What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-28 · 477 added, 605 removed, 135 unchanged (89% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

When the following terms appear in this report, they have the meanings indicated below:

Reportable Segments (for additional information see " Note 12—Segment Information " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ":

Match Group ("MTCH") - is a leading provider of subscription dating products, with a portfolio of dating brands, including Tinder, Match, PlentyOfFish and OkCupid.

At December 31, 2019 , IAC’s economic interest and voting interest in MTCH were 80.7% and 97.5% , respectively.

ANGI Homeservices ("ANGI") - connects quality home service professionals across 500 different categories, from repairing and remodeling to cleaning and landscaping, with consumers through category-transforming products under brands such as HomeAdvisor, Angie’s List, Handy and Fixd Repair.

On September 29, 2017, IAC's HomeAdvisor business and Angie's List, Inc.

("Angie's List") combined under a new publicly-traded company called ANGI Homeservices, Inc.

(the "Combination").

At December 31, 2019 , IAC’s economic interest and voting interest in ANGI were 84.1% and 98.1% , respectively.

Vimeo - operates a global video platform for creative professionals, small and medium businesses ("SMBs"), organizations and enterprises to connect with their audiences, customers and employees.

Dotdash - is a portfolio of digital brands providing expert information and inspiration in select vertical content categories.

Applications - consists of Desktop, which includes our direct-to-consumer downloadable desktop applications and the business-to-business partnership operations, and Mosaic Group , which is a leading provider of global subscription mobile applications comprised of the following businesses:

Apalon, iTranslate, TelTech and, effective April 1, 2018 upon its transfer from Emerging & Other, Daily Burn.

Emerging & Other - consists of Ask Media Group, Bluecrew, NurseFly, a temporary healthcare staffing platform acquired on June 26, 2019, The Daily Beast, College Humor Media and IAC Films;

it also includes Daily Burn, for periods prior to its transfer to Mosaic Group, and CityGrid, Dictionary.com and Electus, for periods prior to the sales of these businesses in the fourth quarter of 2018.

On June 30, 2020, the companies formerly known as Match Group, Inc.

(referred to as “Former Match Group”) and IAC/InterActiveCorp (referred to as “Former IAC”) completed the separation of the Company from IAC through a series of transactions that resulted in two, separate public companies—(1) Match Group, which consists of the businesses of Former Match Group and certain financing subsidiaries previously owned by Former IAC, and (2) IAC, consisting of Former IAC’s businesses other than Match Group (the “Separation”).

As part of the Separation, Former Match Group merged with and into Match Group Holdings II, LLC (“MG Holdings II”), an indirect wholly-owned subsidiary of Match Group, with MG Holdings II surviving the merger as an indirect wholly-owned subsidiary of Match Group.

As a result of the Separation, the operations of Former IAC businesses other than Match Group are presented as discontinued operations.

For additional information relating to the Separation and the related transactions and agreements, see “Part I—Item 1—Business—Separation of Match Group and IAC” and “Part I—Item 1—Business—Relationship with IAC after the Separation.”

Other 2020 Developments

On February 11, 2020, MG Holdings II completed a private offering of $500 million aggregate principal amount of 4.125% Senior Notes.

The proceeds from these notes were used to pay expenses associated with the offering and to fund a portion of the cash consideration of $3.00 per Former Match Group common share in connection with the Separation.

On February 13, 2020, the Credit Facility was amended to, among other things, increase the available borrowing capacity to $750 million, reduce interest rate margins by 0.125%, and extend its maturity to February 13, 2025.

Additionally, on February 13, 2020, the Term Loan was amended to reprice the outstanding balance to LIBOR plus 1.75% and extend its maturity to February 13, 2027.

On May 19, 2020, MG Holdings II completed a private offering of $500 million aggregate principal amount of 4.625% Senior Notes.

The proceeds from these notes were used to redeem the outstanding 6.375% Senior Notes, for general corporate purposes, and to pay expenses associated with the offering.

In July 2020, in connection with the Separation, the sale of 17.3 million newly issued shares of Match Group common stock was completed by IAC.

The proceeds of $1.4 billion, net of associated fees, were transferred directly to IAC pursuant to the terms of the Transaction Agreement.

Operating metrics:

In connection with the management of our businesses, we identify, measure and assess a variety of operating metrics.

The principal metrics we use in managing our businesses are set forth below:

• North America - consists of the financial results and metrics associated with users located in the United States and Canada.

• International - consists of the financial results and metrics associated with users located outside of the United States and Canada.

Direct Revenue - is revenue that is received directly from end users of its products and includes both subscription and à la carte revenue.

Subscribers - are users who purchase a subscription to one of MTCH's products.

