | Quoted Market
Prices for Identical Assets in Active Markets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements |
| | (In thousands) |
| Cash and cash equivalents | $ | 63,245 | | | $ | — | | | $ | — | | | $ | 63,245 | |
| Pooled investments | | | | | | | |
| Equity | 1,154 | | | 9,728 | | | — | | | 10,882 | |
| Fixed income | 6,276 | | | 45,362 | | | — | | | 51,638 | |
| Other | — | | | 576,414 | | | — | | | 576,414 | |
| Insurance annuity contracts | — | | | — | | | 313,095 | | | 313,095 | |
| Total assets at fair value | $ | 70,675 | | | $ | 631,504 | | | $ | 313,095 | | | $ | 1,015,274 | |
At December 31, 2020(b):
| | | | | | | | |
| Years Ended December 31, | | In thousands |
| 2021 | | $ | 38,664 | |
| 2022 | | 38,473 | |
| 2023 | | 36,648 | |
| 2024 | | 35,106 | |
| 2025 | | 26,841 | |
| Thereafter | | 227,409 | |
| Total | | 403,141 | |
| Less: Interest | | 168,967 | |
| Present value of lease liabilities | | $ | 234,174 | |
_____________________
(b) Lease payments exclude $0.1 million2021, the international pension plans held investments in liability matching funds whose objective was to provide leveraged returns equal to that of legally binding minimum lease paymentsthe liabilities. In order to do so, these funds invested in U.K. Treasury Gilt bonds, Gilt Total Return Swaps, Repurchase Transactions, and cash or money markets to provide liquidity to meet payment obligations or post as collateral in the derivative transactions they entered. These liability matching funds were included in Other pooled investments in the table above for leases signed but not yet commenced.
The following are the weighted average assumptions used for lease term and discount rate as of December 31, 2020 and 2019:2021.
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Remaining lease term | | 15.4 years | | 17.4 years |
| Discount rate | | 5.66 | % | | 6.12 | % |
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Other Information: | | | | |
| Right-of-use assets obtained in exchange for lease liabilities | | $ | 81,636 | | | $ | 61,657 | |
| Cash paid for amounts included in the measurement of lease liabilities | | $ | 44,978 | | | $ | 35,321 | |
NOTE 14—COMMITMENTS AND CONTINGENCIES
Commitments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of Commitment Expiration Per Period |
| | Less Than
1 Year | | 1-3
Years | | 3-5
Years | | More Than
5 Years | | Total
Amounts
Committed |
| | (In thousands) |
| Purchase obligations | $ | 45,819 | | | $ | 520 | | | $ | 0 | | | $ | 0 | | | $ | 46,339 | |
Purchase obligations include (i) remaining paymentsthe three levels in the hierarchy of $14.4 million related to a two-year cloud computing contract that expires in April 2021, (ii) a remaining payment of $13.2 million related to the purchase of a 50% interest in a corporate aircraft that is expected to be made in 2021, (iii) remaining payment of $10.0 million related to the Company's allocable share of Oldfair values.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following table provides a reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
| | | | | | | | | | | |
| | December 31, |
| 2022 | | 2021 |
| | (In thousands) |
| Balance at beginning of year | $ | 313,095 | | | $ | — | |
| Acquisition | — | | | 327,722 | |
| Purchases | 440,606 | | | — | |
| Settlements | (13,206) | | | (1,040) | |
| Change in fair value | (237,248) | | | (15,326) | |
| Foreign currency translation | (42,969) | | | 1,739 | |
| Balance at end of year | $ | 460,278 | | | $ | 313,095 | |
There were no transfers in or out of Level 3 investments for the years ended December 31, 2022 and 2021.
Cash Flows
The Company does not have a minimum funding requirement for the qualified domestic pension plan in 2023 and does not expect to have to make any contributions to the plan in the future due to its termination.
While the Company currently does not expect to be required to make any additional contributions to the IPC Plan, the Company has deposited amounts into an escrow account for the benefit of the IPC Plan that total £5.5 million at December 31, 2022.
The following benefit payments, which will primarily be made from the funded plans, are expected to be paid:
| | | | | | | | | | | | | | | | | |
| | Pension Benefits | | Postretirement Benefits |
| Domestic | | International | | Domestic |
| Years Ended December 31, | (In thousands) |
| 2023 | $ | 17,532 | | | $ | 14,237 | | | $ | 487 | |
| 2024 | 56,178 | | | 15,035 | | | 451 | |
| 2025 | 497 | | | 15,811 | | | 426 | |
| 2026 | 294 | | | 16,636 | | | 394 | |
| 2027 | 344 | | | 17,594 | | | 373 | |
| Thereafter | 2,188 | | | 101,449 | | | 1,672 | |
| Net amount recognized, end of year | $ | 77,033 | | | $ | 180,762 | | | $ | 3,803 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Defined Contribution Plans
IAC/InterActiveCorp Retirement Savings Plan
IAC employees in the U.S., including employees of Dotdash hired before January 1, 2023, can elect to participate in a retirement savings program, the IAC/InterActiveCorp Retirement Savings Plan (renamed the IAC Inc. Retirement Savings Plan, effective January 1, 2023; the "IAC Plan"), that qualifies under Section 401(k) of the Internal Revenue Code. Under the IAC Plan, participating employees may contribute up to 50% of their pre-tax earnings, but not more than statutory limits. The Company matches 100% of the first 10% of an employee's eligible compensation, subject to IRS limits on the Company's matching contribution maximum, that a participant contributes to the IAC Plan, except for Angi Inc., which matches fifty cents for each dollar a participant contributes in the IAC Plan, with a maximum contribution of 3% of a participant's eligible earnings. The IAC Plan limits Company matching contributions to $10,000 per participant on an annual basis. Matching contributions to the IAC Plan for the years ended December 31, 2022, 2021 and 2020 were $25.6 million, $22.0 million and $16.9 million, respectively. Matching contributions are invested in the same manner as each participant's voluntary contributions in the investment options provided under the IAC Plan. An investment option in the IAC Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock. The increase in matching contributions in 2022 is due primarily to an increase in employee contributions. The increase in matching contributions in 2021 is due primarily to an increase in headcount and employee contributions.
IAC also has or participates in various benefit plans, principally defined contribution plans, for its international employees. IAC's cloud computing contract,contributions to these plans for the years ended December 31, 2022, 2021 and (iv) payments2020 were $1.1 million, $0.9 million and $0.7 million, respectively.
Meredith Savings and Investment Plan
In connection with the acquisition of $6.9Meredith, the Company assumed its U.S. defined contribution saving plan the Meredith Savings and Investment Plan (the "Meredith Plan"). Eligible employees may participate in the Meredith Plan, which allows eligible employees to contribute a percentage of their salary, commissions, and bonuses in accordance with plan limitations and provisions of Section 401(k) of the Internal Revenue Code and the Company makes matching contributions to the plan subject to the limits of the Meredith Plan. For period after the acquisition through December 31, 2022, the Company matched 100% of the first 4% and 50% of the next 1% of employee contributions for employees eligible for the Company’s pension benefits and 100% of the first 5% for employees ineligible for the Company’s pension benefits. Matching contributions to the Meredith Plan for the years ended December 31, 2022 and 2021 were $10.4 million and $0.8 million, respectively.
Effective January 1, 2023, Dotdash Meredith, as permitted by the relevant IAC Plan documents, merged the Meredith Plan into the IAC Plan. Participants that were previously covered under the Meredith Plan, or hired after January 1, 2023, are eligible for a company match of 100% of the first 5% of employee contributions.
NOTE 14—INCOME TAXES
U.S. and foreign (loss) earnings before income taxes and noncontrolling interests are as follows:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| U.S. | $ | (1,320,332) | | | $ | 758,538 | | | $ | 234,345 | |
| Foreign | (205,904) | | | (28,732) | | | 9,815 | |
| Total | $ | (1,526,236) | | | $ | 729,806 | | | $ | 244,160 | |
The components of the income tax (benefit) provision are as follows:
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Current income tax provision (benefit): | | | | | |
| Federal | $ | 777 | | | $ | (5,818) | | | $ | (29,181) | |
| State | 4,712 | | | 4,751 | | | 2,326 | |
| Foreign | 1,182 | | | 6,680 | | | (496) | |
| Current income tax provision (benefit) | 6,671 | | | 5,613 | | | (27,351) | |
| | | | | |
| Deferred income tax (benefit) provision: | | | | | |
| Federal | (252,022) | | | 111,755 | | | (8,097) | |
| State | (44,335) | | | 18,063 | | | (6,126) | |
| Foreign | (41,401) | | | 3,559 | | | (4,133) | |
| Deferred income tax (benefit) provision | (337,758) | | | 133,377 | | | (18,356) | |
| Income tax (benefit) provision | $ | (331,087) | | | $ | 138,990 | | | $ | (45,707) | |
The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Deferred tax assets: | | | |
| Net operating loss carryforwards | $ | 458,603 | | | $ | 557,329 | |
| Long-term lease liabilities | 137,869 | | | 157,504 | |
| Capitalized research & development expenditures | 74,179 | | | — | |
| Tax credit carryforwards | 64,903 | | | 48,081 | |
| Accrued expenses | 58,697 | | | 47,754 | |
| Customer deposit liability | 22,361 | | | 56,194 | |
| Other | 82,587 | | | 78,740 | |
| Total deferred tax assets | 899,199 | | | 945,602 | |
| Less: valuation allowance | (124,012) | | | (112,640) | |
| Net deferred tax assets | 775,187 | | | 832,962 | |
| | | |
| Deferred tax liabilities: | | | |
| Investment in subsidiaries | (225,375) | | | (227,632) | |
| Investment in MGM Resorts International | (212,390) | | | (385,818) | |
| Intangible assets, net of accumulated amortization | (219,856) | | | (271,629) | |
| Right-of-use assets | (100,643) | | | (122,095) | |
| Capitalized software, equipment, leasehold improvements, buildings and land, net | (46,740) | | | (70,959) | |
| Other | (44,922) | | | (138,029) | |
| Total deferred tax liabilities | (849,926) | | | (1,216,162) | |
| Net deferred tax liabilities | $ | (74,739) | | | $ | (383,200) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
At December 31, 2022, the Company had federal and state net operating losses ("NOLs") of $1.5 billion and $1.1 billion, respectively, available to offset future income. Federal NOLs of $1.3 billion can be carried forward indefinitely and $0.2 billion, if not utilized, will expire at various times between 2031 and 2036. State NOLs of $0.1 billion can be carried forward indefinitely and $1.0 billion, if not utilized, will expire at various times between 2023 and 2042. Federal and state NOLs of $1.3 billion and $0.7 billion, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable law. At December 31, 2022, the Company had foreign NOLs of $416.2 million available to offset future income. Of these foreign NOLs, $402.7 million can be carried forward indefinitely and $13.5 million, if not utilized, will expire at various times between 2025 and 2042. During 2022, the Company recognized tax benefits related to NOLs of $4.0 million. Included in this amount is $1.7 million of tax benefits of acquired attributes, which was recorded as a reduction to goodwill.
