Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 2.93M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 28K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 28K
4: EX-31.3 Certification -- §302 - SOA'02 HTML 28K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
6: EX-32.2 Certification -- §906 - SOA'02 HTML 24K
7: EX-32.3 Certification -- §906 - SOA'02 HTML 24K
13: R1 Cover Page HTML 79K
14: R2 Consolidated Balance Sheet HTML 147K
15: R3 Consolidated Balance Sheet (Parenthetical) HTML 38K
16: R4 Consolidated Statement of Operations HTML 126K
17: R5 Consolidated Statement of Comprehensive Operations HTML 72K
18: R6 Consolidated Statement of Shareholders' Equity HTML 151K
19: R7 Consolidated Statement of Shareholders' Equity HTML 29K
(Parenthetical)
20: R8 Consolidated Statement of Cash Flows HTML 142K
21: R9 The Company and Summary of Significant Accounting HTML 49K
Policies
22: R10 Financial Instruments and Fair Value Measurements HTML 168K
23: R11 Long-Term Debt HTML 50K
24: R12 Accumulated Other Comprehensive Loss HTML 70K
25: R13 Segment Information HTML 519K
26: R14 Dotdash Meredith Restructuring Charges, HTML 82K
Transaction-Related Expenses and Change-In-Control
Payments
27: R15 Pension and Postretirement Benefit Plans HTML 78K
28: R16 Income Taxes HTML 36K
29: R17 Loss Per Share HTML 79K
30: R18 Financial Statement Details HTML 77K
31: R19 Contingencies HTML 29K
32: R20 Related Party Transactions HTML 34K
33: R21 Subsequent Event HTML 25K
34: R22 Pay vs Performance Disclosure HTML 35K
35: R23 Insider Trading Arrangements HTML 29K
36: R24 The Company and Summary of Significant Accounting HTML 60K
Policies (Policies)
37: R25 Financial Instruments and Fair Value Measurements HTML 165K
(Tables)
38: R26 Long-Term Debt (Tables) HTML 44K
39: R27 Accumulated Other Comprehensive Loss (Tables) HTML 69K
40: R28 Segment Information (Tables) HTML 522K
41: R29 Dotdash Meredith Restructuring Charges, HTML 81K
Transaction-Related Expenses and Change-In-Control
Payments (Tables)
42: R30 Pension and Postretirement Benefit Plans (Tables) HTML 75K
43: R31 Loss Per Share (Tables) HTML 76K
44: R32 Financial Statement Details (Tables) HTML 95K
45: R33 THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING HTML 75K
POLICIES - Narrative (Details)
46: R34 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 30K
- Fair Value of Marketable Securities (Details)
47: R35 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 124K
- Narrative (Details)
48: R36 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 40K
- Current Available-for-Sale Marketable Securities
(Details)
49: R37 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 25K
- Investments in MGM Resorts International
(Details)
50: R38 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 30K
- Long-term Investments (Details)
51: R39 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 38K
- Realized and Unrealized Gains and Losses
(Details)
52: R40 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 78K
- Assets and Liabilities Measured at Fair Value on
a Recurring Basis (Details)
53: R41 FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS HTML 39K
- Changes in Level 3 Assets and Liabilities
Measured at Fair Value on a Recurring Basis
(Details)
54: R42 LONG-TERM DEBT - Summary (Details) HTML 59K
55: R43 LONG-TERM DEBT - Narrative (Details) HTML 129K
56: R44 Accumulated Other Comprehensive Loss (Details) HTML 89K
57: R45 SEGMENT INFORMATION - Revenue by Reportable HTML 64K
Segment (Details)
58: R46 SEGMENT INFORMATION - Revenue Disaggregated by HTML 119K
Service (Details)
59: R47 SEGMENT INFORMATION - Revenue and Long-Lived HTML 40K
Assets (Details)
60: R48 SEGMENT INFORMATION - Operating (Loss) Income and HTML 82K
Adjusted EBITDA (Details)
61: R49 SEGMENT INFORMATION - Reconciliation of Adjusted HTML 145K
EBITDA to Operating Income (Details)
62: R50 DOTDASH MEREDITH RESTRUCTURING CHARGES, HTML 37K
TRANSACTION-RELATED EXPENSES AND CHANGE-IN-CONTROL
PAYMENTS - Narrative (Details)
63: R51 Dotdash Meredith Restructuring Charges, HTML 64K
Transaction-Related Expenses and Change-In-Control
Payments (Details)
64: R52 Dotdash Meredith Restructuring Charges, HTML 39K
Transaction-Related Expenses and Change-In-Control
Payments - Allocation of Restructuring Costs
(Details)
65: R53 PENSION AND POSTRETIREMENT BENEFIT PLANS - HTML 52K
Components of Net Periodic Benefit Costs (Details)
66: R54 PENSION AND POSTRETIREMENT BENEFIT PLANS - HTML 34K
Narrative (Details)
67: R55 PENSION AND POSTRETIREMENT BENEFIT PLANS - HTML 28K
Expected Return on Plan Assets (Details)
68: R56 INCOME TAXES - Narrative (Details) HTML 56K
69: R57 LOSS PER SHARE - Summary (Details) HTML 95K
70: R58 FINANCIAL STATEMENT DETAILS - Cash, Cash HTML 35K
Equivalents, and Restricted Cash (Details)
71: R59 FINANCIAL STATEMENT DETAILS - Allowance for Credit HTML 35K
Loss (Details)
72: R60 FINANCIAL STATEMENT DETAILS - Accumulated HTML 30K
Amortization and Depreciation (Details)
73: R61 FINANCIAL STATEMENT DETAILS - Other Income HTML 49K
(Expense), Net (Details)
74: R62 RELATED PARTY TRANSACTIONS - Narrative (Details) HTML 57K
77: XML IDEA XML File -- Filing Summary XML 140K
75: XML XBRL Instance -- iaci-20230930_htm XML 4.05M
76: EXCEL IDEA Workbook of Financial Report Info XLSX 187K
9: EX-101.CAL XBRL Calculations -- iaci-20230930_cal XML 220K
10: EX-101.DEF XBRL Definitions -- iaci-20230930_def XML 997K
11: EX-101.LAB XBRL Labels -- iaci-20230930_lab XML 2.06M
12: EX-101.PRE XBRL Presentations -- iaci-20230930_pre XML 1.32M
8: EX-101.SCH XBRL Schema -- iaci-20230930 XSD 177K
78: JSON XBRL Instance as JSON Data -- MetaLinks 616± 904K
79: ZIP XBRL Zipped Folder -- 0001800227-23-000034-xbrl Zip 685K
(Exact name of registrant as specified in its charter)
iDelaware
i84-3727412
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i555 West 18th Street, iNew York, iNew
Yorki10011
(Address of registrant's principal executive offices)
(i212) i314-7300
(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
iCommon
stock, par value $0.0001
iIAC
iThe 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. iYes ☒ 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). iYes ☒ 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.
iLarge
accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
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 i☐ No ☒
Capitalized
software, equipment, buildings, land and leasehold improvements, net
i478,260
i510,614
Goodwill
i3,021,687
i3,030,168
Intangible
assets, net of accumulated amortization
i1,000,001
i1,170,041
Investment
in MGM Resorts International
i2,379,240
i2,170,182
Long-term
investments
i432,338
i325,721
Other non-current assets
i494,599
i625,774
TOTAL
ASSETS
$
i10,018,172
$
i10,393,635
LIABILITIES
AND SHAREHOLDERS' EQUITY
LIABILITIES:
Current portion of long-term debt
$
i30,000
$
i30,000
Accounts
payable, trade
i143,708
i133,105
Deferred
revenue
i165,807
i157,124
Accrued
expenses and other current liabilities
i683,696
i759,759
Total
current liabilities
i1,023,211
i1,079,988
Long-term
debt, net
i1,999,805
i2,019,759
Deferred
income taxes
i60,627
i76,276
Other
long-term liabilities
i488,632
i617,843
Redeemable
noncontrolling interests
i33,408
i27,235
Commitments
and contingencies
i
i
SHAREHOLDERS' EQUITY:
Common
Stock, $ii0.0001/ par value; authorized ii1,600,000/
shares; i84,408 and i84,184 shares issued and i80,058
and i83,083 shares outstanding at September 30, 2023 and December 31, 2022, respectively
i8
i8
Class
B common stock, $ii0.0001/ par value; authorized ii400,000/
shares; iiii5,789///
shares issued and outstanding at September 30, 2023 and December 31, 2022
Issuance
of common stock pursuant to stock-based awards, net of withholding taxes
—
—
i233
—
—
(i15,965)
—
—
—
(i15,965)
—
(i15,965)
Issuance
of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes
—
—
—
—
—
(i7,792)
—
i5
—
(i7,787)
i1,744
(i6,043)
Purchase
of IAC treasury stock
—
—
—
—
—
—
—
—
(i85,323)
(i85,323)
—
(i85,323)
Purchase
of Angi Inc. treasury stock
—
—
—
—
—
(i8,144)
—
—
—
(i8,144)
—
(i8,144)
Distribution
to and purchase of noncontrolling interests
(i1,179)
—
—
—
—
—
—
—
—
—
—
—
Adjustment
of noncontrolling interests to fair value
i28,897
—
—
—
—
(i28,897)
—
—
—
(i28,897)
—
(i28,897)
Issuance
of Vivian Health preferred shares, net of fees, and the reclassification and creation of noncontrolling interest and subsequent adjustment to liquidation value
(i11,782)
—
—
—
—
i15,380
—
—
—
i15,380
i39,320
i54,700
Adjustment
to noncontrolling interests resulting from the reorganization of a foreign subsidiary
NOTE
1—iTHE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i
Nature of Operations
IAC
today consists of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, among others ranging from early stage to established businesses.
As used herein, "IAC," the "Company,""we,""our,""us" and other similar terms refer to IAC Inc. and its subsidiaries (unless the context requires otherwise).
i
Basis of Presentation
The Company
prepares its consolidated financial statements (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, 2022.
i
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; the determination of
the customer relationship period for certain costs to obtain a contract with a customer; the recoverability 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 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 liability for potential refunds and customer credits; 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
i
Interest Rate Swaps
In March 2023, Dotdash Meredith entered into interest rate swaps for a total notional amount of $i350 million, which synthetically converted a portion of the Dotdash Meredith Term Loan B from a variable rate to a fixed rate to manage interest
rate risk exposure beginning on April 3, 2023. 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 3—Long-term
Debt" for additional information.
/i
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 to 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. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition. For the three and nine months ended September 30, 2022, if Services revenue were recorded on a net basis, revenue would have been reduced by $i64.8 million
and $i187.5 million, respectively.
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 or expected completion of its performance obligation is one year or less. The current and non-current deferred revenue balances were $i165.8
million and $i0.1 million, respectively, at September 30, 2023 and $i157.1 million and $i0.2
million, respectively, at December 31, 2022. During the nine months ended September 30, 2023, the Company recognized $i147.8 million of revenue that was included in the deferred revenue balance at December 31, 2022. During the nine months ended September 30, 2022, the
Company recognized $i145.4 million of revenue that was included in the deferred revenue balance at December 31, 2021. The current and non-current deferred revenue balances were $i165.5
million and $i0.4 million, respectively, at December 31, 2021. Non-current deferred revenue is included in "Other long-term liabilities" in the balance sheet.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Practical Expedients and Exemptions
For 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. 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is tied to sales-based or usage-based royalties, allocated entirely to unsatisfied performance obligations, or to a wholly unsatisfied promise accounted for under
the series guidance and (iii) contracts for which the Company recognizes revenue at the amount which it has the right to invoice for services performed.
i
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 now expires on March 31, 2025. 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 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, 2023, total revenue earned from Google was $i180.3 million
and $i551.0 million, respectively, representing i16% and i17%,
respectively, of the Company's revenue. The revenue earned from the Services Agreement for the three and nine months ended September 30, 2023, was $i149.4 million and $i452.7
million, respectively, representing i13% and i14%, respectively, of the Company's total revenue. For the three and nine months ended September 30, 2022, total revenue earned from Google
was $i161.6 million and $i524.3 million, respectively, representing i12%
and i13%, respectively, of the Company's revenue. The revenue earned from the Services Agreement for the three and nine months ended September 30, 2022, was $i117.3
million and $i386.6 million, respectively, representing i9% and i10%,
respectively, of the Company's total revenue. The related accounts receivable totaled $i57.4 million and $i74.1 million at September 30, 2023 and
December 31, 2022, respectively.
