As filed with the Securities and Exchange Commission on NovemberMay 9, 20222023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2022March 31, 2023
Or
| | | | | |
| ☐ | 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 INC.Inc.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| 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)
| | | | | | | | | | | | | | |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | | Trading Symbol | | Name of exchange on which registered |
| Common stock, par value $0.0001 | | IAC | | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
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 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 4, 2022,May 5, 2023, the following shares of the registrant's common stock were outstanding:
| | | | | |
| Common Stock | 83,066,87880,065,465 | |
| Class B common stock | 5,789,499 | |
| Total | 88,856,37785,854,964 | |
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
IAC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | (In thousands, except par value amounts) | | (In thousands, except par value amounts) |
| ASSETS | ASSETS | | | | ASSETS | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,607,384 | | | $ | 2,118,730 | | Cash and cash equivalents | $ | 1,398,836 | | | $ | 1,417,390 | |
| | Marketable securities | Marketable securities | 16,343 | | | 19,788 | | Marketable securities | 202,138 | | | 239,373 | |
| Accounts receivable, net of reserves | 587,567 | | | 693,208 | | |
| Accounts receivable, net | | Accounts receivable, net | 537,945 | | | 607,809 | |
| | Other current assets | Other current assets | 269,869 | | | 242,188 | | Other current assets | 240,804 | | | 296,563 | |
| Total current assets | Total current assets | 2,481,163 | | | 3,073,914 | | Total current assets | 2,379,723 | | | 2,561,135 | |
| | Capitalized software, equipment, buildings, leasehold improvements and land, net | Capitalized software, equipment, buildings, leasehold improvements and land, net | 583,888 | | | 570,525 | | Capitalized software, equipment, buildings, leasehold improvements and land, net | 461,871 | | | 510,614 | |
| Goodwill | Goodwill | 3,008,244 | | | 3,226,610 | | Goodwill | 3,030,953 | | | 3,030,168 | |
| Intangible assets, net of accumulated amortization | Intangible assets, net of accumulated amortization | 1,282,503 | | | 1,414,892 | | Intangible assets, net of accumulated amortization | 1,115,589 | | | 1,170,041 | |
| Investment in MGM Resorts International | Investment in MGM Resorts International | 1,923,585 | | | 2,649,442 | | Investment in MGM Resorts International | 2,875,022 | | | 2,170,182 | |
| Long-term investments | Long-term investments | 311,291 | | | 327,838 | | Long-term investments | 327,683 | | | 325,721 | |
| Other non-current assets | Other non-current assets | 850,899 | | | 1,037,067 | | Other non-current assets | 563,180 | | | 625,774 | |
| TOTAL ASSETS | TOTAL ASSETS | $ | 10,441,573 | | | $ | 12,300,288 | | TOTAL ASSETS | $ | 10,754,021 | | | $ | 10,393,635 | |
| | LIABILITIES AND SHAREHOLDERS' EQUITY | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| LIABILITIES: | LIABILITIES: | | | | LIABILITIES: | | | |
| Current portion of long-term debt | Current portion of long-term debt | $ | 30,000 | | | $ | 30,000 | | Current portion of long-term debt | $ | 30,000 | | | $ | 30,000 | |
| Accounts payable, trade | Accounts payable, trade | 158,110 | | | 203,173 | | Accounts payable, trade | 114,863 | | | 133,105 | |
| Deferred revenue | Deferred revenue | 158,767 | | | 165,451 | | Deferred revenue | 172,847 | | | 157,124 | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 738,371 | | | 980,574 | | Accrued expenses and other current liabilities | 680,837 | | | 759,759 | |
| Total current liabilities | Total current liabilities | 1,085,248 | | | 1,379,198 | | Total current liabilities | 998,547 | | | 1,079,988 | |
| | Long-term debt, net | Long-term debt, net | 2,026,404 | | | 2,046,237 | | Long-term debt, net | 2,013,107 | | | 2,019,759 | |
| Deferred income taxes | Deferred income taxes | 108,638 | | | 385,890 | | Deferred income taxes | 202,566 | | | 76,276 | |
| Other long-term liabilities | Other long-term liabilities | 650,795 | | | 721,262 | | Other long-term liabilities | 592,132 | | | 617,843 | |
| | Redeemable noncontrolling interests | Redeemable noncontrolling interests | 32,385 | | | 18,741 | | Redeemable noncontrolling interests | 27,189 | | | 27,235 | |
| | Commitments and contingencies | Commitments and contingencies | | Commitments and contingencies | |
| | SHAREHOLDERS' EQUITY: | SHAREHOLDERS' EQUITY: | | | SHAREHOLDERS' EQUITY: | | |
| Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,155 and 83,922 shares issued and 83,054 and 83,922 shares outstanding at September 30, 2022 and December 31, 2021, respectively | 8 | | | 8 | | |
| Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at September 30, 2022 and December 31, 2021 | 1 | | | 1 | | |
| Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,257 and 84,184 shares issued and 81,380 and 83,083 shares outstanding at March 31, 2023 and December 31, 2022, respectively | | Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,257 and 84,184 shares issued and 81,380 and 83,083 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 8 | | | 8 | |
| Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at March 31, 2023 and December 31, 2022 | | Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at March 31, 2023 and December 31, 2022 | 1 | | | 1 | |
| Additional paid-in-capital | Additional paid-in-capital | 6,282,690 | | | 6,265,669 | | Additional paid-in-capital | 6,306,229 | | | 6,295,080 | |
| (Accumulated deficit) retained earnings | (263,600) | | | 905,151 | | |
| Accumulated other comprehensive (loss) income | (29,960) | | | 4,397 | | |
| Treasury stock, 1,101 shares at September 30, 2022 | (85,323) | | | — | | |
| Retained earnings (accumulated deficit) | | Retained earnings (accumulated deficit) | 152,756 | | | (265,019) | |
| Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (14,641) | | | (13,133) | |
| Treasury stock, 2,877 and 1,101 shares at March 31, 2023 and December 31, 2022, respectively | | Treasury stock, 2,877 and 1,101 shares at March 31, 2023 and December 31, 2022, respectively | (177,052) | | | (85,323) | |
| Total IAC shareholders' equity | Total IAC shareholders' equity | 5,903,816 | | | 7,175,226 | | Total IAC shareholders' equity | 6,267,301 | | | 5,931,614 | |
| Noncontrolling interests | Noncontrolling interests | 634,287 | | | 573,734 | | Noncontrolling interests | 653,179 | | | 640,920 | |
| Total shareholders' equity | Total shareholders' equity | 6,538,103 | | | 7,748,960 | | Total shareholders' equity | 6,920,480 | | | 6,572,534 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 10,441,573 | | | $ | 12,300,288 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 10,754,021 | | | $ | 10,393,635 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | |
| | | (In thousands, except per share data) | | (In thousands, except per share data) |
| Revenue | Revenue | $ | 1,300,901 | | | $ | 924,068 | | | $ | 3,988,827 | | | $ | 2,540,185 | | Revenue | $ | 1,084,271 | | | $ | 1,325,345 | | |
| 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) | 453,513 | | | 340,510 | | | 1,499,968 | | | 828,744 | | Cost of revenue (exclusive of depreciation shown separately below) | 342,084 | | | 533,604 | | |
| Selling and marketing expense | Selling and marketing expense | 489,573 | | | 348,187 | | | 1,490,947 | | | 1,001,760 | | Selling and marketing expense | 404,141 | | | 488,463 | | |
| General and administrative expense | General and administrative expense | 260,073 | | | 183,299 | | | 750,746 | | | 521,170 | | General and administrative expense | 269,526 | | | 240,471 | | |
| Product development expense | Product development expense | 74,078 | | | 52,277 | | | 239,149 | | | 157,593 | | Product development expense | 88,338 | | | 84,195 | | |
| Depreciation | Depreciation | 27,567 | | | 17,795 | | | 86,855 | | | 54,093 | | Depreciation | 61,172 | | | 30,236 | | |
| Amortization of intangibles | Amortization of intangibles | 120,777 | | | 14,067 | | | 234,048 | | | 44,542 | | Amortization of intangibles | 54,606 | | | 57,190 | | |
| Goodwill impairment | — | | | — | | | 86,748 | | | — | | |
| | Total operating costs and expenses | Total operating costs and expenses | 1,425,581 | | | 956,135 | | | 4,388,461 | | | 2,607,902 | | Total operating costs and expenses | 1,219,867 | | | 1,434,159 | | |
| Operating loss | Operating loss | (124,680) | | | (32,067) | | | (399,634) | | | (67,717) | | Operating loss | (135,596) | | | (108,814) | | |
| Interest expense | Interest expense | (29,433) | | | (6,032) | | | (74,862) | | | (18,463) | | Interest expense | (38,172) | | | (21,912) | | |
| Unrealized gain (loss) on investment in MGM Resorts International | Unrealized gain (loss) on investment in MGM Resorts International | 42,523 | | | 29,517 | | | (970,112) | | | 687,155 | | Unrealized gain (loss) on investment in MGM Resorts International | 704,840 | | | (187,330) | | |
| Other income (expense), net | 19,678 | | | 79,539 | | | (63,048) | | | 133,388 | | |
| (Loss) earnings from continuing operations before income taxes | (91,912) | | | 70,957 | | | (1,507,656) | | | 734,363 | | |
| Income tax benefit (provision) | 26,065 | | | (9,910) | | | 325,517 | | | (151,046) | | |
| Net (loss) earnings from continuing operations | (65,847) | | | 61,047 | | | (1,182,139) | | | 583,317 | | |
| Loss from discontinued operations, net of tax | — | | | — | | | — | | | (1,831) | | |
| Net (loss) earnings | (65,847) | | | 61,047 | | | (1,182,139) | | | 581,486 | | |
| Net loss (earnings) attributable to noncontrolling interests | 2,024 | | | (357) | | | 13,388 | | | 3,089 | | |
| Net (loss) earnings attributable to IAC shareholders | $ | (63,823) | | | $ | 60,690 | | | $ | (1,168,751) | | | $ | 584,575 | | |
| Other income, net | | Other income, net | 23,749 | | | 6,699 | | |
| Earnings (loss) before income taxes | | Earnings (loss) before income taxes | 554,821 | | | (311,357) | | |
| Income tax (provision) benefit | | Income tax (provision) benefit | (139,502) | | | 70,464 | | |
| Net earnings (loss) | | Net earnings (loss) | 415,319 | | | (240,893) | | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | 2,456 | | | 5,095 | | |
| Net earnings (loss) attributable to IAC shareholders | | Net earnings (loss) attributable to IAC shareholders | $ | 417,775 | | | $ | (235,798) | | |
| | Per share information from continuing operations: | | |
| Basic (loss) earnings per share | $ | (0.74) | | | $ | 0.68 | | | $ | (13.51) | | | $ | 6.58 | | |
| Diluted (loss) earnings per share | $ | (0.74) | | | $ | 0.65 | | | $ | (13.51) | | | $ | 6.16 | | |
| 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 earnings (loss) per share | | Basic earnings (loss) per share | $ | 4.72 | | | $ | (2.72) | | |
| Diluted earnings (loss) per share | | Diluted earnings (loss) per share | $ | 4.57 | | | $ | (2.72) | | |
| | Per share information attributable to IAC Common Stock and Class B common stock shareholders: | |
| Basic (loss) earnings per share | $ | (0.74) | | | $ | 0.68 | | | $ | (13.51) | | | $ | 6.56 | | |
| Diluted (loss) earnings per share | $ | (0.74) | | | $ | 0.65 | | | $ | (13.51) | | | $ | 6.14 | | |
| | Stock-based compensation expense by function: | Stock-based compensation expense by function: | | Stock-based compensation expense by function: | | |
| Cost of revenue | Cost of revenue | $ | 1,071 | | | $ | 18 | | | $ | 2,109 | | | $ | 52 | | Cost of revenue | $ | 19 | | | $ | 5 | | |
| Selling and marketing expense | Selling and marketing expense | 2,315 | | | 1,449 | | | 6,264 | | | 3,766 | | Selling and marketing expense | 1,743 | | | 1,508 | | |
| General and administrative expense | General and administrative expense | 24,860 | | | 11,762 | | | 74,791 | | | 48,695 | | General and administrative expense | 22,844 | | | 25,371 | | |
| Product development expense | Product development expense | 2,871 | | | 2,209 | | | 9,296 | | | 5,291 | | Product development expense | 4,335 | | | 2,803 | | |
| | Total stock-based compensation expense | Total stock-based compensation expense | $ | 31,117 | | | $ | 15,438 | | | $ | 92,460 | | | $ | 57,804 | | Total stock-based compensation expense | $ | 28,941 | | | $ | 29,687 | | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (In thousands) |
| Net (loss) earnings | $ | (65,847) | | | $ | 61,047 | | | $ | (1,182,139) | | | $ | 581,486 | |
| Other comprehensive (loss) income, net of income taxes: | | | | | | | |
| Change in foreign currency translation adjustment | (18,173) | | | (1,560) | | | (36,266) | | | 11,260 | |
| Change in unrealized gains and losses on available-for-sale marketable debt securities | — | | | — | | | — | | | (2) | |
| Total other comprehensive (loss) income, net of income taxes | (18,173) | | | (1,560) | | | (36,266) | | | 11,258 | |
| Comprehensive (loss) income, net of income taxes | (84,020) | | | 59,487 | | | (1,218,405) | | | 592,744 | |
| Components of comprehensive loss (income) attributable to noncontrolling interests: | | | | | | | |
| Net loss (earnings) attributable to noncontrolling interests | 2,024 | | | (357) | | | 13,388 | | | 3,089 | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | 1,061 | | | 477 | | | 1,904 | | | (474) | |
| | | | | | | |
| Comprehensive loss attributable to noncontrolling interests | 3,085 | | | 120 | | | 15,292 | | | 2,615 | |
| Comprehensive (loss) income attributable to IAC shareholders | $ | (80,935) | | | $ | 59,607 | | | $ | (1,203,113) | | | $ | 595,359 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| | 2023 | | 2022 | | | | |
| | (In thousands) |
| Net earnings (loss) | $ | 415,319 | | | $ | (240,893) | | | | | |
| Other comprehensive income (loss), net of income taxes: | | | | | | | |
| Change in foreign currency translation adjustment | 919 | | | (3,701) | | | | | |
| Change in unrealized gains and losses on available-for-sale marketable debt securities | (26) | | | — | | | | | |
| Change in unrealized losses on interest rate swaps | (2,287) | | | — | | | | | |
| Total other comprehensive loss, net of income taxes | (1,394) | | | (3,701) | | | | | |
| Comprehensive income (loss), net of income taxes | 413,925 | | | (244,594) | | | | | |
| Components of comprehensive loss (income) attributable to noncontrolling interests: | | | | | | | |
| Net loss attributable to noncontrolling interests | 2,456 | | | 5,095 | | | | | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | (116) | | | 67 | | | | | |
| | | | | | | |
| | | | | | | |
| Comprehensive loss attributable to noncontrolling interests | 2,340 | | | 5,162 | | | | | |
| Comprehensive income (loss) attributable to IAC shareholders | $ | 416,265 | | | $ | (239,432) | | | | | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 2023 and nine months ended September 30, 2022
(Unaudited)
| | | | Redeemable Noncontrolling Interests | | | Common Stock, $0.0001 par value | | Class B common stock, $0.0001 par value | | Common Stock, $0.001 par value | | Class B common stock, $0.001 par value | | Additional Paid-in-Capital | | (Accumulated Deficit) Retained Earnings | | Accumulated
Other
Comprehensive
(Loss) Income | | Treasury Stock | | Total IAC
Shareholders' Equity | | Noncontrolling
Interests | | Total Shareholders' Equity | | Redeemable Noncontrolling Interests | | | Common Stock, $0.0001 par value | | Class B common stock, $0.0001 par value | | Additional Paid-in-Capital | | (Accumulated Deficit) Retained Earnings | | Accumulated
Other
Comprehensive
(Loss) Income | | Treasury Stock | | Total IAC
Shareholders' Equity | | Noncontrolling
Interests | | Total Shareholders' Equity |
| | | | | $ | | Shares | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | $ | | Shares | | $ | | Shares | |
| | | | | | (In thousands) | | | | | (In thousands) |
| Balance at June 30, 2022 | $ | 27,408 | | | | $ | 8 | | | 84,132 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,261,929 | | | $ | (199,777) | | | $ | (12,852) | | | $ | (59,079) | | | $ | 5,990,230 | | | $ | 634,933 | | | $ | 6,625,163 | | |
| Net income (loss) | 740 | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | (63,823) | | | — | | | — | | | (63,823) | | | (2,764) | | | (66,587) | | |
| Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | (17,112) | | | — | | | (17,112) | | | (1,061) | | | (18,173) | | |
| Balance at December 31, 2022 | | 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 | |
| Net (loss) earnings | | Net (loss) earnings | (254) | | | | — | | | — | | | — | | | — | | | — | | | 417,775 | | | — | | | — | | | 417,775 | | | (2,202) | | | 415,573 | |
| Other comprehensive (loss) income, net of income taxes | | Other comprehensive (loss) income, net of income taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,510) | | | — | | | (1,510) | | | 116 | | | (1,394) | |
| Stock-based compensation expense | Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | 18,741 | | | — | | | — | | | — | | | 18,741 | | | 13,304 | | | 32,045 | | Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | 16,063 | | | — | | | — | | | — | | | 16,063 | | | 13,870 | | | 29,933 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 23 | | | — | | | — | | | — | | | — | | — | | — | | | (1,155) | | | — | | | — | | | — | | | (1,155) | | | — | | | (1,155) | | Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 73 | | | — | | | — | | | (1,850) | | | — | | | — | | | — | | | (1,850) | | | — | | | (1,850) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | (3,690) | | | — | | | 4 | | | — | | | (3,686) | | | 1,566 | | | (2,120) | | Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | (4,699) | | | — | | | 2 | | | — | | | (4,697) | | | 2,287 | | | (2,410) | |
| Purchase of IAC treasury stock | Purchase of IAC treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | — | | | (26,244) | | | (26,244) | | | — | | | (26,244) | | Purchase of IAC treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (91,729) | | | (91,729) | | | — | | | (91,729) | |
| | Adjustment of noncontrolling interests to fair value | Adjustment of noncontrolling interests to fair value | 4,856 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,856) | | | — | | | — | | | — | | | (4,856) | | | — | | | (4,856) | | Adjustment of noncontrolling interests to fair value | 208 | | | | — | | | — | | | — | | | — | | | (208) | | | — | | | — | | | — | | | (208) | | | — | | | (208) | |
| Adjustment to Vivian Health preferred shares to liquidation value | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,854 | | | — | | | — | | | — | | | 3,854 | | | (3,854) | | | — | | |
| Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,835 | | | — | | | — | | | — | | | 7,835 | | | (7,835) | | | — | | |
| Adjustment to the liquidation value of Vivian Health preferred shares | | Adjustment to the liquidation value of Vivian Health preferred shares | — | | | | — | | | — | | | — | | | — | | | 1,812 | | | — | | | — | | | — | | | 1,812 | | | (1,812) | | | — | |
| Other | Other | (619) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 32 | | | — | | | — | | | — | | | 32 | | | (2) | | | 30 | | Other | — | | | | — | | | — | | | — | | | — | | | 31 | | | — | | | — | | | — | | | 31 | | | — | | | 31 | |
| Balance at September 30, 2022 | $ | 32,385 | | | | $ | 8 | | | 84,155 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,282,690 | | | $ | (263,600) | | | $ | (29,960) | | | $ | (85,323) | | | $ | 5,903,816 | | | $ | 634,287 | | | $ | 6,538,103 | | |
| Balance at March 31, 2023 | | Balance at March 31, 2023 | $ | 27,189 | | | | $ | 8 | | | 84,257 | | | $ | 1 | | | 5,789 | | | $ | 6,306,229 | | | $ | 152,756 | | | $ | (14,641) | | | $ | (177,052) | | | $ | 6,267,301 | | | $ | 653,179 | | | $ | 6,920,480 | |
| | Balance at December 31, 2021 | 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 | | 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 | Net loss | (1,647) | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | (1,168,751) | | | — | | | — | | | (1,168,751) | | | (11,741) | | | (1,180,492) | | Net loss | (34) | | | | — | | | — | | | — | | | — | | | — | | | (235,798) | | | — | | | — | | | (235,798) | | | (5,061) | | | (240,859) | |
| Other comprehensive loss | Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | (34,362) | | | ��� | | | (34,362) | | | (1,904) | | | (36,266) | | Other comprehensive loss | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (3,634) | | | — | | | (3,634) | | | (67) | | | (3,701) | |
| Stock-based compensation expense | Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | 53,682 | | | — | | | — | | | — | | | 53,682 | | | 40,971 | | | 94,653 | | Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | 16,702 | | | — | | | — | | | — | | | 16,702 | | | 13,556 | | | 30,258 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 233 | | | — | | | — | | | — | | | — | | — | | — | | | (15,965) | | | — | | | — | | | — | | | (15,965) | | | — | | | (15,965) | | Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 153 | | | — | | | — | | | (14,012) | | | — | | | — | | | — | | | (14,012) | | | — | | | (14,012) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | (7,792) | | | — | | | 5 | | | — | | | (7,787) | | | 1,744 | | | (6,043) | | Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | (1,775) | | | — | | | 2 | | | — | | | (1,773) | | | (700) | | | (2,473) | |
| Purchase of IAC treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | — | | | (85,323) | | | (85,323) | | | — | | | (85,323) | | |
| Purchase of Angi Inc. treasury stock | Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | (8,144) | | | — | | | — | | | — | | | (8,144) | | | — | | | (8,144) | | 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 | Adjustment of noncontrolling interests to fair value | 28,897 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (28,897) | | | — | | | — | | | — | | | (28,897) | | | — | | | (28,897) | | Adjustment of noncontrolling interests to fair value | 9,136 | | | | — | | | — | | | — | | | — | | | (9,136) | | | — | | | — | | | — | | | (9,136) | | | — | | | (9,136) | |
| 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) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 15,380 | | | — | | | — | | | — | | | 15,380 | | | 39,320 | | | 54,700 | | |
| Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,835 | | | — | | | — | | | — | | | 7,835 | | | (7,835) | | | — | | |
| Other | Other | (645) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 922 | | | — | | | — | | | — | | | 922 | | | (2) | | | 920 | | Other | (26) | | | | — | | | — | | | — | | | — | | | 24 | | | — | | | — | | | — | | | 24 | | | — | | | 24 | |
| Balance at September 30, 2022 | $ | 32,385 | | | | $ | 8 | | | 84,155 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,282,690 | | | $ | (263,600) | | | $ | (29,960) | | | $ | (85,323) | | | $ | 5,903,816 | | | $ | 634,287 | | | $ | 6,538,103 | | |
| Balance at March 31, 2022 | | Balance at March 31, 2022 | $ | 27,817 | | | | $ | 8 | | | 84,075 | | | $ | 1 | | | 5,789 | | | $ | 6,249,328 | | | $ | 669,353 | | | $ | 765 | | | $ | — | | | $ | 6,919,455 | | | $ | 581,462 | | | $ | 7,500,917 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three and nine months ended September 30, 2021
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable Noncontrolling Interests | | | Common Stock, $0.0001 par value | | Class B common stock, $0.0001 par value | | Common Stock, $0.001 par value | | Class B common stock, $0.001 par value | | Additional Paid-in-Capital | | Retained Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Total IAC
Shareholders' Equity | | Noncontrolling
Interests | | Total Shareholders' Equity |
| | | | $ | | Shares | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | |
| | | | | (In thousands) |
| Balance at June 30, 2021 | $ | 24,193 | | | | $ | 8 | | | 83,444 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,341,667 | | | $ | 831,489 | | | $ | 5,686 | | | $ | 7,178,851 | | | $ | 566,297 | | | $ | 7,745,148 | |
| Net earnings (loss) | 2,778 | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | 60,690 | | | — | | | 60,690 | | | (2,421) | | | 58,269 | |
| Other comprehensive loss, net of income taxes | (74) | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | (1,083) | | | (1,083) | | | (403) | | | (1,486) | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | 6,626 | | | — | | | — | | | 6,626 | | | 8,816 | | | 15,442 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 74 | | | — | | | — | | | — | | | — | | — | | — | | | (8,792) | | | — | | | — | | | (8,792) | | | — | | | (8,792) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | 4,081 | | | — | | | 24 | | | 4,105 | | | (5,171) | | | (1,066) | |
| Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | (29,766) | | | — | | | — | | | (29,766) | | | — | | | (29,766) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distribution to and purchase of noncontrolling interests | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | — | | | — | | | (570) | | | (570) | |
| Adjustment of noncontrolling interests to fair value | 1,061 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,061) | | | — | | | — | | | (1,061) | | | — | | | (1,061) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | (1,874) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (385) | | | — | | | — | | | (385) | | | 410 | | | 25 | |
| Balance at September 30, 2021 | $ | 26,084 | | | | $ | 8 | | | 83,518 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,312,370 | | | $ | 892,179 | | | $ | 4,627 | | | $ | 7,209,185 | | | $ | 566,958 | | | $ | 7,776,143 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | 3,487 | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | 584,575 | | | — | | | 584,575 | | | (6,576) | | | 577,999 | |
| Other comprehensive income (loss), net of income taxes | 515 | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | 10,746 | | | 10,746 | | | (41) | | | 10,705 | |
| Stock-based compensation expense | — | | | | — | | | — | | | —�� | | | — | | | — | | | — | | — | | — | | | 45,914 | | | — | | | — | | | 45,914 | | | 22,836 | | | 68,750 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 160 | | | — | | | — | | | — | | | 382 | | — | | — | | | (37,866) | | | — | | | — | | | (37,866) | | | — | | | (37,866) | |
| Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | (53,366) | | | — | | | 13 | | | (53,353) | | | (2,454) | | | (55,807) | |
| Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | (35,403) | | | — | | | — | | | (35,403) | | | — | | | (35,403) | |
| Issuance of Vimeo common stock and creation of noncontrolling interests, net of fees | 40,785 | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | 258,965 | | | — | | | — | | | 258,965 | | | — | | | 258,965 | |
| Distribution to and purchase of noncontrolling interests | (24,085) | | | | — | | | — | | | — | | | — | | | — | | | — | | — | | — | | | — | | | — | | | — | | | — | | | (570) | | | (570) | |
| Adjustment of noncontrolling interests to fair value | 777,592 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (777,592) | | | — | | | — | | | (777,592) | | | — | | | (777,592) | |
| Recapitalization of IAC upon Vimeo spin-off | — | | | | 8 | | | 83,358 | | | 1 | | | 5,789 | | | (83) | | | (83,358) | | | (6) | | | (5,789) | | | 80 | | | — | | | — | | | — | | | — | | | — | |
| Spin-off of IAC's investment in Vimeo | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (38) | | | (386,438) | | | 38 | | | (386,438) | | | — | | | (386,438) | |
| Elimination of Vimeo noncontrolling interest | (1,002,324) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,002,324 | | | — | | | — | | | 1,002,324 | | | — | | | 1,002,324 | |
| Other | (1,878) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (262) | | | — | | | — | | | (262) | | | 410 | | | 148 | |
| Balance at September 30, 2021 | $ | 26,084 | | | | $ | 8 | | | 83,518 | | | $ | 1 | | | 5,789 | | | $ | — | | | — | | | $ | — | | | — | | | $ | 6,312,370 | | | $ | 892,179 | | | $ | 4,627 | | | $ | 7,209,185 | | | $ | 566,958 | | | $ | 7,776,143 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | | (In thousands) | | (In thousands) |
| Cash flows from operating activities attributable to continuing operations: | | | | |
| Net (loss) earnings | $ | (1,182,139) | | | $ | 581,486 | | |
| Less: Loss from discontinued operations, net of tax | — | | | (1,831) | | |
| Net (loss) earnings from continuing operations | (1,182,139) | | | 583,317 | | |
| Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities attributable to continuing operations: | | | |
| Cash flows from operating activities: | | Cash flows from operating activities: | | | |
| Net earnings (loss) | | Net earnings (loss) | $ | 415,319 | | | $ | (240,893) | |
| Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | |
| Stock-based compensation expense | Stock-based compensation expense | 92,460 | | | 57,804 | | Stock-based compensation expense | 28,941 | | | 29,687 | |
| Amortization of intangibles | Amortization of intangibles | 234,048 | | | 44,542 | | Amortization of intangibles | 54,606 | | | 57,190 | |
| Depreciation | Depreciation | 86,855 | | | 54,093 | | Depreciation | 61,172 | | | 30,236 | |
| Provision for credit losses | Provision for credit losses | 87,657 | | | 66,428 | | Provision for credit losses | 24,826 | | | 23,287 | |
| Goodwill impairment | 86,748 | | | — | | |
| | Deferred income taxes | Deferred income taxes | (333,202) | | | 150,617 | | Deferred income taxes | 127,154 | | | (76,933) | |
| Unrealized loss (gain) on investment in MGM Resorts International | 970,112 | | | (687,155) | | |
| Losses (gains) on investments in equity securities, net | 10,145 | | | (44,963) | | |
| Unrealized (gain) loss on investment in MGM Resorts International | | Unrealized (gain) loss on investment in MGM Resorts International | (704,840) | | | 187,330 | |
| Losses (gains) on investments in equity securities and sales of businesses, net | | Losses (gains) on investments in equity securities and sales of businesses, net | 2,451 | | | (35,891) | |
| Unrealized increase in the estimated fair value of a warrant | Unrealized increase in the estimated fair value of a warrant | (21,318) | | | (102,331) | | Unrealized increase in the estimated fair value of a warrant | (5,940) | | | (7,985) | |
| Non-cash lease expense (including right-of-use asset impairments) | Non-cash lease expense (including right-of-use asset impairments) | 56,879 | | | 24,497 | | Non-cash lease expense (including right-of-use asset impairments) | 58,656 | | | 13,727 | |
| Pension and postretirement benefit expense | Pension and postretirement benefit expense | 78,088 | | | — | | Pension and postretirement benefit expense | 728 | | | 36,343 | |
| Other adjustments, net | Other adjustments, net | 23,900 | | | 41,278 | | Other adjustments, net | (4,804) | | | (1,379) | |
| 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 | 3,607 | | | (114,645) | | Accounts receivable | 43,023 | | | 75,562 | |
| Other assets | Other assets | 261 | | | 19,001 | | Other assets | 26,978 | | | 5,341 | |
| Operating lease liabilities | Operating lease liabilities | (47,726) | | | (20,513) | | Operating lease liabilities | (19,723) | | | (17,224) | |
| Accounts payable and other liabilities | Accounts payable and other liabilities | (244,371) | | | 103,756 | | Accounts payable and other liabilities | (107,356) | | | (82,606) | |
| Income taxes payable and receivable | Income taxes payable and receivable | (3,696) | | | (6,037) | | Income taxes payable and receivable | 8,610 | | | 5,786 | |
| Deferred revenue | Deferred revenue | 199 | | | 39,940 | | Deferred revenue | 15,366 | | | 11,324 | |
| Net cash (used in) provided by operating activities attributable to continuing operations | (101,493) | | | 209,629 | | |
| Cash flows from investing activities attributable to continuing operations: | | | | |
| Acquisitions, net of cash acquired | — | | | (25,364) | | |
| Net cash provided by operating activities | | Net cash provided by operating activities | 25,167 | | | 12,902 | |
| Cash flows from investing activities: | | Cash flows from investing activities: | | | |
| | Capital expenditures | Capital expenditures | (112,840) | | | (69,401) | | Capital expenditures | (21,863) | | | (30,493) | |
| | Proceeds from maturities of marketable debt securities | Proceeds from maturities of marketable debt securities | — | | | 225,000 | | Proceeds from maturities of marketable debt securities | 137,500 | | | — | |
| Purchases of marketable debt securities | | Purchases of marketable debt securities | (98,520) | | | — | |
| | Cash distribution related to the spin-off of IAC's investment in Vimeo | — | | | (333,184) | | |
| Net proceeds from the sale of businesses and investments | 41,272 | | | 11,915 | | |
| Net proceeds from the sales of businesses and investments | | Net proceeds from the sales of businesses and investments | 1,179 | | | 1,317 | |
| Purchases of investment in MGM Resorts International | Purchases of investment in MGM Resorts International | (244,256) | | | — | | Purchases of investment in MGM Resorts International | — | | | (202,500) | |
| Purchases of investments | (3,036) | | | (23,892) | | |
| | Decrease in notes receivable | 19,497 | | | — | | |
| | Proceeds from sales of assets | | Proceeds from sales of assets | 29,388 | | | 87 | |
| Other, net | Other, net | 5,215 | | | (1,627) | | Other, net | 4,290 | | | — | |
| Net cash used in investing activities attributable to continuing operations | (294,148) | | | (216,553) | | |
| Cash flows from financing activities attributable to continuing operations: | | | | |
| Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 51,974 | | | (231,589) | |
| Cash flows from financing activities: | | Cash flows from financing activities: | | | |
| | Principal payments on Dotdash Meredith Term Loans | Principal payments on Dotdash Meredith Term Loans | (22,500) | | | — | | Principal payments on Dotdash Meredith Term Loans | (7,500) | | | (7,500) | |
| Principal payments on ANGI Group Term Loan | — | | | (220,000) | | |
| | | Debt issuance costs | Debt issuance costs | (785) | | | — | | Debt issuance costs | — | | | (785) | |
| Proceeds from the issuance of Vivian Health preferred shares, net of fees | 34,700 | | | — | | |
| Purchase of IAC treasury stock | (85,323) | | | — | | |
| Purchase of Angi Inc. treasury stock | (8,144) | | | (35,403) | | |
| Proceeds from the exercise of IAC stock options | — | | | 1,496 | | |
| Purchases of IAC treasury stock | | Purchases of IAC treasury stock | (84,720) | | | — | |
| Purchases of Angi Inc. treasury stock | | Purchases of Angi Inc. treasury stock | — | | | (8,144) | |
| | | 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 | (17,058) | | | (35,093) | | Withholding taxes paid on behalf of IAC employees on net settled stock-based awards | (2,236) | | | (14,890) | |
| 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 | (5,587) | | | (56,135) | | Withholding taxes paid on behalf of Angi Inc. employees on net settled stock-based awards | (1,379) | | | (1,322) | |
| | Purchase of noncontrolling interests | (1,179) | | | (24,655) | | |
| | Other, net | Other, net | 4,637 | | | 685 | | Other, net | (140) | | | 5,159 | |
| Net cash used in financing activities attributable to continuing operations | (101,239) | | | (369,105) | | |
| Total cash used in continuing operations | (496,880) | | | (376,029) | | |
| Net cash provided by operating activities attributable to discontinued operations | — | | | 18,053 | | |
| Net cash provided by investing activities attributable to discontinued operations | — | | | 7,602 | | |
| Net cash provided by financing activities attributable to discontinued operations | — | | | 293,577 | | |
| Total cash provided by discontinued operations | — | | | 319,232 | | |
| Net cash used in financing activities | | Net cash used in financing activities | (95,975) | | | (27,482) | |
| Total cash used | | Total cash used | (18,834) | | | (246,169) | |
| 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 | (7,913) | | | (156) | | Effect of exchange rate changes on cash and cash equivalents and restricted cash | 322 | | | (1,029) | |
| Net decrease in cash and cash equivalents and restricted cash | Net decrease in cash and cash equivalents and restricted cash | (504,793) | | | (56,953) | | Net decrease in cash and cash equivalents and restricted cash | (18,512) | | | (247,198) | |
| Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 2,121,864 | | | 3,477,110 | | Cash and cash equivalents and restricted cash at beginning of period | 1,426,069 | | | 2,121,864 | |
| Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 1,617,071 | | | $ | 3,420,157 | | Cash and cash equivalents and restricted cash at end of period | $ | 1,407,557 | | | $ | 1,874,666 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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"), completed the acquisition of Meredith Holdings Corporation ("Meredith"), which holds Meredith Corporation's national media business, consisting of its digital and magazine businesses, and its corporate operations. The parent of the combined entity is Dotdash Meredith, Inc. ("Dotdash Meredith"). See “Note 2—Business Combination” for a description of the acquisition of 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 IAC's financial statements for all periods prior to May 25, 2021. See “Note 12—Discontinued Operations” for additional details.Nature of Operations
IAC today is comprisedconsists of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, as well as a number of other businessesothers ranging from early stage to established.established businesses.