• Direct Revenue - is revenue that is received directly from end users of our products and includes both subscription and à la carte revenue.

• Indirect Revenue - is revenue that is not received directly from an end user of our products, substantially all of which is advertising revenue.

• Subscribers - are users who purchase a subscription to one of our products.

Users who purchase only à la carte features are not included in Subscribers.

• Average Subscribers - is the number of Subscribers at the end of each day in the relevant measurement period divided by the number of calendar days in that period.

Average Revenue per Subscriber ("ARPU") - is Direct Revenue from Subscribers in the relevant measurement period (whether in the form of subscription or à la carte revenue from Subscribers) divided by the Average Subscribers in such period and further divided by the number of calendar days in such period.

• Average Revenue per Subscriber (“ARPU”) - is Direct Revenue from Subscribers in the relevant measurement period (whether in the form of subscription or à la carte revenue) divided by the Average Subscribers in such period and further divided by the number of calendar days in such period.

Direct Revenue from users who are not Subscribers and have purchased only à la carte features is not included in ARPU.

ANGI Homeservices

Marketplace Revenue - includes revenue from the HomeAdvisor and Handy domestic marketplace, including consumer connection revenue for consumer matches, revenue from completed jobs sourced through the HomeAdvisor and Handy platforms and service professional membership subscription revenue.

It excludes revenue from Angie's List, mHelpDesk, HomeStars, Fixd Repair and Felix.

Advertising & Other Revenue - includes Angie’s List revenue (revenue from service professionals under contract for advertising and membership subscription fees from consumers) as well as revenue from mHelpDesk, HomeStars, Fixd Repair, a home warranty and service company, acquired on January 25, 2019, and, for periods prior to its sale on December 31, 2018, Felix.

Marketplace Service Requests - are fully completed and submitted domestic customer service requests to HomeAdvisor and completed jobs sourced through the HomeAdvisor and Handy platforms.

Marketplace Paying Service Professionals ("Marketplace Paying SPs") - are the number of HomeAdvisor and Handy domestic service professionals that paid for consumer matches or completed a job sourced through the HomeAdvisor and Handy platforms in the last month of the period and/or had an active HomeAdvisor membership subscription on the last day of the relevant period.

Platform Revenue - primarily includes revenue from Software-as-a-Service ("SaaS") subscription fees and other related revenue from Vimeo subscribers.

Hardware Revenue - includes sales of our live streaming accessories.

Vimeo sold its hardware business on March 29, 2019.

Vimeo Ending Subscribers - is the number of subscribers to Vimeo's SaaS video tools at the end of the period (including the addition of subscribers from Magisto, a video creation service enabling consumers and businesses to create short-form videos acquired on May 28, 2019).

Display 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 affiliate commerce and performance marketing commissions generated when consumers are directed from our properties to third-party service providers.

Affiliate commerce commissions are generated when a consumer completes a transaction.

Performance marketing commissions are generated on a cost-per-click or cost-per-new account basis.

Operating costs and expenses:

Cost of revenue - consists primarily of traffic acquisition costs, which includes (i) the amortization of in-app purchase fees and (ii) payments made to partners who direct traffic to our Ask Media Group websites, who distribute our business-to-business customized browser-based applications and who integrate our paid listings into their websites.

• Cost of revenue - consists primarily of the amortization of in-app purchase fees, compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, live video costs, and data center rent, energy, and bandwidth costs.

In-app purchase fees are monies paid to Apple and Google in connection with the processing of in-app purchases of subscriptions and product features through the in-app payment systems provided by Apple and Google.

Traffic acquisition costs include payment of amounts based on revenue share and other arrangements.

Cost of revenue also includes hosting fees, compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in data center operations and MTCH customer care functions, payments made to workers staffed by Bluecrew, credit card processing fees, production costs related to IAC Films, College Humor Media

and, for periods prior to its sale on October 29, 2018, Electus, content costs and expenses associated with the operation of the Company's data centers.

Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to search engines, social media sites and third parties that distribute our direct-to-consumer downloadable desktop applications, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the brands within our MTCH and ANGI segments, and compensation expense (including stock-based compensation expense) and other employee-related costs for ANGI's sales force and marketing personnel.

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 MTCH which includes customer service costs within cost of revenue), fees for professional services (including transaction-related costs related to the Separation, defined below, and acquisitions), rent expense, facilities costs, bad debt expense, software license and maintenance costs and acquisition-related contingent consideration fair value adjustments (described below).

The customer service function at ANGI 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 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.

• Selling and marketing expense - consists primarily of advertising expenditures and compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in selling and marketing, and sales support functions.