At December 31, 2022, the Company had tax credit carryforwards of $81.4 million. Of this amount, $67.2 million relates to credits for research activities, $12.2 million relates to credits for foreign taxes, and $2.0 million relates to various other credits. Of these credit carryforwards, $13.6 million can be carried forward indefinitely and $67.8 million, if not utilized, will expire between 2023 and 2042.
During 2022, the Company's valuation allowance increased by $11.4 million primarily due to a change in judgement on the realizability of foreign NOLs related to Meredith, acquired by Dotdash on December 1, 2021, and an increase in unbenefited capital losses, partially offset by a decrease in federal NOLs. At December 31, 2022, the Company had a valuation allowance of $124.0 million related to advertising commitmentsthe portion of tax loss carryforwards, foreign tax credits and other items for which it is more likely than not that the tax benefit will not be realized.
A reconciliation of the income tax provision (benefit) to be madethe amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Income tax (benefit) provision at the federal statutory rate of 21% | $ | (320,510) | | | $ | 153,259 | | | $ | 51,274 | |
| State income taxes, net of effect of federal tax benefit | (26,708) | | | 24,289 | | | 16,995 | |
| Research credit | (19,041) | | | (5,094) | | | (6,078) | |
| Non-deductible goodwill impairment | 15,764 | | | — | | | 53,012 | |
| Non-deductible executive compensation | 12,359 | | | 22,358 | | | 14,219 | |
| Change in valuation allowance on capital losses | 10,940 | | | 754 | | | 11,385 | |
| | | | | |
| Deferred tax adjustment for enacted changes in tax laws and rates | (7,152) | | | 4,049 | | | (14,508) | |
| Change in judgement on beginning of the year valuation allowance | 3,523 | | | 20,248 | | | (3,544) | |
| Non-deductible expenses | 3,105 | | | 4,328 | | | 5,947 | |
| Stock-based compensation | (2,155) | | | (91,729) | | | (163,633) | |
| Amortizable tax basis related to intercompany transaction | — | | | — | | | (7,044) | |
| Other, net | (1,212) | | | 6,528 | | | (3,732) | |
| Income tax (benefit) provision | $ | (331,087) | | | $ | 138,990 | | | $ | (45,707) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:
| | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Balance at January 1 | $ | 17,449 | | | $ | 18,233 | | | $ | 16,585 | |
| Additions for tax positions related to the current year | 5,557 | | | 2,855 | | | 3,419 | |
| Settlements | (7,100) | | | (1,427) | | | (3,733) | |
| Additions for tax positions of prior years | 1,715 | | | 3,420 | | | 2,313 | |
| Reductions for tax positions of prior years | (1,608) | | | (1,116) | | | — | |
| Expiration of applicable statutes of limitations | — | | | (4,516) | | | (351) | |
| Balance at December 31 | $ | 16,013 | | | $ | 17,449 | | | $ | 18,233 | |
The Company is routinely under audit by federal, state, local and foreign authorities in 2021.the area of income tax as a result of previously filed separate company and consolidated tax returns with Old IAC hadand for its tax returns filed on a $150.0 million three-year cloud computing contract of which Old IAC paid $50.0 million in 2019, and $20.0 million and $80.0 million was assigned to the Company and Match Group, respectively,standalone basis following the MTCH Separation. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service ("IRS") has completed its audit of Old IAC’s federal income tax returns for the years ended December 31, 2013 through 2019, which include the operations of the Company. The settlement of these tax years has been submitted to the Joint Committee of Taxation for approval. The statute of limitations for the years 2013 through 2019 has been extended to December 31, 2023. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2014. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from the examination of prior year tax returns. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, $10.0if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At December 31, 2022 and 2021, accruals for interest and penalties are not material.
At December 31, 2022 and 2021, unrecognized tax benefits, including interest and penalties, were $16.6 million in 2020 and had a related prepaid asset of $9.8$18.0 million, respectively. Unrecognized tax benefits, including interest and penalties, at December 31, 2022 decreased by $1.4 million due primarily to a reduction in foreign reserves, partially offset by research credits. If unrecognized tax benefits at December 31, 2022 are subsequently recognized, $15.4 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount at December 31, 2021 was $16.7 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $0.9 million by December 31, 2023 due to expected settlements of which $0.8 million would reduce the income tax provision.
As a result of the Vimeo Spin-Off, the Company’s net deferred tax liability was adjusted for tax attributes from our federal and consolidated state income tax filings that were allocated between the Company and Vimeo. The allocation of tax attributes that was recorded as of December 31, 2021 was preliminary. Following the filing of income tax returns for the year ended December 31, 2021, the allocation was finalized and an adjustment of $2.7 million was recorded to net earnings from discontinued operations in the year ended December 31, 2022.
The Company was included within Old IAC’s tax group for purposes of federal and consolidated state income tax return filings through June 30, 2020, the date of the MTCH Separation. For periods prior thereto, the income tax benefit and/or provision were computed for the Company on an as if standalone, separate return basis and payments to and refunds from Old IAC for the Company’s share of Old IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within "Cash flows from operating activities attributed to continuing operations" in the statement of cash flows.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 15—(LOSS) EARNINGS PER SHARE
The Company treats its common stock and Class B common stock as one class of stock for EPS purposes as both classes of stock participate in earnings, dividends and other distributions on the same basis. The restricted stock award ("the CEO award") granted to our CEO on November 5, 2020 is a participating security and the Company calculates basic EPS using the two-class method since those restricted shares are unvested and have a non-forfeitable dividend right in the event the Company declares a cash dividend on common shares and participate in all other distributions of the Company in the same manner as all other IAC common shares. Diluted EPS is calculated, on the most dilutive basis, which excludes awards that would be anti-dilutive, including the CEO award.
Undistributed earnings allocated to the participating security is subtracted from earnings in determining earnings attributable to holders of IAC common stock and Class B common stock for basic EPS. Basic EPS is computed by dividing net (loss) earnings attributable to holders of IAC common stock and Class B common stock by the weighted-average number of shares of common stock and Class B common stock outstanding during the period.
For the calculation of diluted EPS, net (loss) earnings attributable to holders of IAC common stock and Class B common stock is adjusted for the impact from our public subsidiary's dilutive securities, if applicable, and the reallocation of undistributed earnings allocated to the participating security by the weighted-average number of common stock and Class B common stock outstanding plus dilutive securities during the period.
The numerator and denominator of basic and diluted EPS computations for the Company’s common stock and Class B common stock are calculated as follows:
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | 2021 | 2020 |
| (In thousands, except per share data) |
| Basic EPS: | | | | | |
| Numerator: | | | | | |
| Net (loss) earnings from continuing operations | $ | (1,195,149) | | | $ | 590,816 | | | $ | 289,867 | |
| Net loss attributable to noncontrolling interests of continuing operations | 22,285 | | | 8,748 | | | 726 | |
| Net earnings attributed to unvested participating security | — | | | (20,160) | | | — | |
| Net (loss) earnings from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | (1,172,864) | | | 579,404 | | | 290,593 | |
| | | | | |
| Earnings (loss) from discontinued operations, net of taxes | 2,694 | | | (1,831) | | | (21,281) | |
| Net (earnings) loss attributable to noncontrolling interests of discontinued operations | — | | | (186) | | | 414 | |
| Net loss attributed to unvested participating security | — | | | 68 | | | — | |
| Net loss from discontinued operations attributable to IAC Common Stock and Class B common stock shareholders | 2,694 | | | (1,949) | | | (20,867) | |
| | | | | |
| Net (loss) earnings attributable to IAC Common Stock and Class B common stock shareholders | $ | (1,170,170) | | | $ | 577,455 | | | $ | 269,726 | |
| | | | | |
| Denominator: | | | | | |
Weighted average basic IAC Common Stock and Class B common stock shares outstanding (a) | 86,350 | | | 86,222 | | | 85,355 | |
| | | | | |
| (Loss) earnings per share: | | | | | |
| (Loss) earnings per share from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | $ | (13.58) | | | $ | 6.72 | | | $ | 3.40 | |
| Earnings (loss) per share from discontinued operations, net of tax, attributable to IAC Common Stock and Class B common stock shareholders | 0.03 | | | (0.02) | | | (0.24) | |
| (Loss) earnings per share attributable to IAC Common Stock and Class B common stock shareholders | $ | (13.55) | | | $ | 6.70 | | | $ | 3.16 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | 2021 | 2020 |
| (In thousands, except per share data) |
| Diluted EPS: | | | | | |
| Numerator: | | | | | |
| Net (loss) earnings from continuing operations | $ | (1,195,149) | | | $ | 590,816 | | | $ | 289,867 | |
| Net loss attributable to noncontrolling interests of continuing operations | 22,285 | | | 8,748 | | | 726 | |
| Net earnings attributed to unvested participating security | — | | | (18,981) | | | — | |
Impact from public subsidiaries' dilutive securities (b) | — | | | 406 | | | 71 | |
| Net (loss) earnings from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | (1,172,864) | | | 580,989 | | | 290,664 | |
| | | | | |
| Earnings (loss) from discontinued operations, net of taxes | 2,694 | | | (1,831) | | | (21,281) | |
| Net (earnings) loss attributable to noncontrolling interests of discontinued operations | — | | | (186) | | | 414 | |
| Net loss attributed to unvested participating security | — | | | 64 | | | — | |
| Net loss from discontinued operations attributable to IAC Common Stock and Class B common stock shareholders | 2,694 | | | (1,953) | | | (20,867) | |
| | | | | |
| Net (loss) earnings attributable to IAC Common Stock and Class B common stock shareholders | $ | (1,170,170) | | | $ | 579,036 | | | $ | 269,797 | |
| | | | | |
| | | | | |
| Denominator: | | | | | |
Weighted average basic IAC Common Stock and Class B common stock shares outstanding (a) | 86,350 | | | 86,222 | | | 85,355 | |
Dilutive securities (b)(c)(d)(e) | — | | | 5,606 | | | 5,593 | |
Denominator for earnings per share—weighted average shares (b)(c)(d)(e) | 86,350 | | | 91,828 | | | 90,948 | |
| | | | | |
| (Loss) earnings per share: | | | | | |
| (Loss) earnings per share from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | $ | (13.58) | | | $ | 6.33 | | | $ | 3.20 | |
| Earnings (loss) per share from discontinued operations, net of tax, attributable to IAC Common Stock and Class B common stock shareholders | 0.03 | | | (0.02) | | | (0.23) | |
| (Loss) earnings per share attributable to IAC Common Stock and Class B common stock shareholders | $ | (13.55) | | | $ | 6.31 | | | $ | 2.97 | |
_____________________
(a) On November 5, 2020, IAC's CEO was granted a stock-based award in the form of 3.0 million shares of restricted common stock. The number of shares that ultimately vests is subject to the satisfaction of growth targets in IAC's stock price over the 10-year service condition of the award. These restricted shares have a non-forfeitable dividend right in the event the Company declares a cash dividend on its common shares and participate in all other distributions of the Company in the same manner as all other IAC common shares. Accordingly, the two-class method of calculating EPS is used. While the restricted shares are presented as outstanding shares in the balance sheet, these shares are excluded from the weighted average shares outstanding in calculating basic EPS and the allocable portion of net earnings are also excluded. Fully diluted EPS reflects the impact on earnings and fully diluted shares in the manner that is most dilutive.