As used herein, "IAC,"“IAC,” the "Company," "we," "our" or "us"“Company,” “we,” “our,” “us” and other similar terms refer to IAC Inc. and its subsidiaries (unless the context requires otherwise).
Basis of Presentation
The Company prepares its consolidated financial statements (collectively referred to herein as "financial statements") in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). The 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. All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated.
The unaudited interim financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. In the opinion of management, the unaudited interim financial statements include all normal recurring adjustments considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for the full year. The unaudited interim financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
COVID-19 Update
The impact on the Company from the COVID-19 pandemic and the measures designed to contain its spread continues to have a negative impact on year-over-year financial performance at Angi Inc. and Dotdash Meredith.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Angi Inc.
As previously disclosed, the impact of COVID-19 on the businesses in IAC's Angi Inc. segment 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 these businesses 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
Traffic to Dotdash’s sites is down relative to last year when COVID-19 measures were still more widely in place. As a result, digital advertising and performance marketing revenue at Dotdash, excluding Meredith, declined compared to 2021 due to lower traffic to its sites compared to prior year COVID-19 traffic highs. Post acquisition, Meredith has experienced a similar impact to its digital advertising revenue.
Future Outlook
The extent to which developments related to the COVID-19 pandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the continuing spread of COVID-19, the severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and 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.2022.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its financial statements in accordance with GAAP. These estimates, judgments and assumptions impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates, judgments and assumptions, including those related to: the fair values of cash equivalents and marketable debt and equity securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses and the determination of revenue reserves;losses; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the carrying valuerecoverability of right-of-use assets ("ROU assets"); the useful lives and recoverability of capitalized software, equipment, buildings and leasehold improvements and definite-lived intangible assets; the fair value of assets acquired and liabilities assumed as a result of an acquisition 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; the fair value of interest rate swaps; 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.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Interest Rate Swaps
In March 2023, Dotdash Meredith entered into interest rate swaps for a total notional amount of $350 million to synthetically convert a portion of the Dotdash Meredith Term Loan B from floating rate to fixed rate to manage interest rate risk exposure. Dotdash Meredith designated the interest rate swaps as cash flow hedges and applies hedge accounting to these contracts in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification 815, Derivatives and Hedging. As cash flow hedges, the interest rate swaps are recognized at fair value on the balance sheet as either assets or liabilities, with the changes in fair value recorded in "Accumulated other comprehensive loss" in the balance sheet and reclassified into “Interest expense” in the statement of operations in the periods in which the interest rate swaps affect earnings. Dotdash Meredith assessed hedge effectiveness at the time of entering into these agreements and determined these interest rate swaps are expected to be highly effective. Dotdash Meredith evaluates the hedge effectiveness of the interest rate swaps quarterly, or more frequently, if necessary, by verifying (i) that the critical terms of the interest rate swaps continue to match the critical terms of the hedged interest payments and (ii) that it is probable the counterparties will not default. If the two requirements are met, the interest rate swaps are determined to be effective and all changes in the fair value of the interest rate swaps are recorded in "Accumulated other comprehensive loss." The cash flows related to interest settlements of the hedged monthly interest payments are classified as operating activities in the statement of cash flows, consistent with the interest expense on the related Dotdash Meredith Term Loan B. See "Note 4—Long-term Debt" for additional information. General 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 probable. Revenue is recognized when control of the promised services or goods is transferred to the 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.
From January 1, 2020 through December 31, 2022, Services recorded revenue on a gross basis. Effective January 1, 2023, Angi Inc. modified the Services terms and conditions so that the service professional, rather than Angi Inc., has the contractual relationship with the consumer to deliver the service and Angi Inc.'s performance obligation to the consumer is to connect them with the service professional. This change in contractual terms requires revenue be reported as the net amount of what is received from the consumer after deducting the amounts owed to the service professional providing the service effective for all arrangements entered into after December 31, 2022. This change in accounting treatment resulted in a decrease in revenue of $25.7 million for the three months ended March 31, 2023. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Deferred Revenue
Deferred revenue consists of payments that are received or are contractually due in advance of the Company's performance obligation. The Company’s deferred revenue is reported on a contract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the remaining term of the applicable subscription period or expected completion of its performance obligation is one year or less. The current and non-current deferred revenue balances are $165.5were $172.8 million and $0.4$0.2 million, respectively, at March 31, 2023, and $157.1 million and $0.2 million, respectively, at December 31, 2021, and $137.72022. During the three months ended March 31, 2023, the Company recognized $95.6 million and $0.7 million, respectively,of revenue that was included in the deferred revenue balance at December 31, 2020.2022. During the ninethree months ended September 30,March 31, 2022, the Company recognized $147.3$90.0 million of revenue that was included in the deferred revenue balance at December 31, 2021. During the nine months ended September 30, 2021, the Company recognized $123.5 million of revenue that was included in the deferred revenue balance at December 31, 2020. The current and non-current deferred revenue balances are $158.8were $165.5 million and $0.3$0.4 million, respectively, at September 30, 2022, respectively.December 31, 2021. Non-current deferred revenue is included in "Other long-term liabilities" in the balance sheet.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Practical Expedients and Exemptions
AsFor contracts that have an original duration of one year or less, the Company uses the practical expedient available under FASB Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, applicable to such contracts and does not consider the time value of money.
In addition, as permitted under the practical expedient available under ASU No. 2014-09Revenue from Contracts with Customers,, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is 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.
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 for these costs 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 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 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.
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.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
the duration of the related customer relationship period 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.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the capitalized costs to obtain a contract with a customer at September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Sales Commissions | | App Store Fees | | Total | | Sales Commissions | | | App Store Fees | | Total | | Sales Commissions | | App Store Fees | | Total | | Sales Commissions | | | App Store Fees | | Total |
| | (In thousands) | | (In thousands) |
| Current | Current | $ | 49,421 | | | $ | 9,052 | | | $ | 58,473 | | | $ | 39,669 | | | | $ | 9,023 | | | $ | 48,692 | | Current | $ | 36,157 | | | $ | 7,749 | | | $ | 43,906 | | | $ | 39,590 | | | | $ | 8,266 | | | $ | 47,856 | |
| Non-current | Non-current | 4,596 | | | — | | | 4,596 | | | 6,086 | | | | — | | | 6,086 | | Non-current | 6,086 | | | — | | | 6,086 | | | 5,667 | | | | — | | | 5,667 | |
| Total | Total | $ | 54,017 | | | $ | 9,052 | | | $ | 63,069 | | | $ | 45,755 | | | | $ | 9,023 | | | $ | 54,778 | | Total | $ | 42,243 | | | $ | 7,749 | | | $ | 49,992 | | | $ | 45,257 | | | | $ | 8,266 | | | $ | 53,523 | |
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.
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.
Certain Risks and Concentrations—Services Agreement with Google (the "Services Agreement")
The Company and Google are parties to an amended Services Agreement, which automatically renewed effective March 31, 2023 and expires on March 31, 2024 and provides for an automatic renewal for an additional one-year period absent a notice of non-renewal from either party on or before March 31, 2023.2025. The Company earns certain other advertising revenue from Google that is not attributable to the Services Agreement. A meaningful portion of the Company'sCompany’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 three and nine months ended September 30,March 31, 2023 and 2022, total revenue earned from Google was $161.6$172.9 million and $524.3$193.4 million, respectively, representing 12%16% and 13%15%, respectively, of the Company's revenue. The total revenue earned from the Services Agreement for the three and nine months ended September 30,March 31, 2023 and 2022 was $117.3$138.8 million and $386.6$147.1 million, respectively, representing 9%13% and 10%, respectively, of the Company's total revenue. For the three and nine months ended September 30, 2021, total revenue earned from Google was $185.6 million and $527.0 million, respectively, representing 20% and 21%, respectively, of the Company's revenue. The total revenue earned from the Services Agreement for the three and nine months ended September 30, 2021 was $168.0 million and $471.3 million, respectively, representing 18% and 19%11%, respectively, of the Company's total revenue. The related accounts receivable totaled $58.3$70.9 million and $89.1$74.1 million at September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.
The revenue attributable to the Services Agreement is earned by Ask Media Group and the Desktop business, both withinwhich comprise the Search segment. For the three and nine months ended September 30,March 31, 2023 and 2022, revenue earned from the Services Agreement was $97.3$120.3 million and $315.4$120.5 million, respectively, within Ask Media Group and $20.0$18.5 million and $71.2 million, respectively, within the Desktop business. For the three and nine months ended September 30, 2021, revenue earned from the Services Agreement was $137.9 million and $382.5 million, respectively, within Ask Media Group and $30.1 million and $88.8$26.6 million, respectively, within the Desktop business.
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 and 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-to-consumer ("B2C") business. Google may make changes in the future that could impact the revenue earned from Google, including under the Services Agreement.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
CertainAs a result of certain industry-wide policy changes became effective on August 27, 2020. These industry-wide changes combined with increased enforcement of policies under the Services Agreement have had a negative impact onin prior periods, the results of operations of the B2C business. During the fourth quarter of 2020, Google suspended services with respect to some B2C's products and may do so with respect to other products in the future. As 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 earned over multiple periods beyond just the period in which the initial marketing is incurred. Following the cessation ofCompany discontinued the introduction of new products in March 2021,2021. Therefore, the current B2C revenue stream relates solely to the then existing installed base of products. We expect futureAs a result, the revenue and profits of the B2C business have declined significantly and the Company expects that trend to continue to decline significantly.continue.
Recent Accounting Pronouncements
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 2—BUSINESS COMBINATION
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 total purchase price was calculated and allocated as follows:
| | | | | |
| |
| (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 FINANCIAL STATEMENTS (Continued)
(Unaudited)
The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
| | | | | |
| |
| (In thousands) |
Cash and cash equivalents | $ | 12,436 | |
Accounts receivable | 369,549 | |
Other current assets | 96,116 | |
Leasehold improvements, equipment, buildings, land and capitalized software | 274,026 | |
Goodwill | 1,468,032 | |
Intangible assets | 1,213,159 | |
Other non-current assets | 677,153 | |
Total assets | 4,110,471 | |
Customer deposit liability | (142,206) | |
Other current liabilities | (401,857) | |
Deferred income taxes | (294,715) | |
Other non-current liabilities | (585,228) | |
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 preliminary fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
| | | | | | | | | | | |
| |
| (In thousands) | | Useful Life
(Years) |
| Indefinite-lived trade names and trademarks | $ | 450,150 | | | Indefinite-lived |
| Advertiser relationships | 297,000 | | | 5 |
| Licensee relationships | 171,000 | | | 3-6 |
| Digital content | 96,200 | | | 2-3 |
| Subscriber relationships | 71,109 | | | 1-2 |
| Developed technology | 66,200 | | | 2-3 |
| Trade name and trademarks | 61,500 | | | 1-5 |
| Total identifiable intangible assets acquired | $ | 1,213,159 | | | |
The allocation of the purchase price to certain assets acquired and liabilities assumed is provisional and is subject to review and revision during the measurement period, which the Company expects to extend through the fourth quarter of 2022. In addition,2022, the Company is stillAngi Inc. segment presentation was changed to reflect its four operating segments, which include: (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (consisting of businesses in Europe and Canada). Angi Inc.'s financial information for the processfirst quarter of identifying acquired assets and assumed liabilities, which may also result in an adjustment of the provisional amounts recorded. The subsequent adjustment of the provisional amounts may be material.
The provisional amounts for assets acquired and liabilities assumed include the fair value of:
1.accounts receivable and other receivables, which2022 has been adjusted for an estimated $3.8 million of gross contractual amounts not expectedrecast to be collected, may be subject to adjustment for reassessment of collectability as of the date of acquisition, collections and other adjustments subsequentconform to the acquisition;
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2.prepaid expenses and other current and noncurrent assets, which will be subject to adjustment based upon a review of recoverability and consideration of other factors;
3.inventory;
4.leasehold improvements, equipment, buildings, land and capitalized software, for which the preliminary estimates are subject to revision for:
a.identification of assets acquired;
b.finalization of preliminary appraisals; and
c.determination of useful lives;
5.ROU assets and lease liabilities, which will be subject to adjustment upon completion of the review of the inputs, including sublease assumptions, for the calculations;
6.accounts payable and accrued expenses, which will be subject to adjustment based upon subsequent payment and assessment of other factors;
7.indemnification liabilities, which include pre-acquisition income tax and non-income tax liabilities, will be subject to adjustment for:
a.the reconciliation of the income tax return to the income tax provision for Meredith Corporation's fiscal year ended June 30, 2021 and the short period return from July 1, 2021 through the date of acquisition;
b.the assessment of the amounts of liabilities that existed at the date of acquisition based upon ongoing audits;
c.the assessment of applicable tax rates and other factors; and
d.the identification of other liabilities;
8.contingencies, the initial estimated recorded liability for which is approximately $60 million, including indemnification liabilities, will be subject to adjustment for additional items that are identified and for additional information obtained that will assist in the determination of liabilities as of the date of acquisition;
9.definite and indefinite-lived intangible assets acquired will be subject to adjustment as additional assets are identified, estimates and forecasts are refined and disaggregated, useful lives are finalized, and other factors deemed relevant are considered;
10.deferred income taxes will be subject to adjustment based upon the completion of the review of the book and tax bases of assets acquired and liabilities assumed, applicable tax rates and the impact of the revisions of estimates for the items described above;
11.goodwill will be subject to adjustment for the impact of the revisions of estimates for the items described above; and
12.the allocation of goodwill to reporting units will be subject to revision based upon the items described above and the finalization of the determination of fair value of the reporting units, which has not yet been completed.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Unaudited pro forma financial information
The unaudited pro forma financial information in the table below presents the results of the Company and Meredith as if the Meredith acquisition had occurred on January 1, 2020. 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 this acquisition occurred on January 1, 2020. For the three and nine months ended September 30, 2021, pro forma adjustments include an increase in amortization expense of $38.2 million and $108.7 million, respectively, related to intangible asset adjustments in purchase accounting.
| | | | | | | | | | | |
| Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 |
| (In thousands, except per share data) |
| Revenue | $ | 1,437,989 | | | $ | 4,047,635 | |
| Net earnings from continuing operations | $ | 54,186 | | | $ | 618,622 | |
| Basic earnings per share from continuing operations | $ | 0.60 | | | $ | 6.98 | |
| Diluted earnings per share from continuing operations | $ | 0.57 | | | $ | 6.54 | |
| Net earnings attributable to IAC shareholders | $ | 53,829 | | | $ | 619,880 | |
| Basic earnings per share attributable to IAC shareholders | $ | 0.60 | | | $ | 6.96 | |
| Diluted earnings per share attributable to IAC shareholders | $ | 0.57 | | | $ | 6.51 | |
NOTE 3—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net are as follows:
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | (In thousands) |
| Goodwill | $ | 3,008,244 | | | $ | 3,226,610 | |
| Intangible assets with definite lives, net of accumulated amortization | 588,679 | | | 735,743 | |
| Intangible assets with indefinite lives | 693,824 | | | 679,149 | |
| Total goodwill and intangible assets, net | $ | 4,290,747 | | | $ | 4,641,502 | |
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the nine months ended September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2021 | | | | Deductions | | Impairment | | Foreign
Exchange
Translation | | Balance at September 30, 2022 |
| | (In thousands) |
| Dotdash Meredith | $ | 1,567,843 | | | | | $ | (115,994) | | | $ | — | | | $ | — | | | $ | 1,451,849 | |
| Angi Inc. | 916,375 | | | | | (816) | | | — | | | (12,089) | | | 903,470 | |
| Emerging & Other | 742,392 | | | | | (2,719) | | | (86,748) | | | — | | | 652,925 | |
| Total | $ | 3,226,610 | | | | | $ | (119,529) | | | $ | (86,748) | | | $ | (12,089) | | | $ | 3,008,244 | |
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 are due to working capital adjustments related to Total Home Roofing (“Angi Roofing”), acquired on July 1, 2021. Deductions at the Emerging & Other segment are due to the sale of a business at Mosaic Group.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 fair value of the Mosaic Group reporting unit was determined using both an income approach based on discounted cash flows ("DCF") and a market approach. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses were based on the most recent forecast for Mosaic Group. For years beyond the forecast period, the Mosaic Group estimates was based, in part, on forecasted growth rates. The discount rate used in the DCF analyses was 16.0% and was intended to reflect the risks inherent in the expected future cash flows of the Mosaic Group reporting unit. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of the Mosaic Group reporting unit. To determine a peer group of companies for the Mosaic Group reporting unit, the Company considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective markets. At September 30, 2022, Mosaic Group has goodwill of $153.6 million and the carrying value of this reporting unit 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 $644.5 million.
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | | Additions | | Deductions | | | | Foreign
Exchange
Translation | | Balance at December 31, 2021 |
| | (In thousands) |
| 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 Angi Roofing at Angi. Deductions are primarily related to the allocation of acquired attributes related to the acquisition of Care.com (included in the Emerging & Other segment).
The September 30, 2022 and December 31, 2021 goodwill balances reflect accumulated impairment losses of $981.3 million and $198.3 million at Search and Dotdash Meredith, respectively. The September 30, 2022 goodwill balance also reflects an impairment loss of $86.7 million related to the impairment at Mosaic Group reporting unit (included in the Emerging & Other segment). As a result of impairments recorded in 2020, the Search reportable segment has no goodwill.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At September 30, 2022 and December 31, 2021, intangible assets with definite lives are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net | | Weighted-Average
Useful Life |
| | (In thousands) | | (Years) |
| Advertiser relationships | $ | 297,000 | | | $ | (67,907) | | | $ | 229,093 | | | 5.0 |
| Technology | 198,429 | | | (159,347) | | | 39,082 | | | 3.5 |
| Licensee relationships | 171,000 | | | (34,817) | | | 136,183 | | | 4.9 |
| Content | 106,639 | | | (50,834) | | | 55,805 | | | 2.9 |
| Trade names | 101,594 | | | (30,404) | | | 71,190 | | | 5.5 |
| Service professional relationships | 97,143 | | | (96,828) | | | 315 | | | 3.0 |
| Customer lists and user base | 68,371 | | | (39,526) | | | 28,845 | | | 6.4 |
| Subscriber relationships | 56,300 | | | (28,134) | | | 28,166 | | | 2.0 |
| Total | $ | 1,096,476 | | | $ | (507,797) | | | $ | 588,679 | | | 4.3 |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
| Content | 10,439 | | | (10,439) | | | — | | | 3.4 |
| Trade names | 145,598 | | | (18,224) | | | 127,374 | | | 5.1 |
| 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 September 30, 2022, amortization of intangible assets with definite lives is estimated to be as follows:
| | | | | |
| (In thousands) |
| Remainder of 2022 | $ | 66,898 | |
| 2023 | 207,069 | |
| 2024 | 133,941 | |
| 2025 | 84,295 | |
| 2026 | 68,864 | |
| Thereafter | 27,612 | |
| Total | $ | 588,679 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4—2—DOTDASH MEREDITH RESTRUCTURING CHARGES AND TRANSACTION-RELATED EXPENSES AND CHANGE-IN-CONTROL PAYMENTS
Restructuring Charges
In the first quarter ofDuring 2022, Dotdash Meredith announcedmanagement committed to several actions to improve efficiencies and better align its plans to discontinuecost structure following the acquisition of Meredith on December 1, 2021. These actions included: (i) the discontinuation of certain print publications and the shutdown of PeopleTV, to focusfor which the portfolio and further enable investments toward digital growth. The discontinued print publications consist of Entertainment Weekly, InStyle, EatingWell, Health, Parents, and People en Español, with the April 2022 issues as the final print editions, and Martha Stewart Living, with the May 2022 issue as the final print edition. Dotdash Meredith also announced a voluntary retirement programrelated expense was primarily reflected in the first quarter of 2022, to its employees who met certain age and service requirements. In addition, actions were taken to improve efficiencies following(ii) a voluntary retirement program announced in the Meredith acquisition, including vacating leased office space.
Forfirst quarter of 2022, for which the three and nine months ended September 30,related expense was primarily reflected in the first half of 2022, the Company incurred $24.7 million and $60.8 million, respectively, of related restructuring charges, including $3.4 million and $36.5 million, respectively, of severance and related costs. The restructuring charges for both the three and nine months ended September 30, 2022 include $21.3 million of impairment charges related to(iii) the consolidation of certain leased spaces followingoffice space, for which the Meredith acquisition; $14.3 million related to the impairment of a ROU asset, which is included in "General and administrative expense" and $7.0 million related to the impairment of leasehold improvements and furniture and equipment, which is included in "Depreciation" was reflected in the statementthird quarter of operations.2022 and (iv) a reduction in force plan, for which the related expenses were accrued primarily in the fourth quarter of 2022. These actions resulted in $80.2 million of restructuring charges incurred for the year ended December 31, 2022.
A summary of the costs incurred, payments made and related accruals for the nine months ended September 30, 2022 is presented below:below. The Company anticipates the estimated remaining costs associated with the 2022 restructuring events will be paid by December 31, 2023 from existing cash on hand.
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Digital | | Print | | Other (a) | | Total |
| (In thousands) |
| Restructuring charge accruals | | | | | | | |
| Charges incurred | $ | 29,090 | | | $ | 26,051 | | | $ | 5,696 | | | $ | 60,837 | |
| Payments | (5,888) | | | (16,865) | | | (2,038) | | | (24,791) | |
Non-cash (b) | (21,309) | | | (425) | | | — | | | (21,734) | |
| Restructuring accruals as of September 30, 2022 | $ | 1,893 | | | $ | 8,761 | | | $ | 3,658 | | | $ | 14,312 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2023 | | | | | | |
| Accrued December 31, 2022 | | Charges Incurred | | Reversal of Initial Cost | | Payments | | | | Accrued March 31, 2023 | | Cumulative Charges Incurred | | Estimated Remaining Costs |
| (In thousands) |
| Digital | $ | 10,950 | | | $ | 859 | | | $ | (812) | | | $ | (4,793) | | | | | $ | 6,204 | | | $ | 39,272 | | | $ | — | |
| Print | 12,055 | | | 1,109 | | | (1,201) | | | (4,314) | | | | | 7,649 | | | 33,340 | | | 87 | |
Other (a) | 4,389 | | | 186 | | | (182) | | | (1,504) | | | | | 2,889 | | | 7,585 | | | 91 | |
| Total | $ | 27,394 | | | $ | 2,154 | | | $ | (2,195) | | | $ | (10,611) | | | | | $ | 16,742 | | | $ | 80,197 | | | $ | 178 | |
_____________________(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.
The costs are allocated as follows in the statement of operations:
| | | | | | | | | | | |
| Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
| (In thousands) |
| Cost of revenue | $ | 1,320 | | | $ | 17,921 | |
| Selling and marketing expense | 636 | | | 10,251 | |
| General and administrative expense | 15,702 | | | 24,560 | |
| Product development expense | 84 | | | 1,099 | |
| Depreciation | 7,006 | | | 7,006 | |
| Total | $ | 24,748 | | | $ | 60,837 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2022 | | |
| | | Charges Incurred | | | | Payments | | Non-cash (b) | | Accrued March 31, 2022 |
| | | (In thousands) |
| Digital | | | $ | 5,090 | | | | | $ | (394) | | | $ | — | | | $ | 4,696 | |
| Print | | | 15,625 | | | | | (2,127) | | | (377) | | | 13,121 | |
Other (a) | | | 1,722 | | | | | (106) | | | — | | | 1,616 | |
| Total | | | $ | 22,437 | | | | | $ | (2,627) | | | $ | (377) | | | $ | 19,433 | |
Dotdash Meredith_____________________(b) anticipatesIncludes $0.4 million related to the estimated remaining costs associated with the 2022 restructuring events will be approximately $1.0 million and will be paid by December 31, 2023 from existing cash on hand. A summarywrite-off of the remaining costs is presented below:inventory.
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2022 |
| Digital | | Print | | Other (a) | | Total |
| (In thousands) |
| Remaining estimated restructuring costs | $ | 64 | | | $ | 352 | | | $ | 551 | | | $ | 967 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
| (In thousands) |
| Cost of revenue | $ | 557 | | | $ | 12,182 | |
| Selling and marketing expense | (862) | | | 5,599 | |
| General and administrative expense | 243 | | | 4,313 | |
| Product development expense | 21 | | | 343 | |
| | | |
| Total | $ | (41) | | | $ | 22,437 | |
Transaction-Related Expenses
For the three and nine months ended September 30,March 31, 2023 and 2022, Dotdash Meredith incurred $0.8incurred less than $0.1 million and $6.0$4.0 million, respectively,respectively, of transaction-related expenses related to the acquisition of Meredith.
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.
NOTE 5—3—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Securities
At September 30, 2022March 31, 2023 and December 31, 2021,2022, the fair value of marketable securities are as follows:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | (In thousands) | | (In thousands) |
| Marketable equity securities | Marketable equity securities | $ | 16,343 | | | $ | 19,788 | | Marketable equity securities | $ | 3,167 | | | $ | 4,317 | |
| | Available-for-sale marketable debt securities | | Available-for-sale marketable debt securities | 198,971 | | | 235,056 | |
| Total marketable securities | Total marketable securities | $ | 16,343 | | | $ | 19,788 | | Total marketable securities | $ | 202,138 | | | $ | 239,373 | |
TheAt March 31, 2023, the Company has two investments in marketable equity securities, other than the investment in MGM Resorts International ("MGM"), at September 30, 2022, which. These marketable equity securities are both carried at fair value following the investees' initial public offerings ("IPO"), which took place in the third quarter of 2021 and the first quarter of 2022, respectively.. Prior to the respective IPOs, these investments were accounted for as equity securities without readily determinable fair values. The Company recorded net unrealized pre-tax losses and gains for these investments of $14.0$1.2 million and $8.3$34.4 million during the three and nine months ended September 30,March 31, 2023 and March 31, 2022 for these investments, respectively, and an, respectively. The unrealized pre-tax gain of $25.8 million in both the three and nine months ended September 30, 2021 for the investment that went public in the third quarter of 2021. For the three and nine months ended September 30, 2021, the Company recorded a realized loss of $3.5 million and a realized gain of $7.2 million related to another marketable equity security that was sold in the third quarter of 2021. The net unrealized and realized pre-tax losses and gains related to these investments are included in "Other income, (expense), net" in the statement of operations.
Investment in MGM Resorts International
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | (In thousands) |
| Investment in MGM Resorts International | $ | 1,923,585 | | | $ | 2,649,442 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In the firstAt March 31, 2023 and third quartersDecember 31, 2022, current available-for-sale marketable debt securities are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Amortized cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | Amortized cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| (In thousands) |
| Treasury discount notes | $ | 198,935 | | | $ | 39 | | | $ | (3) | | | $ | 198,971 | | | $ | 234,987 | | | $ | 75 | | | $ | (6) | | | $ | 235,056 | |
| Total available-for-sale marketable debt securities | $ | 198,935 | | | $ | 39 | | | $ | (3) | | | $ | 198,971 | | | $ | 234,987 | | | $ | 75 | | | $ | (6) | | | $ | 235,056 | |
The contractual maturities of debt securities classified as current available-for-sale at March 31, 2023 and 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 March 31, 2023 and December 31, 2022.