The revenue attributable to the Services Agreement is earned by Ask Media Group and the Desktop business, which comprise the Search segment. For the three and nine months ended September 30, 2023, revenue earned from the Services Agreement was $i131.9 million and $i398.3 million,
respectively, within Ask Media Group and $i17.5 million and $i54.4 million, respectively, within the Desktop business. For
the three and nine months ended September 30, 2022, revenue earned from the Services Agreement was $i97.3 million and $i315.4
million, respectively, within Ask Media Group and $i20.0 million and $i71.2
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.
As a result of certain industry-wide policy changes combined with increased enforcement by Google of policies under the Services Agreement in prior periods, the Company discontinued the introduction of new products in 2021. Therefore, the current B2C revenue stream relates solely to the then existing installed base of products. As a result, the revenue and profits of the B2C business have declined significantly and the
Company expects that trend to continue.
iRecent Accounting Pronouncements
There are no recently issued accounting pronouncements that are expected to have a material effect on the results of operations, financial condition or cash flows of the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
i
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
In the fourth quarter of 2022, the Angi Inc. segment presentation was changed
to reflect the following operating segments: (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (consisting of businesses in Europe and Canada). Angi Inc.'s financial information for all prior periods, including the three and nine months ended September 30, 2022 included herein, has been recast to reflect this iifour/
operating segment presentation.
NOTE 2—iFINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable
equity securities are carried at fair value. At December 31, 2022, the Company had itwo investments in marketable equity securities, other than the investment in MGM Resorts International ("MGM"), including one investment that was fully impaired in the first quarter of 2023 due to the investee declaring bankruptcy and another investment that was sold in the third quarter of 2023, resulting in a net pre-tax gain of $i0.1 million.
The Company recorded a net unrealized pre-tax loss of $i0.3 million during the nine months ended September 30, 2023 and net unrealized pre-tax losses of $i14.0 million
and $i8.3 million during the three and nine months ended September 30, 2022 for these investments, respectively. The realized and unrealized pre-tax gains and losses related to these investments are included in "Other income (expense), net" in the statement of operations.
Total
available-for-sale marketable debt securities
$
i173,697
$
i20
$
i—
$
i173,717
$
i234,987
$
i75
$
(i6)
$
i235,056
/
The
contractual maturities of debt securities classified as current available-for-sale at September 30, 2023 and December 31, 2022 were within one year. There were iino/
investments in available-for-sale marketable debt securities that had been in a continuous unrealized loss position for longer than twelve months at September 30, 2023 and December 31, 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At September 30, 2023, the Company owns i64.7
million shares of MGM, including a total of i5.7 million common shares purchased in the first and third quarters of 2022 for $i244.3 million. Based on the number of MGM
shares outstanding at June 30, 2023, the Company owns i18.3% of MGM. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange on that last trading day in the reporting period and any unrealized pre-tax gains or losses are included in the statement of operations. For the three and nine months ended September 30,
2023, the Company recognized an unrealized pre-tax loss of $i463.4 million and an unrealized pre-tax gain of $i209.1
million on its investment in MGM, respectively. For the three and nine months ended September 30, 2022, the Company recorded an unrealized pre-tax gain of $i42.5 million and an unrealized pre-tax loss of $i970.1
million on its investment in MGM, respectively. The cumulative unrealized pre-tax gain at September 30, 2023 is $i1.1 billion. A $2.00 increase or decrease in the share price of MGM would result in an unrealized gain or loss, respectively, of $i129.4
million. At November 3, 2023, the fair value of the Company's investment in MGM was $i2.5 billion.
Equity securities without readily determinable fair values
$
i426,938
$
i323,530
Equity
method investment
i5,400
i2,191
Total
long-term investments
$
i432,338
$
i325,721
/
In
April 2023, the Company purchased additional preferred shares of Turo Inc. ("Turo"), a peer-to-peer car sharing marketplace, for $i103.6 million, which is accounted for as an equity security without a readily determinable fair value, as the preferred shares are not common stock equivalents.
Equity Securities without Readily Determinable Fair Values
i
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, 2023 and 2022.
Downward
adjustments including impairments (gross unrealized pre-tax losses)
i—
i—
(i373)
(i22,376)
Total
$
i—
$
i8,245
$
i1,854
$
(i14,131)
/
The
cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at September 30, 2023 were $i37.8 million and $i104.0
million, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Realized and unrealized pre-tax losses and gains for the Company's investments without readily determinable fair values for the three and nine months ended September 30, 2023 and 2022
are as follows:
Realized pre-tax (losses) gains, net, for equity securities sold during the period
$
(i109)
$
i11,840
$
i69
$
i12,302
Unrealized
pre-tax gains (losses), net, on equity securities held
i—
i8,245
i1,854
(i14,131)
Total
pre-tax (losses) gains, net recognized
$
(i109)
$
i20,085
$
i1,923
$
(i1,829)
All
pre-tax losses and gains on equity securities without readily determinable fair values, realized and unrealized, are recognized in "Other income (expense), net" in the statement of operations.
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.
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
$
i796,305
$
i—
$
i—
$
i796,305
Treasury
discount notes
i—
i161,729
i—
i161,729
Time
deposits
i—
i18,955
i—
i18,955
Marketable
securities:
Treasury discount notes
i—
i173,717
i—
i173,717
Investment
in MGM
i2,379,240
i—
i—
i2,379,240
Other
non-current assets:
Warrant
i—
i—
i45,525
i45,525
Interest
rate swaps(a)
i—
i8,129
i—
i8,129
Total
$
i3,175,545
$
i362,530
$
i45,525
$
i3,583,600
_____________________
(a) Interest
rate swaps relate to the $i350 million notional amount of Dotdash Meredith's Term Loan B and are included in "Other non-current assets" in the balance sheet. See "Note 1—The Company and Summary of Significant Accounting Policies" and "Note 3—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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
i
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):
As
part of the Company's original investment in Turo preferred shares, the Company received a warrant that is recorded at fair value each reporting period using a Monte Carlo simulation model 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.
Contingent Consideration Arrangements
At September 30, 2023, the Company has no contingent
consideration arrangements outstanding. In connection with the Meredith acquisition on December 1, 2021, the Company assumed a contingent consideration arrangement liability of $i0.6 million, which was written off during the first quarter of 2022 due to a change in estimate of the liability related to this arrangement.
Assets measured at fair value on a nonrecurring basis
The
Company's non-financial assets, such as goodwill, intangible assets, ROU assets, capitalized software, equipment, buildings and leasehold improvements, are adjusted to fair value only when an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Goodwill
During
the third quarter of 2023 and second quarter of 2022, the Company reassessed the fair value of the Mosaic Group reporting unit (included in the Emerging & Other segment) and recorded goodwill impairments of $i9.0 million and $i86.7
million, respectively, 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 ii16/%
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, 2023, Mosaic Group has goodwill of $i144.6
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.
Intangible Asset
During the third quarter of 2023, the Company determined that a projected reduction in future revenue related to a certain indefinite-lived trade name intangible asset in the Dotdash Meredith Digital segment was an indicator of possible impairment. Following the identification of the indicator, the Company updated its calculation of the fair value of the indefinite-lived intangible asset
and recorded an impairment of $i7.6 million. The impairment of indefinite-lived intangible assets is included in “Amortization of intangibles” in the statement of operations. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing
of expected future cash flows. The discount rate used in the DCF analysis was intended to reflect the risks inherent in the expected future cash flows generated by the intangible asset. The royalty rate used in the DCF analysis was based upon an estimate of the royalty rate that a market participant would pay to license the Company's trade names and trademarks. The discount rate used to value the trade name was i16% and the royalty rate was i8%.
Following the impairment charge, the carrying value of this indefinite-lived intangible asset approximates its fair value.
ROU Assets and Related Leasehold Improvements, Furniture and Equipment
During the first quarter of 2023, Dotdash Meredith recorded impairment charges of $i70.0 million related to certain unoccupied leased office space due to the continued decline in the commercial real estate market consisting of impairments of $i44.7
million and $i25.3 million of an ROU asset and related leasehold improvements, furniture and equipment, respectively.
During the third quarter of 2022, Dotdash Meredith recorded impairment charges of $i21.3 millionrelated tothe consolidation of certain leased spaces following the Meredith acquisition consisting of impairments of $i14.3 million and $i7.0 million of an ROU asset and related leasehold improvements,
furniture and equipment, respectively. See "Note 6—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-In-Control Payments" for additional information.
The impairment charges related to ROU assets are included in "General and administrative expense" and the impairment charges related to leasehold improvements, furniture and equipment are included in "Depreciation" 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 DCF 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Financial instruments measured at fair value only for disclosure purposes
The total fair value of the outstanding long-term debt, including the current portion, is estimated using observable market prices or indices for similar liabilities,
which are Level 2 inputs, and was approximately $i1.9 billion and $i1.7 billion at September 30, 2023 and December 31, 2022, respectively.
Dotdash Meredith Term Loan A ("Dotdash Meredith Term Loan A") due December 1, 2026
$
i319,375
$
i332,500
Dotdash
Meredith Term Loan B ("Dotdash Meredith Term Loan B") due December 1, 2028
i1,228,125
i1,237,500
Total
Dotdash Meredith long-term debt
i1,547,500
i1,570,000
Less:
current portion of Dotdash Meredith long-term debt
i30,000
i30,000
Less:
original issue discount
i4,680
i5,310
Less:
unamortized debt issuance costs
i8,868
i10,215
Total
Dotdash Meredith long-term debt, net
i1,503,952
i1,524,475
ANGI
Group Debt
i3.875% ANGI Group Senior Notes due August 15, 2028 ("ANGI Group Senior Notes"); interest payable each February 15 and August 15
i500,000
i500,000
Less:
unamortized debt issuance costs
i4,147
i4,716
Total
ANGI Group long-term debt, net
i495,853
i495,284
Total
long-term debt, net
$
i1,999,805
$
i2,019,759
/
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 ifive-year $i350 million Dotdash Meredith Term Loan
A, (ii) the iseven-year $i1.25 billion Dotdash Meredith Term Loan B (and together with the Dotdash Meredith Term Loan A, the "Dotdash Meredith Term Loans") and (iii) a ifive-year
$i150 million revolving credit facility ("Dotdash Meredith Revolving Facility"). 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 i0.10%
for the Dotdash Meredith Term Loan A. The Dotdash Meredith Term Loan B has a varying adjustment of i0.10%, i0.15% or i0.25%
based upon the duration of the borrowing period. At September 30, 2023 and December 31, 2022, the Dotdash Meredith Term Loan A bore interest at Adjusted Term SOFR plus i2.25%, or i7.60%
and i5.91%, respectively, and the Dotdash Meredith Term Loan B bore interest at Adjusted Term SOFR, subject to a minimum of i0.50%, plus i4.00%,
or i9.43% and i8.22%, respectively. Interest payments are due at least quarterly through the terms of the Dotdash Meredith Term Loans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In March 2023, Dotdash Meredith entered into interest rate swaps on the Dotdash Meredith Term Loan B for a total notional amount of $i350 million with a maturity date of April 1, 2027. The
interest rate swaps synthetically convert $i350 million of the Dotdash Meredith Term Loan B for the duration of the interest rate swaps from a variable rate to a fixed rate of approximately i7.92% ((i) the weighted average fixed interest rate of approximately i3.82%
on the interest rate swaps plus (ii) the adjustment to the secured overnight financing rate of i0.10% plus (iii) the base rate of i4.00%), beginning on April 3, 2023.
The interest
rate swaps are expected to be highly effective. See "Note 4—Accumulated Other Comprehensive (Loss) Income" for the net unrealized gains recognized in "Accumulated other comprehensive loss" and realized gains reclassified into “Interest expense” for the three and nine months ended September 30, 2023. At September 30, 2023, approximately $i5.1 million
is expected to be reclassified into interest expense within the next twelve months as realized gains. The related asset of $i8.1 million is included in “Other non-current assets” in the balance sheet at September 30, 2023.