(b) IAC has the option to settle certain Angi Inc. stock-based awards in its shares. For the year ended December 31, 2022, the Company had a loss from continuing operations and as a result these awards were excluded from computing dilutive earnings per share because the impact would have been anti-dilutive. For the years ended December 31, 2021 and 2020 it was more dilutive for IAC to settle these Angi Inc. equity awards. The impact on net earnings relates to the settlement of Angi Inc.'s dilutive securities in IAC common shares.
(c) For the year ended December 31, 2022, the Company had a loss from continuing operations and, as a result, approximately 7.9 million potentially dilutive securities were excluded from computing diluted EPS because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute the EPS amounts for the year ended December 31, 2022.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(d) If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options and subsidiary denominated equity and vesting of restricted common stock, restricted stock units ("RSUs") and market-based awards ("MSUs"). For the years ended December 31, 2021 and 2020, 3.0 million and 3.1 million, respectively, of potentially dilutive securities were excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive.
(e) See "Note 12—Stock-Based Compensation" for additional information on the grant of IAC restricted common stock to its CEO and equity instruments denominated in the shares of certain subsidiaries. NOTE 16—DISCONTINUED OPERATIONS
On May 25, 2021, IAC completed the Spin-off. Following the Spin-off, Vimeo became an independent, separately traded public company. Therefore, Vimeo is presented as a discontinued operation within the Company's financial statements for all periods.
During the fourth quarter of 2022, the Company allocated to Vimeo certain federal and state net operating losses based on the filing of its 2021 tax returns. The Company recorded a $2.7 million tax benefit through discontinued operations and deferred taxes to reflect this allocation.
The components of the loss from discontinued operations for the period January 1, 2021 through May 25, 2021 and the year ended December 31, 2020 in the statement of operations consisted of the following:
| | | | | | | | | | | |
| January 1 through May 25, | | Year Ended December 31, |
| 2021 | | 2020 |
| (In thousands) |
| Revenue | $ | 145,514 | | | $ | 283,146 | |
| Operating costs and expenses: | | | |
| Cost of revenue (exclusive of depreciation shown separately below) | 39,995 | | | 88,589 | |
| Selling and marketing expense | 54,774 | | | 104,216 | |
| General and administrative expense | 23,343 | | | 47,019 | |
| Product development expense | 35,651 | | | 62,803 | |
| Depreciation | 182 | | | 460 | |
| Amortization of intangibles | 2,983 | | | 14,745 | |
| Total operating costs and expenses | 156,928 | | | 317,832 | |
| Operating loss from discontinued operations | (11,414) | | | (34,686) | |
| Interest expense | (140) | | | — | |
| Other income, net | 10,172 | | | 93 | |
| Loss from discontinued operations before taxes | (1,382) | | | (34,593) | |
| Income tax (provision) benefit | (449) | | | 13,312 | |
| Loss from discontinued operations, net of taxes | $ | (1,831) | | | $ | (21,281) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 17—FINANCIAL STATEMENT DETAILS
Cash and Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheet to the total amounts shown in the statement of cash flows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 | | December 31, 2020 | | December 31, 2019 |
| (In thousands) |
| Cash and cash equivalents | $ | 1,417,390 | | | $ | 2,118,730 | | | $ | 3,366,176 | | | $ | 837,916 | |
| Restricted cash included in other current assets | 1,165 | | | 1,941 | | | 448 | | | 503 | |
| Restricted cash included in other non-current assets | 7,514 | | | 1,193 | | | 449 | | | 409 | |
| Cash, cash equivalents, and restricted cash included in current assets of discontinued operations | — | | | — | | | 110,037 | | | 1,904 | |
| Total cash and cash equivalents and restricted cash as shown on the statement of cash flows | $ | 1,426,069 | | | $ | 2,121,864 | | | $ | 3,477,110 | | | $ | 840,732 | |
Restricted cash included in "Other current assets" in the balance sheet at December 31, 2022 primarily consists of cash held related to insurance programs at Care.com.
Restricted cash included in "Other current assets" in the balance sheet at December 31, 2021 primarily consists of cash held in escrow related to the IPC Pension Scheme.
Restricted cash included in "Other current assets" in the balance sheet at December 31, 2020 primarily consists of funds collected from service providers for payments in dispute, which are not settled as of the period end, and cash reserved to fund insurance claims at Angi Inc.
Restricted cash included in "Other current assets" in the balance sheet at December 31, 2019 primarily consists of a deposit related to corporate credit cards at Angi Inc.
Restricted cash included in "Other non-current assets" in the balance sheet at December 31, 2022 primarily consists of cash held in escrow related to the IPC Pension Scheme as well as deposits related to leases and an endorsement guarantee related to insurance at Roofing.
Restricted cash included in "Other non-current assets" in the balance sheet at December 31, 2021 consists of deposits related to leases and an endorsement guarantee related to insurance at Roofing. Restricted cash included in "Other non-current assets" in the balance sheet for all other periods presented consists of deposits related to leases.
At December 31, 2022, all of the Company's international cash can be repatriated without significant tax consequences.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Credit Losses
The following table presents the changes in the allowance for credit losses for the years ended December 31, 2022 and 2021, respectively:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In thousands) |
| Balance at January 1 | $ | 36,637 | | | $ | 27,178 | |
| Current period provision for credit losses | 116,553 | | | 89,893 | |
| Write-offs charged against the allowance | (107,188) | | | (82,998) | |
| | | |
| Recoveries collected | 5,367 | | | 2,441 | |
| Other | (398) | | | 123 | |
| Balance at December 31 | $ | 50,971 | | | $ | 36,637 | |
Other current assets
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| | | |
| Prepaid expenses | $ | 80,039 | | | $ | 73,483 | |
| | | |
| | | |
| Other | 216,524 | | | 168,705 | |
| Other current assets | $ | 296,563 | | | $ | 242,188 | |
Capitalized software, equipment, leasehold improvements, buildings and land, net
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Buildings and leasehold improvements | $ | 305,304 | | | $ | 418,249 | |
| Capitalized software and computer equipment | 291,600 | | | 386,421 | |
| Furniture and other equipment | 137,570 | | | 181,605 | |
| Land | 20,234 | | | 33,919 | |
| Projects in progress | 30,379 | | | 47,218 | |
| Total gross carrying amount | 785,087 | | | 1,067,412 | |
| Accumulated depreciation and amortization | (274,473) | | | (496,887) | |
| Capitalized software, equipment, leasehold improvements, buildings and land, net | $ | 510,614 | | | $ | 570,525 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Accrued expenses and other current liabilities
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| | (In thousands) |
| Accrued employee compensation and benefits | $ | 169,227 | | | $ | 278,418 | |
| Customer deposit liability | 125,441 | | | 146,282 | |
| Accrued advertising expense | 78,601 | | | 67,986 | |
| Accrued traffic acquisition costs | 50,720 | | | 77,913 | |
| Other | 335,770 | | | 412,280 | |
| Accrued expenses and other current liabilities | $ | 759,759 | | | $ | 982,879 | |
Other (expense) income, net
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
Net periodic pension benefit costs, other than the service cost component(a) | $ | (206,422) | | | $ | (17,858) | | | $ | — | |
| Unrealized (decrease) increase in the estimated fair value of a warrant | (62,495) | | | 104,018 | | | (1,213) | |
| Unrealized (loss) gain related to marketable equity securities | (20,342) | | | 18,788 | | | — | |
Foreign exchange (losses) gains, net(b) | (8,503) | | | (13,636) | | | 674 | |
Net realized gain (loss) on sales of businesses, investments and upward (downward) adjustments to the carrying value of equity securities without readily determinable fair values(c)(d) | 59,299 | | | 18,874 | | | (40,050) | |
| Interest income | 24,916 | | | 1,351 | | | 7,177 | |
| Realized gain on the sale of a marketable equity security | — | | | 7,174 | | | — | |
Loss on extinguishment of debt(e) | — | | | (1,110) | | | — | |
| COVID-19 related impairments on a note receivable and a warrant related to certain investees | — | | | — | | | (7,517) | |
| Other | (4,238) | | | (5,747) | | | (1,632) | |
| Other (expense) income, net | $ | (217,785) | | | $ | 111,854 | | | $ | (42,561) | |
_____________________
(a) Includes net pre-tax actuarial losses of $213.4 million and $7.1 million for the years ended December 31, 2022 and 2021, respectively, related to Meredith's IPC Pension Scheme and plans in the U.S. See "Note 13—Pension and Postretirement Benefit Plans" for additional information.
(b) Includes $10.0 million in foreign exchange losses primarily related to the substantial liquidation of certain foreign subsidiaries in the year ended December 31, 2021.