Investment in MGM Resorts International
| | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | (In thousands) |
| Investment in MGM Resorts International | $ | 2,875,022 | | | $ | 2,170,182 | |
At March 31, 2023, the Company purchased a total of 5.7owns 64.7 million additional shares of MGM, for $244.3 million. Following these purchases, the Company owns approximately 64.7including 4.5 million shares purchased in the first quarter of 2022 for $202.5 million, representing a 16.9% ownership interest in MGM as of October 31, 2022. 17.6% ownership. 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. TheFor the three months ended March 31, 2023 and 2022, the Company recorded an unrealized pre-tax gain and loss of $42.5$704.8 million and an unrealized pre-tax loss of $970.1$187.3 million, for the three and nine months ended September 30, 2022respectively, on its investment in MGM, respectively. For the three and nine months ended September 30, 2021, the Company recorded unrealized pre-tax gains on its investment in MGM of $29.5 million and $687.2 million, respectively.MGM. The cumulative unrealized net pre-tax gain through September 30, 2022March 31, 2023 is $659.7$1.6 billion. 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 May 5, 2023, the carrying value of the Company's investment in MGM was $2.8 billion.
Long-term Investments
Long-term investments consist of:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | (In thousands) | | (In thousands) |
| Equity securities without readily determinable fair values | Equity securities without readily determinable fair values | $ | 307,047 | | | $ | 324,649 | | Equity securities without readily determinable fair values | $ | 322,707 | | | $ | 323,530 | |
| Equity method investment | Equity method investment | 4,244 | | | 3,189 | | Equity method investment | 4,976 | | | 2,191 | |
| Total long-term investments | Total long-term investments | $ | 311,291 | | | $ | 327,838 | | Total long-term investments | $ | 327,683 | | | $ | 325,721 | |
Equity Securities without Readily Determinable Fair Values
The following table presents a summary of unrealized pre-tax gains and losses recorded in "Other income, (expense), net" in the statement of operations as adjustments to the carrying value of equity securities without readily determinable fair values held at September 30, 2022 and 2021.March 31, 2023. There were no unrealized pre-tax gains or losses recorded for the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In thousands) |
| Upward adjustments (gross unrealized pre-tax gains) | $ | 8,245 | | | $ | 7,616 | | | $ | 8,245 | | | $ | 8,992 | |
| Downward adjustments including impairments (gross unrealized pre-tax losses) | — | | | (100) | | | (22,376) | | | (100) | |
| Total | $ | 8,245 | | | $ | 7,516 | | | $ | (14,131) | | | $ | 8,892 | |
| | | | | | | | | | | |
| | | | | Three Months Ended
March 31, 2023 |
| | | | | | | (In thousands) |
| Upward adjustments (gross unrealized pre-tax gains) | | | | | | | $ | — | |
| Downward adjustments including impairments (gross unrealized pre-tax losses) | | | | | | | (822) | |
| Total | | | | | | | $ | (822) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at September 30, 2022March 31, 2023 were $36.9 million and $61.0$136.8 million, respectively.
Realized and unrealized pre-tax gains and losses for the Company's investments without readily determinable fair values for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In thousands) |
| Realized pre-tax gains, net, for equity securities | $ | 11,840 | | | $ | 3,022 | | | $ | 12,302 | | | $ | 3,103 | |
| Unrealized pre-tax gains (losses), net, on equity securities held | 8,245 | | | 7,516 | | | (14,131) | | | 8,892 | |
| Total pre-tax gains (losses), net recognized | $ | 20,085 | | | $ | 10,538 | | | $ | (1,829) | | | $ | 11,995 | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| | | | | (In thousands) |
| Realized pre-tax gains, net, for equity securities sold | | | | | $ | 7 | | | $ | 468 | |
| Unrealized pre-tax losses, net, on equity securities held | | | | | (822) | | | — | |
| Total pre-tax (losses) gains, net recognized | | | | | $ | (815) | | | $ | 468 | |
All pre-tax gains and losses on equity securities without readily determinable fair values, realized and unrealized, are recognized in "Other income, (expense), net" in the statement of operations.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 September 30, 2022March 31, 2023 of approximately 26.7%26.5% on a fully diluted basis in the form of preferred shares, which are not common stock equivalents. The Company accounts for the equity lossesearnings (losses) for this investment on a one quarter lag. These equity lossesearnings (losses) were immaterial.
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.
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 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 | $ | 1,224,922 | | | $ | — | | | $ | — | | | $ | 1,224,922 | |
| | | | | | | |
| Time deposits | — | | | 11,039 | | | — | | | 11,039 | |
| Marketable equity securities | 16,343 | | | — | | | — | | | 16,343 | |
| Investment in MGM | 1,923,585 | | | — | | | — | | | 1,923,585 | |
| Other non-current assets: | | | | | | | |
| Warrant | — | | | — | | | 130,612 | | | 130,612 | |
| Total | $ | 3,164,850 | | | $ | 11,039 | | | $ | 130,612 | | | $ | 3,306,501 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 1,660,921 | | | $ | — | | | $ | — | | | $ | 1,660,921 | |
| | | | | | | |
| Time deposits | — | | | 6,057 | | | — | | | 6,057 | |
| Marketable equity security | 19,788 | | | — | | | — | | | 19,788 | |
| Investment in MGM | 2,649,442 | | | — | | | — | | | 2,649,442 | |
| Other non-current assets: | | | | | | | |
| Warrant | — | | | — | | | 109,294 | | | 109,294 | |
| Total | $ | 4,330,151 | | | $ | 6,057 | | | $ | 109,294 | | | $ | 4,445,502 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Contingent consideration arrangements | | | | | $ | (612) | | | $ | (612) | |
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| | Quoted Market
Prices for
Identical Assets in Active
Markets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Total
Fair Value
Measurements |
| | (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 1,007,765 | | | $ | — | | | $ | — | | | $ | 1,007,765 | |
| Treasury discount notes | — | | | 87,250 | | | — | | | 87,250 | |
| Time deposits | — | | | 15,113 | | | — | | | 15,113 | |
| Marketable securities: | | | | | | | |
| Marketable equity securities | 3,167 | | | — | | | — | | | 3,167 | |
| Treasury discount notes | — | | | 198,971 | | | — | | | 198,971 | |
| Investment in MGM | 2,875,022 | | | — | | | — | | | 2,875,022 | |
| Other non-current assets: | | | | | | | |
| Warrant | — | | | — | | | 52,739 | | | 52,739 | |
| Total | $ | 3,885,954 | | | $ | 301,334 | | | $ | 52,739 | | | $ | 4,240,027 | |
| | | | | | | |
| Liabilities: | | | | | | | |
Interest rate swaps(a) | $ | — | | | $ | (2,996) | | | $ | — | | | $ | (2,996) | |
_____________________
(a) Interest rate swaps relate to the $350 million notional amount of Dotdash Meredith's Term Loan B and are included in "Other long-term liabilities" in the balance sheet. See "Note 1—The Company and Summary of Significant Accounting Policies" and "Note 4—Long-term Debt" for additional information. The fair value of interest rate swaps was determined using discounted cash flows derived from observable market prices, including swap curves, which are Level 2 inputs. | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2022 | | 2021 |
| Warrant | | | | Warrant | | Contingent
Consideration
Arrangements |
| | (In thousands) |
| Balance at July 1 | $ | 122,145 | | | | | $ | 60,532 | | | $ | — | |
| | | | | | | |
| Total net gains (losses): | | | | | | | |
| Fair value adjustments included in earnings | 8,467 | | | | | 47,075 | | | (15,000) | |
| | | | | | | |
| Balance at September 30 | $ | 130,612 | | | | | $ | 107,607 | | | $ | (15,000) | |
| | | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | Warrant | | Contingent
Consideration
Arrangements | | Warrant | | Contingent
Consideration
Arrangements | | Warrant | | | Warrant | | Contingent
Consideration
Arrangements |
| | | (In thousands) | | (In thousands) |
| Balance at January 1 | Balance at January 1 | $ | 109,294 | | | $ | (612) | | | $ | 5,276 | | | $ | — | | Balance at January 1 | $ | 46,799 | | | | $ | 109,294 | | | $ | (612) | |
| | Total net gains (losses): | | |
| Total net gains: | | Total net gains: | | | |
| Fair value adjustments included in earnings | Fair value adjustments included in earnings | 21,318 | | | 612 | | | 102,331 | | | (15,000) | | Fair value adjustments included in earnings | 5,940 | | | | 7,985 | | | 612 | |
| | Balance at September 30 | $ | 130,612 | | | $ | — | | | $ | 107,607 | | | $ | (15,000) | | |
| Balance at March 31 | | Balance at March 31 | $ | 52,739 | | | | $ | 117,279 | | | $ | — | |
Warrant
As part of the Company's investment in Turo preferred shares, the Company received a warrant that is recorded at fair value each reporting period with any change included in "Other income, (expense), net" in the 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 balance sheet.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Contingent Consideration Arrangements
At September 30, 2022,March 31, 2023, the Company has two outstandingno contingent consideration arrangements related to business combinations. The maximum contingent payments related to these arrangements is $7.0 million, however, as of September 30, 2022outstanding. In connection with the Company does not expect to make any further paymentsMeredith acquisition on these arrangements. At September 30,December 1, 2021, the Company had one outstandingassumed a contingent consideration arrangement related to a business combination. Duringliability of $0.6 million, which was written off during the thirdfirst quarter of 2021, the Company recorded a $15.0 million loss related to this contingent consideration arrangement2022 due to a change in estimate of the liability related to this arrangement. The amount was paid in full during the fourth quarter of 2021.
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, buildings and leasehold improvements, are adjusted to fair value only when an impairment is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs. See "Note 3—Goodwill During the first quarter of 2023, the Company recorded impairment charges related to unoccupied leased office space due to the continued decline in the commercial real estate market; a $44.7 million impairment of an ROU asset and Intangible Assetsa $25.3 million impairment of leasehold improvements, furniture and equipment, which are included in "General and administrative expense" and "Depreciation," for a detailed descriptionrespectively, in the statement of operations. The impairment charges represent the amount by which the carrying value of the asset group exceeded its estimated fair value, calculated using a discounted cash flow approach using sublease market assumptions of the expected cash flows and discount rate. The impairment charges were allocated between the ROU assets and related leasehold improvements, furniture and equipment of the asset group based on their relative carrying values.
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 $153.6 million of goodwill at Mosaic Group goodwill impairment recorded inGroup. There is one indefinite-lived intangible asset at Dotdash Meredith Digital with a value of approximately $126.0 million for which the second quarterexcess of 2022.fair value over carrying value is less than 20%.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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:
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value |
| | (In thousands) |
| Current portion of long-term debt | $ | (30,000) | | | $ | (27,150) | | | $ | (30,000) | | | $ | (29,550) | |
Long-term debt, net(a) | $ | (2,026,404) | | | $ | (1,748,636) | | | $ | (2,046,237) | | | $ | (2,061,450) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value |
| | (In thousands) |
| Current portion of long-term debt | $ | (30,000) | | | $ | (27,750) | | | $ | (30,000) | | | $ | (26,700) | |
Long-term debt, net(a) | $ | (2,013,107) | | | $ | (1,791,469) | | | $ | (2,019,759) | | | $ | (1,708,413) | |
_____________________
(a) At September 30, 2022March 31, 2023 and December 31, 2021,2022, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $21.1$19.4 million and $23.8$20.2 million, respectively.respectively.
At September 30, 2022March 31, 2023 and December 31, 2021,2022, 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 4—LONG-TERM DEBT
Long-term debt consists of:
| | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | (In thousands) |
| Dotdash Meredith Debt | | | |
| Dotdash Meredith Term Loan A ("Dotdash Meredith Term Loan A") due December 1, 2026 | $ | 328,125 | | | $ | 332,500 | |
| Dotdash Meredith Term Loan B ("Dotdash Meredith Term Loan B") due December 1, 2028 | 1,234,375 | | | 1,237,500 | |
| Total Dotdash Meredith long-term debt | 1,562,500 | | | 1,570,000 | |
| Less: current portion of Dotdash Meredith long-term debt | 30,000 | | | 30,000 | |
| Less: original issue discount | 5,100 | | | 5,310 | |
| Less: unamortized debt issuance costs | 9,762 | | | 10,215 | |
| Total Dotdash Meredith long-term debt, net | 1,517,638 | | | 1,524,475 | |
| | | |
| 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 | 4,531 | | | 4,716 | |
| Total ANGI Group long-term debt, net | 495,469 | | | 495,284 | |
| | | |
| Total long-term debt, net | $ | 2,013,107 | | | $ | 2,019,759 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 6—LONG-TERM DEBT
Long-term debt consists of:
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | (In thousands) |
| Dotdash Meredith Debt | | | |
| Dotdash Meredith Term Loan A ("Dotdash Meredith Term Loan A") due December 1, 2026 | $ | 336,875 | | | $ | 350,000 | |
| Dotdash Meredith Term Loan B ("Dotdash Meredith Term Loan B") due December 1, 2028 | 1,240,625 | | | 1,250,000 | |
| Total Dotdash Meredith long-term debt | 1,577,500 | | | 1,600,000 | |
| Less: current portion of Dotdash Meredith long-term debt | 30,000 | | | 30,000 | |
| Less: original issue discount | 5,521 | | | 6,176 | |
| Less: unamortized debt issuance costs | 10,673 | | | 12,139 | |
| Total Dotdash Meredith long-term debt, net | 1,531,306 | | | 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, which commenced February 15, 2021 | 500,000 | | | 500,000 | |
| | | |
| | | |
| Less: unamortized debt issuance costs | 4,902 | | | 5,448 | |
| Total ANGI Group long-term debt, net | 495,098 | | | 494,552 | |
| | | |
| Total long-term debt, net | $ | 2,026,404 | | | $ | 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. The adjustment to the secured overnight financing rate is fixed at 0.10% for the Dotdash Meredith Term Loan A. The Dotdash Meredith Term Loan B has a varying adjustment of 0.10%, 0.15% or 0.25% based upon the duration of the borrowing period. At September 30, 2022March 31, 2023 and December 31, 2021,2022, the Dotdash Meredith Term Loan A bore interest at Adjusted Term SOFR plus 2.25% and 2.00%, or 4.86%6.94% and 2.15%5.91%, 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 6.61%8.77% and 4.50%8.22%, respectively. Interest payments are due at least quarterly through the terms of the Dotdash Meredith Term Loans.
The outstanding balances of the Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B were $336.9 million and $1.24 billion at September 30, 2022, respectively, and $350.0 million and $1.25 billion at December 31, 2021, respectively. 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 financial statements for the period ending December 31, 2022, theThe 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 Dotdash Meredith'sthe applicable net leverage ratio. No such payment was required related to the period ended December 31, 2022.
In March 2023, Dotdash Meredith entered into interest rate swaps on the Dotdash Meredith Term Loan B for a total notional amount of $350 million with a maturity date of April 1, 2027. The interest rate swaps synthetically convert $350 million of the Dotdash Meredith Term Loan B for the duration of the interest rate swaps to a fixed rate of approximately 7.92% ((i) the weighted average fixed interest rate of approximately 3.82% on the interest rate swaps plus (ii) the adjustment to the secured overnight financing rate of 0.10% plus (iii) the base rate of 4.00%), beginning April 2023.
25The interest rate swaps are expected to be highly effective. For the three months ended March 31, 2023, the unrealized loss recognized in "Accumulated other comprehensive loss" was $2.3 million, net of income tax benefit, and the related liability of $3.0 million is included in “Other non-current liabilities” in the balance sheet at March 31, 2023. There were no realized gains or losses reclassified into “Interest expense” in the three months ended March 31, 2023. At March 31, 2023, $3.0 million is expected to be reclassified into interest expense within the next twelve months as a realized gain.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
There were no outstanding borrowings under the Dotdash Meredith Revolving Facility at September 30, 2022March 31, 2023 and December 31, 2021.2022. 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 September 30, 2022both March 31, 2023 and December 31, 2021, respectively.2022. 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,Adjusted Term SOFR, plus an applicable margin, which is based on Dotdash Meredith's consolidated net leverage ratio.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 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; this1.0, subject to certain available amounts as defined in the Dotdash Meredith Credit Agreement. This ratio was exceeded for both test periods ended March 31, 2023 and December 31, 2022. The Dotdash Meredith Credit Agreement also permits the Company to, among other things, contribute cash to Dotdash Meredith, which will provide additional liquidity to ensure that Dotdash Meredith does not exceed certain consolidated net leverage ratios for any test period, ended September 30, 2022.as further defined in the Dotdash Meredith Credit Agreement. In connection with these 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 impact the consolidated net leverage ratios of Dotdash Meredith. In March 2023, the Company contributed $135.0 million to Dotdash Meredith, which Dotdash Meredith subsequently distributed back to the Company in April 2023.
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 Debt
TheANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of Angi Inc., issued the ANGI Group Senior Notes were issued on August 20, 2020. At any time prior to August 15, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at the redemption prices, set forth in the indenture governing the notes, plus accrued and unpaid interest thereon, if any, to the applicable redemption date.date as set forth in the indenture governing the notes.
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 exceeds 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. At September 30, 2022March 31, 2023, there were no limitations pursuant thereto.
The $250 million ANGI Group Revolving Facility, which otherwise would have expired on November 5, 2023, was terminated effective August 3, 2021. No amounts were ever drawn under the ANGI Group Revolving Facility prior to its termination.
During the nine months ended September 30, 2021, ANGI Group prepaid the remaining balance of $220.0 million of the ANGI Group Term Loan principal, which otherwise would have matured on November 5, 2023.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 7—5—ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following tables presenttable presents the components of accumulated other comprehensive (loss) income andincome. There were no items reclassified out of accumulated other comprehensive (loss) income into earnings:
| | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, |
| 2022 | | | | | | 2021 | | | | |
| Foreign Currency Translation Adjustment | | | | | | Foreign Currency Translation Adjustment | | | | |
| (In thousands) |
| Balance at July 1 | $ | (12,852) | | | | | | | $ | 5,686 | | | | | |
| Other comprehensive loss before reclassifications | (17,112) | | | | | | | (1,083) | | | | | |
| Amounts reclassified to earnings | — | | | | | | | — | | | | | |
| Net current period other comprehensive loss | (17,112) | | | | | | | (1,083) | | | | | |
| Accumulated other comprehensive loss allocated to noncontrolling interests during the period | 4 | | | | | | | 24 | | | | | |
| Balance at September 30 | $ | (29,960) | | | | | | | $ | 4,627 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | | | | | 2021 |
| Foreign Currency Translation Adjustment | | | | | | 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 | $ | 4,397 | | | | | | | $ | (6,172) | | | $ | 2 | | | $ | (6,170) | |
| Other comprehensive (loss) income before reclassifications | (34,362) | | | | | | | 754 | | | (2) | | | 752 | |
| Amounts reclassified to earnings | — | | | | | | | 10,032 | | | — | | | 10,032 | |
| Net current period other comprehensive (loss) income | (34,362) | | | | | | | 10,786 | | | (2) | | | 10,784 | |
| Accumulated other comprehensive loss allocated to noncontrolling interests during the period | 5 | | | | | | | 13 | | | — | | | 13 | |
| Balance at September 30 | $ | (29,960) | | | | | | | $ | 4,627 | | | $ | — | | | $ | 4,627 | |
The amounts reclassified out of foreign currency translation adjustment into earnings for the ninethree months ended September 30, 2021March 31, 2023 and 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
| Foreign Currency Translation Adjustment | | Unrealized Gains (Losses) On Available-For-Sale Marketable Debt Securities | | Unrealized Losses On Interest Rate Swaps | | Accumulated Other Comprehensive Loss | | Foreign Currency Translation Adjustment | | | | Accumulated Other Comprehensive Income (Loss) |
| (In thousands) |
| Balance at January 1 | $ | (13,186) | | | $ | 53 | | | $ | — | | | $ | (13,133) | | | $ | 4,397 | | | | | $ | 4,397 | |
| Other comprehensive income (loss) | 803 | | | (26) | | | (2,287) | | | (1,510) | | | (3,634) | | | | | (3,634) | |
| | | | | | | | | | | | | |
| Net current period other comprehensive income (loss) | 803 | | | (26) | | | (2,287) | | | (1,510) | | | (3,634) | | | | | (3,634) | |
| Accumulated other comprehensive loss allocated to noncontrolling interests during the period | 2 | | | — | | | — | | | 2 | | | 2 | | | | | 2 | |
| Balance at March 31 | $ | (12,381) | | | $ | 27 | | | $ | (2,287) | | | $ | (14,641) | | | $ | 765 | | | | | $ | 765 | |
At March 31, 2023, there was $0.7 million of income tax benefit related to the substantial liquidationunrealized losses on interest rate swaps and less than $0.1 million of certain international subsidiaries.
income tax provision related to net unrealized gains on available-for-sale marketable debt securities. At both September 30,March 31, 2022, and 2021, there was no income tax benefit or provision on the accumulated other comprehensive (loss) income.
NOTE 8—6—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 INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents revenue by reportable segment:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In thousands) | | | (In thousands) |
| Revenue | Revenue | | | | | Revenue | | | | |
| Dotdash Meredith | Dotdash Meredith | | Dotdash Meredith | | |
| Digital | Digital | $ | 220,749 | | | $ | 65,165 | | | $ | 671,424 | | | $ | 203,919 | | Digital | | $ | 184,797 | | | $ | 216,165 | |
| Print | Print | 251,471 | | | — | | | 801,756 | | | — | | Print | | 207,016 | | | 289,978 | |
Intersegment eliminations(a) | Intersegment eliminations(a) | (5,135) | | | — | | | (16,100) | | | — | | Intersegment eliminations(a) | | (4,231) | | | (5,672) | |
| Total Dotdash Meredith | Total Dotdash Meredith | 467,085 | | | 65,165 | | | 1,457,080 | | | 203,919 | | Total Dotdash Meredith | | 387,582 | | | 500,471 | |
| Angi Inc. | Angi Inc. | 498,036 | | | 461,565 | | | 1,449,977 | | | 1,269,582 | | Angi Inc. | | |
| Domestic: | | Domestic: | | |
| Ads and Leads | | Ads and Leads | | 293,506 | | | 294,746 | |
| Services | | Services | | 32,059 | | | 76,450 | |
| Roofing | | Roofing | | 38,372 | | | 36,687 | |
Domestic intersegment eliminations(b) | | Domestic intersegment eliminations(b) | | (1,462) | | | (1,677) | |
| Total Domestic | | Total Domestic | | 362,475 | | | 406,206 | |
| International | | International | | 29,932 | | | 29,953 | |
| Total Angi Inc. | | Total Angi Inc. | | 392,407 | | | 436,159 | |
| Search | Search | 156,719 | | | 228,445 | | | 578,287 | | | 593,086 | | Search | | 152,475 | | | 223,385 | |
| Emerging & Other | Emerging & Other | 180,820 | | | 168,923 | | | 508,903 | | | 473,735 | | Emerging & Other | | 154,031 | | | 166,994 | |
| Intersegment eliminations | Intersegment eliminations | (1,759) | | | (30) | | | (5,420) | | | (137) | | Intersegment eliminations | | (2,224) | | | (1,664) | |
| Total | Total | $ | 1,300,901 | | | $ | 924,068 | | | $ | 3,988,827 | | | $ | 2,540,185 | | Total | | $ | 1,084,271 | | | $ | 1,325,345 | |
The following table presents the revenue of the Company's segments disaggregated by type of service:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In thousands) | | | (In thousands) |
| Dotdash Meredith | Dotdash Meredith | | Dotdash Meredith | | |
| Digital: | Digital: | | Digital: | | |
| Display advertising revenue | $ | 148,309 | | | $ | 42,911 | | | $ | 442,950 | | | $ | 125,014 | | |
| Advertising revenue | | Advertising revenue | | $ | 111,817 | | | $ | 137,090 | |
| Performance marketing revenue | Performance marketing revenue | 46,089 | | | 21,881 | | | 144,127 | | | 77,432 | | Performance marketing revenue | | 50,055 | | | 50,105 | |
| Licensing and other revenue | Licensing and other revenue | 26,351 | | | 373 | | | 84,347 | | | 1,473 | | Licensing and other revenue | | 22,925 | | | 28,970 | |
| Total digital revenue | Total digital revenue | 220,749 | | | 65,165 | | | 671,424 | | | 203,919 | | Total digital revenue | | 184,797 | | | 216,165 | |
| Print: | Print: | | Print: | | |
| Subscription revenue | Subscription revenue | 97,373 | | | — | | | 339,276 | | | — | | Subscription revenue | | 85,637 | | | 130,584 | |
| Advertising revenue | Advertising revenue | 64,446 | | | — | | | 208,399 | | | — | | Advertising revenue | | 47,850 | | | 72,687 | |
| Newsstand revenue | | Newsstand revenue | | 32,246 | | | 31,239 | |
| Project and other revenue | Project and other revenue | 39,419 | | | — | | | 114,698 | | | — | | Project and other revenue | | 28,109 | | | 33,025 | |
| Newsstand revenue | 37,180 | | | — | | | 104,015 | | | — | | |
| Performance marketing revenue | Performance marketing revenue | 13,053 | | | — | | | 35,368 | | | — | | Performance marketing revenue | | 13,174 | | | 22,443 | |
| Total print revenue | Total print revenue | 251,471 | | | — | | | 801,756 | | | — | | Total print revenue | | 207,016 | | | 289,978 | |
Intersegment eliminations(a) | Intersegment eliminations(a) | (5,135) | | | — | | | (16,100) | | | — | | Intersegment eliminations(a) | | (4,231) | | | (5,672) | |
| Total Dotdash Meredith revenue | Total Dotdash Meredith revenue | $ | 467,085 | | | $ | 65,165 | | | $ | 1,457,080 | | | $ | 203,919 | | Total Dotdash Meredith revenue | | $ | 387,582 | | | $ | 500,471 | |
| (a) Includes intersegment eliminations related to digital performance marketing revenue of $5.1 million and $15.9 million for the three and nine months ended September 30, 2022. | |
(a) Intersegment eliminations primarily related to Digital performance marketing commissions earned for the placement of magazine subscriptions for Print. | | (a) Intersegment eliminations primarily related to Digital performance marketing commissions earned for the placement of magazine subscriptions for Print. |
| | Angi Inc. | | |
| North America | | |
| Angi Ads and Leads: | | |
Consumer connection revenue(b) | $ | 260,242 | | | $ | 238,421 | | | $ | 732,075 | | | $ | 699,867 | | |
Advertising revenue(c) | 67,045 | | | 63,953 | | | 195,906 | | | 187,308 | | |
Membership subscription revenue(d) | 14,795 | | | 17,079 | | | 46,586 | | | 51,026 | | |
| Other revenue | 5,658 | | | 6,703 | | | 16,127 | | | 21,412 | | |
| Total Angi Ads and Leads revenue | 347,740 | | | 326,156 | | | 990,694 | | | 959,613 | | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In thousands) | | | (In thousands) |
Angi Services revenue(e) | 131,862 | | | 117,375 | | | 395,894 | | | 244,904 | | |
| Total North America revenue | 479,602 | | | 443,531 | | | 1,386,588 | | | 1,204,517 | | |
| Europe | | |
| Angi Inc. | | Angi Inc. | | |
| Domestic: | | Domestic: | | |
| Ads and Leads: | | Ads and Leads: | | |
Consumer connection revenue(b) | Consumer connection revenue(b) | 15,576 | | | 14,530 | | | 54,320 | | | 54,226 | | Consumer connection revenue(b) | | $ | 212,935 | | | $ | 214,347 | |
| Advertising revenue | | Advertising revenue | | 67,181 | | | 63,902 | |
| Membership subscription revenue | | Membership subscription revenue | | 13,199 | | | 16,237 | |
| Other revenue | | Other revenue | | 191 | | | 260 | |
| Total Ads and Leads revenue | | Total Ads and Leads revenue | | 293,506 | | | 294,746 | |
| Services revenue | | Services revenue | | 32,059 | | | 76,450 | |
| Roofing revenue | | Roofing revenue | | 38,372 | | | 36,687 | |
Domestic intersegment eliminations(b) | | Domestic intersegment eliminations(b) | | (1,462) | | | (1,677) | |
| Total Domestic revenue | | Total Domestic revenue | | 362,475 | | | 406,206 | |
| International: | | International: | | | | |
| Consumer connection revenue | | Consumer connection revenue | | 24,745 | | | 21,803 | |
| Service professional membership subscription revenue | Service professional membership subscription revenue | 2,575 | | | 3,215 | | | 8,203 | | | 9,874 | | Service professional membership subscription revenue | | 5,058 | | | 7,856 | |
| Advertising and other revenue | Advertising and other revenue | 283 | | | 289 | | | 866 | | | 965 | | Advertising and other revenue | | 129 | | | 294 | |
| Total Europe revenue | 18,434 | | | 18,034 | | | 63,389 | | | 65,065 | | |
| Total International revenue | | Total International revenue | | 29,932 | | | 29,953 | |
| Total Angi Inc. revenue | Total Angi Inc. revenue | $ | 498,036 | | | $ | 461,565 | | | $ | 1,449,977 | | | $ | 1,269,582 | | Total Angi Inc. revenue | | $ | 392,407 | | | $ | 436,159 | |
| (b) Includes fees paid by service professionals for consumer matches. | |
(c) Includes revenue from service professionals under contract for advertising. | |
(d) Includes membership subscription revenue from service professionals and consumers. | |
(e) Includes revenue from pre-priced offerings and revenue from Angi Roofing. | |
(b) Intersegment eliminations related to Ads and Leads revenue earned from sales to Roofing. | | (b) Intersegment eliminations related to Ads and Leads revenue earned from sales to Roofing. |
| | Search | Search | | Search | | |
| Advertising revenue | | |
| Google advertising revenue: | $ | 119,576 | | | $ | 171,222 | | | $ | 394,074 | | | $ | 480,157 | | |
| Advertising revenue: | | Advertising revenue: | | |
| Google advertising revenue | | Google advertising revenue | | $ | 140,734 | | | $ | 149,652 | |
| Non-Google advertising revenue | Non-Google advertising revenue | 36,087 | | | 53,401 | | | 180,164 | | | 101,135 | | Non-Google advertising revenue | | 10,973 | | | 71,989 | |
| Total advertising revenue | Total advertising revenue | 155,663 | | | 224,623 | | | 574,238 | | | 581,292 | | Total advertising revenue | | 151,707 | | | 221,641 | |
| Other revenue | Other revenue | 1,056 | | | 3,822 | | | 4,049 | | | 11,794 | | Other revenue | | 768 | | | 1,744 | |
| Total Search revenue | Total Search revenue | $ | 156,719 | | | $ | 228,445 | | | $ | 578,287 | | | $ | 593,086 | | Total Search revenue | | $ | 152,475 | | | $ | 223,385 | |
| | Emerging & Other | Emerging & Other | | Emerging & Other | | |
| Subscription revenue | Subscription revenue | $ | 91,405 | | | $ | 96,763 | | | $ | 278,722 | | | $ | 268,993 | | Subscription revenue | | $ | 86,400 | | | $ | 94,547 | |
| Marketplace revenue | Marketplace revenue | 73,709 | | | 63,456 | | | 202,380 | | | 173,615 | | Marketplace revenue | | 58,419 | | | 66,117 | |
| Media production and distribution revenue | Media production and distribution revenue | 8,954 | | | 730 | | | 9,558 | | | 11,142 | | Media production and distribution revenue | | 3,615 | | | 546 | |
| Advertising revenue: | Advertising revenue: | | Advertising revenue: | | |
| Non-Google advertising revenue | Non-Google advertising revenue | 4,102 | | | 5,039 | | | 11,765 | | | 12,351 | | Non-Google advertising revenue | | 2,899 | | | 3,723 | |
| Google advertising revenue | Google advertising revenue | 535 | | | 862 | | | 1,659 | | | 1,983 | | Google advertising revenue | | 263 | | | 608 | |
| Total advertising revenue | Total advertising revenue | 4,637 | | | 5,901 | | | 13,424 | | | 14,334 | | Total advertising revenue | | 3,162 | | | 4,331 | |
| Service and other revenue | Service and other revenue | 2,115 | | | 2,073 | | | 4,819 | | | 5,651 | | Service and other revenue | | 2,435 | | | 1,453 | |
| Total Emerging & Other revenue | Total Emerging & Other revenue | $ | 180,820 | | | $ | 168,923 | | | $ | 508,903 | | | $ | 473,735 | | Total Emerging & Other revenue | | $ | 154,031 | | | $ | 166,994 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In thousands) | | | (In thousands) |
| Revenue: | Revenue: | | | | | Revenue: | | |
| United States | United States | $ | 1,209,748 | | | $ | 796,808 | | | $ | 3,684,184 | | | $ | 2,156,061 | | United States | | $ | 974,428 | | | $ | 1,204,348 | |
| All other countries | All other countries | 91,153 | | | 127,260 | | | 304,643 | | | 384,124 | | All other countries | | 109,843 | | | 120,997 | |
| Total | Total | $ | 1,300,901 | | | $ | 924,068 | | | $ | 3,988,827 | | | $ | 2,540,185 | | Total | | $ | 1,084,271 | | | $ | 1,325,345 | |
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| | (In thousands) |
| Long-lived assets (excluding goodwill, intangible assets and ROU assets): | | | |
| United States | $ | 455,240 | | | $ | 502,977 | |
| All other countries | 6,631 | | | 7,637 | |
| Total | $ | 461,871 | | | $ | 510,614 | |
The following tables present operating (loss) income and Adjusted EBITDA by reportable segment:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 |
| | | | | | (In thousands) |
| Operating (loss) income: | | | | | | | |
| Dotdash Meredith | | | | | | | |
| Digital | | | | | $ | (17,887) | | | $ | (1,868) | |
| Print | | | | | (5,756) | | | (38,335) | |
Other(c)(d) | | | | | (87,591) | | | (16,042) | |
Total Dotdash Meredith(e) | | | | | (111,234) | | | (56,245) | |
| Angi Inc. | | | | | | | |
| Ads and Leads | | | | | 13,480 | | | 15,486 | |
| Services | | | | | (12,452) | | | (25,750) | |
| Roofing | | | | | 411 | | | (6,150) | |
Other(c) | | | | | (14,939) | | | (13,022) | |
| International | | | | | 3,030 | | | (4,521) | |
| Total Angi Inc. | | | | | (10,470) | | | (33,957) | |
| Search | | | | | 10,770 | | | 25,079 | |
| Emerging & Other | | | | | 11,445 | | | (5,044) | |
| Corporate | | | | | (36,107) | | | (38,647) | |
| Total | | | | | $ | (135,596) | | | $ | (108,814) | |
_____________________
(c) Other comprises unallocated corporate expenses.