The Dotdash Meredith Term Loan A requires quarterly principal payments of approximately $i4.4 million
through December 31, 2024, $i8.8 million through December 31, 2025 and approximately $i13.1 million thereafter
through maturity. The Dotdash Meredith Term Loan B requires quarterly payments of $i3.1 million through maturity. The Dotdash Meredith Term Loan B may require additional annual principal payments as part of an excess cash flow sweep provision, the amount of which, in part, is governed by the applicable net leverage ratio. No such payment was required related to the period ended December 31, 2022.
There were iino/
outstanding borrowings under the Dotdash Meredith Revolving Facility at September 30, 2023 and December 31, 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 i40 basis points at both September 30, 2023 and December 31, 2022. Any borrowings under the Dotdash Meredith
Revolving Facility would bear interest, at Dotdash Meredith's option, at either a base rate or Adjusted Term SOFR, plus an applicable margin, which is based on Dotdash Meredith's consolidated net leverage ratio.
As of the last day of any calendar quarter, if either (i) $i1.00 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 i102%
of face value, exceeds $i25 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 $i250 million
in cash and cash equivalents, as of the last day of such quarter to exceed i5.5 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 i4.0
to 1.0, subject to certain available amounts as defined in the Dotdash Meredith Credit Agreement. This ratio was exceeded for both test periods ended September 30, 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, 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 the three and nine months ended September 30, 2023, the Company contributed $i125.0 million and $i405.0 million,
respectively, to Dotdash Meredith, which Dotdash Meredith subsequently distributed back to the Company $i125.0 million in October 2023 and $i130.0 million
and $i280.0 million in the three and nine months ended September 30, 2023, respectively.
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
ANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of Angi Inc., issued the ANGI Group Senior Notes on August 20, 2020. These notes may be redeemed at the redemption prices, plus accrued and unpaid interest thereon, if any, as set forth in the indenture governing the notes.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 i3.75 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, 2023, there were no limitations pursuant thereto.
NOTE 4—iACCUMULATED OTHER COMPREHENSIVE LOSS
i
The
following tables present the components of accumulated other comprehensive loss, net of income tax.
Unrealized Gains (Losses) On Available-For-Sale Marketable Debt Securities
Unrealized Gains On Interest Rate Swaps
Accumulated Other Comprehensive (Loss) Income
Foreign Currency Translation Adjustment
(In
thousands)
Balance at January 1
$
(i13,186)
$
i53
$
i—
$
(i13,133)
$
i4,397
Other
comprehensive income (loss) before reclassifications
i382
(i37)
i8,512
i8,857
(i34,362)
Amounts
reclassified to earnings
i—
i—
(i2,305)
(i2,305)
i—
Net
current period other comprehensive income (loss)
i382
(i37)
i6,207
i6,552
(i34,362)
Accumulated
other comprehensive loss allocated to noncontrolling interests during the period
i2
i—
i—
i2
i5
Balance
at September 30
$
(i12,802)
$
i16
$
i6,207
$
(i6,579)
$
(i29,960)
/
At
September 30, 2023, there were deferred income tax provisions of $i1.9 million and less than $i0.1 million related to unrealized gains on interest rate
swaps and net unrealized gains on available-for-sale marketable debt securities, respectively. At September 30, 2022, there was ino income tax benefit or provision on the accumulated other comprehensive income.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5—iSEGMENT 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 Emerging & Other, do not meet the quantitative thresholds that require presentation as separate reportable segments.
i
The
following table presents revenue by reportable segment:
(a)
Intersegment eliminations primarily related to Digital performance marketing commissions earned for the placement of magazine subscriptions for Print.
Angi Inc.
Domestic:
Ads
and Leads:
Consumer connection revenue
$
i203,579
$
i262,934
$
i625,527
$
i738,177
Advertising
revenue
i75,074
i67,165
i212,302
i196,256
Membership
subscription revenue
i13,167
i14,795
i39,597
i46,586
Other
revenue
i173
i635
i560
i1,118
Total
Ads and Leads revenue
i291,993
i345,529
i877,986
i982,137
Services
revenue
i29,964
i105,892
i91,890
i290,574
Roofing
revenue
i21,400
i25,993
i84,254
i105,330
Domestic
intersegment eliminations(b)
(i794)
(i2,825)
(i3,257)
(i6,452)
Total
Domestic revenue
i342,563
i474,589
i1,050,873
i1,371,589
International:
Consumer
connection revenue
i23,144
i15,567
i71,260
i54,311
Service
professional membership subscription revenue
i6,023
i7,597
i16,834
i23,211
Advertising
and other revenue
i107
i283
i345
i866
Total
International revenue
i29,274
i23,447
i88,439
i78,388
Total
Angi Inc. revenue
$
i371,837
$
i498,036
$
i1,139,312
$
i1,449,977
(b)Intersegment eliminations related to Ads and Leads revenue earned from sales to Roofing.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
_____________________
(c) Includes an impairment charge of $i7.6 million related to the
reassessed fair value of a certain indefinite-lived intangible asset for the three and nine months ended September 30, 2023. See "Note 2—Financial Instruments and Fair Value Measurements" for additional information on the impairment charge.
(d) Other comprises unallocated corporate expenses.
(e) Includes impairment charges of $i70.0
million related to unoccupied leased office space and write-off of certain leasehold improvements and furniture and equipment of $i4.2 million for the nine months ended September 30, 2023, of which $i29.6 million
is included in "Depreciation" in the statement of operations. See "Note 2—Financial Instruments and Fair Value Measurements" for additional information on the impairment charges.
(f) Dotdash Meredith incurred restructuring charges of $i24.7 million and $i60.8
million and transaction-related expenses of $i0.8 million and $i6.0 million
in connection with the acquisition of Meredith in 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 $ii7.0/ million
of impairment charges included in "Depreciation" in the statement of operations. See "Note 6—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-In-Control Payments" for additional information.
(g)The
Company's primary financial measure and GAAP segment measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements.
iThe following tables reconcile operating income (loss) for the Company's reportable segments and net loss attributable to IAC shareholders
to Adjusted EBITDA:
Unrealized loss on investment in MGM Resorts International
(i463,421)
Other
income, net
i25,455
Loss before income taxes
(i510,860)
Income
tax benefit
i118,838
Net loss
(i392,022)
Net
loss attributable to noncontrolling interests
i1,484
Net
loss attributable to IAC shareholders
$
(i390,538)
_____________________
(j) Includes
stock-based compensation expense for stock-based awards granted to employees of Corporate, Search and all Emerging & Other businesses other than Vivian Health.
Unrealized gain on investment in MGM Resorts International
i42,523
Other
income, net
i19,678
Loss before income taxes
(i91,912)
Income
tax benefit
i26,065
Net loss
(i65,847)
Net
loss attributable to noncontrolling interests
i2,024
Net
loss attributable to IAC shareholders
$
(i63,823)
_____________________
(k) Depreciation
and amortization of intangibles 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.
Acquisition-related Contingent Consideration Fair Value Adjustments
Goodwill Impairment
Adjusted
EBITDA(g)(i)
(In
thousands)
Dotdash Meredith
Digital
$
(i95,217)
$
i14,889
$
i21,004
$
i168,654
$
(i612)
$
—
$
i108,718
Print
(i31,109)
$
i659
$
i8,010
$
i41,322
$
i—
$
—
$
i18,882
Other(d)
(i52,924)
$
i92
$
i4,126
$
i—
$
i—
$
—
$
(i48,706)
Angi
Inc.
Ads and Leads
i61,532
$
i15,303
$
i35,010
$
i7,988
$
i—
$
i—
$
i119,833
Services
(i57,581)
$
i13,068
$
i7,166
$
i2,925
$
i—
$
i—
$
(i34,422)
Roofing
(i18,484)
$
i1,410
$
i587
$
i500
$
i—
$
i—
$
(i15,987)
Other(d)
(i46,655)
$
i8,553
$
i—
$
i—
$
i—
$
i—
$
(i38,102)
International
(i4,713)
$
i444
$
i2,349
$
i—
$
i—
$
i—
$
(i1,920)
Search
i70,461
$
i—
$
i67
$
i—
$
i—
$
i—
$
i70,528
Emerging
& Other
(i114,402)
$
i283
$
i993
$
i12,659
$
i—
$
i86,748
$
(i13,719)
Corporate(j)
(i110,542)
$
i37,759
$
i7,543
$
i—
$
i—
$
i—
$
(i65,240)
Total
(i399,634)
Interest
expense
(i74,862)
Unrealized loss on investment in MGM Resorts International
(i970,112)
Other
expense, net
(i63,048)
Loss before income taxes
(i1,507,656)
Income
tax benefit
i325,517
Net loss
(i1,182,139)
Net
loss attributable to noncontrolling interests
i13,388
Net
loss attributable to IAC shareholders
$
(i1,168,751)
NOTE
6—iDOTDASH MEREDITH RESTRUCTURING CHARGES, TRANSACTION-RELATED EXPENSES AND CHANGE-IN-CONTROL PAYMENTS
Restructuring Charges
During 2023, Dotdash Meredith continued to incur costs related to a voluntary retirement program announced in the first quarter of 2022 and recorded adjustments to previously accrued amounts related to a reduction in force plan, for which the related expenses were accrued primarily in the fourth quarter of 2022.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
During 2022, Dotdash Meredith management committed to several actions to improve efficiencies and better align its cost structure following the acquisition of Meredith on December 1, 2021, which included: (i) the discontinuation of certain print publications and the shutdown of PeopleTV, for which the related expense was primarily reflected in the first quarter of 2022, (ii) the aforementioned voluntary retirement program, for which the related expense was primarily reflected in the first half of 2022, (iii) the consolidation of certain leased
office space, for which the related expense was reflected in the third quarter of 2022 and (iv) the aforementioned reduction in force plan. These actions resulted in $i80.2 million of restructuring charges incurred for the year ended December 31, 2022.
i
A
summary of the costs incurred, payments and related accruals is presented below. The Companyanticipates the estimated remaining costs associated with the 2022 restructuring events will be paid by December 31, 2023 from existing cash on hand.
(b) Includes
$i21.3 million of impairment charges, consisting of impairments of $i14.3 million and $i7.0
million of an ROU asset and related leasehold improvements and furniture and equipment included in "General and administrative expense" and "Depreciation" in the statement of operations, respectively, and $i0.4 million related to the write-off of inventory.
/i
The
costs are allocated as follows in the statement of operations:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Transaction-Related Expenses
Dotdash Meredith incurred transaction-related expenses in connection with the acquisition of Meredith of $i0.8 million and $i6.0 million
for the three and nine months ended September 30, 2022, respectively.
Change-in-Control Payments
On July 1, 2022, Dotdash Meredith made $i83.1 million in change-in-control payments, which were triggered by the acquisition of Meredith and the terms of certain former executives’ contracts. These
payments included amounts accrued in December 2021, as well as amounts previously accrued that became payable following the change in control.
NOTE 7—iPENSION AND POSTRETIREMENT BENEFIT PLANS
i
The
following tables present the components of net periodic benefit (credit) cost for the Dotdash Meredith pension and postretirement benefit plans:
Settlements
during the three and nine months ended September 30, 2023 triggered remeasurements of the pension plans in the U.S. The actuarial gain of $i1.0 million for the three months ended September 30, 2023 primarily relates to updates to participant census data, investment performance and an increase in the discount rate. The actuarial gain of $i1.2
million for the nine months ended September 30, 2023 primarily relates to investment performance, an increase in the discount rate and updates to participant census data.
Settlements during the three and nine months ended September 30, 2022 triggered remeasurements of the funded pension plan in the U.S. The actuarial gain of $i2.6 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 actuarial loss of $i7.5 million for the nine months ended September 30, 2022 primarily relates to the decline in the fair value of the pension plan's assets exceeding the decline in the plan liabilities, partially offset by a gain related to the revaluation of an annuity contract and the gain in
the third quarter of 2022 described above.
Settlements during the nine months ended September 30, 2022 triggered remeasurements of the funded pension plan in the United Kingdom ("U.K."). The actuarial loss of $i68.6 million for the nine months ended September 30, 2022 primarily relates to the decline in the fair value of the pension plan's assets exceeding the decline in the plan liabilities due to higher
interest rates.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
i
The
following table summarizes the weighted average expected return on plan assets used to determine the net periodic benefit costs at September 30, 2023 following the remeasurements, and December 31, 2022, respectively:
The
components of net periodic benefit (credit) cost, other than the service cost component, are included in "Other income (expense), net" in the statement of operations.