(c) Includes a gain of approximately $132.2 million on the balance sheet.sale of BlueCrew in the year ended December 31, 2022. On November 9, 2022, the Company completed the sale of BlueCrew, which was included in the Emerging & Other segment, to EmployBridge, a provider of light industrial staffing solutions, for cash and stock with the Company becoming a minority shareholder in the combined company.
Contingencies
(d) Includes upward and downward adjustments to the carrying value of equity securities without readily determinable fair values. For the years ended December 31, 2022, 2021 and 2020, the Company recorded net (downward) and upward adjustments of $(89.1) million, $8.9 million and $(51.5) million, respectively. Downward adjustments for the year ended December 31, 2020 related to impairments due to COVID-19.
(e) Represents the write-off of deferred debt issuance costs related to the ANGI Group Term Loan, which was repaid in its entirety during the second quarter of 2021.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Supplemental Disclosure of Cash Flow Information:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (In thousands) |
| Cash paid (received) during the year for: | | | | | |
| Interest | $ | 98,150 | | | $ | 21,702 | | | $ | 6,524 | |
| Income tax payments | $ | 16,407 | | | $ | 9,880 | | | $ | 5,974 | |
| Income tax refunds | $ | (3,004) | | | $ | (1,762) | | | $ | (2,010) | |
NOTE 18—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reservesaccruals for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where we believethe Company believes an unfavorable outcome is not probable and, therefore, 0 reserveno accrual is established. Although management currently believes that resolving claims against us,the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. The Company also evaluates other contingent matters, including uncertain income tax positions and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company. See "Note 3—14—Income Taxes" for additional information related to uncertain income tax contingencies.positions. Tinder Optionholder Litigation against
NOTE 19—RELATED PARTY TRANSACTIONS
IAC and MTCHAngi Inc.
In August 2018,Allocation of CEO Compensation and Certain Expenses
Effective October 10, then-current and former employees2022, Joseph Levin, CEO of Match Group’s Tinder business filed a lawsuit in New York state court against IAC and Match Group. SeeSean Rad et al. v. IAC/InterActiveCorpChairman of Angi Inc., was appointed CEO of Angi Inc. Mr. Levin serves as both CEO of IAC and Match Group,Angi Inc., No. 654038/2018(Supreme Court, New York County) following his appointment. For the period from October 10, 2022 to December 31, 2022, IAC allocated $2.1 million in costs to Angi Inc. (including salary, benefits, stock-based compensation and costs related to the CEO’s office). These costs were allocated from IAC based upon time spent on Angi Inc. by Mr. Levin. Management considers the allocation method to be reasonable. The complaint allegesallocated costs include costs directly attributable to Angi Inc. that were initially paid for by IAC and billed by IAC to Angi Inc.
The Combination and Related Agreements
The Company and Angi Inc., in connection with the transaction resulting in the formation of Angi Inc. in 2017, which is referred to as the defendants: (i) wrongfully interfered with"Combination", entered into a contractually established process forcontribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement.
During the independent valuationyear ended December 31, 2022, there have been no IAC equity awards held by Angi Inc. employees exercised or vested, and no exercises and settlements of Tinder by 2 investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpaymentAngi Inc. stock appreciation rights, that would require, pursuant to the plaintiffs upon exerciseemployee matters agreement, reimbursement to IAC in Angi Inc. Class A and Class B common stock.
For the year ended December 31, 2021, 2.6 million shares of theirAngi Inc. Class A common stock options, and (ii) then wrongfully merged Tinder into Match Group, thereby deprivingwere issued to a subsidiary of the plaintiffs of their contractual right to later valuations of Tinder on a stand‑alone basis. The complaint asserts inter alia claims for breach of contract and interference with contractual relations and prospective economic advantage and seeks compensatory damages in the amount of at least $2 billion, as well as punitive damages. Shortly after filing suit, 4 plaintiffs who were still employed by Match Group filed a notice of discontinuance of their claims without prejudice, leaving the 6 former employees as the remaining plaintiffs.
In October 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expert determination any challenge to which is time-barred under applicable law. In June 2019, the court issued a decision and order granting the motion in part but leaving the plaintiffs’ principal claims intact. The defendants appealed from the partial denial of their motion to dismiss, and in October 2019, the Appellate Division, First Department, affirmed the lower court’s decision. After additional appellate motion practice, in May 2020, the Appellate Division reaffirmed the lower court’s decision on different grounds. In June 2020, the defendants filed a motion for leave to appeal that decisionCompany pursuant to the Courtemployee matters agreement as reimbursement for IAC common stock issued in connection with the exercise and settlement of Appeals;certain Angi Inc. stock appreciation rights. There were no shares of Angi Inc. Class A common stock issued to IAC during the Appellate Division denied the motion in Julyyear ended December 31, 2020.
In June 2019, the defendants filed a second motion to dismiss or for other relief based upon certain provisions of the plaintiffs’ agreement with a litigation funding firm; that motion remains pending. From July to November 2019, the defendants filed counterclaims against former Tinder CEO Sean Rad for breach of contract and unjust enrichment based upon his alleged misappropriation and unauthorized destruction of confidential company information, unauthorized recording of conversations with company employees, and breach of his non-solicitation obligations. In January 2020, the parties participated in a mediation that did not result in the resolution of the matter.
Document discovery in the case is substantially complete; deposition discovery is nearing completion. In July 2020, the 4 individuals who earlier had discontinued their claims in the lawsuit commenced arbitration proceedings against IAC and Match Group before the American Arbitration Association in California, asserting the same claims and seeking the same relief as the 6 remaining plaintiffs in the lawsuit. In September 2020, the defendants filed a motion to stay the trial in the New York lawsuit in favor of the California arbitration; in November 2020, the court denied the motion. In December 2020, the claimants in the California arbitration filed a motion to stay those proceedings in favor of the New York action, in which a trial has been
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
provisionally scheduledFor the year ended December 31, 2021, 0.2 million shares of Angi Inc. Class B common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for November 2021;shares of IAC common stock issued in Januaryconnection with the exercise and vesting of IAC equity awards held by Angi Inc. employees. For the year ended December 31, 2020, 0.3 million shares of Angi Inc. Class B common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for shares of IAC common stock, issued for periods after the MTCH Separation, and Old IAC common stock, issued for periods prior to the MTCH Separation, in connection with the exercise and vesting of IAC and Old IAC equity awards held by Angi Inc. employees.
IAC and Vimeo
Following the Spin-off, the relationship between IAC and Vimeo is governed by a number of agreements. These agreements include a separation agreement; a tax matters agreement; a transition services agreement; an employee matters agreement; and office lease agreements. The Company and Vimeo are related parties because Mr. Diller is the beneficial owner of more than 10% of the voting interests in both IAC and Vimeo.
Vimeo has an outstanding payable due to the Company of $0.8 million at both December 31, 2022 and 2021, pursuant to the arbitrator deniedseparation agreement.
For the motion and provisionally scheduled a hearing on the merits for February 2022. IAC believes that the allegations against it in the New York lawsuityear ended December 31, 2022 and the California arbitration are without meritperiod following the Spin-off of May 25, 2021 through December 31, 2021, Vimeo was charged $0.3 million and will continue to defend vigorously against them.
Pursuant$0.9 million, respectively, by IAC for services rendered pursuant to the Transaction Agreement (as defined in Note 1-Organization -MTCH Separation), Match Group has agreedtransition services agreement. At December 31, 2022 and December 31, 2021, there were no outstanding receivables or payables pursuant to indemnifythe transition services agreement.
Vimeo had an outstanding payable due to the Company of $6.4 million at December 31, 2021 related primarily to reimbursements due to the Company for matters relating to any businessthe exercise of Match Group, including indemnifyingVimeo equity awards held by employees of the Company for costs relatedand Vimeo’s participation in the Company’s employee benefit plans. This amount was included in “Other current assets" in the balance sheet at December 31, 2021 and was paid in full in January 2022.
For the year ended December 31, 2022 and the period following the Spin-off of May 25, 2021 through December 31, 2021, Vimeo was charged $4.6 million and $2.6 million, respectively, of rent pursuant to the matter described above.lease agreements. At December 31, 2022 and December 31, 2021, there were no outstanding receivables due from Vimeo pursuant to the lease agreements.
NOTE 15—RELATED PARTY TRANSACTIONS
Relationship with Old IAC prior to the MTCH Separation
The Company’s statement of operations for the year ended December 31, 2020 includes allocations of costs, including stock-based compensation expense, related to Old IAC’s accounting, treasury, legal, tax, corporate support and internal audit functions prior to the MTCH Separation. Old IAC historically allocated costs related to its accounting, treasury, legal, tax, corporate support and internal audit functions that were incurred at the Old IAC legal entity level to its publicly traded subsidiaries, Old MTCH and ANGI Homeservices,Angi Inc., for any services provided under the applicable services agreements. The remaining unallocated expenses of Old IAC related to its accounting, treasury, legal, tax, corporate support and internal audit functions were allocated to the Company. Old IAC allocatedAllocated costs, to the Company, inclusive of stock-based compensation expense, in 2020 prior to the MTCH Separation, totaledwere $85.5 million. Old IAC allocated costs to the Company, inclusive of stock-based compensation expense, totaled $146.0 million and $178.2 million for the years ended December 31, 2019 and 2018, respectively. It is not practicable to determine the actual expenses that would have been incurred for these services had the Company operated as a standalone entity during the periodsperiod presented. Management considers the allocation method to be reasonable.