(d) Includes impairment charges of $70.0 million related to unoccupied leased office space for the three months ended March 31, 2023, of which $25.3 million is included in "Depreciation" in the statement of operations. See "Note 3—Financial Instruments and Fair Value Measurements" for additional information.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| | (In thousands) |
| Long-lived assets (excluding goodwill, intangible assets, and ROU assets): | | | |
| United States | $ | 576,534 | | | $ | 562,628 | |
| All other countries | 7,354 | | | 7,897 | |
| Total | $ | 583,888 | | | $ | 570,525 | |
The following tables present operating (loss) income and Adjusted EBITDA by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (In thousands) |
| Operating (loss) income: | | | | | | | |
| Dotdash Meredith | | | | | | | |
| Digital | $ | (104,445) | | | $ | 7,082 | | | $ | (95,217) | | | $ | 44,383 | |
| Print | 27,325 | | | — | | | (31,109) | | | — | |
Other(f) | (18,378) | | | — | | | (52,924) | | | — | |
Total Dotdash Meredith(g) | (95,498) | | | 7,082 | | | (179,250) | | | 44,383 | |
| Angi Inc. | (11,058) | | | (14,973) | | | (65,901) | | | (47,595) | |
| Search | 19,085 | | | 30,011 | | | 70,461 | | | 74,059 | |
| Emerging & Other | (1,577) | | | (22,239) | | | (114,402) | | | (23,946) | |
| Corporate | (35,632) | | | (31,948) | | | (110,542) | | | (114,618) | |
| Total | $ | (124,680) | | | $ | (32,067) | | | $ | (399,634) | | | $ | (67,717) | |
_____________________
(f) Other comprises unallocated corporate expenses, which are corporate overhead expenses not attributable to the Digital or Print segments.
(g)(e) Dotdash Meredith includesincurred restructuring charges of $24.7$22.4 million and $60.8 million andin the three months ended March 31, 2022. The three months ended March 31, 2022 also include transaction-related expenses of $0.8$4.0 million and $6.0 million related to the acquisition of Meredith for the three and nine months ended September 30, 2022, respectively. The restructuring charges for both the three and nine months ended September 30, 2022 include $7.0 million of impairment charges included in "Depreciation" in the statement of operations.Meredith. See "Note 4—2—Dotdash Meredith Restructuring Charges and Transaction-Related Expenses and Change-in-Control Payments" for additional information. | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In thousands) | | | (In thousands) |
Adjusted EBITDA(h): | | | | | |
Adjusted EBITDA(f): | | Adjusted EBITDA(f): | | |
Dotdash Meredith(i)(e) | Dotdash Meredith(i)(e) | | Dotdash Meredith(i)(e) | | |
| Digital | Digital | $ | 22,602 | | | $ | 8,202 | | | $ | 108,718 | | | $ | 48,673 | | Digital | | $ | 24,403 | | | $ | 34,800 | |
| Print | Print | $ | 23,097 | | | $ | — | | | $ | 18,882 | | | $ | — | | Print | | $ | 11,334 | | | $ | (10,480) | |
Other(f)(g) | Other(f)(g) | $ | (14,506) | | | $ | — | | | $ | (48,706) | | | $ | — | | Other(f)(g) | | $ | (58,854) | | | $ | (15,786) | |
| Angi Inc. | Angi Inc. | $ | 22,882 | | | $ | 12,395 | | | $ | 29,402 | | | $ | 31,139 | | Angi Inc. | | | | |
| Ads and Leads | | Ads and Leads | | $ | 39,851 | | | $ | 34,325 | |
| Services | | Services | | $ | (2,168) | | | $ | (18,567) | |
| Roofing | | Roofing | | $ | 821 | | | $ | (5,026) | |
Other(c) | | Other(c) | | $ | (12,354) | | | $ | (10,450) | |
| International | | International | | $ | 4,354 | | | $ | (3,451) | |
| Search | Search | $ | 19,111 | | | $ | 30,031 | | | $ | 70,528 | | | $ | 74,087 | | Search | | $ | 10,791 | | | $ | 25,100 | |
| Emerging & Other | Emerging & Other | $ | 2,425 | | | $ | 2,737 | | | $ | (13,719) | | | $ | 21,592 | | Emerging & Other | | $ | 14,778 | | | $ | 916 | |
| Corporate | Corporate | $ | (20,830) | | | $ | (23,132) | | | $ | (65,240) | | | $ | (71,769) | | Corporate | | $ | (23,833) | | | $ | (23,694) | |
_____________________
(h)(f) The Company's primary financial measure and GAAP segment measure is Adjusted EBITDA, which is defined as operating income: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.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables reconcile operating (loss) income for the Company's reportable segments and net earnings (loss) earnings attributable to IAC shareholders to Adjusted EBITDA:
| | | | Three Months Ended September 30, 2022 | | | Three Months Ended March 31, 2023 |
| | | Operating (Loss) Income(g) | | Stock-based
Compensation
Expense | | Depreciation (g)(j) | | Amortization of Intangibles(j) | | | Adjusted EBITDA(h)(i) | | | Operating
(Loss) Income | | Stock-based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | | Adjusted EBITDA(f) |
| | | (In thousands) | | | (In thousands) |
| Dotdash Meredith | Dotdash Meredith | | | | | Dotdash Meredith | | | |
| Digital | Digital | $ | (104,445) | | | $ | 5,814 | | | $ | 5,312 | | | $ | 115,921 | | | | $ | 22,602 | | | Digital | $ | (17,887) | | | $ | 1,695 | | | $ | 5,244 | | | $ | 35,351 | | | | $ | 24,403 | |
| Print | Print | 27,325 | | | $ | 391 | | | $ | (2,154) | | | $ | (2,465) | | | | $ | 23,097 | | | Print | (5,756) | | | $ | 146 | | | $ | 2,635 | | | $ | 14,309 | | | | $ | 11,334 | |
Other(f)(c) | Other(f)(c) | (18,378) | | | $ | 53 | | | $ | 3,819 | | | $ | — | | | | $ | (14,506) | | | Other(f)(c) | (87,591) | | | $ | 3,250 | | | $ | 25,487 | | | $ | — | | | | $ | (58,854) | |
| Angi Inc. | Angi Inc. | (11,058) | | | $ | 12,376 | | | $ | 17,759 | | | $ | 3,805 | | | | $ | 22,882 | | | Angi Inc. | | | | | | | | | |
| Ads and Leads | | Ads and Leads | 13,480 | | | $ | 5,491 | | | $ | 18,218 | | | $ | 2,662 | | | | $ | 39,851 | |
| Services | | Services | (12,452) | | | $ | 4,209 | | | $ | 6,075 | | | $ | — | | | | $ | (2,168) | |
| Roofing | | Roofing | 411 | | | $ | 165 | | | $ | 245 | | | $ | — | | | | $ | 821 | |
Other(c) | | Other(c) | (14,939) | | | $ | 2,585 | | | $ | — | | | $ | — | | | | $ | (12,354) | |
| International | | International | 3,030 | | | $ | 427 | | | $ | 897 | | | $ | — | | | | $ | 4,354 | |
| Search | Search | 19,085 | | | $ | — | | | $ | 26 | | | $ | — | | | | $ | 19,111 | | | Search | 10,770 | | | $ | — | | | $ | 21 | | | $ | — | | | | $ | 10,791 | |
| Emerging & Other | Emerging & Other | (1,577) | | | $ | 175 | | | $ | 311 | | | $ | 3,516 | | | | $ | 2,425 | | | Emerging & Other | 11,445 | | | $ | 352 | | | $ | 697 | | | $ | 2,284 | | | | $ | 14,778 | |
Corporate(k) | (35,632) | | | $ | 12,308 | | | $ | 2,494 | | | $ | — | | | | $ | (20,830) | | | |
Corporate(h) | | Corporate(h) | (36,107) | | | $ | 10,621 | | | $ | 1,653 | | | $ | — | | | | $ | (23,833) | |
| Total | Total | (124,680) | | | | | | | | | | | | Total | (135,596) | | | | | | | | | | |
| Interest expense | Interest expense | (29,433) | | | | | | Interest expense | (38,172) | | | | |
| Unrealized gain on investment in MGM Resorts International | Unrealized gain on investment in MGM Resorts International | 42,523 | | | | | | Unrealized gain on investment in MGM Resorts International | 704,840 | | | | |
| Other income, net | Other income, net | 19,678 | | | | | | Other income, net | 23,749 | | | | |
| Loss before income taxes | (91,912) | | | | | | |
| Income tax benefit | 26,065 | | | | | | |
| Net loss | (65,847) | | | | | | |
| Earnings before income taxes | | Earnings before income taxes | 554,821 | | | | |
| Income tax provision | | Income tax provision | (139,502) | | | | |
| Net earnings | | Net earnings | 415,319 | | | | |
| Net loss attributable to noncontrolling interests | Net loss attributable to noncontrolling interests | 2,024 | | | | | | Net loss attributable to noncontrolling interests | 2,456 | | | | |
| Net loss attributable to IAC shareholders | $ | (63,823) | | | | | | |
| Net earnings attributable to IAC shareholders | | Net earnings attributable to IAC shareholders | $ | 417,775 | | | | |
_____________________
(j) Depreciation and amortization of intangibles for Dotdash Meredith for the three months ended September 30, 2022 reflect, in part, cumulative adjustments made to the fair value of leasehold improvements, equipment, buildings, capitalized software and intangible assets acquired in the Meredith acquisition.
(k)(h) Includes stock-based compensation expense for stock-based awards denominated in the sharesgranted to employees of certain subsidiaries of the Company.Corporate, Search and all Emerging & Other businesses other than Vivian Health.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | Three Months Ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Operating Income (Loss) | | Stock-based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Arrangements | | | Adjusted EBITDA(h) | | Three Months Ended March 31, 2022 |
| | | (In thousands) | | Operating (Loss) Income(e) | | Stock-based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | | Adjusted EBITDA(e)(f) |
| | | (In thousands) |
| Dotdash Meredith | Dotdash Meredith | $ | 7,082 | | | $ | — | | | $ | 527 | | | $ | 593 | | | $ | — | | | | $ | 8,202 | | Dotdash Meredith | | | |
| | Digital | | Digital | $ | (1,868) | | | $ | 4,196 | | | $ | 7,489 | | | $ | 25,595 | | | $ | (612) | | | | $ | 34,800 | |
| Print | | Print | (38,335) | | | $ | 64 | | | $ | 5,532 | | | $ | 22,259 | | | $ | — | | | | $ | (10,480) | |
Other(c) | | Other(c) | (16,042) | | | $ | 12 | | | $ | 244 | | | $ | — | | | $ | — | | | | $ | (15,786) | |
| Angi Inc. | Angi Inc. | (14,973) | | | $ | 8,813 | | | $ | 14,701 | | | $ | 3,854 | | | $ | — | | | | $ | 12,395 | | Angi Inc. | | | | | | | | | | | |
| Ads and Leads | | Ads and Leads | 15,486 | | | $ | 4,920 | | | $ | 11,257 | | | $ | 2,662 | | | $ | — | | | | $ | 34,325 | |
| Services | | Services | (25,750) | | | $ | 4,540 | | | $ | 1,668 | | | $ | 975 | | | $ | — | | | | $ | (18,567) | |
| Roofing | | Roofing | (6,150) | | | $ | 830 | | | $ | 127 | | | $ | 167 | | | $ | — | | | | $ | (5,026) | |
Other(c) | | Other(c) | (13,022) | | | $ | 2,572 | | | $ | — | | | $ | — | | | $ | — | | | | $ | (10,450) | |
| International | | International | (4,521) | | | $ | 123 | | | $ | 947 | | | $ | — | | | $ | — | | | | $ | (3,451) | |
| Search | Search | 30,011 | | | $ | — | | | $ | 20 | | | $ | — | | | $ | — | | | | $ | 30,031 | | Search | 25,079 | | | $ | — | | | $ | 21 | | | $ | — | | | $ | — | | | | $ | 25,100 | |
| Emerging & Other | Emerging & Other | (22,239) | | | $ | 25 | | | $ | 331 | | | $ | 9,620 | | | $ | 15,000 | | | | $ | 2,737 | | Emerging & Other | (5,044) | | | $ | 25 | | | $ | 403 | | | $ | 5,532 | | | $ | — | | | | $ | 916 | |
Corporate(k) | (31,948) | | | $ | 6,600 | | | $ | 2,216 | | | $ | — | | | $ | — | | | | $ | (23,132) | | |
Corporate(h) | | Corporate(h) | (38,647) | | | $ | 12,405 | | | $ | 2,548 | | | $ | — | | | $ | — | | | | $ | (23,694) | |
| Total | Total | (32,067) | | | | | | | | | | | | | Total | (108,814) | | | | | | | | | | | | |
| Interest expense | Interest expense | (6,032) | | | | | Interest expense | (21,912) | | | | |
| Unrealized gain on investment in MGM Resorts International | 29,517 | | | | | |
| Unrealized loss on investment in MGM Resorts International | | Unrealized loss on investment in MGM Resorts International | (187,330) | | | | |
| Other income, net | Other income, net | 79,539 | | | | | Other income, net | 6,699 | | | | |
| Earnings before income taxes | 70,957 | | | | | |
| Income tax provision | (9,910) | | | | | |
| Net earnings | 61,047 | | | | | |
| Net earnings attributable to noncontrolling interests | (357) | | | | | |
| Net earnings attributable to IAC shareholders | $ | 60,690 | | | | | |
| Loss before income taxes | | Loss before income taxes | (311,357) | | | | |
| Income tax benefit | | Income tax benefit | 70,464 | | | | |
| Net loss | | Net loss | (240,893) | | | | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | 5,095 | | | | |
| Net loss attributable to IAC shareholders | | Net loss attributable to IAC shareholders | $ | (235,798) | | | | |
NOTE 7—PENSION AND POSTRETIREMENT BENEFIT PLANS
The following table presents the components of net periodic benefit cost for the Dotdash Meredith pension and postretirement benefit plans:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
| Pension | | Postretirement | | Pension | | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| (In thousands) |
| Service cost | $ | 53 | | | $ | — | | | $ | 1 | | | $ | 982 | | | $ | — | | | $ | 2 | |
| Interest cost | 871 | | | 4,777 | | | 58 | | | 699 | | | 3,275 | | | 67 | |
| Expected return on plan assets | (501) | | | (4,771) | | | — | | | (1,578) | | | (4,624) | | | — | |
| | | | | | | | | | | |
| Actuarial loss recognition | 240 | | | — | | | — | | | 12,532 | | | 24,988 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net periodic benefit cost | $ | 663 | | | $ | 6 | | | $ | 59 | | | $ | 12,635 | | | $ | 23,639 | | | $ | 69 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2022 |
| | Operating (Loss) Income(g) | | Stock-based
Compensation
Expense | | Depreciation(g) | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | Goodwill Impairment | | Adjusted EBITDA(h)(i) |
| | (In thousands) |
| Dotdash Meredith | | | | | | | | | | | | | |
| Digital | $ | (95,217) | | | $ | 14,889 | | | $ | 21,004 | | | $ | 168,654 | | | $ | (612) | | | $ | — | | | $ | 108,718 | |
| Print | (31,109) | | | $ | 659 | | | $ | 8,010 | | | $ | 41,322 | | | $ | — | | | $ | — | | | $ | 18,882 | |
Other(f) | (52,924) | | | $ | 92 | | | $ | 4,126 | | | $ | — | | | $ | — | | | $ | — | | | $ | (48,706) | |
| Angi Inc. | (65,901) | | | $ | 38,778 | | | $ | 45,112 | | | $ | 11,413 | | | $ | — | | | $ | — | | | $ | 29,402 | |
| Search | 70,461 | | | $ | — | | | $ | 67 | | | $ | — | | | $ | — | | | $ | — | | | $ | 70,528 | |
| Emerging & Other | (114,402) | | | $ | 283 | | | $ | 993 | | | $ | 12,659 | | | $ | — | | | $ | 86,748 | | | $ | (13,719) | |
Corporate(k) | (110,542) | | | $ | 37,759 | | | $ | 7,543 | | | $ | — | | | $ | — | | | $ | — | | | $ | (65,240) | |
| Total | (399,634) | | | | | | | | | | | | | |
| Interest expense | (74,862) | | | | | | | | | | | | | |
| Unrealized loss on investment in MGM Resorts International | (970,112) | | | | | | | | | | | | | |
| Other expense, net | (63,048) | | | | | | | | | | | | | |
| Loss before income taxes | (1,507,656) | | | | | | | | | | | | | |
| Income tax benefit | 325,517 | | | | | | | | | | | | | |
| Net loss | (1,182,139) | | | | | | | | | | | | | |
| Net loss attributable to noncontrolling interests | 13,388 | | | | | | | | | | | | | |
| Net loss attributable to IAC shareholders | $ | (1,168,751) | | | | | | | | | | | | | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2021 |
| | Operating Income (Loss) | | Stock-based
Compensation
Expense | | Depreciation | | Amortization
of Intangibles | | Acquisition-related Contingent Consideration Fair Value Adjustments | | | | Adjusted EBITDA(h) |
| | (In thousands) |
| | | | | | | | | | | | | |
| Dotdash Meredith | $ | 44,383 | | | $ | — | | | $ | 1,706 | | | $ | 2,584 | | | $ | — | | | | | $ | 48,673 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Angi Inc. | (47,595) | | | $ | 20,390 | | | $ | 45,728 | | | $ | 12,616 | | | $ | — | | | | | $ | 31,139 | |
| Search | 74,059 | | | $ | — | | | $ | 28 | | | $ | — | | | $ | — | | | | | $ | 74,087 | |
| Emerging & Other | (23,946) | | | $ | 75 | | | $ | 1,121 | | | $ | 29,342 | | | $ | 15,000 | | | | | $ | 21,592 | |
Corporate(k) | (114,618) | | | $ | 37,339 | | | $ | 5,510 | | | $ | — | | | $ | — | | | | | $ | (71,769) | |
| Total | (67,717) | | | | | | | | | | | | | |
| Interest expense | (18,463) | | | | | | | | | | | | | |
| Unrealized gain on investment in MGM Resorts International | 687,155 | | | | | | | | | | | | | |
| Other income, net | 133,388 | | | | | | | | | | | | | |
| Earnings from continuing operations before income taxes | 734,363 | | | | | | | | | | | | | |
| Income tax provision | (151,046) | | | | | | | | | | | | | |
| Net earnings from continuing operations | 583,317 | | | | | | | | | | | | | |
| Loss from discontinued operations, net of tax | (1,831) | | | | | | | | | | | | | |
| Net earnings | 581,486 | | | | | | | | | | | | | |
| Net loss attributable to noncontrolling interests | 3,089 | | | | | | | | | | | | | |
| Net earnings attributable to IAC shareholders | $ | 584,575 | | | | | | | | | | | | | |
NOTE 9—PENSION AND POSTRETIREMENT BENEFIT PLANS
The following table presents the components of net periodic benefit costs for the pension and postretirement benefit plans in the Company assumedU.S. The actuarial loss of $0.2 million was the result of an adjustment in connection with the acquisition of Meredith:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
| Pension | | Postretirement | | Pension | | Postretirement |
| Domestic | | International | | Domestic | | Domestic | | International | | Domestic |
| (In thousands) |
| Service cost | $ | 877 | | | $ | — | | | $ | 2 | | | $ | 2,766 | | | $ | — | | | $ | 5 | |
| Interest cost | 1,267 | | | 3,999 | | | 66 | | | 3,154 | | | 11,073 | | | 200 | |
| Expected return on plan assets | (308) | | | (4,252) | | | — | | | (2,484) | | | (12,668) | | | — | |
| Actuarial (gain) loss recognition | (2,643) | | | — | | | — | | | 7,490 | | | 68,552 | | | — | |
| Net periodic (credit) benefit costs | $ | (807) | | | $ | (253) | | | $ | 68 | | | $ | 10,926 | | | $ | 66,957 | | | $ | 205 | |
Settlements during the three and nine months ended September 30,March 31, 2022 triggered remeasurementsa remeasurement of Meredith'sthe funded pension planplans in the United Kingdom ("U.K.") and U.S. The U.S. actuarial gain of $2.6 million for the three months ended September 30, 2022 primarily relates to assumption changes due to increases in the discount rate and updates to participant census data. The U.S.U.K. actuarial loss of $7.5$25.0 million for the nine months ended September 30, 2022 primarily relates to the decline in the fair value of the U.K. pension plan's assets exceeding the decline in the plan liabilities, partially offset by the gain related to an annuity contract revaluation in the second quarter of 2022 and the gain in the third quarter of 2022 described above.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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. As the plan amendment had not been executed as of the September 30, 2022 plan measurement date, the assumptions were developed on an ongoing plan basis. The amendment is expected to be fully executed in the fourth quarter of 2022, which will trigger a re-measurement loss at December 31, 2022 equal to the amount of cost expected to be incurred to settle the benefit obligations in excess of plan assets. The Company is evaluating the amount of the loss and the date all obligations will be settled.
Settlements in the first and second quarter of 2022 triggered remeasurements of Meredith's funded pension plan in the United Kingdom ("U.K."), consisting of the IPC Pension Scheme. The actuarial loss of $68.6 million for the nine months ended September 30, 2022 primarily relates to the decline in the fair value of the IPC Pension Scheme's assets exceeding the decline in the plan liabilities, in each case due to higher interest rates.
On July 28, 2022, following approval by the trustees of Dotdash Meredith's IPC Pension Scheme, the IPC Pension Scheme entered into an insurance buy-in contract with a private limited life insurance company to insure the remaining portion of the IPC Pension Scheme covering all IPC Pension Scheme participants who were not covered by the insurance buy-in contract entered into in May 2020. The insurance contract is designed to provide payments equal to all future designated contractual benefit payments to covered participants. The benefit obligation was not transferred to the insurer, and Dotdash Meredith remains responsible for paying pension benefits to the IPC Pension Scheme participants.
As a result of this transaction, the IPC Pension Scheme incurred anU.S. actuarial loss of approximately £110$12.5 million or $119 million based onwas primarily due to the September 30, 2022 exchange rate. The net assets of the IPC Pension Scheme are included in "Other non-current assets" on the balance sheet, and at September 30, 2022 were $130.7 million. As the IPC Pension Scheme did not require remeasurement for the quarter ended September 30, 2022, the actuarial loss will be recordeddecline in the quarter ending December 31, 2022 as an expense within "Other income (expense), net" in the statement of operations. In addition, we will be refining the estimate of the actuarial loss.
Following this transaction, the IPC Pension Scheme owns two insurance contracts that are intended to insure 100% of the future designated contractual benefit payments to all covered participants. Thefair value of the annuity contracts and the liabilities with respect to insured participants are expected to match (i.e., the full benefits have been insured). As mentioned above, the benefit obligation was not transferred to the insurer, and Dotdash Meredith remains responsible for paying IPC Pension Scheme pension benefits. While Dotdash Meredith 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.plan assets.
The following table summarizes the weighted average expected return on plan assets used to determine the net periodic benefit costs at September 30, 2022,March 31, 2023, following the remeasurements during the nine months ended September 30, 2022,remeasurement, and December 31, 2021,2022, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| Pension |
| Domestic | | International | | Domestic | | International |
| Expected return on plan assets | 3.15 | % | | 2.20 | % | | 6.00 | % | | 1.90 | % |
| | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Pension |
| Domestic | | | | Domestic | | |
| Expected return on plan assets | 4.31 | % | | | | 2.80 | % | | |
The components of net periodic benefit costs, other than the service cost component, are included in "Other income, (expense), net" in the statement of operations.
NOTE 10—8—INCOME TAXES
At the end of each interim period, the Company estimates the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the Company's tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision or benefit in the quarter in which the change occurs. Included in the income tax benefit for
For the three months ended September 30, 2022 was a benefit of $3.7 million due to a higher estimated annual effective tax rate from that applied to the second quarter’s year to date ordinary loss from continuing operations. The higher estimated annual effective rate was primarily due to the reduced impact that forecasted nondeductible stock-based compensation expense had on the increase in forecasted ordinary pre-tax losses.
For the three and nine months ended September 30, 2022,March 31, 2023, the Company recorded an income tax benefitprovision of $26.1$139.5 million, and $325.5 million, respectively, which represents an effective income tax rate of 28% and 22%25%, respectively. For the three months ended September 30, 2022, the effective income tax rate was higher than the statutory rate of 21% due primarily to the realization of a capital loss. For the nine months ended September 30, 2022, the effective income tax rate waswhich is higher than the statutory rate of 21% due primarily to state taxes and nondeductible compensation expense, partially offset by the non-deductible portion of the Mosaic Group goodwill impairment charge.research credits. For the three and nine months ended September 30, 2021,March 31, 2022, the Company recorded an income tax provisionbenefit of $9.9 million and $151.0$70.5 million, which represents an effective income tax rate of 14% and 21%23%, respectively. For the three months ended September 30, 2021, the effective tax rate was lowerwhich is higher than the statutory rate of 21% due primarily to state taxes and excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by state taxes, nondeductible stock-based compensation expense, and foreign income taxed at different rates. For the nine months ended September 30, 2021, the effective income tax rate was the same as the statutory rate of 21% due to excess tax benefits generated by the exercise and vesting of stock-based awards, offset by an increase in the valuation allowance on beginning-of-the-year deferred tax assets related to the Spin-off and state taxes.expense.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals for interest and penalties are not material.
On December 19, 2019, IAC/InterActiveCorp ("Old IAC") entered into a transaction agreement with Match Group, Inc. ("Old MTCH"),
IAC Holdings, Inc. ("New IAC" or the "Company"), a direct wholly-owned subsidiary of Old IAC, and Valentine Merger Sub LLC, an indirect wholly-owned subsidiary of Old IAC. On June 30, 2020, the businesses of Old MTCH were separated from the remaining businesses of Old IAC through a series of transactions that resulted in the pre-transaction stockholders of Old IAC owning shares in two, separate public companies—(1) Old IAC, which was renamed Match Group, Inc. ("New Match") and which owns the businesses of Old MTCH and certain Old IAC financing subsidiaries, and (2) New IAC, which was renamed IAC, 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."INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company isCompany's income taxes are 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 Oldfor periods prior to the June 30, 2020 separation of IAC from Match Group (the "Match Separation") and for its tax returns filed on a standalone basis following the MTCHMatch 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’sthe 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, 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 INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At September 30, 2022March 31, 2023 and December 31, 2021,2022, unrecognized tax benefits, including interest and penalties, are $18.2were $17.4 million and $18.0$16.6 million, respectively. Unrecognized tax benefits, including interest and penalties, at September 30, 2022March 31, 2023 increased by $0.2$0.8 million due primarily to research credits, partially offset by a reduction in foreign reserves.settlements. If unrecognized tax benefits at September 30, 2022March 31, 2023 are subsequently recognized, $17.1$16.2 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount at December 31, 20212022 was $16.7$15.4 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $5.0$0.6 million by September 30, 2023March 31, 2024 due to expected settlements of which $4.9$0.5 million would reduce the income tax provision.
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 September 30, 2022,March 31, 2023, the Company has a U.S. gross deferred tax asset of $889.6$816.4 million that the Company expects to fully utilize on a more likely than not basis. Of this amount, $799.9$641.7 million will be utilized upon the future reversal of deferred tax liabilities and the remaining net deferred tax asset of $89.7$174.7 million will be utilized based on forecasts of future taxable income. The Company’sCompany's most significant net deferred tax asset that could expire relates to U.S. federal net operating loss (“NOL”("NOL") carryforwards of $91.2$40.4 million. The Company expects to generate sufficient future taxable income of at least $434.1$192.6 million prior to the expiration of these NOLs, the majority of which expire between 20292033 and 2036, to fully realize this deferred tax asset.
NOTE 11—9—EARNINGS (LOSS) EARNINGS PER SHARE
The Company treats its common stock and Class B common stock as one class of stock for net earnings (loss) earnings per share ("EPS") purposes as both classes of stock participate in earnings, dividends and other distributions on the same basis. The restricted stock award ("the CEO award") granted to our Chief Executive Officer ("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.restricted stock award granted to our CEO.