Advertising expenditures includes online marketing, including fees paid to search engines and social media sites, offline marketing (which is primarily television advertising), and payments to partners that direct traffic to our brands.

• General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources, acquisition-related contingent consideration fair value adjustments (described below), fees for professional services (including transaction-related costs for acquisitions), and facilities costs.

• Product development expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing, and enhancement of product offerings and related technology.

• Acquisition-related contingent consideration fair value adjustments - relate to the portion of the purchase price of certain acquisitions that is contingent upon the financial performance and/or operating metric targets of the acquired company.

The fair value of the liability is estimated at the date of acquisition and adjusted each reporting period until the liability is settled.

Significant changes in financial performance and/or operating metrics will result in a significantly higher or lower fair value measurement.

Significant changes in forecasted earnings and/or operating metrics for the acquired company will result in a significantly higher or lower fair value measurement.

The changes in the estimated fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount if the arrangement is longer than one year, are recognized in “General and administrative expense” in the accompanying consolidated statement of operations.

Long-term debt (for additional information see " Note 7—Long-term Debt " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ":

MTCH Term Loan - due November 16, 2022.

The outstanding balance of the MTCH Term Loan as of December 31, 2019 is $425.0 million .

The MTCH Term Loan bears interest at LIBOR plus 2.50% and was 4.44% and 5.09% at December 31, 2019 and 2018 , respectively.

MTCH Credit Facility - MTCH's $500 million revolving credit facility expires on December 7, 2023.

At December 31, 2019 , there were no outstanding borrowings under the MTCH Credit Facility.

At December 31, 2018 , the outstanding borrowings under the MTCH Credit Facility were $260.0 million , which bore interest at LIBOR plus 1.50%, or 4.00% .

The MTCH Credit Facility was repaid with a portion of the net proceeds from the 5.625% MTCH Senior Notes issued on February 15, 2019 (described below).

6.375% MTCH Senior Notes - MTCH's 6.375% Senior Notes due June 1, 2024, with interest payable each June 1 and December 1.

The outstanding balance of the 6.375% MTCH Senior Notes as of December 31, 2019 is $400.0 million .

5.00% MTCH Senior Notes - MTCH's 5.00% Senior Notes due December 15, 2027, with interest payable each June 15 and December 15.

The outstanding balance of the 5.00% MTCH Senior Notes as of December 31, 2019 is $450.0 million .

5.625% MTCH Senior Notes - On February 15, 2019, MTCH issued $350 million aggregate principal amount of its 5.625% Senior Notes due February 15, 2029, with interest payable each February 15 and August 15.

The proceeds were used to repay outstanding borrowings under the MTCH Credit Facility, to pay expenses associated with the offering, and for general corporate purposes.

The outstanding balance of the 5.625% MTCH Senior Notes as of December 31, 2019 is $350.0 million.

ANGI Term Loan - due November 5, 2023.

The outstanding balance of the ANGI Term Loan as of December 31, 2019 , is $247.5 million .

At both December 31, 2019 and 2018 , the ANGI Term Loan bears interest at LIBOR plus 1.50% and has quarterly principal payments.

The interest rate was 3.25% and approximately 4.00% at December 31, 2019 and 2018 , respectively.

ANGI Credit Facility - The ANGI $250 million revolving credit facility expires on November 5, 2023.

At December 31, 2019 and 2018 , there were no outstanding borrowings under the ANGI Credit Facility.

2022 Exchangeable Notes - On October 2, 2017, IAC FinanceCo, Inc., a subsidiary of the Company, issued $517.5 million aggregate principal amount of 0.875% Exchangeable Senior Notes due October 1, 2022, which are exchangeable into shares of the Company's common stock.

Long-term debt:

• Credit Facility - The revolving credit facility of MG Holdings II.

At December 31, 2019, $500 million was available under the Credit Facility.

On February 13, 2020, the Credit Facility was amended to, among other things, increase the available borrowing capacity from $500 million to $750 million, reduce interest rate margins by 0.125%, and extend its maturity from December 7, 2023 to February 13, 2025.

At December 31, 2020, the Company had letters of credit of $0.2 million outstanding and therefore $749.8 million was available under the Credit Facility.

• Term Loan - MG Holdings II’s term loan.

At December 31, 2019, the Term Loan bore interest at LIBOR plus 2.50% and the then applicable rate was 4.44%.

On February 13, 2020, the Term Loan was amended to reprice the outstanding balance to LIBOR plus 1.75% and extend its maturity from November 16, 2022 to February 13, 2027.

At December 31, 2020, the applicable interest rate was 1.96% and $425 million was outstanding.

• 6.375% Senior Notes - MG Holdings II’s 6.375% Senior Notes, which were redeemed on June 11, 2020 with the proceeds from the 4.625% Senior Notes.