The portion of interest income reflected in the statement of operations that is related party in nature was less than $0.1 million in 2020 prior to the MTCH Separation, and $0.4 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively, and is included in ‘‘Interest income, net’’ in the table below.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following table summarizes the components of the net increase in Old IAC’s investment in the Company for the periodsperiod prior to the MTCH Separation:
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, the date of the MTCH Separation | | Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| (In thousands) |
| Cash transfers (from) to Old IAC related to its centrally managed U.S. treasury management function, acquisitions and cash expenses paid by Old IAC on behalf of the Company, net | $ | (1,742,854) | | | $ | (182,382) | | | $ | 215,993 | |
| Contribution of buildings to Match Group | 34,973 | | | 0 | | | 0 | |
| Taxes | 34,436 | | | (1,874) | | | 1,120 | |
| Allocation of costs from Old IAC | (12,652) | | | (80,143) | | | (71,977) | |
| Interest income, net | 102 | | | 420 | | | 325 | |
| Net (increase) decrease in Old IAC's investment in the Company prior to the MTCH Separation | $ | (1,685,995) | | | $ | (263,979) | | | $ | 145,461 | |
| | | | | |
| Six Months Ended June 30, 2020, the date of the MTCH Separation |
|
| (In thousands) |
| Cash transfers from Old IAC related to its centrally managed U.S. treasury management function, acquisitions and cash expenses paid by Old IAC on behalf of the Company, net | $ | (1,742,854) | |
| Contribution of buildings to Match Group | 34,973 | |
| Taxes | 34,436 | |
| Allocation of costs from Old IAC | (12,652) | |
| Interest income, net | 102 | |
| Net increase in Old IAC's investment in the Company prior to the MTCH Separation | $ | (1,685,995) | |
Notes Receivable—Related Party
During 2019, the Company, through two subsidiaries, entered into loan agreements with Old IAC for cash transfers to Old IAC under its centrally managed U.S. treasury function. During the first quarter of 2020, the outstanding balance, which was $55.3 million at December 31, 2019, was repaid.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
On February 11, 2020, the Company, through a subsidiary, entered into a loan agreement with Old IAC for cash transfers to Old IAC under its centrally managed U.S. treasury function. During the second quarter of 2020, the outstanding balance, which was $27.2 million at March 31, 2020, was repaid.
Long-term Debt—Related Party
On December 14, 2018, the Company, through a subsidiary, entered into a loan agreement with Old IAC for an amount not to exceed $15.0 million for general working capital purposes in the ordinary course of business. During the first quarter of 2019, the outstanding balance, which was $2.5 million at December 31, 2018, was repaid.
IAC and ANGI
Old IAC and ANGI, in connection with the Combination, entered into a contribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement. Upon the MTCH Separation, Old IAC assigned these agreements to the Company.
For the year ended December 31, 2020, 0.3 million shares of ANGI Class B common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for shares of IAC common stock, issued for periods after the MTCH Separation, and Old IAC common stock, issued for periods prior to the MTCH Separation, in connection with the exercise and vesting of IAC and Old IAC equity awards held by ANGI employees. For the years ended December 31, 2019 and 2018, 0.5 million and 0.9 million shares, respectively, of ANGI Class B common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement.
On October 10, 2018, Old IAC was issued 5.1 million shares of Class B common stock of ANGI pursuant to the post-closing adjustment provision of the Angie's List merger agreement.
For the years ended December 31, 2020, 2019 and 2018, ANGI was charged $4.8 million, $4.8 million and $5.7 million by IAC, for periods after the MTCH Separation, and Old IAC, for periods prior to the MTCH Separation, for services rendered pursuant to the services agreement. There were 0 outstanding receivables or payables pursuant to the services agreement as of December 31, 2020 or December 31, 2019.
At December 31, 2020 and December 31, 2019, ANGI had outstanding payables of $0.9 million and $0.2 million, respectively, due to the Company pursuant to the tax sharing agreement. There were $3.1 million of refunds made to ANGI pursuant to this agreement during the year ended December 31, 2020. During the first quarter of 2019, $11.4 million was paid to the Company pursuant to this agreement.
Additionally, the Company subleases office space from ANGI and was charged rent of $1.8 million and $1.4 million for the years ended December 31, 2020 and 2019, respectively. There were 0 amounts charged pursuant to subleases for office space between the Company and ANGI for the year ended December 31, 2018. At both December 31, 2020 and 2019, there were outstanding payables of less than $0.1 million due to ANGI pursuant to sublease agreements, which were subsequently paid in full in the first quarter of 2021 and 2020, respectively.
IAC and Old MTCH
Prior to the MTCH Separation, for the six months ended June 30, 2020, the date of the MTCH Separation, and for the years ended December 31, 2019 and 2018, Old MTCH incurred rent expense of $1.4 million and $5.8 million and $5.2 million respectively, for leasing office space for certain of its businesses at properties owned by the Company. The amounts wereamount was paid in full by Old MTCH at the date of the MTCH Separation and at December 31, 2019 and 2018, respectively.Separation. After the MTCH Separation, Match Group is no longer a related party.
On January 31, 2020, Old IAC contributed 2two office buildings in Los Angeles to Old MTCH, which are primarily occupied and were previously leased from the Company by Tinder. In connection with this contribution, the Company entered into a lease with Old MTCH for office space which the Company currently occupies, in one of the buildings and for the six months ended June 30, 2020, the date of the MTCH Separation, the Company paid Old MTCH less than $0.1 million under the lease. Old MTCH issued 1.4 million shares of Old MTCH common stock to Old IAC for the buildings.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
IAC and Expedia
TheAt December 31, 2022, the Company and Expedia each havehad a 50% ownership interest in 2 aircraftstwo aircraft that may be used by both companies. One of these aircraft was delivered in the third quarter of 2021; IAC and Expedia each made the payments to acquire their respective interest in this aircraft directly to third parties. In 2019,the fourth quarter of 2022, the Company and Expedia entered into an agreement to jointly acquiresold a new corporate aircraft that was jointly owned for a total expected costproceeds of $72.3$19.0 million (including purchase(sales price andnet of related costs), with each company to bearreceiving 50% of such expected cost. The Company paid approximately $23 million in 2019 in connection with the purchase agreement, and the respective share of the balance is due upon delivery of the new aircraft, which is expected to occur in the third quarter of 2021.proceeds. Members of the aircraft flight crews are employed by an entity in which the Company and Expedia each have a 50% ownership interest. The Company and Expedia have agreed to share costs relating to flight crew compensation and benefits pro-rata according to each company’s respective usage of the aircraft, for which they are separately billed by the entity described above. The Company and Expedia are related parties because Mr. Diller serves as Chairman and Senior Executive of both IAC and Expedia. For each of the years in the period ended December 31, 2020, 2019 and 2018, total2022, the payments made to this entity by the Company were not material.
NOTE 16—BENEFIT PLANS
IAC employees in the United States can elect to participate in a retirement savings program, the IAC/InterActiveCorp Retirement Savings Plan ("the Plan"), that qualifies under Section 401(k) of the Internal Revenue Code. Under the Plan, participating employees may contribute up to 50% of their pre-tax earnings, but not more than statutory limits. Prior to July 2019, the Company contributed an amount equal to 50% of the first 6% of compensation that a participant contributes in each payroll period to the Plan. In June 2019, the Company approved a change to its matching contribution to 100% of the first 10% of an employee's eligible compensation, subject to IRS limits on the Company's matching contribution maximum, that a participant contributes to the Plan. This change was phased in beginning July 1, 2019 and was implemented by some but not all of IAC's subsidiaries participating in the Plan by January 1, 2020. Matching contributions to the Plan for the years ended December 31, 2020, 2019 and 2018 were $20.5 million, $15.4 million and $10.2 million, respectively. Matching contributions are invested in the same manner as each participant's voluntary contributions in the investment options provided under the Plan. An investment option in the Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock. The increases in matching contributions in both 2020 and 2019 are due primarily to the aforementioned change in the Company's matching contribution.
IAC also has or participates in various benefit plans, principally defined contribution plans, for its international employees. IAC's contributions to these plans for the years ended December 31, 2020, 2019 and 2018 were $1.0 million, $1.0 million and $0.6 million, respectively.
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 17—FINANCIAL STATEMENT DETAILS
CashIn addition, in December 2021, the Company and Cash Equivalents and Restricted Cash
The following table providesExpedia entered into agreements pursuant to which Expedia may use certain aircraft owned 100% by a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheet to the total amounts shown in the statement of cash flows:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 | | December 31, 2018 | | December 31, 2017 |
| (In thousands) |
| Cash and cash equivalents | $ | 3,476,188 | | | $ | 839,796 | | | $ | 884,975 | | | $ | 757,202 | |
| Restricted cash included in other current assets | 473 | | | 527 | | | 1,441 | | | 2,737 | |
| Restricted cash included in other assets | 449 | | | 409 | | | 420 | | | 0 | |
| Total cash and cash equivalents and restricted cash as shown on the statement of cash flows | $ | 3,477,110 | | | $ | 840,732 | | | $ | 886,836 | | | $ | 759,939 | |
Restricted cash included in other current assets at December 31, 2020 primarily consists of cash received from customers at ANGI through their Handy platform, representing funds collected for payments to service providers, which were not settled assubsidiary of the period end.
Restricted cash at December 31, 2019 primarily consists ofCompany on a deposit related to corporate credit cards.
Restricted cash at December 31, 2018 primarily consists of a cash collateralized letter of credit and a deposit related to corporate credit cards.
Restricted cash at December 31, 2017 primarily supports a letter of credit to a supplier, which was released to the Company in the second quarter of 2018.
Restricted cash included in other non-current assets for all periods presented consists of deposits related to leases.
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Other current assets: | | | |
| Capitalized costs to obtain a contract with a customer | $ | 61,514 | | | $ | 43,069 | |
| Prepaid expenses | 50,123 | | | 41,934 | |
| Capitalized downloadable search toolbar costs, net | 12,730 | | | 21,985 | |
| Other | 23,263 | | | 45,346 | |
| Other current assets | $ | 147,630 | | | $ | 152,334 | |
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Building, capitalized software, leasehold improvements and equipment | | | |
| Buildings and leasehold improvements | $ | 198,778 | | | $ | 242,882 | |
| Capitalized software and computer equipment | 149,789 | | | 124,523 | |
| Furniture and other equipment | 84,161 | | | 84,640 | |
| Land | — | | | 11,591 | |
| Projects in progress | 53,635 | | | 43,576 | |
| Building, capitalized software, leasehold improvements and equipment | 486,363 | | | 507,212 | |
| Accumulated depreciation and amortization | (208,112) | | | (201,798) | |
| Building, capitalized software, leasehold improvements and equipment, net | $ | 278,251 | | | $ | 305,414 | |
| | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| | (In thousands) |
| Accrued expenses and other current liabilities: | | | |
| Accrued employee compensation and benefits | $ | 126,161 | | | $ | 105,960 | |
| Accrued advertising expense | 62,854 | | | 59,269 | |
| Accrued revenue share | 38,710 | | | 30,574 | |
| Other | 155,837 | | | 124,670 | |
| Accrued expenses and other current liabilities | $ | 383,562 | | | $ | 320,473 | |
Other (expense) income, net
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
Impairments related to COVID-19 (a) | $ | (59,001) | | | $ | 0 | | | $ | 0 | |
| Realized gains related to the sale of investments | 10,661 | | | 2,327 | | | 589 | |
| Realized gains related to the sale of the investment in Pinterest | 0 | | | 20,486 | | | 26,777 | |
Upward adjustments to the carrying value of equity securities without readily determinable fair values (b) | 0 | | | 18,505 | | | 128,901 | |
| Interest income | 7,189 | | | 15,164 | | | 9,125 | |
Realized gains (losses) related to the sale of business (c) | 1,061 | | | (8,239) | | | 121,230 | |
| Unrealized reduction in the estimated fair value of a warrant | (1,213) | | | (9,123) | | | 0 | |
| Mark-to-market loss on an indemnification claim related to the Handy acquisition | (181) | | | (1,779) | | | 0 | |
| Other | (984) | | | (3,294) | | | (3,827) | |
| Other (expense) income, net | $ | (42,468) | | | $ | 34,047 | | | $ | 282,795 | |
_____________________
(a) Includes $51.5 million in impairments related to investments in equity securities without readily determinable fair values and $7.5 million in impairments of a note receivable and a warrant related to certain investees incost basis. For the year ended December 31, 2020.