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 earnings (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 earnings (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.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The numerator and denominator of basic and diluted EPS computations for the Company’s common stock and Class B common stock are calculated as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In thousands, except per share data) |
| Basic EPS: | | | | | | | |
| Numerator: | | | | | | | |
| Net (loss) earnings from continuing operations | $ | (65,847) | | | $ | 61,047 | | | $ | (1,182,139) | | | $ | 583,317 | |
| Net loss (earnings) attributable to noncontrolling interests of continuing operations | 2,024 | | | (357) | | | 13,388 | | | 3,275 | |
| Net earnings attributed to unvested participating security | — | | | (2,040) | | | — | | | (19,749) | |
| Net (loss) earnings from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | $ | (63,823) | | | $ | 58,650 | | | $ | (1,168,751) | | | $ | 566,843 | |
| | | | | | | |
| Loss from discontinued operations, net of tax | $ | — | | | $ | — | | | $ | — | | | $ | (1,831) | |
| Net earnings attributable to noncontrolling interests of discontinued operations | — | | | — | | | — | | | (186) | |
| Net loss attributed to unvested participating security | — | | | — | | | — | | | 68 | |
| Net loss from discontinued operations attributable to IAC Common Stock and Class B common stock shareholders | $ | — | | | $ | — | | | $ | — | | | $ | (1,949) | |
| | | | | | | |
| Net (loss) earnings attributable to IAC Common Stock and Class B common stock shareholders | $ | (63,823) | | | $ | 58,650 | | | $ | (1,168,751) | | | $ | 564,894 | |
| | | | | | | |
| Denominator: | | | | | | | |
Weighted average basic IAC Common Stock and Class B common stock shares outstanding(a) | 86,022 | | | 86,258 | | | 86,515 | | | 86,106 | |
| | | | | | | |
| (Loss) earnings per share: | | | | | | | |
| (Loss) earnings per share from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | $ | (0.74) | | | $ | 0.68 | | | $ | (13.51) | | | $ | 6.58 | |
| Loss per share from discontinued operations, net of tax, attributable to IAC Common Stock and Class B common stock shareholders | $ | — | | | $ | — | | | $ | — | | | $ | (0.02) | |
| (Loss) earnings per share attributable to IAC Common Stock and Class B common stock shareholders | $ | (0.74) | | | $ | 0.68 | | | $ | (13.51) | | | $ | 6.56 | |
| | | | | | | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| | | | | (In thousands, except per share data) |
| Basic EPS: | | | | | | | |
| Numerator: | | | | | | | |
| Net earnings (loss) | | | | | $ | 415,319 | | | $ | (240,893) | |
| Net loss attributable to noncontrolling interests | | | | | 2,456 | | | 5,095 | |
| Net earnings attributed to unvested participating security | | | | | (14,156) | | | — | |
| Net earnings (loss) attributable to IAC common stock and Class B common stock shareholders | | | | | $ | 403,619 | | | $ | (235,798) | |
| | | | | | | |
| Denominator: | | | | | | | |
Weighted average basic IAC common stock and Class B common stock shares outstanding(a) | | | | | 85,534 | | | 86,784 | |
| | | | | | | |
| Earnings (loss) per share attributable to IAC common stock and Class B common stock shareholders: | | | | | | | |
| Earnings (loss) per share | | | | | $ | 4.72 | | | $ | (2.72) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In thousands, except per share data) |
| Diluted EPS: | | | | | | | |
| Numerator: | | | | | | | |
| Net (loss) earnings from continuing operations | $ | (65,847) | | | $ | 61,047 | | | $ | (1,182,139) | | | $ | 583,317 | |
| Net loss (earnings) attributable to noncontrolling interests of continuing operations | 2,024 | | | (357) | | | 13,388 | | | 3,275 | |
| Net earnings attributed to unvested participating security | — | | | (1,938) | | | — | | | (18,494) | |
Impact from public subsidiaries' dilutive securities(b) | — | | | 91 | | | — | | | 245 | |
| Net (loss) earnings from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | $ | (63,823) | | | $ | 58,843 | | | $ | (1,168,751) | | | $ | 568,343 | |
| | | | | | | |
| Loss from discontinued operations, net of tax | $ | — | | | $ | — | | | $ | — | | | $ | (1,831) | |
| Net earnings attributable to noncontrolling interests of discontinued operations | — | | | — | | | — | | | (186) | |
| Net loss attributed to unvested participating security | — | | | — | | | — | | | 64 | |
| Net loss from discontinued operations attributable to IAC Common Stock and Class B common stock shareholders | $ | — | | | $ | — | | | $ | — | | | $ | (1,953) | |
| | | | | | | |
| Net (loss) earnings attributable to IAC Common Stock and Class B common stock shareholders | $ | (63,823) | | | $ | 58,843 | | | $ | (1,168,751) | | | $ | 566,390 | |
| | | | | | | |
| Denominator: | | | | | | | |
Weighted average basic IAC Common Stock and Class B common stock shares outstanding(a) | 86,022 | | | 86,258 | | | 86,515 | | | 86,106 | |
Dilutive securities(b)(c)(d) | — | | | 4,818 | | | — | | | 6,089 | |
Denominator for earnings per share—weighted average shares(b)(c)(d) | 86,022 | | | 91,076 | | | 86,515 | | | 92,195 | |
| | | | | | | |
| (Loss) earnings per share: | | | | | | | |
| (Loss) earnings per share from continuing operations attributable to IAC Common Stock and Class B common stock shareholders | $ | (0.74) | | | $ | 0.65 | | | $ | (13.51) | | | $ | 6.16 | |
| Loss per share from discontinued operations, net of tax, attributable to IAC Common Stock and Class B common stock shareholders | $ | — | | | $ | — | | | $ | — | | | $ | (0.02) | |
| (Loss) earnings per share attributable to IAC Common Stock and Class B common stock shareholders | $ | (0.74) | | | $ | 0.65 | | | $ | (13.51) | | | $ | 6.14 | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
| | | | | (In thousands, except per share data) |
| Diluted EPS: | | | | | | | |
| Numerator: | | | | | | | |
| Net earnings (loss) | | | | | $ | 415,319 | | | $ | (240,893) | |
| Net loss attributable to noncontrolling interests | | | | | 2,456 | | | 5,095 | |
| Net earnings attributed to unvested participating security | | | | | (13,720) | | | — | |
Impact from public subsidiaries' dilutive securities(b) | | | | | — | | | — | |
| Net earnings (loss) attributable to IAC common stock and Class B common stock shareholders | | | | | $ | 404,055 | | | $ | (235,798) | |
| | | | | | | |
| Denominator: | | | | | | | |
Weighted average basic IAC common stock and Class B common stock shares outstanding(a) | | | | | 85,534 | | | 86,784 | |
Dilutive securities(b)(c)(d) | | | | | 2,819 | | | — | |
Denominator for earnings per share—weighted average shares(b)(c)(d) | | | | | 88,353 | | | 86,784 | |
| | | | | | | |
| Earnings (loss) per share attributable to IAC common stock and Class B common stock shareholders: | | | | | | | |
| Earnings (loss) per share | | | | | $ | 4.57 | | | $ | (2.72) | |
_____________________
(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. The impact on net earnings relates to the settlement of Angi Inc.'s dilutive securities in IAC common shares. For the three and nine months ended September 30,March 31, 2023, these Angi Inc. equity awards were anti-dilutive. For the three months ended March 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 three and nine months ended September 30, 2021 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.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(c)For the three and nine months ended September 30, 2022, the Company had a loss from continuing operations and, as a result, approximately 8.0 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 three and nine months ended September 30, 2022.
(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 and restricted stock units ("RSUs") and market-based awards ("MSUs"). For both the three and nine months ended September 30, 2021, 3.0March 31, 2023, 3.3 million potentially dilutive securities related to the CEO award were excluded from the calculation ofcomputing diluted EPS because their inclusionthe impact would have been anti-dilutive.
NOTE 12—DISCONTINUED OPERATIONS
On May 25, 2021, IAC completed(d) For the Spin-off. Followingthree months ended March 31, 2022, the Spin-off, Vimeo became an independent, separately traded public company. Therefore, Vimeo is presentedCompany had a loss from operations and, as a discontinued operation within IAC's financial statements for all periods priorresult, approximately 7.8 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 May 25, 2021.
The components ofcompute the loss from discontinued operationsEPS amounts for the period January 1, 2021 through May 25, 2021 in the statement of operations consisted of the following:three months ended March 31, 2022.
| | | | | |
| January 1 through May 25, 2021
|
| (In thousands) |
Revenue | $ | 145,514 | |
Operating costs and expenses: | |
Cost of revenue (exclusive of depreciation shown separately below) | 39,995 | |
Selling and marketing expense | 54,774 | |
General and administrative expense | 23,343 | |
Product development expense | 35,651 | |
Depreciation | 182 | |
Amortization of intangibles | 2,983 | |
Total operating costs and expenses | 156,928 | |
Operating loss from discontinued operations | (11,414) | |
Interest expense | (140) | |
Other income, net | 10,172 | |
Loss from discontinued operations before tax | (1,382) | |
Income tax expense | (449) | |
Loss from discontinued operations, net of tax | $ | (1,831) | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 13—10—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:
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 | | March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
| | (In thousands) | | (In thousands) |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,607,384 | | | $ | 2,118,730 | | | $ | 3,404,913 | | | $ | 3,366,176 | | Cash and cash equivalents | $ | 1,398,836 | | | $ | 1,417,390 | | | $ | 1,852,598 | | | $ | 2,118,730 | |
| Restricted cash included in other current assets | Restricted cash included in other current assets | 2,872 | | | 1,941 | | | 14,027 | | | 448 | | Restricted cash included in other current assets | 1,081 | | | 1,165 | | | 21,183 | | | 1,941 | |
| Restricted cash included in other non-current assets | Restricted cash included in other non-current assets | 6,815 | | | 1,193 | | | 1,217 | | | 449 | | Restricted cash included in other non-current assets | 7,640 | | | 7,514 | | | 885 | | | 1,193 | |
| Cash, cash equivalents, and restricted cash included in current assets of discontinued operations | — | | | — | | | — | | | 110,037 | | |
| | Total cash and cash equivalents and restricted cash as shown on the statement of cash flows | Total cash and cash equivalents and restricted cash as shown on the statement of cash flows | $ | 1,617,071 | | | $ | 2,121,864 | | | $ | 3,420,157 | | | $ | 3,477,110 | | Total cash and cash equivalents and restricted cash as shown on the statement of cash flows | $ | 1,407,557 | | | $ | 1,426,069 | | | $ | 1,874,666 | | | $ | 2,121,864 | |
Restricted cash included in "Other current assets" in the balance sheet at September 30,March 31, 2023 and December 31, 2022 primarily consists of cash held related to insurance programs at BluecrewCare.com.
Restricted cash included in "Other current assets" in the balance sheet at March 31, 2022 primarily consists of cash received from Care.com’s payment solutions customers for payroll and Care.com.related taxes, which were remitted subsequent to period end, and cash held in escrow related to the funded pension plan in the U.K.
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 the Company assumed in connection with the acquisition of Meredith.
Restricted cash included in "Other current assets"funded pension plan in the balance sheet at September 30, 2021 primarily consists of cash received from customers at Care.com’s payment solutions business, representing funds collected for payroll and related taxes, which were not remitted as of the period end.
Restricted cash included in "Other current assets" 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.U.K.
Restricted cash included in "Other non-current assets" in the balance sheet at September 30,March 31, 2023 and December 31, 2022 primarily consists of cash held in escrow related to the IPC Pension Schemefunded pension plan in the Company assumed in connection with the acquisition of MeredithU.K as well as a check endorsement guarantee at the Roofing segment and deposits related to leases and an endorsement guarantee related to insurance at Angi Roofing.leases.
Restricted cash included in "Other non-current assets" in the balance sheet at March 31, 2022 and December 31, 2021 consists ofinclude deposits related to leases and ana check endorsement guarantee related to insurance at Angi Roofing. Restricted cash included in "Other non-current assets" in the balance sheet for all other periods presented consists of deposits related to leases.Roofing segment.
Credit Losses
The following table presents the changes in the allowance for credit losses for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively:
| | | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In thousands) | | (In thousands) |
| Balance at January 1 | Balance at January 1 | $ | 36,637 | | | $ | 27,178 | | Balance at January 1 | $ | 50,971 | | | $ | 36,556 | |
| Current period provision for credit losses | Current period provision for credit losses | 87,657 | | | 66,428 | | Current period provision for credit losses | 24,826 | | | 23,287 | |
| Write-offs charged against the allowance | Write-offs charged against the allowance | (73,807) | | | (55,942) | | Write-offs charged against the allowance | (29,308) | | | (20,518) | |
| Recoveries collected | Recoveries collected | 4,152 | | | 1,896 | | Recoveries collected | 1,489 | | | — | |
| Balance at September 30 | $ | 54,639 | | | $ | 39,560 | | |
| Other | | Other | (466) | | | 216 | |
| Balance at March 31 | | Balance at March 31 | $ | 47,512 | | | $ | 39,541 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Accumulated Amortization and Depreciation
The following table provides the accumulated amortization and depreciation within the balance sheet:
| | Asset Category | Asset Category | September 30, 2022 | | December 31, 2021 | Asset Category | March 31, 2023 | | December 31, 2022 |
| | | (In thousands) | | (In thousands) |
| ROU assets included in other non-current assets | $ | 129,487 | | | $ | 87,052 | | |
| Right-of-use assets included in other non-current assets | | Right-of-use assets included in other non-current assets | $ | 216,264 | | | $ | 157,650 | |
| Capitalized software, equipment, buildings and leasehold improvements | Capitalized software, equipment, buildings and leasehold improvements | $ | 276,822 | | | $ | 496,887 | | Capitalized software, equipment, buildings and leasehold improvements | $ | 295,702 | | | $ | 274,473 | |
| Intangible assets | Intangible assets | $ | 507,797 | | | $ | 278,831 | | Intangible assets | $ | 636,829 | | | $ | 582,063 | |
Other income, (expense), net
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (In thousands) |
| Realized gain related to the sale of investments | $ | 11,840 | | | $ | 3,022 | | | $ | 12,302 | | | $ | 3,103 | |
| Interest income | 8,778 | | | 216 | | | 11,918 | | | 931 | |
| Unrealized increase in the estimated fair value of a warrant | 8,467 | | | 47,075 | | | 21,318 | | | 102,331 | |
| Upward (downward) adjustments to the carrying value of equity securities without readily determinable fair values | 8,245 | | | 7,516 | | | (14,131) | | | 8,892 | |
Net periodic pension benefit credits (costs), other than the service cost component(a) | 1,871 | | | — | | | (75,317) | | | — | |
| Unrealized (loss) gain related to marketable equity securities | (13,972) | | | 25,794 | | | (8,316) | | | 25,794 | |
Foreign exchange losses, net(b) | (5,196) | | | (858) | | | (11,425) | | | (11,976) | |
| Realized (loss) gain on the sale of a marketable equity security | — | | | (3,536) | | | — | | | 7,174 | |
Loss on extinguishment of debt(c) | — | | | — | | | — | | | (1,110) | |
| Other | (355) | | | 310 | | | 603 | | | (1,751) | |
| Other income (expense), net | $ | 19,678 | | | $ | 79,539 | | | $ | (63,048) | | | $ | 133,388 | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 |
| | | | | | (In thousands) |
| Interest income | | | | | $ | 16,930 | | | $ | 698 | |
| Unrealized increase in the estimated fair value of a warrant | | | | | 5,940 | | | 7,985 | |
| | | | | | | |
| | | | | | | |
| Unrealized (loss) gain related to marketable equity securities | | | | | (1,150) | | | 34,352 | |
Net periodic pension benefit costs, other than the service cost component (a) | | | | | (674) | | | (35,359) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other | | | | | 2,703 | | | (977) | |
| Other income, net | | | | | $ | 23,749 | | | $ | 6,699 | |
_____________________
(a) Includes a pre-tax actuarial gainlosses of $2.6$0.2 million for the three months ended September 30, 2022March 31, 2023 related to Meredith's fundedthe pension planplans in the U.S. and a pre-tax actuarial loss of $76.1$37.5 million for the ninethree months ended September 30,March 31, 2022 related to Meredith'sthe funded pension plans in the U.K., consisting of the IPC Pension Scheme, and the U.S. See "Note 9—7—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 nine months ended September 30, 2021.
(c) 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 FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 14—11—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes accruals for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where the Company believes an unfavorable outcome is not probable and, therefore, no accrual is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. The Company also evaluates other contingent matters, including 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 10—8—Income Taxes" for additional information related to uncertain income tax contingencies.positions. NOTE 15—12—RELATED PARTY TRANSACTIONS
IAC and Angi Inc.
Allocation of CEO Compensation and Certain Expenses
Joseph Levin, CEO of IAC and Chairman of Angi Inc., was appointed CEO of Angi Inc on October 10, 2022. As a result, for the three months ended March 31, 2023, IAC allocated $2.3 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 allocated costs also include costs directly attributable to Angi Inc. that were initially paid for by IAC and billed by IAC to Angi Inc.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 "Combination", entered into a contribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement.
There were no shares of Angi Inc. Class A or Class B common stock issued to IAC pursuant to the employee matters agreement during the three and nine months ended September 30, 2022. During 2022, there have been no IAC equity awards held by Angi Inc. employees exercised or vested, and no exercises and settlements of Angi Inc. stock appreciation rights, that would require reimbursement to IAC in Angi Inc. Class A and Class B common stock.
For the three and nine months ended September 30, 2021, less than 0.1 million and 2.6 million shares, respectively, of Angi Inc. Class A common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for IAC common stock issued in connection with the exercise and settlement of certain Angi Inc. stock appreciation rights.
For the three and nine months ended September 30, 2021, less than 0.1 million and 0.2 million shares, respectively, of Angi Inc. Class B common stock were issued to a subsidiary of the Company pursuant to the employee matters agreement as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by Angi Inc. employees.
IAC and Vimeo Inc. ("Vimeo")
Following the Spin-off,spin-off of Vimeo from IAC, the relationship between IAC and Vimeo is governed by a number of agreements. Theseseveral agreements, which include a separation agreement;agreement, a tax matters agreement;agreement, a transition services agreement;agreement, an employee matters agreement;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.
At September 30, 2022The Company has an outstanding receivable of $0.8 million at both March 31, 2023 and December 31, 2021, Vimeo had no outstanding payables or receivables2022 due to or due from the Company pursuant to the tax sharing agreement. There were no payments to or refunds from Vimeo pursuant to this agreement for the three and nine months ended September 30, 2022,separation agreement. This amount is included in "Other current assets" in the balance sheet.
For the three months ended September 30, 2021March 31, 2023 and for the period following the Spin-off of May 25, 2021 through September 30, 2021.
For the three and nine months ended September 30, 2022, Vimeo was charged less than $0.1 million and $0.3$0.1 million, respectively, by IAC for services rendered pursuant to the transition services agreement. For the three months ended September 30, 2021 and for the period following the Spin-off of May 25, 2021 through September 30, 2021, Vimeo was charged $0.4 million and $0.6 million, respectively, by IAC for services rendered pursuant to the transition service agreement. At September 30, 2022March 31, 2023 and December 31, 2021,2022, there were no outstanding receivables or payables pursuant to the transition services agreement.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 the exercise of Vimeo equity awards held by employees of the Company and 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. At September 30, 2022, Vimeo had no outstanding payable due to the Company.
For the three and nine months ended September 30, 2022, Vimeo was charged $0.7 million and $3.7 million, respectively, of rent pursuant to the lease agreements. For the three months ended September 30, 2021March 31, 2023 and for the period following the Spin-off of May 25, 2021 through September 30, 2021,2022, Vimeo was charged $1.1$0.9 million and $1.5$1.6 million, respectively, of rent pursuant to the lease agreements. At September 30, 2022, Vimeo hadMarch 31, 2023, the Company has an outstanding payablereceivable of $0.1 million due to the Company of $0.2 millionfrom Vimeo pursuant to the lease agreements. This amount is included in "Other currentnon-current assets" in the balance sheet at September 30, 2022 and is expected to be paid in the fourth quarter of 2022.sheet. At December 31, 2021,2022, there were no outstanding receivables due from Vimeo pursuant to the lease agreements.
IAC and Expedia
TheAt March 31, 2023, the Company and Expedia each havehad a 50% ownership interest in threetwo aircraft that may be used by both companies. Members of the aircraft flight crews are employed by an entity in which the Company and Expedia each have a 50% ownership interest. The Company and Expedia have agreed to share costs relating to flight crew compensation and benefits pro-rata according to each company’s respective usage of the aircraft, for which they are separately billed by the entity described above. The Company and Expedia are related parties because Mr. Diller serves as Chairman and Senior Executive of both IAC and Expedia. For the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, total payments made to this entity by the Company were not material.
In addition, in December 2021, the Company and Expedia entered into agreements pursuant to which Expedia may use additionalcertain aircraft owned 100% by a subsidiary of the Company on a cost basis. For the three and nine months ended September 30,March 31, 2023 and 2022, totalthe payments made by Expedia to the Company pursuant to this arrangement were not material.
NOTE 16—13—SUBSEQUENT EVENTEVENTS
On November 9, 2022,In April 2023, the Company completed the saleacquisition of Bluecrew, which is included in the Emerging & Other segment, to EmployBridge,formerly leased land under its New York City headquarters building for a providerpurchase price of light industrial staffing solutions, for cash and stock with$80.0 million.
In April 2023, the Company becomingpurchased additional shares of Turo for $103.6 million. Following the purchase, IAC's aggregate percentage ownership in Turo is approximately 31%.
From April 1, 2023 through May 5, 2023, IAC repurchased 1.3 million shares of its common stock, on a minority shareholdertrade date basis, at an average price of $50.47 per share, or $67.2 million in the combined company.aggregate. At May 5, 2023, IAC has 3.8 million shares remaining in its share repurchase authorization.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
GENERAL
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, referred to herein as "IAC"), completed the acquisition of Meredith Holdings Corporation ("Meredith"), which holds Meredith Corporation's national media business, consisting of 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 IAC's financial statements for all periods prior to May 25, 2021.
Management Overview
IAC today is comprisedconsists of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, as well as a number of other businessesothers ranging from early stage to established.established businesses.
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).
For a more detailed description of the Company's operating businesses, see "Description of IAC Businesses" included in "Item 1—Business" to the Company's Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Defined Terms and Operating Metrics:
Unless otherwise indicated or as the context otherwise requires, certain terms used in this quarterly report, which include the principal operating metrics we use in managing our business, are defined below:
•Dotdash Meredith - 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. - 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. In the fourth quarter of 2022, the Angi Inc. segment presentation was changed to reflect its four operating segments, which include: (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (consisting of businesses in Europe and Canada). Angi Inc.'s financial information for the first quarter of 2022 has been recast to conform to the current period presentation. At September 30, 2022,March 31, 2023, the Company’s economic interest and voting interest in Angi Inc. were 84.3%83.9% and 98.2%98.1%, respectively.
•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:
•Care.com, a 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's brands include Care For Business, Care.com offerings to enterprises and HomePay;
•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, GrammaticaSpeak & Translate), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero), Health (Window - Intermittent Fasting) and Lifestyle (Blossom, Pixomatic); and
•Bluecrew, Vivian Health, The Daily Beast, IAC Films, and Newco (an IAC incubator) and, for periods prior to its sale on November 9, 2022, Bluecrew.
Dotdash Meredith
•Digital Revenue -consists principally of display includes advertising revenue, performance marketing revenue and licensing and other revenue.
◦Dotdash Display Advertising Revenue revenue- primarily includes revenue generated from display advertisements sold both directly through our sales team and via programmatic exchanges.
•◦Dotdash Performance Marketing Revenue marketing revenue- primarily includes revenue generated through affiliate commerce, affinity marketing channels and performance marketing commissionscommissions. Affiliate commerce commission revenue is generated when consumers are directed from our propertiesDotdash Meredith refers users to third-party service providers. Affiliate commerce commissions are generated when a consumer completespartner websites resulting in a purchase or transaction. Affinity marketing programs market and place magazine subscriptions for both Dotdash Meredith and third-party publisher titles. Performance marketing commissions are generated on a cost-per-click or cost-per-action basis.
◦Licensing and Other revenue - primarily includes revenue generated through brand and content licensing agreements. Brand licensing generates royalties from multiple long-term trademark licensing agreements with retailers, manufacturers, publishers and service providers. Content licensing royalties are earned from our relationship with Apple News + as well as other content distribution relationships.
•Print Revenue - primarily includes subscription, advertising, newsstand advertising and performance marketing revenue.
Angi Inc.
•Angi 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.
•Angi Services Revenue - primarily reflects domestic revenue from pre-priced offerings by which consumers request services through an Angi Inc. platform and Angi Inc. connects them with a service professional to perform the service. From January 1, 2020 through December 31, 2022, Services recorded revenue on a gross basis. Effective January 1, 2023, Angi Inc. modified the Services terms and conditions so that the service professional, rather than Angi Inc., has the contractual relationship with the consumer to deliver the service and Angi Inc.'s performance obligation to the consumer is to connect them with the service professional. This change in contractual terms requires revenue be reported as the net amount of what is received from the consumer after deducting the amounts owed to the service professional providing the service effective for all arrangements entered into after December 31, 2022. This change in accounting treatment resulted in a decrease in revenue of $25.7 million for the three months ended March 31, 2023. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition.
•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 and includes revenue from Total Home Roofing, Inc. ("Angi Roofing"), which was acquired on July 1, 2021.service.
•Angi Service Requests ("Service Requests")International Revenue - are fully completed primarily reflects revenue generated within the International segment (consisting of businesses in Europe and submitted domestic customerCanada), including consumer connection revenue for consumer matches and membership subscription revenue from service requestsprofessionals and includes Angi Services requests in the period.consumers.
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 (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 Angi Services arrangements that were entered into prior to January 1, 2023 and the change to net revenue reporting, compensation expense (including stock-based compensation expense) and other employee-related costs, roofing material and third-party contactor costs associated with Angi Roofing arrangements, credit card processing fees, payments made to workers staffed by Bluecrew for periods prior to its sale on November 9, 2022, hosting fees and payments made to care providers for Care For Business.
•Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to search engines, social media sites, other online marketing platforms, app platforms and partner-related payments to those who direct traffic to the brands within our Angi Inc. segment, offline marketing, which is primarily television advertising, compensation expense (including stock-based compensation expense) and other employee-related costs for sales force and marketing personnel, subscription acquisition costs related to Dotdash Meredith, and outsourced personnel and consulting costs.costs and service guarantee expense at Angi Inc.
•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 Care.com, which includes customer service costs within "Cost of revenue" in the statement of operations), fees for professional services (including transaction-related costs related to the acquisition of Meredith the Spin-offHoldings Corporation ("Meredith") and other acquisitions and dispositions)acquisitions), 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 Angi 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 contractor 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 changesChanges in the estimated fair value of the contingent consideration arrangements are recognized 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 statement of operations.
•Dotdash Meredith Term Loan A - due December 1, 2026. TheAt March 31, 2023 and December 31, 2022, the outstanding balance of the Dotdash Meredith Term Loan A is $336.9was $328.1 million and $350.0$332.5 million, at September 30, 2022 and December 31, 2021, respectively, and bore interest at an adjusted term secured overnight financing rate ("Adjusted Term SOFR") plus 2.25% and 2.00%, or 4.86%6.94% and 2.15%5.91%, at September 30, 2022 and December 31, 2021, respectively. The Dotdash Meredith Term Loan A has quarterly principal payments.
•Dotdash Meredith Term Loan B - due December 1, 2028. TheAt March 31, 2023 and December 31, 2022, the outstanding balance of the Dotdash Meredith Term Loan B iswas $1.23 billion and $1.24 billion, and $1.25 billion at September 30, 2022 and December 31, 2021, respectively, and bore interest at Adjusted Term SOFR, subject to a minimum of 0.50%, plus 4.00%, or 6.61%8.77% and 4.50%8.22%, at September 30, 2022 and December 31, 2021, respectively. The Dotdash Meredith Term Loan B has quarterly principal payments.
•Dotdash Meredith Revolving Facility - Dotdash Meredith's $150.0 million revolving credit facility expires on December 1, 2026. At September 30, 2022March 31, 2023 and December 31, 2021,2022, there were no outstanding borrowings under the Dotdash Meredith Revolving Facility.
•ANGI Group Senior Notes - on August 20, 2020, ANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of 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.
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 earnings (loss) earnings attributable to IAC shareholders to operating loss to Adjusted EBITDA for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022. 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. Angi Inc. has now passed the anniversary of the rebranding and organic search results continue to improve relative to the same period in 2021. Angi Inc. expects this positive trend to continue. However, organic search results 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
Angi Services was launched in August 2019, and Angi Inc. has invested and continues to invest significantly in Angi Services since then. Angi Inc.'s investment in Angi Services peaked in the first quarter of 2022. As a result, on a sequential basis, the negative impact on profits has declined in each quarter of 2022 and is expected to decline in the fourth quarter of 2022 relative to the third quarter. On a year-over-year basis, the positive impact on profits began in the third quarter of 2022 and Angi Inc. expects that positive year-over-year trend to continue in the fourth quarter of 2022 and into 2023.
Dotdash Meredith Restructuring and Other Charges
In the first quarter ofDuring 2022, Dotdash Meredith announcedmanagement committed to several actions to improve efficiencies and better align its plans to discontinuecost structure following the acquisition of Meredith on December 1, 2021. These actions included: (i) the discontinuation of certain print publications and the shutdown of PeopleTV, to focusfor which the portfolio and further enable investments toward digital growth. The discontinued print publications consist of Entertainment Weekly, InStyle, EatingWell, Health, Parents, and People en Español, with the April 2022 issues as the final print editions, and Martha Stewart Living, with the May 2022 issue as the final print edition. Dotdash Meredith also announced a voluntary retirement programrelated expense was primarily reflected in the first quarter of 2022, to its employees who met(ii) a voluntary retirement program announced in the first quarter of 2022, for which the related expense was primarily reflected in the first half of 2022, (iii) the consolidation of certain age and service requirements. In addition, actions were taken to improve efficiencies following the Meredith acquisition, including vacating leased office space.space, for which the related expense was reflected in the third quarter of 2022 and (iv) a reduction in force plan, for which the related expenses were accrued primarily in the fourth quarter of 2022. These actions resulted in $80.2 million of restructuring charges incurred for the year ended December 31, 2022.
ForDuring the first quarter of 2023, Dotdash Meredith continued to incur costs related to the voluntary retirement program and recorded adjustments to previously accrued amounts related to the reduction in force. Dotdash Meredith incurred restructuring charges of $2.2 million and $22.4 million in the three and nine months ended September 30,March 31, 2023 and 2022, the Company incurred $24.7respectively, including $2.2 million and $60.8 million, respectively, of related restructuring charges, including $3.4 million and $36.5$20.5 million, respectively, of severance and related costs. The restructuring charges for bothDotdash Meredith recorded reversals of previously accrued costs of $2.2 million, resulting in a net reversal of expense of less than $0.1 million, in the three and nine months ended September 30, 2022 include $21.3 millionMarch 31, 2023.
During the first quarter of 2023, Dotdash Meredith reassessed the sublease market assumptions and recorded impairment charges related to the consolidation of certain unoccupied leased spaces following the Meredith acquisition; $14.3 million relatedoffice space due to the continued decline in the commercial real estate market; a $44.7 million impairment of a right-of-use asset ("("ROU asset"), and a $25.3 million impairment of leasehold improvements, furniture and equipment, which is are included in "General and administrative expense,expense" and "Depreciation," and $7.0 million related to the impairment of leasehold improvements and furniture and equipment, which is included in "Depreciation"respectively, in the statement of operations.
Dotdash Meredith anticipates the estimated remaining costs associated with the 2022 restructuring events will be approximately
$1.0 million and will be paid by December 31, 2023 from existing cash on hand.
Certain Risks and Concentrations—Services Agreement with Google (the "Services Agreement")
The Company and Google are parties to an amended Services Agreement, which automatically renewed effective March 31, 2023 and expires on March 31, 2024 and provides for an automatic renewal for an additional one-year period absent2025.
As a noticeresult of non-renewal from either 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 three and nine months ended September 30, 2022, total revenue earned from Google was $161.6 million and $524.3 million, respectively, representing 12% and 13%, respectively, of the Company's revenue. The total revenue earned from the Services Agreement for the three and nine months ended September 30, 2022 was $117.3 million and $386.6 million, respectively, representing 9% and 10%, respectively, of the Company's total revenue. For the three and nine months ended September 30, 2021, total revenue earned from Google was $185.6 million and $527.0 million, respectively, representing 20% and 21%, respectively, of the Company's revenue. The total revenue earned from the Services Agreement for the three and nine months ended September 30, 2021 was $168.0 million and $471.3 million, respectively, representing 18% and 19%, respectively, of the Company's total revenue. The related accounts receivable totaled $58.3 million and $89.1 million at September 30, 2022 and December 31, 2021, respectively.