NOTE 8—iINCOME TAXES
At the end of each interim period, the Company estimates the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The
income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences and the likelihood of the realization of deferred tax assets
generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the Company's tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision or benefit in the quarter in which the change occurs. Included in the income tax benefit for the three months ended September 30, 2023 was a benefit of $i2.8 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 due primarily to the reduced impact that forecasted nondeductible compensation expense had on the increase in forecasted ordinary pre-tax losses and state taxes.
For the three and nine months ended September 30, 2023, the Company recorded an income tax benefit of $i118.8
million and $i3.6 million, respectively, which represents an effective income tax rate of i23% and i5%,
respectively. For the three months ended September 30, 2023, the effective income tax rate was higher than the statutory rate of 21% due primarily to state taxes. For the nine months ended September 30, 2023, the effective income tax rate was lower than the statutory rate of 21% due primarily to nondeductible compensation expense, return to provision adjustments, foreign income taxed at different statutory rates and unconsolidated tax losses, partially offset by research credits and the realization of capital losses. For the three and nine months ended September 30, 2022, the Company recorded an income tax benefit of $i26.1
million and $i325.5 million, respectively, which represents an effective income tax rate of i28% and i22%,
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 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.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company's income taxes are routinely under audit by federal, state, local and foreign authorities as a result of previously filed separate company and consolidated tax returns for 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 Match 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. On June 27, 2023, the Joint Committee of Taxation completed its review of the federal income tax returns for the years ended December 31, 2013 through 2019, which include the operations of the Company, and approved the audit settlement previously agreed to with the Internal Revenue Services ("IRS"). The statute of limitations for the years 2013 through 2019 expires on December 31, 2023. The resolution of this IRS examination will result in a net liability to Match Group of $i2.5 million
excluding interest, which was previously accrued. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2013. 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.
At September 30, 2023 and December 31, 2022, unrecognized tax benefits, including interest and penalties, were $i18.9 million and $i16.6
million, respectively. Unrecognized tax benefits, including interest and penalties, at September 30, 2023 increased by $i2.3 million due primarily to research credits, partially offset by settlements. If unrecognized tax benefits at September 30, 2023 are subsequently recognized, $i17.9
million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount at December 31, 2022 was $i15.4 million. The Company believes
that it is reasonably possible that its unrecognized tax benefits could decrease by $i0.8 million by September 30, 2024 due to expected settlements of which $i0.7
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, 2023, the Company has a U.S. gross deferred tax asset of $i840.4 million
that the Company expects to fully utilize on a more likely than not basis. Of this amount, $i525.5 million will be utilized upon the future reversal of deferred tax liabilities and the remaining net deferred tax asset of $i314.9 million
will be utilized based on forecasts of future taxable income. The Company's most significant net deferred tax asset that could expire relates to U.S. federal net operating loss ("NOL") carryforwards of $i40.4 million. The Company expects to generate sufficient future taxable income of at least $i192.6 million
prior to the expiration of these NOLs, the majority of which expire between 2033 and 2036, to fully realize this deferred tax asset.
NOTE 9—iLOSS PER SHARE
The Company treats its common stock and Class B common stock as one class of stock for net earnings (loss) per share ("EPS") purposes as both classes of stock participate in earnings, dividends and other distributions
on the same basis. The restricted stock award granted to our Chief Executive Officer ("CEO") on November 5, 2020 is a participating security and the Company calculates 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 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) 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) 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.
Net
earnings attributed to unvested participating security
i—
i—
i—
i—
Impact
from public subsidiaries' dilutive securities(b)
i—
i—
i—
i—
Net
loss attributable to IAC common stock and Class B common stock shareholders
$
(i390,538)
$
(i63,823)
$
(i61,808)
$
(i1,168,751)
Denominator:
Weighted
average basic IAC common stock and Class B common stock shares outstanding(a)
i82,826
i86,022
i83,804
i86,515
Dilutive
securities(b)(c)
i—
i—
i—
i—
Denominator
for earnings per share—weighted average shares(b)(c)
i82,826
i86,022
i83,804
i86,515
Loss
per share attributable to IAC common stock and Class B common stock shareholders:
Loss per share
$
(i4.72)
$
(i0.74)
$
(i0.74)
$
(i13.51)
_____________________
(a)
On November 5, 2020, IAC's CEO was granted a stock-based award in the form of i3.0 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 i10-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, 2023 and 2022, these Angi Inc. equity awards were anti-dilutive.
(c) For the three and nine months ended September 30, 2023 and 2022, the Company had a loss from operations and, as a result, approximately ii8.0/ million
and ii8.0/ million
potentially dilutive securities, respectively, 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 endedSeptember 30, 2023 and 2022.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 10—iFINANCIAL STATEMENT DETAILS
Cash and Cash Equivalents and Restricted Cash
ii
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:
Restricted
cash included in other non-current assets
i371
i7,514
i6,815
i1,193
Total
cash and cash equivalents and restricted cash as shown on the statement of cash flows
$
i1,260,798
$
i1,426,069
$
i1,617,071
$
i2,121,864
//
Restricted
cash included in "Other current assets" in the balance sheet at September 30, 2023 primarily consists of cash held in escrow related to the funded pension plan in the U.K and cash held related to insurance programs at Care.com. Restricted cash included in "Other non-current assets" in the balance sheet at September 30, 2023 consists of deposits related to leases.
Restricted cash included in "Other current assets" in the balance sheet at December 31, 2022 includes cash held related to insurance programs at Care.com. Restricted cash included in "Other non-current assets" in the balance sheet at December 31, 2022 primarily consists of cash held in escrow related to the funded pension plan in the U.K.
as well as a check endorsement guarantee at the Roofing segment and deposits related to leases.
Restricted cash included in "Other current assets" in the balance sheet at September 30, 2022 primarily consists of cash held related to insurance programs at Bluecrew and Care.com. Restricted cash included in "Other non-current assets" in the balance sheet at September 30, 2022 primarily consists of cash held in escrow related to the funded pension plan in the U.K. as well as a check endorsement guarantee at the Roofing segment and deposits related to leases.
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 funded
pension plan in the U.K. Restricted cash included in "Other non-current assets" in the balance sheet at December 31, 2021 consists of deposits related to leases and a check endorsement guarantee at the Roofing segment.
Credit Losses
i
The following table presents the changes in the allowance for credit losses for the nine months ended September 30, 2023 and 2022, respectively:
Unrealized
increase (decrease) in the estimated fair value of a warrant
i6,457
i8,467
(i1,274)
i21,318
Net
realized gains on sales of businesses, investments and upward (downward) adjustments to the carrying value of equity securities without readily determinable fair values
i1,318
i20,361
i2,666
i265
Net
periodic pension benefit credit (cost), other than the service cost component(a)
i743
i1,871
i217
(i75,317)
Foreign
exchange (losses) gains, net
(i1,685)
(i5,196)
i396
(i11,425)
Unrealized
losses related to marketable equity securities
(i257)
(i13,972)
(i145)
(i8,316)
Other
i537
(i631)
i5,717
(i1,491)
Other
income (expense), net
$
i25,455
$
i19,678
$
i60,189
$
(i63,048)
_____________________
(a) Includes
pre-tax actuarial gains of $i1.0 million and $i1.2 million related to the pension plans in the U.S. for the three and nine months ended
September 30, 2023, respectively and includes a pre-tax actuarial gain of $i2.6 million related to the funded pension plan in the U.S. for the three months ended September 30, 2022 and a pre-tax actuarial loss of $i76.0 million
related to the funded pension plans in the U.K. and U.S. for the nine months endedSeptember 30, 2022. See "Note 7—Pension and Postretirement Benefit Plans" for additional information.
/
NOTE 11—iCONTINGENCIES
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 it 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 8—Income Taxes" for information related to uncertain income tax positions.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 12—iRELATED 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 and nine months ended September 30, 2023, IAC allocated $i2.6 million and $i7.2
million, respectively, 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.
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, which collectively govern the relationship between IAC and Angi Inc.
IAC and Vimeo Inc. ("Vimeo")
In connection with the spin-off of Vimeo from IAC, the parties entered in several agreements to govern their relationship following the completion of the transaction, certain of which remain in effect and are as follows: a separation agreement, a tax matters agreement and an employee matters agreement. Following the completion of the transaction, Vimeo and IAC entered into certain commercial agreements, including lease agreements, which IAC believes are ordinary course and have been negotiated at arm's length. The Company and Vimeo are related parties because Mr. Diller is the beneficial owner of more than i10%
of the voting interests in both IAC and Vimeo.
The Company has an outstanding receivable of $ii0.8/
million due from Vimeo pursuant to the separation agreement at September 30, 2023 and December 31, 2022. This amount is included in "Other current assets" in the balance sheet and was paid in full in October 2023.
The Company charged Vimeo rent pursuant to lease agreements of $i0.9 million and $i2.6 million
for the three and nine months ended September 30, 2023, respectively, and $i0.7 million and $i3.7 million for the three and nine months ended September 30, 2022, respectively. At September 30,
2023, the Company has an outstanding receivable of $i0.2 million due from Vimeo pursuant to the lease agreements. This amount is included in "Other non-current assets" in the balance sheet. At December 31, 2022, there were ino
outstanding receivables due from Vimeo pursuant to the lease agreements.
IAC and Expedia
At September 30, 2023, the Company and Expedia each had a i50% ownership interest in itwo
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 i50% 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, 2023 and 2022, total payments made to this entity by the Company were not material.
In addition, Expedia may use certain aircraft owned i100%
by a subsidiary of the Company on a cost basis. For the three and nine months ended September 30, 2023 and 2022, the payments made by Expedia to the Company pursuant to this arrangement were not material.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 13—iSUBSEQUENT EVENT
On November 1, 2023, Angi Inc. completed the sale of 100% of its wholly-owned subsidiary Total Home Roofing, LLC ("THR") to a non-public third party. THR comprises the entirety of Angi Inc.'s Roofing segment.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
GENERAL
Management Overview
IAC today consists of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, among others ranging from early stage to 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, 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 - is one of the largest digital and print publishers in America. From mobile to magazines, nearly 200 million people trust us to help them make decisions, take action and find inspiration. Dotdash Meredith's over 40 iconic brands include PEOPLE, Better Homes & Gardens, Verywell, FOOD & WINE, The Spruce, Allrecipes, Byrdie, REAL SIMPLE, Investopedia and Southern Living. Dotdash Meredith has two operating segments: (i) Digital, which includes its digital, mobile and licensing operations; and (ii) Print, which includes its magazine subscription and newsstand operations;
•Angi
Inc. - 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 the following operating segments: (i) Ads and Leads, (ii) Services, (iii) Roofing and (iv) International (consisting of businesses in Europe and Canada). Angi Inc.'s financial information for all prior periods, including the three and nine months ended September 30, 2022, included herein, has been recast to reflect this four operating segment presentation. At September 30, 2023, the Company’s economic and voting interests in Angi Inc. were 83.8% and 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; and
•Emerging & Other - consists of:
•Care.com - a leading online destination for families to connect with caregivers for their children, aging parents, pets and homes and for caregivers to connect with families seeking care services. Care.com's brands include Care For Business, Care.com
offerings to enterprises and HomePay;
•Mosaic Group - a leading developer and provider of global subscription mobile applications. Mosaic Group's portfolio of applications includes some of the largest and most popular applications in the following verticals: Communications (RoboKiller, TapeACall, Trapcall), Language (iTranslate, Speak & Translate), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero) and Lifestyle(Blossom, Pixomatic); and
•Vivian Health, Daily Beast, IAC Films and, for periods prior to its sale on November 9, 2022, Bluecrew.
•Digital
Revenue - includes advertising revenue, performance marketing revenue and licensing and other revenue.
◦Advertising revenue - primarily includes revenue generated from display advertisements sold both directly through our sales team and via programmatic exchanges.
◦Performance marketing revenue - primarily includes revenue generated through affiliate commerce, affinity marketing channels and performance marketing commissions. Affiliate commerce commission revenue is generated when Dotdash Meredith refers users to commerce partner 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 and performance marketing revenue.
Angi Inc.
•Ads
and Leads Revenue - primarily reflects domestic consumer connection revenue for consumer matches, revenue from service professionals under contract for advertising and membership subscription revenue from service professionals and consumers.