(b) Includes a $128.8 million unrealized gain to adjust2022, the remaining interest in Pinterest to fair value in accordance with ASU No. 2016-02 in the year ended December 31, 2018.
(c) Includes a realized loss on the sale of Vimeo's hardware business, which was sold in the first quarter of 2019,and gains relatedpayments made by Expedia to the sales of Dictionary.com, Electus, Felix and CityGrid in the year ended December 31, 2018.Company pursuant to this arrangement were not material.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Supplemental Disclosure of Cash Flow Information:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| | (In thousands) |
| Cash paid (received) during the year for: | | | | | |
| Interest | $ | 6,524 | | | $ | 10,042 | | | $ | 13,108 | |
| Income tax payments | $ | 6,876 | | | $ | 4,861 | | | $ | 4,084 | |
| Income tax refunds | $ | (2,080) | | | $ | (3,048) | | | $ | (30,320) | |
Supplemental Disclosure of Non-Cash Transactions:
The Company recorded an acquisition-related contingent consideration liability of $25.5 million during the year ended December 31, 2018, in connection with an acquisition. There were 0 acquisition-related contingent consideration liabilities recorded for the years ended December 31, 2020 and 2019. See "Note 6—Financial Instruments and Fair Value Measurements" for additional information on contingent consideration arrangements.On October 19, 2018, ANGI issued 8.6 million shares of its Class A common stock valued at $165.8 million in connection with the acquisition of Handy.
NOTE 18—QUARTERLY RESULTS (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended March 31(a)(e) | | Quarter Ended June 30(b)(e) | | Quarter Ended September 30(c)(e) | | Quarter Ended December 31(d)(e) |
| | (In thousands, except per share data) |
| Year Ended December 31, 2020 | | | | | | | |
| Revenue | $ | 684,124 | | | $ | 726,361 | | | $ | 788,377 | | | $ | 848,819 | |
| Cost of revenue | $ | 179,327 | | | $ | 178,639 | | | $ | 207,643 | | | $ | 249,122 | |
| Operating loss | $ | (312,338) | | | $ | (107,019) | | | $ | (128,626) | | | $ | (24,366) | |
| Net (loss) earnings | $ | (330,571) | | | $ | (94,064) | | | $ | 185,861 | | | $ | 507,360 | |
| Net (loss) earnings attributable to IAC shareholders | $ | (328,199) | | | $ | (96,117) | | | $ | 184,917 | | | $ | 509,125 | |
| Per share information attributable to IAC shareholders: |
Basic (loss) earnings per share(f)(g) | $ | (3.86) | | | $ | (1.13) | | | $ | 2.17 | | | $ | 5.96 | |
Diluted (loss) earnings per share(f)(g) | $ | (3.86) | | | $ | (1.13) | | | $ | 2.04 | | | $ | 5.59 | |
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended March 31(e) | | Quarter Ended June 30(e) | | Quarter Ended September 30(e) | | Quarter Ended December 31(e) |
| (In thousands, except per share data) |
| Year Ended December 31, 2019 | | | | | | | |
| Revenue | $ | 641,220 | | | $ | 688,685 | | | $ | 705,382 | | | $ | 670,514 | |
| Cost of revenue | $ | 139,848 | | | $ | 149,725 | | | $ | 158,161 | | | $ | 152,506 | |
| Operating (loss) income | $ | (34,183) | | | $ | (13,770) | | | $ | 13,912 | | | $ | (16,408) | |
| Net (loss) earnings | $ | (13,673) | | | $ | 22,021 | | | $ | 18,378 | | | $ | 5,457 | |
| Net (loss) earnings attributable to IAC shareholders | $ | (14,247) | | | $ | 13,789 | | | $ | 16,466 | | | $ | 6,887 | |
| Per share information attributable to IAC shareholders: |
Basic (loss) earnings per share(f)(g) | $ | (0.17) | | | $ | 0.16 | | | $ | 0.19 | | | $ | 0.08 | |
Diluted (loss) earnings per share(f)(g) | $ | (0.17) | | | $ | 0.16 | | | $ | 0.19 | | | $ | 0.08 | |
(a)The first quarter of 2020 includes:
i.as a result of the effects of COVID-19:
•an after-tax $208.9 million impairment related to the goodwill of the Desktop reporting unit;
•an after-tax $16.4 million impairment related to certain indefinite-lived intangible assets of the Desktop reporting unit;
•an after-tax $51.5 million impairment of certain equity securities without readily determinable fair values; and
•an after-tax $7.5 million impairment of a note receivable and a warrant related to certain investee.
(b)The second quarter includes:
i.after-tax stock-based compensation expense of $40.7 million related to the modification of previously issued equity awards as a result of the MTCH Separation; and an
ii.after-tax unrealized loss of $24.7 million related to IAC's investment in MGM.
(c)The third quarter of 2020 includes:
i.an after-tax $53.2 million impairment related to the goodwill of the Desktop reporting unit;
ii.an after-tax $8.3 million impairment of intangible assets of the Desktop reporting unit; and an
iii.after-tax unrealized gain of $227.7 million related to IAC's investment in MGM.
(d)The fourth quarter of 2020 includes after-tax unrealized gain of $439.6 million related to IAC's investment in MGM.
(e)The first, second, third and fourth quarters of 2020 include after-tax stock-based compensation expense of $8.9 million, $2.7 million, $4.1 million and $1.5 million, respectively, related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination. The first, second, third and fourth quarters of 2019 include after-tax stock-based compensation expense of $7.4 million, $6.3 million, $5.7 million, and $5.7 million, respectively, related to this modification.
(f)Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.
(g)The Company computed basic and diluted earnings per share for periods prior to the MTCH Separation using the shares issued on June 30, 2020 in connection with the MTCH Separation.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 19—SUBSEQUENT EVENTS
In January 2021, Vimeo raised $300 million of equity capital via the sale of 6.2 million shares of Vimeo Class A voting common stock for $200 million, or $32.41 per share, at a $5.2 billion pre-money valuation, and 2.8 million shares of Vimeo Class A voting common stock for $100 million, or $35.35 per share, at a $5.7 billion pre-money valuation. Following the sale, IAC holds 88% of Vimeo's total outstanding capital stock.
On February 12, 2021, Vimeo, Inc. entered into a five-year $100 million revolving credit facility (the "Vimeo Credit Facility"), which is secured by substantially all of its assets, subject to certain exceptions. Borrowings under the Vimeo Credit Facility bear interest, at Vimeo's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on Vimeo’s consolidated net leverage ratio. At closing, there were no borrowings under the Vimeo Credit Facility.
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Item 9. Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of the Company's Disclosure Controls and Procedures
The Company monitors and evaluates on an ongoing basis its disclosure controls and procedures and internal control over financial reporting in order to improve their overall effectiveness. In the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.
Conclusion Regarding the Effectiveness of the Company's Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management, including our Chairman and Senior Executive, Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), conducted an evaluation, as of the end of the period covered by this annual report, of the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on this evaluation, our Chairman and Senior Executive, CEO and our CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
Based on this assessment, management has determined that, as of December 31, 2022, the Company's internal control over financial reporting is effective. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report, included herein.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
There were no changes to the Company’sThe Company monitors and evaluates on an ongoing basis its internal control over financial reporting duringin order to improve its overall effectiveness. In the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of IAC Inc.
Opinion on Internal Control Over Financial Reporting
We have audited IAC Inc. and subsidiaries’ internal control over financial reporting.reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, IAC Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
Management'sWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022 and 2021, and the related consolidated and combined statements of operations, comprehensive operations, shareholders’ and parent’s equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a), and our report dated March 1, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting
This annual report does not include a report of management’s assessment regardingReporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting or an attestation report of the Company’s independent registeredbased on our audit. We are a public accounting firm because dueregistered with the PCAOB and are required to a transition period established bybe independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SECSecurities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for newly public companies.our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
March 1, 2023
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
The information required by Part III (Items 10, 11, 12, 13 and 14) has been incorporated herein by reference to IAC's definitive proxy statement be used in connection with IAC’s 20212023 Annual Meeting of Stockholders (the "2021"2023 Proxy Statement"), as set forth below in accordance with General Instruction G(3) of Form 10-K.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Items 401 and 405 of Regulation S-K relating to directors and executive officers of IAC and their compliance with Section 16(a) of the Exchange Act is set forth in the sections entitled "Information Concerning Director Nominees" andNominees," "Information Concerning IAC Executive Officers Who Are Not Directors" and "Delinquent 16(a) Reports," respectively, in the 20212023 Proxy Statement and is incorporated herein by reference. The information required by Item 406 of Regulation S-K relating to IAC's Code of Business Conduct and Ethics is set forth under the caption "Part I-Item 1-Business-Description of IAC Businesses-Additional Information-Code of Business Conduct and Ethics" of this annual report and is incorporated herein by reference. The information required by subsections (c)(3), (d)(4) and (d)(5) of Item 407 of Regulation S-K is set forth in the sections entitled "Corporate Governance" and "The Board and Board Committees" in the 20212023 Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by Item 402 of Regulation S-K relating to executive and director compensation and pay ratio disclosure is set forth in the sections entitled "Executive Compensation" and" "Director Compensation" and "Pay Ratio Disclosure" in the 20212023 Proxy Statement and is incorporated herein by reference. The information required by subsections (e)(4) and (e)(5) of Item 407 of Regulation S-K relating to certain compensation committee matters is set forth in the sections entitled "The Board and Board Committees," "Compensation Committee Report" and "Compensation Committee Interlocks and Insider Participation" in the 20212023 Proxy Statement and is incorporated herein by reference; provided, however, that the information set forth in the section entitled "Compensation Committee Report" shall be deemed furnished herein and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act.Act of 1934, as amended.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information regarding ownership of IAC common stock and Class B common stock required by Item 403 of Regulation S-K and securities authorized for issuance under IAC's various equity compensation plans required by Item 201(d) of Regulation S-K is set forth in the sections entitled "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information," respectively, in the 20212023 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions involving IAC required by Item 404 of Regulation S-K and director independence determinations required by Item 407(a) of Regulation S-K is set forth in the sections entitled "Certain Relationships and Related Person Transactions" and "Corporate Governance," respectively, in the 20212023 Proxy Statement and is incorporated herein by reference.