The revenue attributable to the Services Agreement is earned by Ask Media Group and the Desktop business, both within the Search segment. For the three and nine months ended September 30, 2022, revenue earned from the Services Agreement was $97.3 million and $315.4 million, respectively, within Ask Media Group and $20.0 million and $71.2 million, respectively, within the Desktop business. For the three and nine months ended September 30, 2021, revenue earned from the Services Agreement was $137.9 million and $382.5 million, respectively, within Ask Media Group and $30.1 million and $88.8 million, respectively, within the Desktop business.
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 and 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-to-consumer ("B2C") business. Google may make changes in the future that could impact the revenue earned from Google, including under the Services Agreement.
Certain industry-wide policy changes became effective on August 27, 2020. These industry-wide changes combined with increased enforcement of policies under the Services Agreement have had a negative impact onin prior periods, the results of operations of the B2C business. During the fourth quarter of 2020, Google suspended services with respect to some B2C's products and may do so with respect to other products in the future. As 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 earned over multiple periods beyond just the period in which the initial marketing is incurred. Following the cessation ofCompany discontinued the introduction of new products in March 2021,2021. Therefore, the current B2C revenue stream relates solely to the then existing installed base of products. We expect futureAs a result, the revenue and profits of the B2C business have declined significantly and the Company expects that trend to continuecontinue.
COVID-19 Update
The impactthe financial statements included in "Item 1—Consolidated Financial Statements" for additional information on the Company from the COVID-19 pandemic and the measures designed to contain its spread continues to have a negative impact on year-over-year financial performance at Angi Inc. and Dotdash Meredith.Services Agreement with Google.
Angi Inc.
As previously disclosed, the impact of COVID-19 on the businesses in IAC's Angi Inc. segment 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 these businesses 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
Traffic to Dotdash’s sites is down relative to last year when COVID-19 measures were still more widely in place. As a result, digital advertising and performance marketing revenue at Dotdash, excluding Meredith, declined compared to 2021 due to lower traffic to its sites compared to prior year COVID-19 traffic highs. Post acquisition, Meredith has experienced a similar impact to its digital advertising revenue.
Future Outlook
The extent to which developments related to the COVID-19 pandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the continuing spread of COVID-19, the severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and 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.
Results of Operations for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021
Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Dotdash Meredith | | | | | | | | | | | | | | | |
| Digital | $ | 220,749 | | | $ | 155,584 | | | 239% | | $ | 65,165 | | | $ | 671,424 | | | $ | 467,505 | | | 229% | | $ | 203,919 | |
| Print | 251,471 | | | 251,471 | | | N/A | | — | | | 801,756 | | | 801,756 | | | N/A | | — | |
| Intersegment eliminations | (5,135) | | | (5,135) | | | N/A | | — | | | (16,100) | | | (16,100) | | | N/A | | — | |
| Total Dotdash Meredith | 467,085 | | | 401,920 | | | 617% | | 65,165 | | | 1,457,080 | | | 1,253,161 | | | 615% | | 203,919 | |
| Angi Inc. | 498,036 | | | 36,471 | | | 8% | | 461,565 | | | 1,449,977 | | | 180,395 | | | 14% | | 1,269,582 | |
| Search | 156,719 | | | (71,726) | | | (31)% | | 228,445 | | | 578,287 | | | (14,799) | | | (2)% | | 593,086 | |
| Emerging & Other | 180,820 | | | 11,897 | | | 7% | | 168,923 | | | 508,903 | | | 35,168 | | | 7% | | 473,735 | |
| Intersegment eliminations | (1,759) | | | (1,729) | | | (5,802)% | | (30) | | | (5,420) | | | (5,283) | | | (3,848)% | | (137) | |
| Total | $ | 1,300,901 | | | $ | 376,833 | | | 41% | | $ | 924,068 | | | $ | 3,988,827 | | | $ | 1,448,642 | | | 57% | | $ | 2,540,185 | |
_____________________
N/A = Not applicable
For the three months ended September 30, 2022March 31, 2023 compared to the three months ended September 30, 2021March 31, 2022
Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Dotdash Meredith | | | | | | | | | | | | | | | |
| Digital | | | | | | | | | $ | 184,797 | | | $ | (31,368) | | | (15)% | | $ | 216,165 | |
| Print | | | | | | | | | 207,016 | | | (82,962) | | | (29)% | | 289,978 | |
| Intersegment eliminations | | | | | | | | | (4,231) | | | 1,441 | | | 25% | | (5,672) | |
| Total Dotdash Meredith | | | | | | | | | 387,582 | | | (112,889) | | | (23)% | | 500,471 | |
| Angi Inc. | | | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | | | |
| Ads and Leads | | | | | | | | | 293,506 | | | (1,240) | | | 0% | | 294,746 | |
| Services | | | | | | | | | 32,059 | | | (44,391) | | | (58)% | | 76,450 | |
| Roofing | | | | | | | | | 38,372 | | | 1,685 | | | 5% | | 36,687 | |
| Domestic intersegment eliminations | | | | | | | | | (1,462) | | | 215 | | | 13% | | (1,677) | |
| Total Domestic | | | | | | | | | 362,475 | | | (43,731) | | | (11)% | | 406,206 | |
| International | | | | | | | | | 29,932 | | | (21) | | | 0% | | 29,953 | |
| Total Angi Inc. | | | | | | | | | 392,407 | | | (43,752) | | | (10)% | | 436,159 | |
| Search | | | | | | | | | 152,475 | | | (70,910) | | | (32)% | | 223,385 | |
| Emerging & Other | | | | | | | | | 154,031 | | | (12,963) | | | (8)% | | 166,994 | |
| Intersegment eliminations | | | | | | | | | (2,224) | | | (560) | | | (34)% | | (1,664) | |
| Total | | | | | | | | | $ | 1,084,271 | | | $ | (241,074) | | | (18)% | | $ | 1,325,345 | |
•Dotdash Meredith revenue increased 617%decreased 23% to $467.1$387.6 million due primarily to the contributiondecreases of $407.9 million from Meredith, acquired December 1, 2021, partially offset by a decrease of $5.4$83.0 million, or 13%29%, from Print and $31.4 million, or 15%, from Digital. The decrease from Print was driven by restructuring activities in the first quarter of 2022, which included the discontinuation of several publications and the reduction in circulation of others. The decrease from Digital was due primarily to decreases of $25.3 million, or 18%, in Dotdash Display Advertising Revenue and $6.0 million, or 21%, in Licensing and Other Revenue. The decrease in Dotdash Display Advertising Revenue was due primarily to a decreasetraffic declines to its sites compared to COVID-19 supported traffic levels in the prior year period, declines in premium advertising sold through ourits sales team and lower rates across programmatic ratechannelss.. The decrease in Licensing and Other Revenue was due primarily to lower revenue share from syndication partner sites and lower licensing fees from retail partners.
•Angi Inc. revenue increased 8%decreased 10% to $498.0$392.4 million driven by increases of $21.6 million, or 7%, in Angi Ads and Leads Revenue and $14.5 million, or 12%, in Angi Services Revenue. The increase in Angi Ads and Leads Revenue was due primarily to price increases implemented duringa decrease of $44.4 million, or 58%, from Services resulting from the second quarterchange to net revenue reporting as described above under "Services Revenue" and a decrease of 2022. The increase in Angi Services Revenue was$18.0 million due primarily to organic growth, partially offset by a decrease of $11.4 million in revenuethe shift away from Angi Roofing.complex and less profitable Services offerings.
•Search revenue decreased 31%32% to $156.7$152.5 million due to decreases of $58.5$61.4 million, or 30%32%, from Ask Media Group and $13.2$9.5 million, or 38%32%, from Desktop. The decrease infrom Ask Media Group revenue was due to a reduction in marketing from affiliate partners resulting in decreaseddriving fewer visitors to ad supported search and content websites. The decrease infrom Desktop revenue was due primarily to the Google policy changes announced inand the prior yearsubsequent cessation of new products described above under "Services Agreement with Google (the "Services Agreement")."
•Emerging & Other revenue increased 7%decreased 8% to $180.8$154.0 million due primarily to the inclusion of Bluecrew in the prior year period, which was sold on November 9, 2022, and a 13% increasedecrease in revenue at Care.com, an increase of $8.2 million at IAC Films due to Everything Everywhere All at Once and growth of 77% from Vivian Health, partially offset by lower revenue at Mosaic Group, and the Daily Beast.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
•Dotdash Meredith revenue increased 615% to $1.5 billion due to the contribution of $1.3 billion from Meredith, acquired December 1, 2021, partially offset by decreasesgrowth of $8.9 million, or 11%, in Dotdash Performance Marketing Revenue5% and $3.1 million, or 3%, in Dotdash Display Advertising Revenue. The decrease in Dotdash Performance Marketing Revenue was due to primarily to declines in both affiliate commerce commission51% at Care.com and Vivian Health, respectively, and increased 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 Display Advertising Revenue was due to the factors described above in the three-month discussion.at IAC Films.
•Angi Inc. revenue increased 14% to $1.4 billion driven by increases of $151.0 million, or 62%, in Angi Services Revenue and $31.1 million, or 3%, in Angi Ads and Leads Revenue, partially offset by a decrease of $1.7 million, or 3%, at the European businesses. The increase in Angi Services Revenue was due primarily to organic growth and to a lesser extent, $67.9 million in revenue attributable to Angi Roofing, acquired July 1, 2021. The increase in Angi Ads and Leads Revenue is due primarily to price increases implemented during the second quarter of 2022 and the anniversary of the initial impact of the brand integration that began in March 2021. The revenue decrease at the European businesses was due to the unfavorable impact of the strengthening of the U.S. dollar relative to the Euro and British Pound.
•Search revenue decreased 2% to $578.3 million due to a decrease of $27.6 million, or 26%, from Desktop, partially offset by growth of $12.8 million, or 3%, from Ask Media Group. The decrease in Desktop revenue was due primarily to the factor described above in the three-month discussion. The increase in Ask Media Group revenue was due primarily to higher marketing driving increased visitors to ad supported search and content websites in the first half of 2022.
•Emerging & Other revenue increased 7% to $508.9 million due primarily to a 13% increase in revenue at Care.com and growth from Vivian Health and Bluecrew, partially offset by lower revenue at Mosaic Group and the Daily Beast.
Cost of revenue (exclusive of depreciation shown separately below)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Cost of revenue (exclusive of depreciation) | $ | 453,513 | | | $ | 113,003 | | | 33% | | $ | 340,510 | | | $ | 1,499,968 | | | $ | 671,224 | | | 81% | | $ | 828,744 | |
| As a percentage of revenue | 35% | | | | | | 37% | | 38% | | | | | | 33% |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Cost of revenue (exclusive of depreciation shown separately below) | | | | | | | | | $ | 342,084 | | | $ | (191,520) | | | (36)% | | $ | 533,604 | |
| As a percentage of revenue | | | | | | | | | 32% | | | | | | 40% |
Cost of revenue in 2022 increased2023 decreased from 20212022 due to an increasedecreases of $182.6$60.3 million from Search, $59.8 million from Dotdash Meredith, partially offset by a decrease of $78.5 million from Search.
•The Dotdash Meredith increase was due primarily to $179.0 million of expense from the inclusion of Meredith and an increase of $4.2 million in compensation expense related to increased editorial headcount at Dotdash.
•The Search decrease was due primarily to a decrease of $78.3 million in traffic acquisition costs at Ask Media Group resulting from the decrease in revenue.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
Cost of revenue in 2022 increased from 2021 due to increases of $578.6 million from Dotdash Meredith and $112.8$57.0 million from Angi Inc., partially offset by a decrease of $25.9 and $14.5 million from Search.
•The Dotdash Meredith increase was due primarily to $567.5 million of expense from the inclusion of Meredith and an increase of $12.0 million in compensation expense related to increased editorial headcount at Dotdash. Included in Meredith's expense is $17.9 million of restructuring costs primarily related to the reorganization of the Dotdash Meredith business described above under "Dotdash Meredith Restructuring Charges."
•The Angi Inc. increase was due primarily to $55.2 million of costs attributable to growth at Angi Services and $53.7 million of costs attributable to the inclusion of Angi Roofing for nine months in the current year compared to three months in the prior year. The increase at Angi Services was due primarily to organic growth, including costs incurred for third-party service professionals for other Angi Services arrangements. The increase at Angi Roofing was due primarily to costs incurred for roofing materials and third-party contractors.
•The Search decrease was due primarily to a decrease in traffic acquisition costs of $40.9$58.4 million at Ask Media Group partially offset by an increase in traffic acquisition costs of $16.8 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 increaseDotdash Meredith decrease was due primarily to decreases of $43.0 million from Print and $16.9 million from Digital. The decrease from Print was due primarily to a decrease of $27.7 million in production and distribution costs (postage, printing, paper and content) due to the discontinuation of several publications in the first quarter of 2022 and the reduction in circulation of others. Print was further impacted by a decrease of $11.9 million in compensation expense resulting from a voluntary retirement program in the first quarter of 2022 and the reduction in force described above under "Dotdash Meredith Restructuring and Other Charges." The decrease from Digital was due primarily to a decrease of $7.2 million in traffic acquisition costs at Desktopdriven by lower revenue and a decrease of $5.9 million in compensation expense due to the reduction in force.
•The Angi Inc. decrease was due primarily to a decrease of $53.5 million from Services due primarily to a $47.7 million decrease in payments to third-party professional service providers due primarily to a decrease of $25.7 million resulting from the change to net revenue reporting effective January 1, 2023, described above. Additionally, payments to third-party professional service providers decreased as a result of unfavorable revenue share rates resulting in higher revenue share payments comparedthe shift away from complex and less profitable Services offerings.
•The Emerging & Other decrease was primarily due to the inclusion in the prior year.year period of $13.4 million in expense from Bluecrew, which was sold on November 9, 2022.
Selling and marketing expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Selling and marketing expense | $ | 489,573 | | | $ | 141,386 | | | 41% | | $ | 348,187 | | | $ | 1,490,947 | | | $ | 489,187 | | | 49% | | $ | 1,001,760 | |
| As a percentage of revenue | 38% | | | | | | 38% | | 37% | | | | | | 39% |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Selling and marketing expense | | | | | | | | | $ | 404,141 | | | $ | (84,322) | | | (17)% | | $ | 488,463 | |
| As a percentage of revenue | | | | | | | | | 37% | | | | | | 37% |
Selling and marketing expense in 20222023 increaseddecreased from 20212022 due to decreases increasesof $122.6$54.2 million from Dotdash Meredith, $18.4$20.9 million from SearchAngi Inc. and $5.8$11.5 million from Emerging & Other.
•The Dotdash Meredith decrease was due primarily to decreases of $37.5 million in subscription acquisition costs and Other.$12.4 million in compensation expense from Print. The decrease in subscription acquisition costs was driven by lower commission payments made to third-party agents to sell magazine subscriptions resulting from the discontinuation of several publications in the first quarter of 2022 and the reduction in circulation of others. The decrease in compensation expense was due to a voluntary retirement program in the first quarter of 2022 and the reduction in force described above under "Dotdash Meredith Restructuring and Other Charges."
•The Angi Inc. decrease was due primarily to decreases of $8.2 million from International, $6.1 million from Services and $4.4 million from Ads and Leads.
◦The International decrease was due primarily to a decrease of $8.9 million in advertising expense due primarily to decreases of $4.8 million and $4.4 million in television spend and online marketing spend, respectively.
◦The Services decrease was due primarily to decreases of $4.3 million in professional fees, $3.4 million in compensation expense and $1.1 million in advertising expense, partially offset by an increase of $3.5 million in service guarantee expense. The decrease in professional fees was primarily due to decreases in consulting fees and outsourced personnel costs of $3.6 million due to lower phone-based sales wages primarily resulting from increased reliance on more profitable digital conversion channels and $1.3 million due to streamlined fulfillment operations driven, in part, by fewer complex services, respectively. The decrease in compensation expense was due primarily to lower headcount. The decrease in advertising expense was primarily due to a decrease in service professional marketing spend. The increase in service guarantee expense is due to the aforementioned change in contractual terms and conditions such that this expense is no longer a component of cost of revenue, which is where the expense was recorded prior to January 1, 2023.
◦The Ads and Leads decrease was due primarily to decreases of $10.7 million in advertising expense and $1.7 million in consulting fees, partially offset by an increase of $7.6 million in compensation expense. The decrease in advertising expense was due primarily to a decrease of $11.4 million in online marketing spend. The decrease in consulting fees was due primarily to a decrease in marketing and branding consultancy fees. The increase in compensation expense was due primarily to increased sales commissions driven by sales growth and the immediate expensing of commissions for certain transactions beginning October 1, 2022, rather than recording commissions as an asset to be amortized over the duration of the related customer relationship period due to the average customer relationship being assessed as less than one year.
•The Emerging & Other decrease was due primarily to decreases of $6.7 million in online marketing spend at Mosaic Group and $4.2 million in expense at Bluecrew, which was sold on November 9, 2022.
General and administrative expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| General and administrative expense | | | | | | | | | $ | 269,526 | | | $ | 29,055 | | | 12% | | $ | 240,471 | |
| As a percentage of revenue | | | | | | | | | 25% | | | | | | 18% |
General and administrative expense in 2023 increased from 2022 due to increases of $31.7 million from Dotdash Meredith and $5.6 million from Emerging & Other, partially offset by a decrease of $7.1 million from Angi Inc.
•The Dotdash Meredith increase was due principally to $120.3 million of expense from the inclusion of Meredith.
•The Search increase was due primarily to an increase of $20.8impairment charge at Other (unallocated corporate costs) of $44.7 million of an ROU asset related to unoccupied lease space recognized in online marketing at Ask Media Group,the first quarter of 2023, partially offset by a decrease of $3.6$4.1 million at Desktop as it eliminated all marketing of its B2C products beginning in early March 2021 due primarily restructuring costs ($0.2 million in 2023 compared to the Google policy changes in the fourth quarter of 2020 and the first quarter of 2021 $4.3 million 2022) related to activities described above under "Certain Risks"Dotdash Meredith Restructuring and Concentrations—Services Agreement with Google (the "Services Agreement"). The increase at Ask Media Group was due primarilyOther Charges" and the inclusion in 2022 of $4.0 million in transaction-related costs related to increases in both search engine marketing and ad placement spend on social media sites.the acquisition of Meredith.
•The Emerging & Other increase was due primarily to increasesan increase in expense of $3.7$3.3 million in marketing spend at IAC Films related to certain participation rights, the inclusion in the prior year period of a $3.2 million gain at Care.com related to the termination of a lease and $1.3an increase of $1.6 million in compensation expense at Care.com and Vivian Health, respectively, partially offset by decreasesa decrease in expense of $2.8$2.0 million in advertising expense at Mosaic Group and $2.4 million in online marketing at Care.com. Bluecrew, which was sold on November 9, 2022.
•The increase in marketing spend at IAC Films was related to Everything Everywhere All at Once. The increase in compensation expense at both Care.com and Vivian HealthAngi Inc. decrease was due primarily to higher headcount.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
Selling and marketing expense in 2022 increased from 2021 due to increasesa decrease of $415.2$6.7 million from Dotdash Meredith, $28.8 million from Emerging & Other, $28.7 million from Angi Inc.,Ads and $22.2 million from Search.
•The Dotdash Meredith increase was due principally to $410.4 million of expense from the inclusion of Meredith. Included in Meredith's expense is $10.3 million of restructuring costs primarily related to the reorganization of the Dotdash Meredith business described above under "Dotdash Meredith Restructuring Charges."
•The Emerging & Other increase wasLeads due primarily to increases of $8.2 milliondecreases in compensation expense of $7.3 million and $4.8recruitment fees of $1.4 million, partially offset by an increase in online marketing at Care.com, $3.7the provision for credit losses of $3.1 million in marketing spend at IAC Films, $3.5 milliondue primarily to lower collection rates. The decrease in compensation expense and $1.9 millionis due primarily to a reduction in online marketing at Vivian Health and $1.8 million in outsourced personnel costs at Bluecrew. The increases at Care.com, IAC Films and Vivian Health are due to the factors described above in the three-month discussion.headcount.
Product development expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Product development expense | | | | | | | | | $ | 88,338 | | | $ | 4,143 | | | 5% | | $ | 84,195 | |
| As a percentage of revenue | | | | | | | | | 8% | | | | | | 6% |
Product development expense in 2023 increased from 2022 due to increases of $7.5 million from Angi Inc. and $2.6 million from Dotdash Meredith, partially offset by $6.1 million from Emerging & Other.
•The Angi Inc. increase was due primarily to expense of $10.0 million from the inclusion of Angi Roofing for nine months in the current year compared to three months in the prior year, and increases in advertising expense of $7.2 million, professional fees of $4.4 million, software maintenance costs of $4.0 million and compensation expense of $2.5 million partially offset by a decrease in lease expense of $4.2 million. The increase in advertising expense was due primarily to an increase of $20.2$6.2 million in search engine marketing spend, partially offset by decreases of $11.4 million in app platformsfrom Ads and service professional marketing, and $1.6 million in television spend. The increase in search engine marketing spend was due to the continued brand integration initiative at the beginning of 2022 and increased costs to obtain service requests later in 2022. The decrease in fees paid to app platforms and service professional marketing was due primarily to the investment in Angi Services in 2021 as compared to 2022. The decrease in television spend in 2022 reflects the return to historical spending levels in 2021 as compared to the shift to online marketing from television marketing. The increase in professional fees wasLeads due primarily to an increase in consulting costs for creative advertising agencies. The increase in software maintenance costs was duecompensation expense of $6.8 million related primarily to general maintenance. The increase in compensation expense was due primarily to an increase in wage-related expense from higher headcount, partially offset by a decrease in commissions expense. The decrease in lease expense was as a result of Angi Inc. reducing its real estate footprint in 2021.
•The Search increase was due primarily to an increase of $44.1 million in online marketing at Ask Media Group, partially offset by a decrease of $22.7 million at Desktop. The increase at Ask Media Group and the decrease at Desktop are due to the factors described above in the three-month discussion.
General and administrative expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| General and administrative expense | $ | 260,073 | | | $ | 76,774 | | | 42% | | $ | 183,299 | | | $ | 750,746 | | | $ | 229,576 | | | 44% | | $ | 521,170 | |
| As a percentage of revenue | 20% | | | | | | 20% | | 19% | | | | | | 21% |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
General and administrative expense in 2022 increased from 2021 due to increases of $57.5 million from Dotdash Meredith and $25.2 million from Angi Inc., partially offset by a decrease of $9.8 million from Emerging & Other.spend on projects that did not meet capitalization requirements.
•The Dotdash Meredith increase was due primarily to $43.0 million of expense from the inclusion of Meredith, a $14.3 million impairment of a ROU asset related to the consolidation of certain leased spaces following the Meredith acquisition, and an increase of $3.3$2.9 million in compensation expense, partially offset by a decrease of $5.5 million in professional fees at Dotdash. During the third quarter of 2022, Dotdash Meredith incurred $15.7 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." The increase in compensation expense at Dotdash wasfrom Digital due primarily to an increase in stock-based compensation expense. The decrease in professional fees was due to the inclusion in 2021 of $5.5 million of transaction-related costs in connection with the Meredith transaction.
•The Angi Inc. increase was due primarily to increases of $10.9 million in the provision for credit losses, $7.8 million in compensation expense and $6.3 million in legal expense. The increase in the provision for credit losses was due primarily to higher Angi Ads and Leads revenue. The increase in compensation expense was due primarily to increases in wage-related expense of $4.2 million and stock-based compensation expense of $3.0 million. The increase in wage-related expense was due$4.1 million related primarily to an increase in headcount and the increasea decrease in stock-based compensation expense was primarily due to the acceleration of stock-based awards related to management departures in the third quarter of 2022, and new awards granted. The increase in legal expense is due primarily to accrualsthat qualified for certain legal matters in the current quarter.capitalization.
•The Emerging & Other decrease was due primarily to the inclusiondecreases in 2021outsourced personnel costs of $3.6 million and compensation expense of $15.0$1.7 million at Care.com, and a decrease in expense of $2.6 million at Bluecrew, which was sold on November 9, 2022, partially offset by an increase in compensation expense of $2.4 million at Vivian Health. The decreases in outsourced personnel costs and compensation expense at Care.com was due primarily to costs incurred in 2022 to enhance product offerings and develop new products, and lower headcount, respectively. The increase in compensation expense at Vivian Health was due primarily to an increase in headcount.
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Depreciation | | | | | | | | | $ | 61,172 | | | $ | 30,936 | | | 102% | | $ | 30,236 | |
| As a percentage of revenue | | | | | | | | | 6% | | | | | | 2% |
Depreciation increased in 2023 from 2022 due primarily to increases of $20.1 million at Dotdash Meredith and $11.4 million at Angi Inc. The increase at Dotdash Meredith was due primarily to the impairment of leasehold improvements and furniture and equipment of $25.3 million related to unoccupied leased space, partially offset by a decrease of $4.5 million in an acquisition-related contingent consideration fair value adjustment related to depreciation as a change in estimateresult of the liabilityreclassification of certain acquired capitalized software from depreciable assets to intangible assets in connection with the completion of purchase accounting related to the amountacquisition of contingent considerationMeredith. The increase at Angi Inc. was due primarily to be paid outcapitalized software projects placed in connection with a previous Mosaic Group acquisition.service after the first quarter of 2022.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021Operating (loss) income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Dotdash Meredith | | | | | | | | | | | | | | | |
| Digital | | | | | | | | | $ | (17,887) | | | $ | (16,019) | | | (857)% | | $ | (1,868) | |
| Print | | | | | | | | | (5,756) | | | 32,579 | | | 85% | | (38,335) | |
| Other | | | | | | | | | (87,591) | | | (71,549) | | | (446)% | | (16,042) | |
| Total Dotdash Meredith | | | | | | | | | (111,234) | | | (54,989) | | | (98)% | | (56,245) | |
| Angi Inc. | | | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | | | |
| Ads and Leads | | | | | | | | | 13,480 | | | (2,006) | | | (13)% | | 15,486 | |
| Services | | | | | | | | | (12,452) | | | 13,298 | | | 52% | | (25,750) | |
| Roofing | | | | | | | | | 411 | | | 6,561 | | | NM | | (6,150) | |
| Other | | | | | | | | | (14,939) | | | (1,917) | | | (15)% | | (13,022) | |
| Total Domestic | | | | | | | | | (13,500) | | | 15,936 | | | 54% | | (29,436) | |
| International | | | | | | | | | 3,030 | | | 7,551 | | | NM | | (4,521) | |
| Total Angi Inc. | | | | | | | | | (10,470) | | | 23,487 | | | 69% | | (33,957) | |
| Search | | | | | | | | | 10,770 | | | (14,309) | | | (57)% | | 25,079 | |
| Emerging & Other | | | | | | | | | 11,445 | | | 16,489 | | | NM | | (5,044) | |
| Corporate | | | | | | | | | (36,107) | | | 2,540 | | | 7% | | (38,647) | |
| Total | | | | | | | | | $ | (135,596) | | | $ | (26,782) | | | (25)% | | $ | (108,814) | |
| | | | | | | | | | | | | | | |
| As a percentage of revenue | | | | | | | | | (13)% | | | | | | (8)% |
_____________________
NM = Not meaningful
General and administrative expense in 2022Operating loss increased from 2021 due$26.8 million to increasesa loss of $175.3$135.6 million from Dotdash Meredith, $58.8 million from Angi Inc., and $3.1 million from Emerging & Other, partially offset by a decrease of $4.6 million from Corporate.
•The Dotdash Meredith increase was due primarily to $149.8 million of expense from the inclusion of Meredith, a $14.3 million impairment described above in the three-month discussion related to the consolidation of certain leased spaces following the Meredith acquisition, and an increase of $10.6$30.9 million in compensation expense, partially offset by a decreasedepreciation and income of $4.7 million in professional fees at Dotdash. During the first nine months of 2022, Dotdash Meredith incurred $24.6 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 $5.8 million in transaction-related costs, of which $4.9 million was incurred at Meredith, associated with its acquisition. The increase in compensation expense and the decrease in professional fees at Dotdash are due to the factors described above in the three-month discussion.
•The Angi Inc. increase was due primarily to increases of $22.7 million in compensation expense, $14.2 million in the provision for credit losses, $12.0 million of expense from the inclusion of Angi Roofing for nine months in the current year compared to three months in the prior year, increases of $6.3 million in legal expense, $6.2 million in professional fees and $5.5 million in software and maintenance costs, partially offset by a decrease of $8.2 million of impairment charges of ROU assets and related leasehold improvements and furniture and equipment. The increase in compensation expense was due primarily to increases in stock-based compensation expense of $14.4 million and wage-related expense of $12.8 million, partially offset by a $6.0 million charge in the first quarter of 2021, related to the acquisition of an additional 21% interest in MyBuilder at a premium to fair value. The increase in stock-based compensation expense was due primarily to the reversal of previously recognized expense related to unvested awards that were forfeited due to management departures in the first quarter of 2021, the acceleration of stock-based awards related to management departures in the third quarter of 2022, and new awards granted. The increases in wage-related expense, provision for credit losses and legal expense were due primarily to the factors described above in the three-month discussion. The increase in professional fees was due primarily to outsourced personnel costs and legal fees. The increase in software licenses and maintenance costs was due primarily to increased investment in software to support Angi Inc.'s customer service function. The decrease in impairments of ROU assets and related leasehold improvements and furniture and equipment was due primarily to charges of $2.3$0.6 million in 2022 relative to $9.6 million in 2021, primarily due to Angi Inc. reducing its real estate footprint in 2021.
•The Emerging & Other increase was due primarily to a $7.1 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 and increases of $3.5 million in professional fees at Newco (an IAC incubator) and $1.8 million in software maintenance at Care.com,partially offset by the inclusion in 2021 of $15.0 million of expense in an acquisition-related contingent consideration fair value adjustment, at Mosaic Group, aspartially offset by decreases of $2.5 million in amortization of intangibles and $0.8 million in stock-based compensation expense and an increase in Adjusted EBITDA of $1.4 million, described abovebelow. The increase in the three-month discussion, and a gain of $3.2 million at Care.com related to the termination of a lease in the first quarter of 2022.
•The Corporate decreasedepreciation was due primarily to the inclusion in 2021 of $6.1 million of transaction-related costs in connection with the Spin-off.
Product development expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Product development expense | $ | 74,078 | | | $ | 21,801 | | | 42% | | $ | 52,277 | | | $ | 239,149 | | | $ | 81,556 | | | 52% | | $ | 157,593 | |
| As a percentage of revenue | 6% | | | | | | 6% | | 6% | | | | | | 6% |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
Product development expense in 2022 increased from 2021 due to an increase of $22.5 million from Dotdash Meredith.
•The Dotdash Meredith increase was due primarily to $20.9 million of expense from the inclusion of Meredith.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
Product development expense in 2022 increased from 2021 due to increases of $68.9 million from Dotdash Meredith and $18.0 million from Emerging & Other, partially offset by a decrease of $4.6 million from Search.
•The Dotdash Meredith increase was due primarily to $64.8 million of expense from the inclusion of Meredith and an increase of $4.2 million in compensation expense at Dotdash due primarily to an increase in headcount.
•The Emerging & Other increase was due primarily to increases of $7.5 million in compensation expense and $3.4 million in outsourced personnel costs at Care.com, and a $2.4 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. The increase in compensation expense at Care.com was due primarily to higher headcount. The increase in outsourced personnel costs at Care.com was due primarily to enhancing existing product offerings and developing new products.
•The Search decrease was due primarily to a decrease of $5.4 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")."