•Services Revenue - primarily reflects domestic revenue from pre-priced offerings by which the consumer requests services through an Angi Inc. platform and Angi Inc. 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 to 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. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition. For the three and nine months ended September 30, 2022, if Services revenue were recorded on a net basis, revenue would have been reduced by $64.8 million and $187.5 million, respectively.
•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. On November 1, 2023, Angi Inc. completed the sale of 100% of its wholly-owned subsidiary Total Home Roofing, LLC ("THR") to a non-public third party. THR comprises the entirety of Angi Inc.'s Roofing segment.
•International Revenue- primarily reflects revenue generated within the International segment (consisting of businesses in Europe and Canada), including consumer connection revenue for consumer matches and membership subscription revenue from service professionals
and consumers.
•Service Requests - are (i) fully completed and submitted domestic service requests for connections with Ads and Leads service professionals, (ii) contacts to Ads and Leads service professionals generated via the service professional directory from unique users in unique categories (such that multiple contacts from the same user in the same category in the same day are counted as one Service Request) and (iii) requests to book Services jobs in the period.
•Monetized Transactions - are (i) Service Requests that are matched to a paying Ads and Leads service professional in the period and (ii) completed and in-process Services jobs in the period; a single service request can result in multiple monetized transactions.
•Cost of revenue (exclusive of depreciation) - consists primarily of traffic acquisition costs, which include (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. 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 performed work contracted under 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 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 expenditures, 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 expenditures, which primarily consists of costs related to 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, outsourced personnel and consulting 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 Holdings Corporation ("Meredith") and other 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. Changes in the estimated fair value of the contingent consideration arrangements are recognized during each reporting period in "General and administrative expense" in the statement of operations.
•Dotdash Meredith Term Loan A - due December 1, 2026. At September 30, 2023 and December 31, 2022, the outstanding balance of the Dotdash Meredith Term Loan A was $319.4 million and $332.5 million, respectively, and bore interest at an adjusted term secured overnight financing rate ("Adjusted Term SOFR") plus 2.25%, or 7.60% and 5.91%, respectively. The Dotdash Meredith Term Loan A has quarterly principal payments.
•Dotdash Meredith Term Loan B - due December 1, 2028. At September 30,
2023 and December 31, 2022, the outstanding balance of the Dotdash Meredith Term Loan B was $1.23 billion and $1.24 billion, respectively, and bore interest at Adjusted Term SOFR, subject to a minimum of 0.50%, plus 4.00%, or 9.43% and 8.22%, 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,
2023 and December 31, 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 loss attributable to IAC shareholders to operating loss to Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.
Dotdash Meredith Restructuring and Other Charges
Restructuring Charges
During 2023, Dotdash Meredith continued to incur costs related to a voluntary retirement program announced in the first quarter of 2022 and recorded adjustments to previously accrued amounts related to a reduction in force plan, for which the related expenses were accrued primarily in the fourth quarter of 2022.
During 2022, Dotdash Meredith management committed to several
actions to improve efficiencies and better align its cost structure following the acquisition of Meredith on December 1, 2021, which included: (i) the discontinuation of certain print publications and the shutdown of PeopleTV, for which the related expense was primarily reflected in the first quarter of 2022, (ii) the aforementioned voluntary retirement program, for which the related expense was primarily reflected in the first half of 2022, (iii) the consolidation of certain leased office space, for which the related expense was reflected in the third quarter of 2022 and (iv) the aforementioned reduction in force plan. These actions resulted in $80.2 million of restructuring charges incurred for the year ended December 31, 2022.
For the three months ended September 30,
2023, Dotdash Meredith incurred restructuring charges of $0.6 million. For the nine months ended September 30, 2023, Dotdash Meredith incurred net restructuring charges of $0.8 million, including charges incurred of $3.5 million and reversals of previously recorded accrued costs of $2.7 million.
For the three and nine months ended September 30, 2022, Dotdash Meredith incurred restructuring charges of $24.7 million and $60.8 million, respectively, including $3.4 million and $36.5 million, respectively, of severance and related costs. At September 30, 2023, the cumulative restructuring charges incurred were $81.0 million.
For both the three and nine months ended September 30, 2022,
restructuring charges included impairment charges of $21.3 million related to the consolidation of certain leased spaces following the Meredith acquisition, consisting of impairments of $14.3 million and $7.0 million of an right-of-use asset ("ROU asset") and related leasehold improvements, furniture and equipment, respectively, which are included in "General and administrative expense" and "Depreciation," respectively, in the statement of operations.
Other Charges
During the first quarter of 2023, Dotdash Meredith reassessed the sublease market assumptions and recorded impairment charges of $70.0 million related to certain unoccupied leased office space due to the continued decline in the commercial real estate market, consisting of impairments of $44.7 million and $25.3 million
of an ROU asset and related leasehold improvements, furniture and equipment, respectively, which are included in "General and administrative expense" and "Depreciation," respectively, 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 now expires on March 31, 2025.
As
a result of certain industry-wide policy changes combined with increased enforcement by Google of policies under the Services Agreement in prior periods, the Company discontinued the introduction of new Desktop business-to-consumer ("B2C") products in 2021. Therefore, the current B2C revenue stream relates solely to the then existing installed base of products. As a result, the revenue and profits of the B2C business have declined significantly and the Company expects that trend to continue. See "Note 1—The Company and Summary of Significant Accounting Policies" to the financial statements included in "Item
1—Consolidated Financial Statements" for additional information on the Services Agreement with Google.
•Dotdash Meredith revenue decreased 11% to $417.5 million due primarily to decreases of $40.2 million, or 16%, from Print and $8.7 million, or 4%, from Digital. The decrease from Print was driven by the planned reduction in the circulation of certain publications. The decrease from Digital was due primarily to decreases of $17.1 million, or 12%, in Advertising revenue and $1.9 million, or 7%, in Licensing and Other revenue, partially offset by an increase of $10.3 million, or 22%, in Performance Marketing revenue. The decrease in Advertising revenue was due primarily to lower programmatic revenue due to lower traffic, compared to the prior year period, driven by the Entertainment category and certain partner
sites and declines in premium advertising sold through the Dotdash Meredith sales team. The decrease in Licensing and Other revenue was due primarily to lower royalties earned from retail partners. The increase in Performance Marketing revenue was due primarily to an increase in affiliate commerce commission revenue, partially offset by a decline in Performance Marketing revenue primarily in the Finance and Health categories.
•Angi Inc. revenue decreased 25% to $371.8 million due primarily to decreases of $75.9 million, or 72%, from Services, $53.5 million, or 15%, from Ads and Leads and $4.6 million, or 18%, from Roofing, partially offset by an increase of $5.8 million, or 25%, from International.
◦The Services decrease was due primarily to the change to net revenue reporting
as described above under "Services Revenue" and a decrease of $27.1 million due primarily to the continued shift away from complex and less profitable offerings and lower Service Requests.
◦The Ads and Leads decrease was due primarily to a decrease of $59.4 million, or 23%, in consumer connection revenue due primarily to a decline in Monetized Transactions and a decline in service professionals in the Angi Inc. network, partially offset by an increase of $7.9 million, or 12%, in advertising revenue. The decrease in Monetized Transactions was as a result of an effort to rationalize sales to service professionals that are unprofitable as well as efforts to increase lead quality, including changes to certain demand channels, to enhance the user experience for both homeowners and service professionals. The increase in advertising revenue was
due primarily to continued growth in sales and improved retention
◦The Roofing decrease was primarily due to a decline in projects and a strategic shift in operations to select markets.
◦The International increase was driven by a larger service professional network and higher revenue per service professional.
•Search revenue increased 6% to $166.1 million due to an increase of $12.6 million, or 9%, from Ask Media Group, partially offset by a decrease
of $3.3 million, or 15%, from Desktop. The increase from Ask Media Group was due to higher marketing from affiliate partners driving higher visitors to ad supported search and content websites. The decrease from Desktop was due primarily to the Google policy changes and the subsequent discontinuing of new products described above under "Services Agreement with Google (the "Services Agreement")."
•Emerging & Other revenue decreased 12% to $158.4 million due primarily to the inclusion of Bluecrew in the prior year period, which was sold on November 9, 2022, and decreases in revenue at Mosaic Group and IAC Films, partially offset by an increase in revenue of 4% to $101.6 million at Care.com and 40% growth at Vivian Health.
•Dotdash Meredith revenue decreased 16% to $1.2 billion due primarily to decreases of $176.7 million, or 22%, from Print and $62.6 million, or 9%, from Digital. The decrease from Print was due to the planned reduction in circulation of certain publications and the discontinuation of others in the first quarter of 2022. The decrease from Digital was due primarily to a decrease of $67.7 million, or 15%, in Advertising revenue resulting primarily from lower programmatic revenue as a result of traffic declines in the first quarter of 2023 due to COVID-19 supported traffic levels in early 2022 and traffic declines in the second and third quarters of 2023 driven primarily by the Entertainment category and certain
partner sites, and declines in premium advertising sold through the Dotdash Meredith sales team.
•Angi Inc. revenue decreased 21% to $1.1 billion due primarily to decreases of $198.7 million, or 68%, from Services, $104.2 million, or 11%, from Ads and Leads and $21.1 million, or 20%, from Roofing, partially offset by an increase of $10.1 million or 13% from International.
◦The Services decrease was due primarily to the change to net revenue reporting described above under "Services Revenue" and a decrease of $69.6 million due primarily to the continued shift away from complex and less profitable offerings and lower Service Requests.
◦The Ads and Leads decrease was due primarily to a decrease of $112.7 million, or 15%, in
consumer connection revenue due primarily to the factors described above in the three-month discussion.
◦The Roofing decrease was primarily due to the factors described above in the three-month discussion.
◦The International increase was driven by the factors described above in the three-month discussion.
•Search revenue decreased 14% to $495.6 million due to decreases of $63.1 million, or 13%, from Ask Media Group and $19.7 million, or 25%, from Desktop. The decrease from Ask Media Group was due to a reduction in marketing by affiliate partners driving fewer visitors to ad supported search and content websites. The
decrease from Desktop was due primarily to the factors described above in the three-month discussion.
•Emerging & Other revenue decreased 10% to $460.4 million due primarily to the inclusion of Bluecrew in the prior year period and decreases in revenue at Mosaic Group and Daily Beast, partially offset by an increase of 4% to $283.7 million at Care.com, growth of 46% at Vivian Health and increased revenue at IAC Films, due primarily to Everything Everywhere All at Once.
Cost of revenue in 2023 decreased from 2022 due to decreases of $80.3 million from Angi Inc., $39.0 million from Dotdash Meredith and $18.1 million from Emerging & Other, partially offset by an increase of $28.5 million from Search.
•The Angi Inc. decrease was due primarily to decreases of $72.8 million from Services and $5.9 million from Roofing.
◦The Services decrease was due primarily to a $66.2 million decrease in payments to third-party professional service providers due primarily to 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 the shift away from complex and less profitable offerings.
◦The Roofing decrease was due primarily to the reduction in revenue discussed above that resulted in decreases of $2.3 million and $1.0 million in roofing materials and third-party contractor costs, respectively.
•The Dotdash Meredith decrease was due primarily to decreases of $21.1 million from Print and $17.9 million from Digital. The decrease from Print was due primarily to a decrease of $13.5 million in production and distribution costs (postage, printing, paper and content) due to the planned reduction in the circulation of certain publications. Print was further impacted by decreases of $3.5
million in third-party advertising campaign fulfillment costs due to lower project-related revenue and $3.0 million in compensation expense due to the 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 decreases of $11.5 million in traffic acquisition costs and $4.0 million in content creation costs due primarily to lower revenue.
•The Emerging & Other decrease was primarily due to the inclusion in the prior year period of $16.1 million in expense from Bluecrew, which was sold on November 9, 2022.
•The Search increase was due primarily to an increase in traffic acquisition
costs of $28.5 million at Ask Media Group due primarily to an increase in the proportion of revenue earned from affiliate partners who direct traffic to our websites.
Cost of revenue in 2023 decreased from 2022 due to decreases of $233.4 million from Angi Inc., $141.2 million from Dotdash Meredith, $45.2 million from Emerging & Other and $37.2 million from Search.
•The Angi Inc. decrease was due primarily to decreases of $206.8 million from Services and $22.4 million from Roofing.
◦The
Services decrease was due primarily to a $186.9 million decrease in payments to third-party professional service providers due primarily to 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 the shift away from complex and less profitable offerings.