Item 14. Principal AccountingAccountant Fees and Services
Information required by Item 9(e) of Schedule 14A regarding the fees and services of IAC's independent registered public accounting firm and the pre-approval policies and procedures applicable to services provided to IAC by such firm is set forth in the sections entitled "Fees Paid to Our Independent Registered Public Accounting Firm" and "Audit and Non-Audit Services Pre-Approval Policy," respectively, in the 20212023 Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) List of documents filed as part of this Report:
(1) Consolidated and Combined Financial Statements of IAC
Report of Independent Registered Public Accounting Firm: Ernst & Young LLP.LLP (PCAOB ID: 42).
Consolidated and Combined Balance Sheet as of December 31, 20202022 and 2019.2021.
Consolidated and Combined Statement of Operations for the Years Ended December 31, 2020, 20192022, 2021 and 2018.2020.
Consolidated and Combined Statement of Comprehensive Operations for the Years Ended December 31, 2020, 20192022, 2021 and 2018.2020.
Consolidated Statement of Shareholders' Equity and Combined Statement of Parents Equity for the Years Ended December 31, 2020, 20192022, 2021 and 2018.2020.
Consolidated and Combined Statement of Cash Flows for the Years Ended December 31, 2020, 20192022, 2021 and 2018.2020.
Notes to Consolidated and Combined Financial Statements.
(2) Consolidated and Combined Financial Statement Schedule of IAC
| | | | | | | | |
Schedule
Number | | |
| II | | Valuation and Qualifying Accounts. |
All other financial statements and schedules not listed have been omitted since the required information is either included in the Consolidated and Combined Financial Statements or the notes thereto, is not applicable or is not required.
(3) Exhibits
The exhibits listed below are filed as part of, or are incorporated by reference in, this annual report. References to "Old IAC" below refer to then IAC/InterActiveCorp under SEC File No. 000-20570. IAC/InterActiveCorp changed its name to IAC Inc., effective August 11, 2022. ANGI Homeservices Inc. changed its name to Angi Inc., effective March 17, 2021.
| | | | | | | | | | | | | | |
Exhibit
No. | | Description | | Location |
| 2.1 | | Agreement and Plan of Merger, dated as of May 1, 2017, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of August 26, 2017,October 6, 2021, by and among, Angie’s List, Inc.,Meredith, New Meredith, Dotdash and, for certain limited purposes set forth therein, IAC/InterActiveCorp, ANGI Homeservices Inc. and Casa Merger Sub, Inc.
InterActiveCorp. | | |
| 2.2 | | Separation Agreement by and between IAC/InterActiveCorp and Vimeo, Inc., dated as of May 24, 2021. | | |
| 2.3 | | Agreement and Plan or Merger by and among IAC/InterActiveCorp, Buzz Merger Sub Inc. and Care.com, Inc., dated December 20, 2019.(1) | | |
| 2.4 | | Transaction Agreement, dated as of December 19, 2019, by and among Old IAC, IAC/InterActiveCorp, Valentine Merger Sub LLC and Match Group, Inc.(1) | | |
2.32.5 | | Amendment No. 1, dated April 28, 2020, to the Transaction Agreement, dated as of December 19, 2019, by and among Old IAC, IAC/InterActiveCorp, Valentine Merger Sub LLC and Match Group, Inc. | | |
2.42.6 | | Amendment No. 2, dated June 22, 2020, to the Transaction Agreement, dated as of December 19, 2019, by and among Old IAC, IAC/InterActiveCorp, Valentine Merger Sub LLC and Match Group, Inc. | | |
2.52.7 | | Agreement and Plan orof Merger, dated as of May 1, 2017, by and among Angie’s List, Inc., IAC/InterActiveCorp, BuzzANGI Homeservices Inc. and Casa Merger Sub, Inc. and Care.com, Inc., dated December 20, 2019.(1) | | |
| | Restated Certificate of Incorporation of IAC Inc. (2) | | |
| 3.2 | | Restated Certificate of Incorporation of IAC/InterActiveCorp, dated as of June 30, 2020.InterActiveCorp. | | |
3.23.3 | | Certificate of Amendment of Restated Certificate of Incorporation of IAC/InterActiveCorp. | | |
| 3.4 | | Certificate of Amendment of Restated Certificate of Incorporation of IAC Inc. | | |
| 3.5 | | Amended and Restated By-laws of IAC/InterActiveCorp, dated as of June 30, 2020.IAC, Inc. | | |
3.33.6 | | Certificate of Designations of Series A Cumulative Preferred Stock of IAC/InterActiveCorp, dated as of June 30, 2020.Stock. | | |
| | Description of IAC/InterActiveCorpIAC Inc. Capital Stock.(1)(2) | | |
| 4.2 | | Indenture, dated as of August 20, 2020, among ANGI Group, LLC, the guarantors party thereto and Computershare Trust Company, N.A., as trustee. | |
|
| | | | | | | | | | | | | | |
| 10.1 | | Amended and Restated Governance Agreement, dated as of August 9, 2005, among IAC/InterActiveCorp, Liberty Media Corporation and Barry Diller. | | |
| 10.2 | | Letter Agreement, dated as of December 1, 2010, by and among IAC/InterActiveCorp, Liberty Media Corporation, Liberty USA Holdings, LLC and Barry Diller. | |
|
| 10.3 | | Letter Agreement, dated as of December 1, 2010, by and between IAC/InterActiveCorp and Barry Diller. | | |
| 10.4 | | Credit Agreement, dated as of December 1, 2021, by and among Dotdash Meredith, Inc., as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto. | | |
| 10.5 | | IAC/InterActiveCorp 2018 Stock and Annual Incentive Plan.(2)(3) | | |
10.5 | | Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2018 Stock and Annual Incentive Plan.(2) | | |
| | | | | | | | | | | | | | |
| 10.6 | | Form of Terms and Conditions for Restricted Stock Units granted under the IAC/InterActiveCorp 2018 Stock and Annual Incentive Plan.(2) | | |
| | Form of Notice and Terms and Conditions for 2020 Five- Year Restricted Stock Unit Awards.(1)(2)(3) | | |
10.810.7 | | IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2)(3) | | |
10.910.8 | | Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2)(3) | | |
10.10 | | Form of Terms and Conditions for Restricted Stock Units granted under the IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2) | | |
10.1110.9 | | IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2)(3) | | |
10.1210.10 | | Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2)(3) | | |
10.13 | | Form of Terms and Conditions for Restricted Stock Units granted under the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2) | | |
10.1410.11 | | IAC/InterActiveCorp Amended and Restated 2005 Stock and Annual Incentive Plan.(2)Plan (effective December 17, 2008).(3) | | |
10.1510.12 | | Form of Terms and Conditions for Stock Options granted under the IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(2)(3) | | |
| | Summary of IAC/InterActiveCorp Non-Employee Director Compensation Arrangements.(1)(2)(3) | | |
10.1710.14 | | 2011 IAC/InterActiveCorp Deferred Compensation Plan for Non-Employee Directors.(2)(3) | | |
| | | | | | | | | | | | | | |
10.1810.15 | | Equity and Bonus Compensation Arrangement, dated as of August 24, 1995, between Barry Diller and the Registrant.(2)(3) | | |
10.1910.16 | | Employment Agreement between Joseph Levin and IAC/InterActiveCorp, dated as of November 5, 2020.(2)(3) | | |
10.2010.17 | | Amended and Restated Restricted Stock Award Agreement, dated as of June 7, 2021, by and between Joseph Levin and IAC/InterActiveCorp, dated as of November 5, 2020.(2)InterActiveCorp.(3) | | |
10.2110.18 | | Second Amended and Restated Employment Agreement between Victor A. Kaufman and IAC/InterActiveCorp, dated as of March 15, 2012.(2)(3)
| | |
10.2210.19 | | Employment Agreement between Glenn H. SchiffmanChristopher Halpin and IAC/InterActiveCorp, dated as of April 7, 2016.(2)
January 4, 2022.(3) | | |
| | | | | | | | | | | | | | |
10.2310.20 | | Employment Agreement between Mark Stein and IAC/InterActiveCorp, dated as of June 28, 2018.(2)(3)
| | |
10.2410.21 | | Employment Agreement between Gregg Winiarski and IAC/InterActiveCorp, dated as of February 26, 2010.(2) | | |
| | Employment Agreement between Kendall Handler and IAC/InterActiveCorp, dated as of December 31, 2020.(1)(2)(3) | | |
| | | | | | | | | | | | | | |
| | Google Services Agreement, dated as of October 26, 2015, between the RegistrantIAC/InterActiveCorp and Google Inc.(1)(3)(4)(5) | | |
| | Amendment No. 3 to Google Services Agreement, dated as of February 11, 2019 (with an effective date of April 1, 2020), between the RegistrantIAC/InterActiveCorp and Google LLC.(1)(3)(4)(5)
| | |
10.2810.24 | | Amended and Restated CreditAmendment No. 4 to Google Services Agreement, dated as of November 5, 2018,August 23, 2021 (with an effective date of August 1, 2021), between IAC/InterActiveCorp and Google LLC and certain of their respective subsidiaries.(4)
| | |
| 10.25 | | Employee Matters Agreement by and among ANGI Homeservicesbetween IAC/InterActiveCorp and Vimeo, Inc., the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A.,dated as Administrative Agent.