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Depreciation | $ | 27,567 | | | $ | 9,772 | | | 55% | | $ | 17,795 | | | $ | 86,855 | | | $ | 32,762 | | | 61% | | $ | 54,093 | |
| As a percentage of revenue | 2% | | | | | | 2% | | 2% | | | | | | 2% |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
Depreciation increased in 2022 from 2021 due primarily to the impairment of leasehold improvements and furniture and equipment at Dotdash Meredith of $7.0$25.3 million related to the consolidation of certainunoccupied leased spaces, as described above under "Dotdash Meredith Restructuring Charges"space and an increase in expense of $3.1 million at Angi Inc. due primarily related to investmentscapitalized software projects placed in capitalized software.
Forservice after the nine months ended September 30,first quarter of 2022, compared to the nine months ended September 30, 2021
Depreciation increased in 2022 from 2021 due primarily to $31.4 million of expense from the inclusion of Meredith and the factors described above in the three-month discussion.
Operating (loss) income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Dotdash Meredith | | | | | | | | | | | | | | | |
| Digital | $ | (104,445) | | | $ | (111,527) | | | NM | | $ | 7,082 | | | $ | (95,217) | | | $ | (139,600) | | | NM | | $ | 44,383 | |
| Print | 27,325 | | | 27,325 | | | N/A | | — | | | (31,109) | | | (31,109) | | | N/A | | — | |
| Other | (18,378) | | | (18,378) | | | N/A | | — | | | (52,924) | | | (52,924) | | | N/A | | — | |
| Total Dotdash Meredith | (95,498) | | | (102,580) | | | NM | | 7,082 | | | (179,250) | | | (223,633) | | | NM | | 44,383 | |
| Angi Inc. | (11,058) | | | 3,915 | | | 26% | | (14,973) | | | (65,901) | | | (18,306) | | | (38)% | | (47,595) | |
| Search | 19,085 | | | (10,926) | | | (36)% | | 30,011 | | | 70,461 | | | (3,598) | | | (5)% | | 74,059 | |
| Emerging & Other | (1,577) | | | 20,662 | | | 93% | | (22,239) | | | (114,402) | | | (90,456) | | | (378)% | | (23,946) | |
| Corporate | (35,632) | | | (3,684) | | | (12)% | | (31,948) | | | (110,542) | | | 4,076 | | | 4% | | (114,618) | |
| Total | $ | (124,680) | | | $ | (92,613) | | | (289)% | | $ | (32,067) | | | $ | (399,634) | | | $ | (331,917) | | | (490)% | | $ | (67,717) | |
| | | | | | | | | | | | | | | |
| As a percentage of revenue | (10)% | | | | | | (3)% | | (10)% | | | | | | (3)% |
_____________________
NM = Not meaningful
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
Operating loss increased $92.6 million to $124.7 million, despite the increase of $24.5 million in Adjusted EBITDA, described below, due primarily to increases of $106.7 million in amortization of intangibles, $15.7 million in stock-based compensation expense, and $9.8 million in depreciation, partially offset by a decrease in depreciation at Dotdash Meredith as a result of the inclusionreclassification of certain acquired capitalized software from depreciable assets to intangible assets in 2021connection with the completion of $15.0 million of expensepurchase accounting related to an acquisition-related contingent consideration fair value adjustment. the acquisition of Meredith. The increasedecrease in the amortization of intangibles was due primarily to the acquisition of Meredith, partially offset by lower expense at Dotdash Meredith Print and Care.com due to certain intangible assets becoming fully amortized. Theamortized, partially offset by an increase in stock-based compensation expense was due primarily to new awards granted, the forfeiture of certain equity awards in 2021 and the acceleration of awards related to management departures in the third quarter of 2022. The increase in depreciation was due primarily to the impairment of leasehold improvements and furniture and equipment at Dotdash Meredith of $7.0 million related to the consolidation of certain leased spaces,Digital as described above under "Dotdash Meredith Restructuring Charges" and an increase in expense of $3.1 million at Angi Inc. due primarily to investments in capitalized software.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
Operating loss decreased $331.9 million to $399.6 million due primarily to an increase of $189.5 million in amortization of intangibles, a goodwill impairment of $86.7 million at Mosaic Group in the second quarter of 2022, increases of $34.7 million in stock-based compensation expense and $32.8 million in depreciation, and a decrease in Adjusted EBITDA of $3.9 million, described below, partially offset by a change in acquisition-related contingent consideration fair value adjustments (income of $0.6 million in 2022 compared to expense of $15.0 million in 2021). The goodwill impairment at Mosaic Group is a result of the projected reduction in future revenue and profitsreclassification of certain acquired capitalized software from the business and lower trading multiples of a selected peer group of companies. The increase in amortization of intangibles was duedepreciable assets to the factorsintangible assets described above in the three-month discussion. The increase in depreciation was due primarily to expense from the inclusion of Meredith and factors described above in the three-month discussion. 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 the third quarter of 2022. and new awards granted since the first quarter of 2021.
At September 30, 2022, Mosaic Group has goodwill of $153.6 million and the carrying value of this reporting unit 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 $153.6 million of goodwill at Mosaic Group. There is one indefinite-lived intangible asset at Dotdash Meredith Digital with a value of approximately $644.5 million.$126.0 million for which the excess of fair value over carrying value is less than 20%.
At September 30, 2022,March 31, 2023, there was $349.6was $319.1 million ofof 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 4.6 4.4 years.
Adjusted EBITDA
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 | | | 2023 | | $ Change | | % Change | | 2022 |
| | | (Dollars in thousands) | | | (Dollars in thousands) |
| Dotdash Meredith | Dotdash Meredith | | Dotdash Meredith | | |
| Digital | Digital | $ | 22,602 | | | $ | 14,400 | | | 176% | | $ | 8,202 | | | $ | 108,718 | | | $ | 60,045 | | | 123% | | $ | 48,673 | | Digital | | $ | 24,403 | | | $ | (10,397) | | | (30)% | | $ | 34,800 | |
| Print | Print | 23,097 | | | 23,097 | | | N/A | | — | | | 18,882 | | | 18,882 | | | N/A | | — | | Print | | 11,334 | | | 21,814 | | | NM | | (10,480) | |
| Other | Other | (14,506) | | | (14,506) | | | N/A | | — | | | (48,706) | | | (48,706) | | | N/A | | — | | Other | | (58,854) | | | (43,068) | | | (273)% | | (15,786) | |
| Total Dotdash Meredith | Total Dotdash Meredith | 31,193 | | | 22,991 | | | 280% | | 8,202 | | | 78,894 | | | 30,221 | | | 62% | | 48,673 | | Total Dotdash Meredith | | (23,117) | | | (31,651) | | | NM | | 8,534 | |
| Angi Inc. | Angi Inc. | 22,882 | | | 10,487 | | | 85% | | 12,395 | | | 29,402 | | | (1,737) | | | (6)% | | 31,139 | | Angi Inc. | | |
| Domestic | | Domestic | | |
| Ads and Leads | | Ads and Leads | | 39,851 | | | 5,526 | | | 16% | | 34,325 | |
| Services | | Services | | (2,168) | | | 16,399 | | | 88% | | (18,567) | |
| Roofing | | Roofing | | 821 | | | 5,847 | | | NM | | (5,026) | |
| Other | | Other | | (12,354) | | | (1,904) | | | (18)% | | (10,450) | |
| Total Domestic | | Total Domestic | | 26,150 | | | 25,868 | | | 9,230% | | 282 | |
| International | | International | | 4,354 | | | 7,805 | | | NM | | (3,451) | |
| Total Angi Inc. | | Total Angi Inc. | | 30,504 | | | 33,673 | | | NM | | (3,169) | |
| Search | Search | 19,111 | | | (10,920) | | | (36)% | | 30,031 | | | 70,528 | | | (3,559) | | | (5)% | | 74,087 | | Search | | 10,791 | | | (14,309) | | | (57)% | | 25,100 | |
| Emerging & Other | Emerging & Other | 2,425 | | | (312) | | | (11)% | | 2,737 | | | (13,719) | | | (35,311) | | | NM | | 21,592 | | Emerging & Other | | 14,778 | | | 13,862 | | | 1,513% | | 916 | |
| Corporate | Corporate | (20,830) | | | 2,302 | | | 10% | | (23,132) | | | (65,240) | | | 6,529 | | | 9% | | (71,769) | | Corporate | | (23,833) | | | (139) | | | (1)% | | (23,694) | |
| Total | Total | $ | 54,781 | | | $ | 24,548 | | | 81% | | $ | 30,233 | | | $ | 99,865 | | | $ | (3,857) | | | (4)% | | $ | 103,722 | | Total | | $ | 9,123 | | | $ | 1,436 | | | 19% | | $ | 7,687 | |
| | As a percentage of revenue | As a percentage of revenue | 4% | | 3% | | 3% | | 4% | As a percentage of revenue | | 1% | | 1% |
•Dotdash Meredith Adjusted EBITDA decreased $31.7 million to a loss of $23.1 million due to an increase in Adjusted EBITDA losses of $43.1 million from Other (unallocated corporate costs) and a decrease in Adjusted EBITDA of $10.4 million from Digital, partially offset by an increase in Adjusted EBITDA of $21.8 million from Print.
◦The Other (unallocated corporate costs) Adjusted EBITDA loss increase was due primarily to an impairment charge of $44.7 million of an ROU asset related to unoccupied lease space recognized in the first quarter of 2023.
◦The Digital Adjusted EBITDA decrease was due primarily to lower revenue and an increase in product development expense described above, partially offset by the inclusion in 2022 of $5.8 million of restructuring charges and transaction-related expenses.
◦The Print Adjusted EBITDA increase was due primarily to a decrease in operating costs and expenses driven by the inclusion in 2022 of $16.4 million of restructuring charges and transaction-related expenses.
•Angi Inc. Adjusted EBITDA increased $33.7 million to $30.5 million from a loss of $3.2 million due to decreases in Adjusted EBITDA losses of $16.4 million from Services, $5.8 million from Roofing and $7.8 million from International and an increase in Adjusted EBITDA of $5.5 million from Ads and Leads, partially offset by increased Adjusted EBITDA losses of $1.9 million from Other (unallocated corporate costs).
◦The Services Adjusted EBITDA loss decrease was due primarily to pricing and fulfillment optimization efforts over the past year and lower operating expenses due to a reduced overall cost base as a result of exiting complex services and less profitable Services offerings.
◦The Roofing Adjusted EBITDA loss decrease was due primarily to higher revenue and margin optimization efforts (both labor and material efficiencies).
◦The International Adjusted EBITDA loss decrease was due primarily to lower selling and marketing expense, described above.
◦The Ads and Leads Adjusted EBITDA increase was due primarily to lower selling and marketing expense due to improved marketing efficiency and lower general and administrative expense due to lower compensation expense and other operating expenses.
◦The Other (unallocated corporate costs) Adjusted EBITDA loss increase was due primarily to an increase in lease expense due to the repurposing of its real estate for general and administrative functions in 2022.
•Search Adjusted EBITDA decreased 57% to $10.8 million due primarily to lower revenue.
•Emerging & Other Adjusted EBITDA increased $13.9 million to $14.8 million due primarily to higher profits at Care.com and Mosaic Group and the sale of Bluecrew, which had losses in the prior year period, partially offset by higher losses at IAC Films, Vivian Health, Newco and Daily Beast.
Interest expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Interest expense | | | | | | | | | $ | 38,172 | | | $ | 16,260 | | | 74% | | $ | 21,912 | |
Interest expense in 2023 increased from 2022 due primarily to an increase in interest rates on the Dotdash Meredith Term Loans.
Unrealized gain (loss) on investment in MGM Resorts International ("MGM")
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Unrealized gain (loss) on investment in MGM Resorts International | | | | | | | | | $ | 704,840 | | | $ | 892,170 | | | NM | | $ | (187,330) | |
The Company's investment in MGM is accounted for as a marketable equity security and the unrealized pre-tax gain and loss of $704.8 million and $187.3 million in the three months ended March 31, 2023 and 2022, respectively, were due to changes in the price of MGM as reported on the New York Stock Exchange. As of March 31, 2023, the Company owns approximately 64.7 million shares in MGM.
Other income, net
| | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 |
| | | | | | (Dollars in thousands) |
| Interest income | | | | | $ | 16,930 | | | $ | 698 | |
| Unrealized increase in the estimated fair value of a warrant | | | | | 5,940 | | | 7,985 | |
| | | | | | | |
| | | | | | | |
| Unrealized (loss) gain related to marketable equity securities | | | | | (1,150) | | | 34,352 | |
Net periodic pension benefit costs, other than the service cost component (a) | | | | | (674) | | | (35,359) | |
| | | | | | | |
| | | | | | | |
| Other | | | | | 2,703 | | | (977) | |
| Other income, net | | | | | $ | 23,749 | | | $ | 6,699 | |
| | | | | | | |
| $ Change | | | | | $ | 17,050 | | | |
| % Change | | | | | 255 | % | | |
_____________________
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
•Dotdash Meredith Adjusted EBITDA increased 280% to $31.2 million, due to higher revenue, partially offset by $17.7 million in restructuring charges and $0.8 million in transaction-related costs associated with the Meredith acquisition described above under "Dotdash Meredith Restructuring Charges."
•Angi Inc. Adjusted EBITDA increased $10.5 million to $22.9 million, due to higher revenue, partially offset by an increase of $25.2 million in general and administrative expense, which is described above.
•Search Adjusted EBITDA decreased $10.9 million to $19.1 million due to a decrease in Ask Media Group revenue and an increase in online marketing, partially offset by a decrease in traffic acquisitions costs.
•Emerging & Other Adjusted EBITDA decreased $0.3 million to $2.4 million due primarily to increased losses at Bluecrew, the Daily Beast and Newco and lower profits at Mosaic Group, partially offset by increased profits at Care.com.
•Corporate Adjusted EBITDA loss decreased 10% to $20.8 million due primarily to lower wage-related expense.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
•Dotdash Meredith Adjusted EBITDA increased 62% to $78.9 million, due to higher revenue, partially offset by $53.8 million in restructuring charges and $6.0 million in transaction-related costs associated with the Meredith acquisition described above under "Dotdash Meredith Restructuring Charges."
•Angi Inc. Adjusted EBITDA decreased 6% to $29.4 million, despite higher revenue, due to an increase of $112.8 million in cost of revenue due primarily to the growth of Angi Services, including $53.7 million of costs attributable to the inclusion of Angi Roofing for nine months in the current year compared to three months in the prior year, and an increase of $7.2 million in advertising expense, due primarily to the consolidation under a single brand on March 17, 2021, which has adversely affected both free and paid search engine marketing efforts.
•Search Adjusted EBITDA decreased $3.6 million to $70.5 million due primarily to a decrease in Desktop revenue and an increase in traffic acquisition costs as a result of unfavorable revenue share rates resulting in higher revenue share payments compared to the prior year, partially offset by higher revenue from Ask Media Group.
•Emerging & Other Adjusted EBITDA decreased $35.3 million to a loss of $13.7 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 Mosaic Group and IAC Films and increased losses at Newco, Bluecrew and the Daily Beast, partially offset by higher profits at Care.com.
•Corporate Adjusted EBITDA loss decreased 9% to $65.2 million due primarily to the inclusion in 2021 of $6.1 million of transaction-related costs in connection with the Spin-off.
Interest expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Interest expense | $ | 29,433 | | | $ | 23,401 | | | 388% | | $ | 6,032 | | | $ | 74,862 | | | $ | 56,399 | | | 305% | | $ | 18,463 | |
For the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021
Interest expense in 2022 increased from 2021 due primarily to the Dotdash Meredith Term Loans, partially offset by the repayment of the ANGI Group Term Loan during the second quarter of 2021 and the write-off of deferred debt issuance costs associated with the termination of the ANGI Group Revolving Facility in August 2021.
Unrealized gain (loss) on investment in MGM Resorts International
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Unrealized gain (loss) on investment in MGM Resorts International | $ | 42,523 | | | $ | 13,006 | | | 44% | | $ | 29,517 | | | $ | (970,112) | | | $ | (1,657,267) | | | NM | | $ | 687,155 | |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
During the three months ended September 30, 2022 and 2021, the Company recorded unrealized pre-tax gains of $42.5 million and $29.5 million, respectively. In the third quarter of 2022, the Company purchased an additional 1.2 million shares of MGM for $41.8 million.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
During the nine months ended September 30, 2022 and 2021, the Company recorded an unrealized pre-tax loss of $970.1 million and an unrealized pre-tax gain of $687.2 million, respectively. In the first and third quarters of 2022, the Company purchased a total of 5.7 million additional shares of MGM for $244.3 million. Following these purchases, the Company owns approximately 64.7 million shares, representing a 16.9%ownership interest in MGM as ofOctober 31, 2022.
Other income (expense), net
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (Dollars in thousands) |
| Realized gain related to the sale of investments | $ | 11,840 | | | $ | 3,022 | | | $ | 12,302 | | | $ | 3,103 | |
| Interest income | 8,778 | | | 216 | | | 11,918 | | | 931 | |
| Unrealized increase in the estimated fair value of a warrant | 8,467 | | | 47,075 | | | 21,318 | | | 102,331 | |
| Upward (downward) adjustments to the carrying value of equity securities without readily determinable fair values | 8,245 | | | 7,516 | | | (14,131) | | | 8,892 | |
Net periodic pension benefit credits (costs), other than the service cost component(a) | 1,871 | | | — | | | (75,317) | | | — | |
| Unrealized (loss) gain related to marketable equity securities | (13,972) | | | 25,794 | | | (8,316) | | | 25,794 | |
Foreign exchange losses, net(b) | (5,196) | | | (858) | | | (11,425) | | | (11,976) | |
| Realized (loss) gain on the sale of a marketable equity security | — | | | (3,536) | | | — | | | 7,174 | |
Loss on extinguishment of debt(c) | — | | | — | | | — | | | (1,110) | |
| Other | (355) | | | 310 | | | 603 | | | (1,751) | |
| Other income (expense), net | $ | 19,678 | | | $ | 79,539 | | | $ | (63,048) | | | $ | 133,388 | |
| | | | | | | |
| $ Change | $ | (59,861) | | | | | $ | (196,436) | | | |
| % Change | (75) | % | | | | NM | | |
_____________________
(a) Includes a pre-tax actuarial gain of $2.6 million for the three months ended September 30, 2022 related to Meredith's funded pension plan in the U.S. and a pre-tax actuarial loss of $76.1 million for the nine months ended September 30, 2022 related to Meredith's funded pension plans in the U.K., consisting of the IPC Pension Scheme, and the U.S. See "Note 9—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 nine months ended September 30, 2021.
(c) 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.
Income tax (provision) benefit (provision)
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 | | | 2023 | | $ Change | | % Change | | 2022 |
| | | (Dollars in thousands) | | | (Dollars in thousands) |
| Income tax benefit (provision) | $ | 26,065 | | | $ | 35,975 | | | NM | | $ | (9,910) | | | $ | 325,517 | | | $ | 476,563 | | | NM | | $ | (151,046) | | |
| Income tax (provision) benefit | | Income tax (provision) benefit | | $ | (139,502) | | | $ | (209,966) | | | NM | | $ | 70,464 | |
| Effective income tax rate | Effective income tax rate | 28% | | 14% | | 22% | | 21% | Effective income tax rate | | 25% | | 23% |
For the three months ended September 30, 2022 compared to the three months ended September 30, 2021
In 2022,2023, the effective income tax rate wasis higher than the statutory rate of 21% due primarily to the realization of a capital loss.state taxes and nondeductible compensation expense, partially offset by research credits.
In 2021,2022, the effective income tax rate was loweris higher than the statutory rate of 21% due primarily to state taxes and excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by state taxes, nondeductible stock-based compensation expense and foreign income taxed at different rates.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021
In 2022, the effective income tax rate was higher than the statutory rate of 21% due primarily to state taxes, offset by the non-deductible portion of the Mosaic Group goodwill impairment charge.
In 2021, the effective income tax rate was the same as the statutory rate of 21% due to excess tax benefits generated by the exercise and vesting of stock-based awards, offset by an increase in the valuation allowance on beginning-of-the-year deferred tax assets related to the Spin-off and state taxes.
Net loss (earnings) attributable to noncontrolling interests
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | $ Change | | % Change | | 2021 | | 2022 | | $ Change | | % Change | | 2021 |
| | (Dollars in thousands) |
| Net loss (earnings) attributable to noncontrolling interests | $ | 2,024 | | | $ | 2,381 | | | NM | | $ | (357) | | | $ | 13,388 | | | $ | 10,299 | | | 333% | | $ | 3,089 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | | | | | 2023 | | $ Change | | % Change | | 2022 |
| | | | | | | | | | (Dollars in thousands) |
| Net loss attributable to noncontrolling interests | | | | | | | | | $ | 2,456 | | | $ | (2,639) | | | (52)% | | $ | 5,095 | |
Net loss (earnings) attributable to noncontrolling interests in 20222023 and 20212022 primarily represents the publicly-held interest in Angi Inc.'s (losses) earnings. Net loss attributable to noncontrolling interests in 2022 also include a third-party interest in a subsidiary that holds two marketable equity securities that the Company recorded net unrealized losses on in 2022. Net (earnings) loss attributable to non-controlling interests in 2021 includes unrealized gains related to one of the investments that went public in the third quarter of 2021.losses.
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, and our internal budgets are based and may impact management 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. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.
The following table reconciles net earnings (loss) earnings attributable to IAC shareholders to operating loss to Adjusted EBITDA:
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In thousands) | | | (In thousands) |
| Net (loss) earnings attributable to IAC shareholders | $ | (63,823) | | | $ | 60,690 | | | $ | (1,168,751) | | | $ | 584,575 | | |
| Net earnings (loss) attributable to IAC shareholders | | Net earnings (loss) attributable to IAC shareholders | | $ | 417,775 | | | $ | (235,798) | |
| Add back: | Add back: | | Add back: | | |
| Net (loss) earnings attributable to noncontrolling interests | (2,024) | | | 357 | | | (13,388) | | | (3,089) | | |
| Loss from discontinued operations, net of tax | — | | | — | | | — | | | 1,831 | | |
| Income tax (benefit) provision | (26,065) | | | 9,910 | | | (325,517) | | | 151,046 | | |
| Other (income) expense, net | (19,678) | | | (79,539) | | | 63,048 | | | (133,388) | | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | | (2,456) | | | (5,095) | |
| Income tax provision (benefit) | | Income tax provision (benefit) | | 139,502 | | | (70,464) | |
| Other income, net | | Other income, net | | (23,749) | | | (6,699) | |
| Unrealized (gain) loss on investment in MGM Resorts International | Unrealized (gain) loss on investment in MGM Resorts International | (42,523) | | | (29,517) | | | 970,112 | | | (687,155) | | Unrealized (gain) loss on investment in MGM Resorts International | | (704,840) | | | 187,330 | |
| Interest expense | Interest expense | 29,433 | | | 6,032 | | | 74,862 | | | 18,463 | | Interest expense | | 38,172 | | | 21,912 | |
| Operating loss | Operating loss | (124,680) | | | (32,067) | | | (399,634) | | | (67,717) | | Operating loss | | (135,596) | | | (108,814) | |
| Add back: | Add back: | | Add back: | | |
| Stock-based compensation expense | Stock-based compensation expense | 31,117 | | | 15,438 | | | 92,460 | | | 57,804 | | Stock-based compensation expense | | 28,941 | | | 29,687 | |
| Depreciation | Depreciation | 27,567 | | | 17,795 | | | 86,855 | | | 54,093 | | Depreciation | | 61,172 | | | 30,236 | |
| Amortization of intangibles | Amortization of intangibles | 120,777 | | | 14,067 | | | 234,048 | | | 44,542 | | Amortization of intangibles | | 54,606 | | | 57,190 | |
| Acquisition-related contingent consideration fair value adjustments | Acquisition-related contingent consideration fair value adjustments | — | | | 15,000 | | | (612) | | | 15,000 | | Acquisition-related contingent consideration fair value adjustments | | — | | | (612) | |
| Goodwill impairment | — | | | — | | | 86,748 | | | — | | |
| | Adjusted EBITDA | Adjusted EBITDA | $ | 54,781 | | | $ | 30,233 | | | $ | 99,865 | | | $ | 103,722 | | Adjusted EBITDA | | $ | 9,123 | | | $ | 7,687 | |
Non-Cash Expenses That Are Excluded from Our Non-GAAP Measure
Stock-based compensation expense consists of expense associated with awards that were granted under various IAC stock and annual incentive 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 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 capitalized software, equipment, buildings and leasehold improvements 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, content, trade names, content, service professional relationships, customer lists and user base and 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
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | | (In thousands) |
| Angi Inc. cash and cash equivalents and marketable debt securities: | | Angi Inc. cash and cash equivalents and marketable debt securities: | |
| United States | | United States | $ | 304,521 | | | $ | 311,422 | |
| All other countries | | All other countries | 10,439 | | | 9,733 | |
| Total cash and cash equivalents | | Total cash and cash equivalents | 314,960 | | | 321,155 | |
| Marketable debt securities (United States) | | Marketable debt securities (United States) | 12,495 | | | — | |
| Total Angi Inc. cash and cash equivalents and marketable debt securities | | Total Angi Inc. cash and cash equivalents and marketable debt securities | 327,455 | | | 321,155 | |
| | (In thousands) | | | | |
| Dotdash Meredith cash and cash equivalents: | Dotdash Meredith cash and cash equivalents: | | Dotdash Meredith cash and cash equivalents: | |
| United States | United States | $ | 125,002 | | | $ | 218,612 | | United States | 262,498 | | | 109,000 | |
| All other countries | All other countries | 14,336 | | | 14,781 | | All other countries | 13,321 | | | 14,866 | |
| Total Dotdash Meredith cash and cash equivalents | Total Dotdash Meredith cash and cash equivalents | 139,338 | | | 233,393 | | Total Dotdash Meredith cash and cash equivalents | 275,819 | | | 123,866 | |
| | Angi Inc. cash and cash equivalents: | | |
| United States | 302,046 | | | 404,277 | | |
| All other countries | 26,749 | | | 23,859 | | |
| Total Angi Inc. cash and cash equivalents | 328,795 | | | 428,136 | | |
| | | IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities: | IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities: | | IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities: | |
| United States | United States | 1,106,843 | | | 1,408,828 | | United States | 780,690 | | | 939,168 | |
| All other countries | All other countries | 32,408 | | | 48,373 | | All other countries | 27,367 | | | 33,201 | |
| Total cash and cash equivalents | Total cash and cash equivalents | 1,139,251 | | | 1,457,201 | | Total cash and cash equivalents | 808,057 | | | 972,369 | |
| Marketable securities (United States) | Marketable securities (United States) | 16,343 | | | 19,788 | | Marketable securities (United States) | 189,643 | | | 239,373 | |
| Total IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities | Total IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities | 1,155,594 | | | 1,476,989 | | Total IAC (excluding Dotdash Meredith and Angi Inc.) cash and cash equivalents and marketable securities | 997,700 | | | 1,211,742 | |
| | Total cash and cash equivalents and marketable securities | Total cash and cash equivalents and marketable securities | $ | 1,623,727 | | | $ | 2,138,518 | | Total cash and cash equivalents and marketable securities | $ | 1,600,974 | | | $ | 1,656,763 | |
| | Dotdash Meredith Debt: | Dotdash Meredith Debt: | | Dotdash Meredith Debt: | |
| Dotdash Meredith Term Loan A | Dotdash Meredith Term Loan A | $ | 336,875 | | | $ | 350,000 | | Dotdash Meredith Term Loan A | $ | 328,125 | | | $ | 332,500 | |
| Dotdash Meredith Term Loan B | Dotdash Meredith Term Loan B | 1,240,625 | | | 1,250,000 | | Dotdash Meredith Term Loan B | 1,234,375 | | | 1,237,500 | |
| Total Dotdash Meredith long-term debt | Total Dotdash Meredith long-term debt | 1,577,500 | | | 1,600,000 | | Total Dotdash Meredith long-term debt | 1,562,500 | | | 1,570,000 | |
| Less: current portion of Dotdash Meredith long-term debt | Less: current portion of Dotdash Meredith long-term debt | 30,000 | | | 30,000 | | Less: current portion of Dotdash Meredith long-term debt | 30,000 | | | 30,000 | |
| Less: original issue discount | Less: original issue discount | 5,521 | | | 6,176 | | Less: original issue discount | 5,100 | | | 5,310 | |
| Less: unamortized debt issuance costs | Less: unamortized debt issuance costs | 10,673 | | | 12,139 | | Less: unamortized debt issuance costs | 9,762 | | | 10,215 | |
| Total Dotdash Meredith long-term debt, net | Total Dotdash Meredith long-term debt, net | 1,531,306 | | | 1,551,685 | | Total Dotdash Meredith long-term debt, net | 1,517,638 | | | 1,524,475 | |
| | ANGI Group Debt: | ANGI Group Debt: | | ANGI Group Debt: | |
| ANGI Group Senior Notes | ANGI Group Senior Notes | 500,000 | | | 500,000 | | ANGI Group Senior Notes | 500,000 | | | 500,000 | |
| Less: unamortized debt issuance costs | Less: unamortized debt issuance costs | 4,902 | | | 5,448 | | Less: unamortized debt issuance costs | 4,531 | | | 4,716 | |
| Total ANGI Group long-term debt | 495,098 | | | 494,552 | | |
| Total ANGI Group long-term debt, net | | Total ANGI Group long-term debt, net | 495,469 | | | 495,284 | |
| | Total long-term debt, net | Total long-term debt, net | $ | 2,026,404 | | | $ | 2,046,237 | | Total long-term debt, net | $ | 2,013,107 | | | $ | 2,019,759 | |
The Company's international cash can be repatriated without significant tax consequences.
Cash Flow Information
In summary, IAC's cash flows are as follows:
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2022 | | 2021 |
| (In thousands) |
| Net cash (used in) provided by: | | | |
| Operating activities attributable to continuing operations | $ | (101,493) | | | $ | 209,629 | |
| Investing activities attributable to continuing operations | $ | (294,148) | | | $ | (216,553) | |
| Financing activities attributable to continuing operations | $ | (101,239) | | | $ | (369,105) | |
| | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2023 | | 2022 |
| (In thousands) |
| Net cash provided by (used in): | | | |
| Operating activities | $ | 25,167 | | | $ | 12,902 | |
| Investing activities | $ | 51,974 | | | $ | (231,589) | |
| Financing activities | $ | (95,975) | | | $ | (27,482) | |
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. Non-cash adjustments include the unrealized loss (gain)(gains) losses on the investment in MGM, deferred income taxes, depreciation, non-cash lease expense (including ROU impairments), amortization of intangibles, pension and postretirement benefit expense, losses (gains) on sales of businesses and investments in equity securities, stock-based compensation expense, provision for credit losses and unrealized increase in the estimated fair value of a warrant, stock-based compensation expense, provision for credit losses, depreciation, goodwill impairment, pension and postretirement benefit expense, non-cash lease expense (including ROU asset impairments), and net losses (gains) on investments in equity securities.warrant.