◦The Roofing decrease was due primarily to decreases of $11.0 million and $6.0 million in roofing materials and third-party contractor costs, respectively.
•The
Dotdash Meredith decrease was due primarily to decreases of $90.1 million from Print and $51.3 million from Digital. The decrease from Print was due primarily to decreases of $54.4 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 planned reduction in circulation of others. Print was further impacted by decreases of $20.2 million in compensation expense and $9.6 million in third-party advertising campaign fulfillment costs due to the factors described above in the three-month discussion. The decrease from Digital was due primarily to decreases of $28.7 million in traffic acquisition costs, $8.6 million in compensation expense and $8.1 million in content creation costs. The decreases
in traffic acquisition costs and content creation costs were due to the factors described above in the three-month discussion. The decrease in compensation expense was due primarily to lower headcount due to the voluntary retirement program in the first quarter of 2022 and the reduction in force described above under "Dotdash Meredith Restructuring and Other Charges."
•The Emerging & Other decrease was primarily due to the inclusion in the prior year period of $43.7 million in expense from Bluecrew.
•The Search decrease was due primarily to a decrease in traffic acquisition costs of $33.9 million at Ask Media Group due primarily to a decrease in the proportion of revenue earned from affiliate partners who direct traffic to our websites.
Selling and marketing expense in 2023 decreased
from 2022 due primarily to decreases of $30.4 million from Angi Inc., $22.4 million from Dotdash Meredith, $14.2 million from Emerging & Other and $11.7 million from Search.
•The Angi Inc. decrease was due primarily to decreases of $21.3 million from Ads and Leads and $9.7 million from Services.
◦The Ads and Leads decrease was due primarily to a decrease of $18.4 million in advertising expense. The decrease in advertising expense was due primarily to a decrease of $32.8 million in online marketing spend due to increased efficiency, partially offset by an increase of $15.8 million in television spend due to efforts to build awareness of the Angi Inc. brand.
◦The
Services decrease was due primarily to decreases of $5.6 million in compensation expense, $5.1 million in consulting fees and outsourced personnel costs and $2.3 million in advertising expense, partially offset by an increase of $4.1 million in service guarantee expense. The decrease in compensation expense was due primarily to lower headcount. The decreases in consulting fees and outsourced personnel costs were due to $1.8 million less in phone-based sales wages primarily resulting from increased reliance on more profitable digital conversion channels and $2.8 million less due to streamlined fulfillment operations, partially driven by fewer complex services. The decrease in advertising expense was primarily due to a decrease of $1.5 million in service professional marketing spend. The increase in service guarantee expense is due to the aforementioned change in contractual terms and conditions resulting in the change to net revenue reporting 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 Dotdash Meredith decrease was due primarily to decreases of $7.4 million in subscription acquisition costs and $4.0 million in compensation expense from Print and a decrease of $3.4 million in compensation expense from Digital. The decrease in subscription acquisition costs was driven by lower commission payments made to third-party agents that sell magazine subscriptions due to the planned reduction in the circulation of certain publications. The decrease in compensation expense was due primarily to the voluntary retirement program in the first quarter of 2022 described above under "Dotdash Meredith Restructuring and Other Charges."
•The Emerging & Other decrease was due primarily to a decrease in online marketing spend of $5.5 million at Mosaic Group, a decrease in offline marketing spend of $2.8 million at IAC Films and the inclusion in the prior year period of $4.0 million in expense from Bluecrew, which was sold on November 9, 2022.
•The Search decrease was primarily due to a decrease of $10.8 million in online marketing spend at Ask Media Group.
Selling and marketing
expense in 2023 decreased from 2022 due primarily to decreases of $115.3 million from Dotdash Meredith, $89.7 million from Angi Inc., $38.6 million from Emerging & Other and $11.9 million from Search.
•The Dotdash Meredith decrease was due primarily to decreases of $75.9 million in subscription acquisition costs and $23.3 million in compensation expense from Print and a decrease of $7.8 million in compensation expense from Digital. The decrease in subscription acquisition costs was driven by the factor described above in the three-month discussion and the discontinuation of several publications in the first quarter of 2022. The decrease in compensation expense was due to the factor described above in the three-month discussion and the reduction in force described above under
"Dotdash Meredith Restructuring and Other Charges."
•The Angi Inc. decrease was due primarily to decreases of $49.4 million from Ads and Leads, $26.5 million from Services, $7.2 million from Roofing and $7.0 million from International.
◦The Ads and Leads decrease was due primarily to decreases of $51.4 million in advertising expense and $4.2 million in consulting fees, partially offset by an increase of $7.9 million in compensation expense. The decrease in advertising expense was due primarily to a decrease of $76.2 million in online marketing spend, partially offset by an increase of $24.6 million in television spend driven primarily due to the factors described above in the
three-month discussion. 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 due to the immediate expensing of commissions within the Ads business for certain transactions beginning October 1, 2022.
◦The Services decrease was due primarily to decreases of $16.3 million in consulting fees and outsourced personnel costs, $13.8 million in compensation expense and $5.2 million in advertising expense, partially offset by an increase of $11.4 million in service guarantee expense. The decreases in consulting fees and outsourced personnel costs were due to $10.5 million less phone-based sales wages primarily resulting from increased reliance on more profitable digital
conversion channels and $5.2 million less due to streamlined fulfillment operations, partially offset by fewer complex services. The decreases in compensation expense and advertising expense and the increase in service guarantee expense were primarily due to the factors described above in the three-month discussion.
◦The Roofing decrease was due primarily to a decrease of $3.3 million in compensation expense due to a reduction in headcount and a strategic shift in operations to select markets.
◦The International decrease was due primarily to a decrease of $10.3 million in advertising expense due primarily to decreases of $6.2 million and $4.5 million in online marketing spend and television spend, respectively, partially offset by an increase of $2.7 million in compensation expense.
•The
Emerging & Other decrease was due primarily to decreases of $17.6 million and $3.2 million in online marketing spend and television spend, respectively, at Mosaic Group, the inclusion in the prior year period of $12.0 million in expense from Bluecrew and a decrease of $7.0 in television spend at Care.com, partially offset by an increase of $2.4 million in online marketing spend at Vivian Health.
•The Search decrease was primarily to a decrease of $10.0 million in online marketing spend at Ask Media Group.
General and administrative expense in 2023 decreased
from 2022 due primarily to decreases of $25.8 million from Angi Inc. and $25.0 million from Dotdash Meredith.
•The Angi Inc. decrease was due primarily to a decrease of $22.8 million from Ads and Leads due primarily to decreases of $14.1 million in the provision for credit losses, $6.4 million in legal expense, $2.6 million in compensation expense and $2.3 million in outsourced personnel costs. The decrease in the provision for credit losses was due primarily to lower revenue and improved collection rates. The decrease in compensation expense was due primarily to lower headcount. The decrease in outsourced personnel costs was due primarily to a reduction in third-party providers.
•The Dotdash Meredith decrease
was due primarily to the inclusion in 2022 of $15.7 million in restructuring costs, including a $14.3 million impairment of a ROU asset at Digital related to the consolidation of certain leased spaces following the Meredith acquisition, and a decrease in expense in 2023 of $8.0 million due to the reversal of certain indemnification liabilities established for tax contingencies in connection with the acquisition of Meredith.
General and administrative expense in 2023 decreased from 2022 due primarily to decreases of $55.6 million from Angi Inc., $2.7 million from Emerging & Other and $2.3 million
from Dotdash Meredith.
•The Angi Inc. decrease was due primarily to decreases of $44.8 million from Ads and Leads and $8.9 million from Services.
◦The Ads and Leads decrease was due primarily to decreases of $15.0 million in compensation expense, $14.9 million in the provision of credit losses, $9.0 million of legal expense and $3.8 million in outsourced personnel costs. The decreases in compensation expense, provision of credit losses and outsourced personnel costs were due primarily to the factors described above in the three-month discussion.
◦The Services decrease was due primarily to decreases of $7.2 million in compensation expense and $3.9 million in the provision for credit losses. The decrease
in compensation expense was due primarily to lower headcount. The decrease in the provision for credit losses was due primarily to improved collection rates and lower revenue.
•The Emerging & Other decrease was due primarily to the inclusion in the prior year period of $5.9 million in expense from Bluecrew and a decrease of $2.7 million in compensation expense at Vivian Health, partially offset by $3.3 million in consulting costs at IAC Films and the inclusion in the prior year period of a $3.2 million gain at Care.com related to the termination of a lease. The decrease in compensation expense at Vivian Health was due primarily to a $7.1 million charge related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with the equity raise in the second quarter
of 2022, partially offset by an increase of $4.4 million in payroll-related expenses due to higher headcount.
•The Dotdash Meredith decrease was due primarily to an impairment charge at Other (unallocated corporate costs) of $44.7 million of a ROU asset related to unoccupied lease space recognized in the first quarter of 2023, partially offset by inclusion in 2022 of $24.6 million in restructuring costs related to activities described above under "Dotdash Meredith Restructuring and Other Charges" and the inclusion of $5.8 million in 2022 of transaction-related costs related to the acquisition of Meredith and a decrease in expense in 2023 of $8.0 million due to the reversal of certain indemnification liabilities described above in the three-month discussion.
Product development expense in 2023 increased from 2022 due to an increase
of $5.7 million from Angi Inc., partially offset by a decrease of $1.4 million from Emerging & Other.
•The Angi Inc. increase was due primarily to an increase of $4.5 million from Ads and Leads due primarily to an increase in compensation expense of $3.9 million related primarily to increased spend on projects that did not meet capitalization requirements.
•The Emerging & Other decrease was due primarily to the inclusion in the prior year period of $2.6 million of expense at Bluecrew, which was sold on November 9, 2022, partially offset by an increase of $1.6 million in compensation expense at Vivian Health due primarily to an increase in headcount.
Product development expense in 2023 increased from 2022 due primarily to increases of $17.7 million from Angi Inc. and $2.5 million from Dotdash Meredith, partially offset by a decrease of $10.9 million from Emerging & Other.
•The Angi Inc. increase was due primarily to an increase of $15.9 million from Ads and Leads due primarily to an increase in compensation expense of $17.0 million due primarily to the factor described in the three-month discussion.
•The Dotdash Meredith increase was due primarily to an increase of $1.8 million from Digital due primarily to an increase in compensation expense of $4.0 million related to primarily to an increase in headcount and a decrease
in compensation expense that qualified for capitalization, partially offset by a decrease of $1.7 million in software maintenance.
•The Emerging & Other decrease was due primarily to the inclusion in the prior year period of $7.6 million of expense at Bluecrew.
Depreciation increased in 2023 from 2022 due primarily to increases of $4.8 million at Angi Inc. and $1.8 million at Dotdash Meredith. The increase at Angi Inc. was due primarily to investments in capitalized software which are being depreciated over an average useful life of two years. The increase at Dotdash Meredith was due primarily to an increase in depreciation as a result of the reclassification in the prior year of certain acquired capitalized software from depreciable assets to intangible assets in connection with the completion of purchase accounting related to the acquisition of Meredith, partially offset by the inclusion of a $7.0 million impairment recorded in the third
quarter of 2022 of leasehold improvements and furniture and equipment related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges."
Depreciation increased in 2023 from 2022 due primarily to increases of $25.8 million at Dotdash Meredith and $25.1 million at Angi Inc. The increase at Dotdash Meredith
was due primarily to an impairment of leasehold improvements and furniture and equipment of $25.3 million in the first quarter of 2023 related to unoccupied leased space and a $4.2 million write-off of certain leasehold improvements and furniture and equipment during the second quarter of 2023, partially offset by the inclusion of a $7.0 million impairment recorded in the third quarter of 2022 of leasehold improvements and furniture and equipment related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges."The increase at Angi Inc. was due primarily to an increase in capitalized software projects placed in service and investments in capitalized software.