of May 24, 2021. | | |
10.2910.26 | | Tax Matters Agreement by and between IAC/InterActiveCorp and Vimeo, Inc., dated as of May 24, 2021. | | |
| 10.27 | | Transition Services Agreement by and between IAC/InterActiveCorp and Vimeo, Inc., dated as of May 24, 2021. | | |
| 10.28 | | Amended and Restated Employee Matters Agreement, dated as of June 30, 2020, by and between IAC/InterActiveCorp and Match Group, Inc. | | |
10.3010.29 | | Tax Matters Agreement, dated as of June 30, 2020, by and between IAC/InterActiveCorp and Match Group, Inc. | | |
10.3110.30 | | Transition Services Agreement, dated as of June 30, 2020, by and between IAC/InterActiveCorp and Match Group, Inc. | | |
10.3210.31 | | Contribution Agreement, dated as of September 29, 2017, by and between IAC/InterActiveCorp and ANGI Homeservices Inc. | | |
10.3310.32 | | Employee Matters Agreement, dated as of September 29, 2017, by and between IAC/InterActiveCorp and ANGI Homeservices Inc.(1) | | |
10.3410.33 | | Investor Rights Agreement, dated as of September 29, 2017, by and between IAC/InterActiveCorp and ANGI Homeservices Inc. | | |
10.3510.34 | | Tax Sharing Agreement, dated as of September 29, 2017, by and between IAC/InterActiveCorp and ANGI Homeservices Inc. | | |
10.3610.35 | | Services Agreement, dated as of September 29, 2017, by and between IAC/InterActiveCorp and ANGI Homeservices Inc.(1) | | |
| | Subsidiaries of the Registrant as of December 31, 2020.(1)2022.(2) | | |
| | Consent of Ernst & Young LLP.(1)(2) | | |
| | | | | | | | | | | | | | |
| | Certification of the Chairman and Senior Executive pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)(2) | | |
| | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)(2) | | |
| | | | | | | | | | | | | | |
| | Certification of the Chief Financial Officer and Chief Operating Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)(2) | | |
| | | | | | | | | | | | | | |
| | Certification of the Chairman and Senior Executive pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(5)(6) | | |
| | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(5)(6) | | |
| | Certification of the Chief Financial Officer and Chief Operating Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(5)(6) | | |
| 99.1 | | Voting Agreement, dated as of November 5, 2020, by and among Barry Diller, The Arrow 1999 Trust, dated September 16, 1999, as amended, The AVF Trust U/A/D February 17, 2016, The TVF Trust U/A/D February 17, 2016, The TALT Trust U/A/D February 17, 2016, and Joseph M. Levin. | | |
| 101.INS | | Inline XBRL Instance (the instance document
does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL
document)(2) | | |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema(1)Schema(2) | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation(1)Calculation(2) | | |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition(1)Definition(2) | | |
| 101.LAB | | Inline XBRL Taxonomy Extension Labels(1)Labels(2) | | |
| 101.PRE | | XBRL Taxonomy Extension Presentation(1)Presentation(2) | | |
| 104 | | Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101)
| | |
(1)Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish on a supplemental basis a copy of any omitted attachment to the SEC on a confidential basis upon request.
(2)Filed herewith.
(2)(3)Reflects management contracts and management and director compensatory plans.
(3)(4)Certain confidential information has been omitted from this exhibit because it is not material and would likely cause competitive harmpursuant to IAC/InterActiveCorp if publicly disclosed.applicable SEC rules.
(4)(5)RefilingReflects redacted documents for which confidential treatment was previously granted to and/or extended for Old IAC.
(5)(6)Furnished herewith.
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | | | | |
February 17, 2021March 1, 2023 | | IAC/INTERACTIVECORPIAC INC. |
| | | By: | | /s/ GLENN H. SCHIFFMANCHRISTOPHER HALPIN |
| | | | Glenn H. SchiffmanChristopher Halpin |
| | | | Executive Vice President, Chief Financial Officer and Chief FinancialOperating Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 17, 2021:March 1, 2023: | | | | | | | | |
| Signature | | Title |
| | | |
| /s/ BARRY DILLER | | Chairman of the Board, Senior Executive and Director |
| Barry Diller | | |
| | |
| /s/ JOSEPH LEVIN | | Chief Executive Officer and Director |
| Joseph Levin | | |
| | |
| /s/ VICTOR A. KAUFMAN | | Vice Chairman and Director |
| Victor A. Kaufman | | |
/s/ GLENN H. SCHIFFMANCHRISTOPHER HALPIN | | Executive Vice President, Chief Financial Officer and Chief FinancialOperating Officer |
Glenn H. SchiffmanChristopher Halpin | | |
| | |
| /s/ MICHAEL H. SCHWERDTMAN | | Senior Vice President and Controller (Chief Accounting Officer) |
| Michael H. Schwerdtman | | |
| | |
| /s/ CHELSEA CLINTON | | Director |
| Chelsea Clinton | | |
| | |
| /s/ MICHAEL D. EISNER | | Director |
| Michael D. Eisner | | |
| | |
| /s/ BONNIE S. HAMMER | | Director |
| Bonnie S. Hammer | | |
| | |
| | |
| /s/ BRYAN LOURD | | Director |
| Bryan Lourd | | |
| | |
/s/ WESTLEY MOORE | | Director |
Westley Moore | | |
| | |
/s/ DAVID S. ROSENBLATT | | Director |
| David S. Rosenblatt | | |
| | |
| /s/ ALAN G. SPOON | | Director |
| Alan G. Spoon | | |
| | |
| /s/ ALEXANDER VON FURSTENBERG | | Director |
| Alexander von Furstenberg | | |
| | |
| /s/ RICHARD F. ZANNINO | | Director |
| Richard F. Zannino | | |
Schedule II
IAC/INTERACTIVECORPIAC INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
| | Description | Description | Balance at
Beginning
of Period | | Charges to
Earnings | | Charges to
Other Accounts | | Deductions | | Balance at
End of Period | Description | Balance at
Beginning
of Period | | Charges to
Earnings | | Charges to
Other Accounts | | Deductions | | Balance at
End of Period |
| | | (In thousands) | | (In thousands) |
| 2022 | | 2022 | |
| Allowance for credit losses | | Allowance for credit losses | $ | 36,637 | | | $ | 116,553 | | (a) | $ | 109 | | | $ | (102,328) | | (b) | $ | 50,971 | |
| | Deferred tax valuation allowance | | Deferred tax valuation allowance | $ | 112,640 | | | $ | (4,497) | | (c) | $ | 15,869 | | (d) | $ | — | | | $ | 124,012 | |
| Other reserves | | Other reserves | $ | 2,530 | | | $ | 1,880 | |
| 2021 | | 2021 | | | | | | | | | |
| Allowance for credit losses | | Allowance for credit losses | $ | 27,178 | | | $ | 89,893 | | (a) | $ | 123 | | | $ | (80,557) | | (b) | $ | 36,637 | |
| | Deferred tax valuation allowance | | Deferred tax valuation allowance | $ | 111,691 | | | $ | (1,620) | | (e) | $ | 2,569 | | (f) | $ | — | | | $ | 112,640 | |
| Other reserves | | Other reserves | $ | — | | | $ | 2,530 | |
| 2020 | 2020 | | 2020 | | | | | | | | | |
| Allowance for credit losses | Allowance for credit losses | $ | 20,257 | | | $ | 80,765 | | (a) | $ | (52) | | | $ | (73,316) | | (c) | $ | 27,654 | | Allowance for credit losses | $ | 19,984 | | | $ | 78,931 | | (a) | $ | (152) | | | $ | (71,585) | | (b) | $ | 27,178 | |
| Revenue reserves | 3,891 | | | 110,796 | | (b) | 0 | | | (112,625) | | (d) | 2,062 | | |
| | Deferred tax valuation allowance | Deferred tax valuation allowance | 92,990 | | | 11,623 | | (e) | 9,071 | | (f) | 0 | | | 113,684 | | Deferred tax valuation allowance | $ | 91,180 | | | $ | 11,443 | | (g) | $ | 9,068 | | (h) | $ | — | | | $ | 111,691 | |
| Other reserves | 5,060 | | | 8,054 | | |
| 2019 | | | | | | | | | | |
| Allowance for credit losses | $ | 16,344 | | | $ | 65,723 | | (a) | $ | 247 | | | $ | (62,057) | | (c) | $ | 20,257 | | |
| Revenue reserves | 1,792 | | | 114,005 | | (b) | (2) | | | (111,904) | | (d) | 3,891 | | |
| Deferred tax valuation allowance | 86,778 | | | 7,813 | | (g) | (1,601) | | (f) | 0 | | | 92,990 | | |
| Other reserves | 4,726 | | | | | | | | | 5,060 | | |
| 2018 | | | | | | | | | | |
| Allowance for credit losses | $ | 9,075 | | | $ | 48,362 | | (a) | $ | (451) | | | $ | (40,642) | | (c) | $ | 16,344 | | |
| Revenue reserves | 1,635 | | | 87,803 | | (b) | (5) | | | (87,641) | | (d) | 1,792 | | |
| Deferred tax valuation allowance | 91,040 | | | (2,056) | | (h) | (2,206) | | (f) | 0 | | | 86,778 | | |
| Other reserves | 0 | | | | | | | | | 4,726 | | |
|
(a) Additions to the allowance for credit losses are charged to expense.
(b) Additions to the revenue reserves are charged against revenue.
(c) Write-offAmount is primarily write-offs of fully reserved accounts receivable.receivable, net of recoveries.
(c) Amount is primarily related to a decrease in federal net operating losses ("NOLs"), partially offset by a net increase in unbenefited capital losses.
(d) Amount is primarily related to write-offa change in judgement on the realizability of revenue reserve at ANGIforeign NOLs related to Meredith, acquired by Dotdash on December 1, 2021, partially offset by currency translation adjustments on foreign NOLs.
(e) Amount is primarily related to credits granteda decrease in both foreign NOLs and unbenefited capital losses, partially offset by an increase in federal NOLs.
(f) Amount is primarily related to service professionals.acquired foreign and state NOLs, partially offset by currency translation adjustments on foreign NOLs.
(e)(g) Amount is primarily related to impairments of certain equity securities without readily determinable fair values.
(f)(h) Amount is primarily related to currency translation adjustments on foreign NOLs.
(g) Amount is primarily related to an increase in foreign NOLs partially offset by a net decrease in unbenefited capital losses.
(h) Amount is primarily related to an expired tax credit.