20222023
Adjustments to net losses attributable to continuing operationsearnings consist primarily of an unrealized lossgain on the investment in MGM of $970.1 million, amortization of intangibles of $234.0 million, stock-based compensation expense of $92.5 million, provision of credit losses of $87.7 million, depreciation of $86.9 million, goodwill impairment of $86.7 million, pension and postretirement benefit expense of $78.1 million, non-cash lease expense (including ROU asset impairments) of $56.9 million, and net losses on investments in equity securities of $10.1 million, partially offset by deferred taxes of $333.2$704.8 million and an unrealized increase in the estimated fair value of a warrant of $21.3$5.9 million, partially offset by deferred taxes of $127.2 million, depreciation of $61.2 million, non-cash lease expense of $58.7 million, amortization of intangibles of $54.6 million, stock-based compensation expense of $28.9 million, provision of credit losses of $24.8 million and net losses on sales of businesses and investments in equity securities of $2.5 million. The decrease from changes in working capital include decreases in accounts payable and other liabilities of $244.4$107.4 million and operating lease liabilities of $47.7$19.7 million, partially offset by a decrease in accounts receivable of $43.0 million, a decrease in other assets of $27.0 million and an increase in deferred revenue of $15.4 million. The decrease in accounts payable and other liabilities is due primarily to decreases in (i) accrued employee compensation due primarily to payment of 2022 bonuses in 2023, a decrease in accrued payroll due to timing of payments and restructuring related severance payments at Dotdash Meredith and (ii) decreases in accounts payable at Dotdash Meredith, due primarily to a decrease in spend in the first quarter of 2023 relative to the fourth quarter of 2022 and timing of payments, and at Care.com, due primarily to timing of payments. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The decrease in accounts receivable is due primarily to a decrease in revenue in the first quarter of 2023 relative to the fourth quarter of 2022 at Dotdash Meredith, partially offset by an increase at Angi Inc., due primarily to timing of cash receipts for credit card transactions. The decrease in other assets is due, in part, to a decrease in prepaid hosting services at Angi Inc., Dotdash Meredith and Corporate. The increase in deferred revenue is due primarily to timing of annual subscription renewals at Care.com.
Net cash provided by investing activities includes maturities of marketable debt securities of $137.5 million and proceeds from the sales of assets of $29.4 million, including $28.9 million related to the sale of a building at Dotdash Meredith, partially offset by $98.5 million for the purchases of marketable debt securities and capital expenditures of $21.9 million primarily related to investments in capitalized software at Angi Inc. to support its products and services and payment of $8.1 million related to the acquisition of the formerly leased land under IAC's New York City headquarters building. The purchase of the land was completed in April 2023.
Net cash used in financing activities includes the repurchase of 1.7 million shares of IAC common stock, on a settlement date basis, for $84.7 million at an average price of $51.16 per share, principal payments on Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B of $7.5 million, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $2.2 million and withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $1.4 million.
2022
Adjustments to net loss consist primarily of an unrealized loss on the investment in MGM of $187.3 million, amortization of intangibles of $57.2 million, pension and postretirement benefit expense of $36.3 million, depreciation of $30.2 million, stock-based compensation expense of $29.7 million, provision of credit losses of $23.3 million and non-cash lease expense of $13.7 million, partially offset by deferred taxes of $76.9 million, net gains on investments in equity securities of $35.9 million and an unrealized increase in the estimated fair value of a warrant of $8.0 million. The decrease from changes in working capital include decreases in accounts payable and other liabilities of $82.6 million and operating lease liabilities of $17.2 million, partially offset by a decrease in accounts receivable of $75.6 million and an increase in deferred revenue of $11.3 million. The decrease in accounts payable and other liabilities is due primarily to a decrease in accrued employee compensation due, in part, to change-in-control payments,payment of 2021 bonuses in 2022 and payment of commissions, partially offset by an increase in restructuring charges at Dotdash Meredith, and a decrease in accrued traffic acquisition costs and related payables at Search, a payment of pre-acquisition income tax indemnification liabilities at Dotdash Meredith, and 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.Search. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The decrease in accounts receivable is due primarily to a decrease in revenue in the first quarter of 2022 relative to the fourth quarter of 2021 at Dotdash Meredith and Search, partially offset by revenue growth at Angi Inc., primarily attributable to Angi Services. The increase in deferred revenue is due primarily to timing of annual subscription renewals at Care.com.
Net cash used in investing activities attributable to continuing operations includes $244.3$202.5 million for the purchase of 5.7an additional 4.5 million additional shares of MGM and capital expenditures of $112.8$30.5 million primarily related to investments in capitalized software at Angi Inc., Care.com, and Dotdash Meredith to support its products and services, partially offset by net proceeds from the sale of certain businesses and investments of $41.3 million, and a decrease in notes receivable of $19.5 million.services.
Net cash used in financing activities attributable to continuing operations includes the repurchase of 1.1 million shares of IAC Class A 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 $22.5 million, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $17.1$14.9 million, 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, principal payments on Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B of $7.5 million and withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $5.6 million, partially offset by proceeds from the issuance of Vivian Health preferred shares, net of fees, of $34.7$1.3 million.
2021
Adjustments to net earnings attributable to continuing operations consist primarily of $687.2 million of an unrealized gain on the investment in MGM, an unrealized increase in the estimated fair value of a warrant of $102.3 million, and net gains on investments in equity securities of $45.0 million, partially offset by deferred income taxes $150.6 million, provision for credit losses of $66.4 million, stock-based compensation expense of $57.8 million, depreciation of $54.1 million, amortization of intangibles of $44.5 million, and non-cash lease expense (including ROU asset impairments) of $24.5 million. The increase from changes in working capital primarily consists of an increase in accounts payable and other liabilities of $103.8 million, an increase in deferred revenue of $39.9 million and a decrease in other assets of $19.0 million, partially offset by an increase in accounts receivable of $114.6 million, a decrease in operating lease liabilities of $20.5 million and a decrease in income taxes payable and receivable of $6.0 million. The increase in accounts payable and other liabilities is due primarily to increases in accrued traffic acquisition costs and related payables at Search, an increase in accrued advertising and related payables at Angi Inc. and accrued roofing material costs related to Angi Roofing at Angi Inc. The increase in deferred revenue is due primarily to timing of cash received related to various production deals at IAC Films, growth in subscription sales at Care.com, as well as an increase in annual memberships and customer deposits for Angi Services jobs at Angi Inc. The decrease in other assets is due to decreases in capitalized downloadable search toolbar costs at Search and capitalized sales commissions at Angi Inc. The increase in accounts receivable is due primarily to revenue growth at Angi Inc. primarily attributable to Angi Services, and Search, partially offset by timing of cash receipts at Care.com. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The decrease in income taxes payable and receivable is due primarily to the release of income tax reserves due to statue expirations and income tax payments in excess of income tax accruals.
Net cash used in investing activities attributable to continuing operations includes the cash distribution to IAC related to the spin-off of Vimeo of $333.2 million, capital expenditures of $69.4 million primarily related to investments in capitalized software at Angi Inc. to support its products and services, and a payment of $12.7 million related to the purchase of a 50% interest in an aircraft at Corporate, acquisitions of $25.4 million, principally related to the Angi Roofing acquisition at Angi Inc., and purchases of investments of $23.9 million, primarily related to Turo, partially offset by maturities of marketable debt securities of $225.0 million.
Net cash used in financing activities attributable to continuing operations includes $220.0 million for the prepayment of the remaining balance of the ANGI Group Term Loan, which otherwise would have matured on November 5, 2023, $56.1 million for withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled, $35.4 million for the repurchase of 3.2 million shares of Angi Inc. Class A common stock, on a settlement date basis, at an average price of $11.06 per share, $35.1 million for withholding taxes paid on behalf of IAC employees for stock-based awards that were net settled and $24.7 million for the purchase of redeemable noncontrolling interests.
Discontinued Operations
Net cash provided by discontinued operations of $319.2 million for the nine months ended September 30, 2021 relates to the operations of Vimeo. The Company does not expect cash flows from discontinued operations following the Spin-off.
Liquidity and Capital Resources
Financing Arrangements
In March 2023, Dotdash Meredith entered into interest rate swaps for a total notional amount of $350 million with a maturity date of April 1, 2027 to manage interest rate risk exposure. Dotdash Meredith designated the interest rate swaps as cash flow hedges and applies hedge accounting to these contracts. The interest rate swaps synthetically convert $350 million of the Dotdash Meredith Term Loan B for the duration of the interest rate swaps to a fixed rate of approximately 7.92% ((i) the weighted average fixed interest rate of approximately 3.82% on the interest rate swaps plus (ii) the adjustment to the secured overnight financing rate of 0.10% plus (iii) the base rate of 4.00%), beginning April 2023.
Investment in MGM Resorts International
InAt March 31, 2023, the Company owns 64.7 million shares of MGM, including 4.5 million shares purchased in the first and third quartersquarter of 2022 for $202.5 million, representing a 17.6% ownership.
Investment in Turo
In April 2023, the Company purchased a total of 5.7 million additional shares of MGMTuro for $244.3$103.6 million. Following these purchases, the Company ownspurchase, IAC's aggregate percentage ownership in Turo is approximately 64.7 million shares, representing a 16.9%ownership interest in MGM as of October 31, 2022.31%.
Share Repurchase Authorizations and Activity
During the ninethree months ended September 30, 2022,March 31, 2023, IAC repurchased 1.11.8 million shares of its common stock, on a trade date basis, at an average price of $77.44$51.16 per share, or $85.3$90.9 million in aggregate. At September 30, 2022,From April 1, 2023 through May 5, 2023, IAC has 6.9 million shares remaining in its share repurchase authorization.
During the nine months ended September 30, 2022, Angi Inc. repurchased 1.0an additional 1.3 million shares of its Class A common stock, on a trade date basis, at an average price of $7.80$50.47 per share, or $8.1$67.2 million in aggregate. At September 30, 2022May 5, 2023, IAC has 3.8 million shares remaining in its share repurchase authorization.
At May 5, 2023 Angi Inc. has 15.0 million shares remaining in its share repurchase authorization.
IAC and Angi 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 Angi Inc. may settle stock options, stock settled stock appreciation rights, restricted stock units ("RSUs") and restricted 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 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 Inc., as applicable, on the employee's behalf.All awards are being settled currently on a net basis.
Certain previously issued Angi Inc. stock appreciation rights are settleable in either shares of Angi Inc. common stock or shares of IAC common stock at IAC's option. If settled in IAC common stock, Angi Inc. reimburses IAC in shares of Angi Inc.'s common stock.
The following table summarizes (i) the aggregate intrinsic value of IAC options, Angi Inc. options, Angi Inc. stock settled stock appreciation rights, IAC and Angi Inc. non-publicly traded subsidiary denominated stock settled stock appreciation rights and (ii) the aggregate fair value (based on stock prices as of November 4, 2022)May 5, 2023) of IAC and Angi 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 September 30, 2023 | | Estimated withholding taxes payable on shares that will vest after September 30, 2023 | | 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 March 31, 2024 | | Estimated withholding taxes payable on shares that will vest after March 31, 2024 | | Estimated IAC shares to be issued |
| | (In thousands) | | (In thousands) |
| IAC | IAC | | IAC | |
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) | $ | 42,732 | | | $ | 15,058 | | | $ | 6,308 | | | 472 | | Stock settled stock appreciation rights denominated in shares of certain non-publicly traded IAC subsidiaries other than Angi Inc. subsidiaries (a) | $ | 27,921 | | | $ | 11,568 | | | $ | 2,392 | | | 263 | |
IAC denominated stock options (b) | IAC denominated stock options (b) | 88,476 | | | 44,238 | | | — | | | 977 | | IAC denominated stock options (b) | 108,721 | | | 54,360 | | | — | | | 1,024 | |
IAC RSUs (c) | IAC RSUs (c) | 65,161 | | | 654 | | | 30,804 | | | 745 | | IAC RSUs (c) | 91,943 | | | 2,658 | | | 42,136 | | | 888 | |
IAC restricted stock (d) | IAC restricted stock (d) | — | | | — | | | — | | | — | | IAC restricted stock (d) | — | | | — | | | — | | | — | |
| Total IAC outstanding employee stock-based awards | Total IAC outstanding employee stock-based awards | 196,369 | | | 59,950 | | | 37,112 | | | 2,194 | | Total IAC outstanding employee stock-based awards | 228,585 | | | 68,586 | | | 44,528 | | | 2,175 | |
| | Angi Inc. | Angi Inc. | | Angi Inc. | |
| Angi Inc. RSUs | | Angi Inc. RSUs | 61,800 | | | 7,586 | | | 22,801 | | |
| Angi Inc. stock appreciation rights | Angi Inc. stock appreciation rights | — | | | — | | | — | | | See footnote (f) below | Angi Inc. stock appreciation rights | — | | | — | | | — | | | See footnote (f) below |
Other Angi Inc. equity awards (a)(e) | Other Angi Inc. equity awards (a)(e) | 40,582 | | | 4,971 | | | 14,906 | | | See footnote (f) below | Other Angi Inc. equity awards (a)(e) | 46 | | | 23 | | | — | | | See footnote (f) below |
| Total Angi outstanding employee stock-based awards | 40,582 | | | 4,971 | | | 14,906 | | | |
| Total Angi Inc. outstanding employee stock-based awards | | Total Angi Inc. outstanding employee stock-based awards | 61,846 | | | 7,609 | | | 22,801 | | |
| Total outstanding employee stock-based awards | Total outstanding employee stock-based awards | $ | 236,951 | | | $ | 64,921 | | | $ | 52,018 | | | Total outstanding employee stock-based awards | $ | 290,431 | | | $ | 76,195 | | | $ | 67,329 | | |
_____________________
(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 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) The Company has the discretion to 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 by selling IAC common shares. Assuming all IAC stock options outstanding on November 4, 2022May 5, 2023 were settled on a gross basis i.e.(i.e., through the issuance of a number of IAC common shares equal to the number of stock options exercised,exercised) the Company would have issued 2.8 million common shares and would have received $39.8$39.2 million in cash proceeds. These amounts reflect adjustments made to IAC awards upon the completion
(c) Approximately 80%70% of the estimated withholding taxes payable on shares that willRSUs, which vest after September 30, 2023March 31, 2024, is related to awards that are scheduled to cliff vest in 2025, the five-year anniversary of the grant date.
(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.
(e) Includes Angi Inc. stock options RSUs and subsidiary denominated equity.
(f) Pursuant to the employee matters agreement between IAC and Angi Inc., certain stock appreciation rights of Angi, Inc. and equity awards denominated in shares of Angi Inc.'s subsidiaries may be settled in either shares of Angi Inc. common stock or IAC common stock. To the extent shares of IAC common stock are issued in settlement of these awards, Angi Inc. is obligated to reimburse IAC for the cost of those shares by issuing shares of Angi Inc. common stock.
Contractual Obligations
In the third quarter of 2022,March 2023, the Company entered into an agreement to acquire the formerly leased land under its New York City headquarters building, which purchase was completed in April 2023 for a three-year cloud computing contract with payments of $84.0 million expected to be made within the next twelve months and the remaining paymentstotal purchase price of approximately $43.0$80.0 million, expected to be made by September 2024.including $8.1 million paid in March 2023. At September 30, 2022,March 31, 2023, there have been no other material changes outside of the ordinary course of business to the Company's contractual obligations since the disclosures for the year ended December 31, 2021,2022, included in the Company's Annual Report on Form 10-K.
Capital and Other 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 20222023 capital expenditures are expected to be higher than 2021its 2022 capital expenditures of $90.2$139.8 million by approximately 55%5% to 60%10%, due primarily dueto the acquisition of the formerly leased land described above, partially offset by lower capital expenditures related to the development of capitalized software to support products and services at Angi Inc., Dotdash Meredith, and Care.com, partially offset by a decrease in capital expenditures at Corporate due to the purchase of a 50% interest in an aircraft in 2021.
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.Care.com.
Liquidity Assessment
On a consolidated basis, the Company generated positive cash flows from operating activities of $25.2 million for the three months ended March 31, 2023; excluding the positive cash flows from operating activities of $19.1 million generated by Angi Inc. and negative cash flows from operating activities of $5.8 million generated by Dotdash Meredith, the Company generated positive cash flows from operating activities of $11.9 million.
At September 30, 2022,March 31, 2023, the Company's consolidated cash, cash equivalents and marketable equity securities, excluding MGM, were $1.6 billion, of which $328.8$327.5 million and $139.3$275.8 million was held by Angi Inc. and Dotdash Meredith, respectively. The Company's consolidated debt includes approximately $1.6 billion, which is a liability of Dotdash Meredith, Inc., a subsidiary of IAC, and $500.0 million, which is a liability of ANGI Group, a subsidiary of Angi Inc. On a consolidated basis, the Company generated negative cash flows from operating activities of $101.5 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2022, the Company generated negative cash flows from operating activities of $13.2 million, excluding the negative cash flows from operating activities of $99.7 million generated by Dotdash Meredith and the positive cash flows from operating activities of $11.4 million generated by Angi Inc. Angi Inc. is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, the Company cannot freely access the cash of Angi Inc. and its subsidiaries. In addition, theThe Dotdash 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, (asas defined in the Dotdash Meredith Credit Agreement)Agreement, exceeds 4.0 to 1.0; this ratio was exceeded for the test period ended September 30, 2022.March 31, 2023. The Dotdash Meredith Credit Agreement also permits the Company to, among other things, contribute cash to Dotdash Meredith, which will provide additional liquidity 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 these 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 impact the consolidated net leverage ratios of Dotdash Meredith. In March 2023, the Company contributed $135.0 million to Dotdash Meredith, which Dotdash Meredith subsequently distributed back to the Company in April 2023. Angi Inc. is an 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 Angi 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.factors.
The Company believes Angi Inc.'s and Dotdash Meredith's existing cash, and cash equivalents and expected positive cash flows from operations, and the Company's existing cash and cash equivalents, excluding Angi Inc. and Dotdash Meredith, will be sufficient to fund their 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 next twelve months. The Company may need to raise additional capital through future debt or equity financing to make additional acquisitions and investments beyond the next twelve months.investments. Additional financing may not be available on terms favorable to the Company, or at 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 incrementaladditional financing.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Equity Price Risk
In the first and third quarters of 2022, the Company purchased a total of 5.7 million additional shares of MGM for $244.3 million. Following these purchases,At March 31, 2023, the Company owns approximately 64.7 million shares representing a 16.9%of MGM. For the three months ended March 31, 2023 and 2022, the Company recorded an unrealized pre-tax gain and loss of $704.8 million and $187.3 million, respectively, on its investment in MGM.
ownership interestThe cumulative unrealized net pre-tax gain through March 31, 2023 is $1.6 billion. At March 31, 2023 and December 31, 2022, the carrying value of the Company's investment in MGM, aswhich includes the cumulative unrealized pre-tax gains, was $2.9 billion and $2.2 billion, or approximately 27% and 21% of October 31, 2022.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 May 5, 2023, the carrying value of the Company's investment in MGM was
$2.8 billion. The Company's results of operations and financial condition have been in the past been and may be 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 gain of $42.5 million and an unrealized pre-tax loss of $970.1 million for the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, the Company recorded unrealized pre-tax gains of $29.5 million and $687.2 million, respectively.
The cumulative unrealized net pre-tax gain through September 30, 2022 is $659.7 million. The carrying value of the Company's investment in MGM, which includes the cumulative unrealized pre-tax gains, was $1.9 billion and $2.6 billion at September 30, 2022 and December 31, 2021, respectively, which represents approximately 18% and 22% of IAC's consolidated total assets at September 30, 2022 and December 31, 2021, respectively. A $2.00 increase or decrease in the share price of MGM would, respectively, result in an unrealized pre-tax gain or loss of $129.4 million.
Interest Rate Risk
The Company's exposure to risk for changes in interest rates relates primarily to the Company's long-term debt.
At September 30, 2022,March 31, 2023, the principal amount of the Company's outstanding debt totals $2.08$2.1 billion, of which $1.58$1.6 billion is the Dotdash Meredith Term Loans, which bear interest at a variable rate, and $500.0 million is the ANGI Group Senior Notes, which bear interest at a fixed rate.
During the ninethree months ended September 30, 2022,March 31, 2023, Adjusted Term SOFR for the Dotdash Meredith Term Loans increased nearly 250an average of approximately 65 basis points relative to December 31, 2021.2022. As a result of the increase in Adjusted Term SOFR during the ninethree months ended September 30, 2022,March 31, 2023, the interest expense on Dotdash Meredith Term Loans was $8.6$2.0 million higher as compared to what interest expense would have been if the Adjusted Term SOFR been unchanged during 2022.2023. At September 30, 2022,March 31, 2023, the outstanding balance of $1.24$1.23 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 6.61%8.77%, and the outstanding balance of $336.9$328.1 million related to the Dotdash Meredith Term Loan A bore interest at Adjusted Term SOFR plus 2.25%, or 4.86%6.94%. If Adjusted Term SOFR were to increase or decrease by 100 basis points, the annual interest expense on the Dotdash Meredith Term Loans would increase or decrease by $15.8 million.
$15.7 million, excluding the impact of our interest rate swaps. In March 2023, we entered into interest rate swaps for a total notional amount of $350 million to synthetically convert a portion of the Dotdash Meredith Term Loan B from floating rate to fixed rate to manage interest rate risk exposure and applies hedge accounting to these contracts. See "
If market rates decline relative to the interest raterates on the ANGI Group Senior Notes, the Company runs the risk that the related required interest payments 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 $24.4$22.9 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, nor changes in the credit profile.
Item 4. 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.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company’s management, including our principal executiveChairman and principal financial officers, or persons performing similar functions, evaluatedSenior Executive, Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), conducted an evaluation, as of the end of the period covered by this quarterly report, of the effectiveness of the Company's disclosure controls and procedures as defined by Rule 13a-15(e) under the Exchange Act. Based on this evaluation, management hasour Chairman and Senior Executive, CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
There wereThe Company monitors and evaluates on an ongoing basis its internal control over financial reporting in order to improve its overall effectiveness. In the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.
During the quarter ended March 31, 2023, there have been no changes to our internal control over financial reporting during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, ourthe Company's internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Overview
In the ordinary course of business, IAC and its subsidiaries may become parties to litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholder 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 mattersmatter described below involveinvolves issues or claims that may be of particular interest to IAC's stockholders, regardless of whether any of these matterssuch matter may be material to IAC's financial position or operations based upon the standard set forth in the rules of the Securities and Exchange Commission.
Shareholder Litigation Arising Out of the MTCH Separation
This shareholder class action and derivative lawsuit pending in Delaware state court is described in detail under the captions Part I-Item 3-Legal Proceedings of our annual report on Form 10-K for the fiscal year ended December 31, 2021 (page 36) and Part II-Item 1-Legal Proceedings of our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2022 (page 59)34). SeeDavid Newman v. IAC/InterActiveCorp et al.,No. 2020-0505 (Delaware Chancery Court), and Construction Industry & Laborers Joint Pension Trust for Southern Nevada Plan A v. IAC/InterActiveCorp et al. (Delaware(Delaware Chancery Court), which have been consolidated under the caption In re Match Group, Inc. Derivative Litigation,No. 2020-0505. This lawsuit alleges that the terms of the MTCH Separation (as defined on page 1428 of this quarterly report) are unfair to the former Match Group public shareholders 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 and asserts a variety of direct and derivative claims. On September 1, 2022,As previously reported, the court issued an opiniondismissed the action in September 2022, and order granting the defendants' motions to dismiss the operative complaint with prejudice. On October 3, 2022, the plaintiffs filed a notice of appeal toappealed. On May 3, 2023, the Delaware Supreme Court fromheard oral argument on the Chancery Court's order of dismissal.appeal, which remains pending. IAC believes that the allegations in this litigation are without merit and will continue to defend vigorously against them.
Item 1A. Risk Factors
Cautionary Statement Regarding Forward-Looking Information
This quarterly report on Form 10-Q 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, 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 quarterly 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: (i) our ability to market our products and services in a successful and cost-effective manner, (ii) the display of links to websites offering our products and services in a prominent manner in search results, (iii) changes in our relationship with (or policies implemented by) Google, (iv) our continued ability to market, distribute and monetize our products and services through search engines, digital app stores, advertising networks and social media platforms, (v) the failure or delay of the markets and industries in which our businesses operate to migrate online and the continued growth and acceptance of online products and services as effective alternatives to traditional products and services, (vi) our continued ability to develop and monetize versions of our products and services for mobile and other digital devices, (vii) adverse economic events or trends that adversely impact advertising spending levels, (viii) the ability of our Digital business to successfully expand the digital reach of our portfolio of publishing brands, (ix) risks related to our Print business (declining revenue, increased paper and postage costs, reliance on a single supplier to print our magazines and increasedpotential increases in pension plan obligations), (ix) the ability of our Digital business to successfully expand the digital reach of our portfolio of publishing brands, (x) our ability to establish and maintain relationships with quality and trustworthy service professionals and caregivers, (xi) the ability of Angi Inc. to successfully implement its brand initiative and expand Angi Services (its pre-priced offerings), while balancing the overall mix of service requests and directory services on Angi platforms, (xii) our ability to access, collect and use personal data about our users and subscribers, (xiii) our ability to engage directly with users, subscribers, consumers, service professionals and caregivers on a timely basis, (xiii) our ability to access, collect and use personal data about our users and subscribers, (xiv) the ability of our Chairman and Senior Executive, certain members of his family and our Chief Executive Officer to exercise significant influence over the composition of our board of directors, matters subject to stockholder approval and our operations, (xv) risks related to our liquidity and indebtedness (the impact of our indebtedness on our ability to operate our business, our ability to generate sufficient cash to service our indebtedness and interest rate risk), (xvi) our inability to freely access the cash of Dotdash Meredith and/or Angi Inc. and their respective subsidiaries, (xvii) dilution with respect to our investmentinvestments in IAC and Angi Inc., (xviii) our ability to compete, (xix) adverse economic events or trends (particularly those that adversely impact consumer confidence and spending behavior), either generally and/or in any of the markets in which our businesses operate, as well as geopolitical conflicts, (xx) our ability to build, maintain and/or enhance our various brands, (xxi) the adverse impact of the COVID-19 outbreakand other similar outbreaks on our businesses, (xxii) our ability to protect our systems, technology and infrastructure from cyberattacks and to protect personal and confidential user information (including credit card information), as well as the impact of cyberattacks experienced by third parties, (xxiii) the occurrence of data security breaches and/or fraud, (xxiv) increased liabilities and costs related to the processing, storage, use and disclosure of personal and confidential user information, (xxv) the integrity, quality, efficiency and scalability of our systems, technology and infrastructure (and those of third parties with whom we do business) and (xxvi) changes in key personnel.
Certain of these and other risks and uncertainties are discussed in our filings with the SEC, including under the caption Part I-Item 1A-Risk Factors of our annual report on 10-K for the fiscal year ended December 31, 2021.2022, as well as below. Other unknown or unpredictable factors that could also adversely affect IAC's business, financial condition and operating results may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this quarterly 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 quarterly report. IAC does not undertake to update these forward-looking statements.
Risk Factors
In addition to the other information set forth in this quarterly report, you should carefully consider the risk factors discussed under the caption Part I-Item 1A-Risk Factors of our annual report on 10-K for the fiscal year ended December 31, 2021,2022, and the risk factor below, any or all of which could materially and adversely affect IAC's business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect IAC's business, financial condition and/or operating results.
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 in a cost-effective manner. As these channels continue 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-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 be 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-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.
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 (which may be unilaterally updated by search engines without advance notice), 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.
Moreover, changes in the usage and functioning of search engines as a result of the development of generative artificial intelligence technology (“GAI”) and/or general disruption to the technologies and platforms upon which our businesses rely to provide and market their digital content, products and services, could negatively impact our ability to drive traffic to our properties and monetize our digital content, products and services generally. GAI-powered chatbots and other tools could change the way people access and consume information, and if they supplant traffic to the websites of our businesses (in particular, the Digital business within our Dotdash Meredith financial reporting segment), we could experience decreased traffic and advertising revenues, which could adversely impact our business, financial condition and results of operations. In addition, GAI has the potential to generate digital content and information and develop digital products and services at a much greater scale and in a more cost-effective manner relative to traditional efforts, which could result in increased competition. The failure to adopt or otherwise adapt to evolving GAI capabilities could adversely affect our ability to compete generally, which could adversely affect our business, financial condition and results of operations.
Lastly, 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 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 case of traffic and leads generated through third party arrangements, the quality, validity (generated by real users with genuine interest and 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 not in our control. If the quality, validity and/or convertibility of traffic and leads we acquire 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), our business, financial condition and results of operations could be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
The Company did not issue or sell any shares of its common stock or any other equity securities pursuant to unregistered transactions during the quarter ended September 30, 2022.
Issuer Purchases of Equity Securities
The following table sets forth purchases by the Company of shares of IAC common stock during the quarter ended September 30, 2022:March 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | (a) Total Number of Shares Purchased | | (b) Average Price Paid Per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | (d) Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2) |
| July 2022 | | — | | | — | | | — | | | 7,301,226 | |
| August 2022 | | 366,732 | | | $71.56 | | 366,732 | | | 6,934,494 | |
| September 2022 | | — | | | — | | | — | | | 6,934,494 | |
| Total | | 366,732 | | | $71.56 | | 366,732 | | | 6,934,494 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | (a)
Total Number of Shares Purchased | | (b)
Average Price Paid Per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | (d) Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (2) |
| January 2023 | | — | | | — | | | — | | | 6,934,494 | |
| February 2023 | | 245,000 | | | $ | 52.08 | | | 245,000 | | | 6,689,494 | |
| March 2023 | | 1,531,000 | | | $ | 51.01 | | | 1,531,000 | | | 5,158,494 | |
| Total | | 1,776,000 | | | $ | 51.16 | | | 1,776,000 | | | 5,158,494 | |
_____________________
(1) Reflects repurchases of IAC common stock made pursuant to the Company’s previously announced June 2020 repurchase authorization.authorization (the "Repurchase Authorization").
(2) Represents the total number of shares of IAC common stock that remained available for repurchase as of September 30, 2022March 31, 2023 under the Company's previously announced June 2020Repurchase Authorization. From April 1, 2023 through May 5, 2023, IAC repurchased an additional approximately 1.3 million shares of IAC common stock at an average price paid per share of $50.47 pursuant to the Repurchase Authorization. As of May 5, 2023, there were approximately 3.8 million shares of IAC common stock that remained available for repurchase authorization. under the Repurchase Authorization.
IAC may purchase shares of IAC common stock pursuant to this repurchase authorizationthe Repurchase Authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
Item 6. Exhibits
The documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith, incorporated by reference to the location indicated or furnished herewith.
| | | | | | | | |
Exhibit
Number | Description | Location |
| 3.1 | Restated Certificate of Incorporation of IAC Inc. | |
| 3.2 | Restated Certificate of Incorporation of IAC/InterActiveCorp. | |
3.23.3 | Certificate of Amendment toof Restated Certificate of Incorporation of the Registrant.IAC/InterActiveCorp. | |
3.33.4 | Certificate of Amendment of Restated Certificate of Incorporation of the Registrant.IAC Inc. | |
3.43.5 | Certificate of Designations of Series A Cumulative Preferred Stock of the Registrant.Stock.
| |
3.53.6 | Amended and Restated By-Laws of the Registrant.IAC Inc. | |
| Amendment No. 1 to Employment Agreement, dated as of March 1, 2023, between IAC Inc. and Mark Stein.(1)(2) | |
| Form of Notice and Terms and Conditions for 2023 Restricted Stock Unit Awards.(1)(2) | |
| Certification of the Chairman and Senior Executive pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.(1) | |
| Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.(1) | |
| Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.(1) | |
| 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.(2)(3) | |
| | | | | | | | |
| Certification of the Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.(2)(3) | |
| Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.(2)(3) | |
| 101.INS | Inline XBRL Instance.(1) | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema.(1) | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation.(1) | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition.(1) | |
| 101.LAB | Inline XBRL Taxonomy Extension Labels.(1) | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation.(1) | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
_____________________
(1)Filed herewith.
Reflects management contracts and management and director equity award agreements related to a management and director compensatory plan. (2)(3)Furnished herewith.
SIGNATURES
Pursuant to the requirements 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.
| | | | | | | | | | | | | | |
| Dated: | NovemberMay 9, 20222023 | | | |
| | IAC INC. |
| | | | |
| | By: | | /s/ CHRISTOPHER HALPIN |
| | | | Christopher Halpin |
| | | | Executive Vice President, Chief Financial Officer and Chief FinancialOperating Officer |
| | | | | | | | | | | |
| | | |
| Signature | Title | | Date |
| | | |
| /s/ CHRISTOPHER HALPIN | Executive Vice President, Chief Financial Officer and Chief FinancialOperating Officer | | NovemberMay 9, 20222023 |
| Christopher Halpin | | | |