Operating loss decreased $91.9 million to a loss of $32.7 million due primarily to an increase in Adjusted EBITDA of $45.6 million, described below, and decreases of $59.4 million in amortization of intangibles and $2.2 million in stock-based compensation expense, partially offset by a goodwill impairment of $9.0 million at Mosaic Group and an increase of $6.2 million in depreciation. The decrease in the amortization of intangibles was due primarily to a higher expense in the third quarter of 2022 at Dotdash Meredith resulting from fair value adjustments recorded during the measurement period to identifiable
intangible assets in connection with the completion of purchase accounting related to the acquisition of Meredith, partially offset by a $7.6 million indefinite-lived intangible asset impairment at the Dotdash Meredith Digital segment in the third quarter of 2023. The decrease in stock-based compensation expense was due primarily to lower expense at Angi Inc.'s Services segment due to a reduction in headcount as a result of the shift away from complex and less profitable offerings. The goodwill impairment at Mosaic Group is 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 increase in depreciation was due primarily to investments in capitalized software at Angi Inc. and the reclassification in the prior year of certain
acquired capitalized software from depreciable assets to intangible assets in connection with the completion of purchase accounting related to the acquisition of Meredith, partially offset by the inclusion of a $7.0 million impairment recorded in the third quarter of 2022 of leasehold improvements and furniture and equipment related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges."
Operating loss decreased $175.8 million to a loss of $223.8 million due primarily to a net decrease in goodwill impairments of $77.7 million at Mosaic Group ($9.0 million in 2023 compared to $86.7 million
in 2022), an increase in Adjusted EBITDA of $79.8 million, described below, and decreases of $63.9 million in amortization of intangibles and $4.4 million in stock-based compensation expense, partially offset by an increase of $49.4 million in depreciation and income of $0.6 million in 2022 related to an acquisition-related contingent consideration fair value adjustment. The goodwill impairments in 2023 and 2022 at Mosaic Group were due to the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. The decrease in the amortization of intangibles was due primarily to lower expense at Dotdash Meredith due to the factors described above in the three-month discussion, and lower expense at Care.com and Angi Inc.'s Services segment due to certain intangible assets becoming fully amortized, partially offset by a $7.6 million
indefinite-lived intangible asset impairment at the Dotdash Meredith Digital segment in the third quarter of 2023. The decrease in stock-based compensation expense was due primarily to lower expense at Angi Inc.'s Services segment due to the reduction in headcount described above in the three-month discussion. The increase in depreciation was due primarily to the impairment of leasehold improvements and furniture and equipment of $25.3 million at Dotdash Meredith in the first quarter of 2023 related to unoccupied leased space, a $4.2 million write-off of certain leasehold improvements and furniture and equipment during the second quarter of 2023 and an increase in expense at Angi Inc. due primarily to an increase in capitalized software projects placed in service and investments in capitalized software, partially offset by the inclusion of a $7.0 million impairment at Dotdash Meredith recorded in the third quarter of 2022 described above in
the three-months discussion.
At September 30, 2023, there was $289.6 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately
4.0 years.
•Dotdash Meredith Adjusted EBITDA increased $37.1 million to $68.3 million due to an increase in Adjusted EBITDA
of $29.2 million from Digital and reduced Adjusted EBITDA losses of $11.7 million from Other (unallocated corporate costs), partially offset by a decrease in Adjusted EBITDA of $3.8 million from Print.
◦The Digital Adjusted EBITDA increase was due primarily to lower operating expenses and the inclusion in 2022 of $15.0 million of restructuring charges and transaction-related expenses, including a $14.3 million impairment of a ROU asset related to the consolidation of certain leased spaces following the Meredith acquisition.
◦The Other (unallocated corporate costs) Adjusted EBITDA loss decrease was due primarily to a decrease in expense in 2023 of $8.0 million due to the reversal of certain indemnification liabilities established for tax contingencies
in connection with the acquisition of Meredith and the inclusion in 2022 of $1.6 million of restructuring charges and transaction-related expenses.
◦The Print Adjusted EBITDA decrease was due primarily to revenue declines, partially offset by lower operating expenses driven by the reduction in the circulation of certain publications and the inclusion in 2022 of $1.9 million of restructuring charges and transaction-related expenses.
•Angi Inc. Adjusted EBITDA increased $3.0 million to $25.9 million due primarily to reduced Adjusted EBITDA losses of $5.9 million from Roofing and increases in Adjusted EBITDA of $5.5 million and $2.1 million from Services and International, respectively, partially offset by a decrease in Adjusted EBITDA of $11.1 million from Ads and Leads.
◦The Roofing Adjusted EBITDA loss decrease
was due primarily to lower selling and marketing expenses and general and administrative expense due to headcount rationalization and a strategic shift of operations to select markets.
◦The Services Adjusted EBITDA increase 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 a shift away from complex and less profitable offerings.
◦The International Adjusted EBITDA increase was due primarily to an increase in revenue and lower selling and marketing expense due to more efficient marketing spend.
◦The Ads and Leads Adjusted EBITDA decrease was due primarily to a decrease in revenue, partially offset by lower general and administrative
expense due to a decrease in the provision for credit losses and lower compensation expense and lower selling and marketing expense due to improved marketing efficiency.
•Search Adjusted EBITDA decreased 37% to $12.0 million due primarily to a decrease in Desktop revenue resulting from the wind-down of the B2C business and an increase in traffic acquisition costs at Ask Media Group as a result of higher revenue share rates.
•Emerging & Other Adjusted EBITDA increased $12.5 million to $15.0 million due primarily to the sale of Bluecrew, which had Adjusted EBITDA losses of $7.4 million in the prior year period, and higher profits at Mosaic Group and Care.com.
•Dotdash Meredith Adjusted EBITDA increased $20.3 million to $99.2 million due to increases in Adjusted EBITDA of $29.1 million and $18.3 million from Print and Digital, respectively, partially offset by an increase in Adjusted EBITDA losses of $27.1 million from Other (unallocated corporate costs).
◦The Print Adjusted EBITDA increase was due primarily to the inclusion in 2022 of $27.2 million of restructuring charges and transaction-related expenses.
◦The Digital Adjusted EBITDA increase was due primarily to decreases in traffic acquisition costs, compensation expense and the inclusion in 2022 of $22.9 million of
restructuring charges and transaction-related expenses, including a $14.3 million impairment of a ROU asset described above in the three-month discussion.
◦The Other (unallocated corporate costs) Adjusted EBITDA loss increase was due primarily to an impairment charge of $44.7 million of a ROU asset related to unoccupied lease space recognized in the first quarter of 2023, partially offset by the inclusion in 2022 of $9.7 million of restructuring charges and transaction-related expenses and a decrease in expense in 2023 of $8.0 million due to the reversal of certain indemnification liabilities described above in the three-month discussion.
•Angi Inc. Adjusted EBITDA increased $45.3 million to $74.7 million due primarily to increases in Adjusted EBITDA of $37.5 million and $13.2 million from Services and International, respectively, and reduced Adjusted EBITDA losses of $13.5 million from Roofing, partially offset by a decrease in Adjusted EBITDA of $19.6 million from Ads and Leads.
◦The Services Adjusted EBITDA increase was due primarily to
pricing and fulfillment optimization efforts and lower operating expenses described above in the three-month discussion.
◦The International Adjusted EBITDA increase was due an increase in revenue and lower selling and marketing expense.
◦The Roofing Adjusted EBITDA loss decrease was due primarily to the factors described above in the three-month discussion.
◦The Ads and Leads Adjusted EBITDA decrease was due primarily
to lower revenue, partially offset by lower selling and marketing expense and lower general and administrative expense described above in the three-month discussion.
•Search Adjusted EBITDA decreased 48% to $36.8 million due primarily to lower revenue at Ask Media Group due to a reduction in marketing by affiliate partners driving fewer visitors to ad supported search and content websites and at Desktop resulting from the wind-down of the B2C business.
•Emerging & Other Adjusted EBITDA increased $49.8 million to $36.1 million from a loss of $13.7 million due primarily to the sale of Bluecrew, which had Adjusted EBITDA losses of $20.7 million in the prior year period, higher profits at Care.com and Mosaic Group
and the inclusion in the second quarter of 2022 of 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 April 2022.
•Corporate Adjusted EBITDA loss increased $1.8 million to $67.1 million due primarily to increased compensation expense.
Interest expense in 2023 increased from 2022 due primarily to an increase in interest rates from 6.61% and 4.86% at September 30, 2022to 9.43% and 7.60% at September 30, 2023on the Dotdash Meredith Term Loan B and Dotdash Meredith Term Loan A, respectively.
Unrealized (loss) gain on investment in MGM Resorts International ("MGM")
The Company's investment in MGM is accounted for as a marketable equity security. The Company recognized an unrealized pre-tax loss and gain on its investment in MGM of $463.4 million and $209.1 million for the three and nine months ended September 30, 2023, respectively, and an unrealized
pre-tax gain and loss of $42.5 million and $970.1 million for the three and nine months ended September 30, 2022, respectively, which were due to changes in the price of MGM's common stock as reported on the New York Stock Exchange. As of September 30, 2023, the Company owns approximately 64.7 million common shares in MGM. Based on the number of MGM shares outstanding at June 30, 2023, the Company owns 18.3% of MGM.
Unrealized
increase (decrease) in the estimated fair value of a warrant
6,457
8,467
(1,274)
21,318
Net realized gains on sales of businesses, investments and upward (downward) adjustments to the carrying value of equity securities without readily determinable fair values
1,318
20,361
2,666
265
Net
periodic pension benefit credit (cost), other than the service cost component(a)
743
1,871
217
(75,317)
Foreign exchange (losses) gains, net
(1,685)
(5,196)
396
(11,425)
Unrealized
losses related to marketable equity securities
(257)
(13,972)
(145)
(8,316)
Other
537
(631)
5,717
(1,491)
Other
income (expense), net
$
25,455
$
19,678
$
60,189
$
(63,048)
$ Change
$
5,777
$
123,237
%
Change
29
%
NM
_____________________
(a) Includes pre-tax actuarial gains of $1.0 million and $1.2 million related to the pension plans in the U.S. for the three and nine months ended September 30, 2023, respectively. Includes a pre-tax actuarial gain of $2.6 million related to the funded pension plan in the U.S. for the three months ended September 30, 2022 and a pre-tax actuarial loss of $76.0 million related to the funded pension plans in
the U.K. and the U.S. for the nine months endedSeptember 30, 2022. See "Note 7—Pension and Postretirement Benefit Plans" for additional information.
In 2023, the effective income tax rate is lower than the statutory rate of 21% due primarily to nondeductible compensation expense, return to provision adjustments, foreign income taxed at different statutory rates and unconsolidated tax losses, partially offset by research credits and realization of capital losses.
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 goodwill impairment at Mosaic Group.
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 loss attributable to IAC shareholders to operating loss to Adjusted EBITDA:
Non-Cash Expenses That Are
Excluded from Our Non-GAAP Measure
Stock-based compensationexpense 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, 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.
Net
cash provided by operating activities consists of net earnings adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include the unrealized (gains) losses on the investment in MGM, deferred income taxes, amortization of intangibles, depreciation, stock-based compensation expense, provision for credit losses, goodwill impairment, non-cash lease expense (including ROU impairments), pension and postretirement benefit (credit) cost, unrealized decrease (increase) in the estimated fair value of a warrant and (gains) losses on investments in equity securities and sales of businesses.
2023
Adjustments to net earnings consist primarily of amortization of intangibles of $170.2 million, depreciation of $136.2 million, stock-based compensation expense of $88.1 million, non-cash lease expense of $85.6 million, provision for credit losses of $71.3 million,
goodwill impairment of $9.0 million and an unrealized decrease in the estimated fair value of a warrant of $1.3 million, partially offset by an unrealized gain on the investment in MGM of $209.1 million, deferred income taxes of $17.6 million and net gains on investments in equity securities and sales of businesses of $2.5 million. The decrease from changes in working capital include decreases in accounts payable and other liabilities of $82.7 million and operating lease liabilities of $56.4 million, partially offset by a decrease in other assets of $10.0 million, an increase in deferred revenue of $8.7 million and a decrease in accounts receivable of $7.1 million. The decrease in accounts payable and other liabilities is due, in part, to a decrease in accrued employee compensation, due primarily to restructuring related severance at Dotdash Meredith and timing of payments, and a decrease in accrued traffic acquisition costs and related payables at Dotdash Meredith
and Search. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The decrease in other assets is due, in part, to refunds of pre-acquisition income tax receivables at Dotdash Meredith and timing of payments. The increase in deferred revenue is due primarily to timing of annual subscription renewals and subscription growth at Care.com and timing of cash receipts at Angi Inc. The decrease in accounts receivable is due primarily to a decrease in revenue relative to the fourth quarter of 2022 at Dotdash Meredith and Search, partially offset by an increase at Angi Inc. due to timing of cash receipts.
Net cash used in investing activities includes $320.1 million for the purchases of marketable debt securities, capital expenditures of $126.6 million, primarily related to payment of approximately $80 million for the acquisition of the formerly leased land under IAC's New York
City headquarters building as well as investments of $34.0 million in capitalized software at Angi Inc. to support its products and services, and $103.6 million for the purchase of additional shares of Turo, partially offset by maturities of marketable debt securities of $387.5 million, proceeds from the sales of assets of $29.0 million, including $28.2 million related to the sale of a building at Dotdash Meredith, a decrease in notes receivable of $11.3 million and net proceeds from the sale of businesses and investments of $9.2 million.
Net cash used in financing activities includes the repurchase of 3.2 million shares of IAC common stock, on a settlement date basis, for $165.6 million at an average price of $51.00 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 $8.3 million, withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $4.8 million and the repurchase of 1.1 million shares of Angi Inc. Class A common stock, on a settlement date basis, for $3.4 million at an average price of $3.22 per share.
Adjustments to net loss consist primarily of an unrealized loss 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 for credit losses of $87.7 million, depreciation
of $86.9 million, goodwill impairment of $86.7 million, pension and postretirement benefit cost of $78.1 million, non-cash lease expense of $56.9 million and net losses on investments in equity securities and sales of businesses of $8.1 million, partially offset by deferred income taxes of $333.2 million and an unrealized increase in the estimated fair value of a warrant of $21.3 million. The decrease from changes in working capital include decreases in accounts payable and other liabilities of $238.9 million and operating lease liabilities of $48.3 million. The decrease in accounts payable and other liabilities is due primarily to a decrease in accrued employee compensation due, in part, to a change-in-control payments, partially offset by an increase in restructuring charges at Dotdash Meredith, 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. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion.
Net cash used in investing activities includes $244.3 million for the purchase of an additional 5.7 million additional shares of MGM and capital expenditures of $112.8 million primarily related to investments of $91.1 million in capitalized software at Angi Inc. 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.
Net cash used in financing activities 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 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 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 million.
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 from a variable rate 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 on April 3, 2023.
At September 30, 2023,
the Company owns 64.7 million common shares of MGM, including 5.7 million additional common shares purchased in the first and third quarters of 2022 for $244.3 million. Based on the number of MGM shares outstanding at June 30, 2023, the Company owns 18.3% of MGM.
Investment in Turo
In April 2023, the Company purchased additional shares of Turo for $103.6 million. At September 30, 2023, IAC's aggregate percentage ownership in Turo
is approximately 30%.
Share Repurchase Authorizations and Activity
During the nine months ended September 30, 2023, IAC repurchased 3.2 million shares of its common stock, on a trade date basis, at an average price of $51.00 per share, or $165.6 million in aggregate. At November 3, 2023, IAC had 3.7 million shares remaining in its share repurchase authorization.
During the nine months ended September 30, 2023, Angi Inc. repurchased 1.1 million shares of its common stock, on a trade date basis, at an average price of $3.22 per share, or $3.4 million in aggregate. At November 3, 2023 Angi Inc. had 14.0 million shares remaining in its share
repurchase authorization.
IAC and Angi Inc. may purchase their shares pursuant to their authorizations over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, price and future outlook.
As of the date of this filing, Angi Inc. intends to put in place a share repurchase plan with the intent of utilizing the full 14.0 million shares remaining in its stock repurchase authorization. The plan will be subject to price and volume limitations.
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 by management 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.
The following table summarizes (i) the aggregate intrinsic value of IAC and Angi Inc. non-publicly traded subsidiary denominated stock settled stock appreciation rights, IAC options, Angi Inc. stock settled stock appreciation rights and Angi Inc. options and (ii) the aggregate fair value (based on stock prices as of November 3, 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 IAC and Angi Inc. 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, 2024
Estimated withholding taxes payable on shares that will vest after September 30, 2024
Estimated IAC shares to be issued
(In thousands)
IAC
Stock
settled stock appreciation rights denominated in shares of certain non-publicly traded IAC subsidiaries other than Angi Inc. subsidiaries(a)
$
26,299
$
10,382
$
2,768
294
IAC denominated stock options (b)
81,834
40,917
—
913
IAC
RSUs (c)
81,967
3,032
36,769
941
IAC restricted stock (d)
—
—
—
—
Total
IAC outstanding employee stock-based awards
190,100
54,331
39,537
2,148
Angi Inc.
Angi
Inc. RSUs
39,655
5,798
13,255
Angi Inc. stock appreciation rights
—
—
—
See footnote (f) below
Other Angi Inc. equity awards (a)(e)
2,607
864
440
See
footnote (f) below
Total Angi Inc. outstanding employee stock-based awards
42,262
6,662
13,695
Total outstanding employee stock-based awards
$
232,362
$
60,993
$
53,232
_____________________
(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 and Angi Inc.
(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 award holders to pay related withholding taxes, which he or she may do by selling shares of IAC common stock upon exercise. Assuming all IAC stock options outstanding on November 3, 2023 were settled on a
gross basis (i.e., through the issuance of a number of shares of IAC common stock equal to the number of stock options exercised), the Company would have issued2.7 million shares of IAC common stock and would have received $38.3 million in cash proceeds.
(c) Approximately 60% of the estimated withholding taxes payable upon the vesting of RSUs scheduled to vest after September 30, 2024 is related to RSUs that are scheduled to cliff vest in 2025 (the five-year anniversary of the grant date), subject to continued employment through the vesting 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 subject to continued employment through the vesting date. As of the date of this report, the price per share of IAC common stock was below the minimum price threshold to earn the award.
(e) Includes Angi Inc. stock options 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.
The Company anticipates that it will need to make capital expenditures in connection with the development and expansion of its operations. The Company's 2023 capital expenditures are expected to be higher than its 2022 capital expenditures of $139.8 million by approximately 5% to 10%, due primarily to the acquisition of the formerly leased land under IAC's New York City headquarters building, partially offset by lower capital expenditures related to the development of capitalized software at Angi Inc. and Care.com.
Liquidity Assessment
On
a consolidated basis, the Company generated positive cash flows from operating activities of $142.6 million for the nine months ended September 30, 2023; excluding the positive cash flows from operating activities of $88.8 million generated by Angi Inc. and negative cash flows from operating activities of $10.7 million generated by Dotdash Meredith, the Company generated positive cash flows from operating activities of $64.5 million.
At September 30, 2023, the Company's consolidated cash, cash equivalents and marketable securities, excluding MGM, were $1.4 billion, of
which $366.8 million and $266.4 million was held by Angi Inc. and Dotdash Meredith, respectively. The Company's consolidated debt includes approximately $1.5 billion, which is a liability of Dotdash Meredith, Inc., and $500.0 million, which is a liability of ANGI Group, a subsidiary of Angi Inc. The 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 exceeds 4.0 to 1.0, subject to certain available amounts as defined in the Dotdash Meredith Credit Agreement. This ratio was exceeded for the test period ended September 30, 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 the three and nine months ended September 30, 2023, the Company contributed $125.0 million and $405.0 million, respectively, to Dotdash Meredith, which Dotdash Meredith subsequently distributed back to the
Company $125.0 million in October 2023 and $130.0 million and $280.0 million in the three and nine months ended September 30, 2023, respectively. 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.
The
Company believes Angi Inc.'s and Dotdash Meredith's existing cash, cash equivalents and expected positive cash flows from operations, and the Company's existing cash and cash equivalents and expected positive cash flows from operations, 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 acquisitions and 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 additional financing.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Equity Price Risk
At September 30,
2023, the Company owns 64.7 million common shares of MGM. For the three and nine months ended September 30, 2023, the Company recognized an unrealized pre-tax loss of $463.4 million and an unrealized pre-tax gain of $209.1 million on its investment in MGM, respectively. For the three and nine months ended September 30, 2022, the Company recorded an unrealized pre-tax gain of $42.5 million and an unrealized pre-tax loss of $970.1 million, respectively.
The cumulative unrealized
net pre-tax gain at September 30, 2023 is $1.1 billion. At September 30, 2023 and December 31, 2022, the carrying value of the Company's investment in MGM, which includes the cumulative unrealized pre-tax gains, was $2.4 billion and $2.2 billion, or approximately 24% and 21% of the Company's consolidated total assets, respectively. A $2.00 increase or decrease in the share price of MGM would result in an unrealized gain or loss, respectively, of $129.4 million. At November 3, 2023, the fair value of the Company's
investment in MGM was $2.5 billion. The Company's results of operations and financial condition have in the past been and may in the future be materially impacted by increases or decreases in the price of MGM common shares, which are traded on the New York Stock Exchange.
Interest Rate Risk
At September 30, 2023, the principal amount of the Company's outstanding debt totals $2.0 billion, of which $1.5 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.
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 a portion of the Dotdash Meredith Term Loan B from a variable rate to a fixed rate to manage interest rate risk exposure beginning on April 3, 2023 and applies hedge accounting to these contracts. See "Note 1—The Company and Summary of Significant Accounting Policies" and "Note 3—Long-term Debt"
to the financial statements included in "Item 1—Consolidated Financial Statements" for more information. The fair value of the interest rate swaps is determined using discounted cash flows derived from observable market prices, including swap curves, and represents what Dotdash Meredith would pay or receive to terminate the swap agreements. Dotdash Meredith intends to continue to meet the conditions for hedge accounting, however, if these interest rate swaps were not highly effective in offsetting cash flows attributable to the hedged risk, the changes in the fair value of the interest rate swaps used as hedges could have a significant impact on future results of operations.
During the nine months ended September 30, 2023, Adjusted
Term SOFR for the Dotdash Meredith Term Loans increased an average of approximately 131 basis points relative to December 31, 2022. As a result of the increase in Adjusted Term SOFR during the nine months ended September 30, 2023, the interest expense on Dotdash Meredith Term Loans, net of $2.3 million realized gains related to the $350 million in notional amount of interest rate swaps, was $9.2 million higher as compared to what interest expense would have been if the Adjusted Term SOFR been unchanged during 2023. At September 30, 2023, the outstanding balance of $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 9.43%, and the outstanding balance of $319.4 million related to the Dotdash Meredith Term Loan A bore interest at Adjusted
Term SOFR plus 2.25%, or 7.60%. If Adjusted Term SOFR were to increase or decrease by 100 basis points, the annual interest expense on the Dotdash Meredith Term Loans, net of the impact related to the $350 million in notional amount of interest rate swaps, would increase or decrease by $12.0 million.
If market rates decline relative to interest rates 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 $21.0 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.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management, including our Chairman and Senior 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, our 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.
The 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 September 30, 2023, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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 matter described below involves issues or claims that may be of particular
interest to IAC's stockholders, regardless of whether such 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, 2022 (page 34). See David 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 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 32 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. As previously reported, the court dismissed the action in September 2022, and the plaintiffs appealed. On May 30, 2023, after hearing oral argument on the appeal, the Delaware Supreme Court issued an order directing the parties to submit supplemental briefing concerning
the correct legal standard governing judicial review of the MTCH Separation. Supplemental briefing was completed on September 29, 2023. 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 potential increases in pension plan obligations), (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, (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 investments 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 COVID-19 and 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 captions Part I-Item 1A-Risk Factors of our annual report on 10-K for the fiscal year ended December 31, 2022 and Part II-Item 1A-Risk Factors of our quarterly report on Form 10-Q for the quarter ended March 31, 2023. 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 captions Part I-Item 1A-Risk Factors of our annual report on Form 10-K for the fiscal year ended December 31, 2022 and Part II-Item 1A-Risk Factors of our quarterly report on Form 10-Q for the quarter ended March 31, 2023, 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.
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, 2023.
Issuer Purchases of Equity Securities
The Company did not purchase any shares of its common stock during the quarter ended September 30,
2023. As of that date, 3,686,692 shares of IAC common stock remained available for repurchase under the Company's previously announced June 2023 repurchase authorization. The Company may repurchase shares pursuant to this repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
Item 5. Other Information
Rule
10b5-1 Trading Plans
During the quarter ended September 30, 2023, none of the Company’s directors or officers iiadopted/
or iiterminated/ a Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S‑K).
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.
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 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)
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.