• 5.00% Senior Notes - MG Holdings II’s 5.00% Senior Notes due December 15, 2027, with interest payable each June 15 and December 15, which were issued on December 4, 2017.

At December 31, 2020, $450 million aggregate principal amount was outstanding.

• 5.625% Senior Notes - MG Holdings II’s 5.625% Senior Notes due February 15, 2029, with interest payable each February 15 and August 15, which were issued on February 15, 2019.

At December 31, 2020, $350 million aggregate principal amount was outstanding.

• 4.125% Senior Notes - MG Holdings II’s 4.125% Senior Notes due August 1, 2030, with interest payable each February 1 and August 1, which were issued on February 11, 2020.

The proceeds were used to pay expenses associated with the offering and fund a portion of the $3.00 per common share of Former Match Group that was payable in connection with the Separation.

At December 31, 2020, $500 million aggregate principal amount was outstanding.

• 4.625% Senior Notes - MG Holdings II’s 4.625% Senior Notes due June 1, 2028, with interest payable each June 1 and December 1, which were issued on May 19, 2020.

The proceeds were used to redeem the outstanding 6.375% Senior Notes, for general corporate purposes, and to pay expenses associated with the offering.

At December 31, 2020, $500 million aggregate principal amount was outstanding.

• 2022 Exchangeable Notes - During the third quarter of 2017, Match Group FinanceCo, Inc., a subsidiary of the Company, issued $517.5 million aggregate principal amount of 0.875% Exchangeable Senior Notes due October 1, 2022, which are exchangeable into shares of the Company's common stock.

Interest is payable each April 1 and October 1.

The outstanding balance of the 2022 Exchangeable Notes as of December 31, 2019 is $517.5 million .

2026 Exchangeable Notes - During the second quarter of 2019, IAC FinanceCo 2, Inc., a subsidiary of the Company, issued $575.0 million aggregate principal amount of 0.875% Exchangeable Senior Notes due June 15, 2026, which are exchangeable into shares of the Company's common stock.

A portion of the net proceeds were used to pay the net premium on the exchangeable note hedge transactions and the remainder will be used for general corporate purposes.

The outstanding balance of the 2022 Exchangeable Notes at December 31, 2020 was $517.5 million.

• 2026 Exchangeable Notes - During the second quarter of 2019, Match Group FinanceCo 2, Inc., a subsidiary of the Company, issued $575.0 million aggregate principal amount of 0.875% Exchangeable Senior Notes due June 15, 2026, which are exchangeable into shares of the Company's common stock.

Interest is payable each June 15 and December 15.

The outstanding balance of the 2026 Exchangeable Notes as of December 31, 2019 is $575.0 million .

2030 Exchangeable Notes - During the second quarter of 2019, IAC FinanceCo 3, Inc., a subsidiary of the Company, issued $575.0 million aggregate principal amount of 2.00% Exchangeable Senior Notes due January 15, 2030, which are exchangeable into shares of the Company's common stock.

A portion of the net proceeds were used to pay the net premium on the exchangeable note hedge transactions and the remainder will be used for general corporate purposes.

The outstanding balance of the 2026 Exchangeable Notes at December 31, 2020 was $575 million.

• 2030 Exchangeable Notes - During the second quarter of 2019, Match Group FinanceCo 3, Inc., a subsidiary of the Company, issued $575.0 million aggregate principal amount of 2.00% Exchangeable Senior Notes due January 15, 2030, which are exchangeable into shares of the Company's common stock.

Interest is payable each January 15 and July 15.

commencing on January 15, 2020.

The outstanding balance of the 2030 Exchangeable Notes as of December 31, 2019 is $575.0 million .

4.75% Senior Notes - IAC's 4.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15.

On August 23, 2019, the Company redeemed all outstanding 4.75% Senior Notes for $34.5 million plus a premium of $0.5 million and accrued interest of $0.3 million.

IAC Credit Facility - The IAC $250 million revolving credit facility, under which IAC Group, LLC, a subsidiary of the Company, is the borrower, expires on November 5, 2023.

At December 31, 2019 and 2018 , there were no outstanding borrowings under the IAC Credit Facility.

The outstanding balance of the 2030 Exchangeable Notes at December 31, 2020 was $575 million.

Non-GAAP financial measure:

• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) - is a Non-GAAP financial measure.

See " Principles of Financial Reporting " for the definition of Adjusted EBITDA and a reconciliation of net earnings attributable to IAC shareholders to operating income to consolidated Adjusted EBITDA for the years ended December 31, 2019 and 2018 .

See “Principles of Financial Reporting” for the definition of Adjusted EBITDA and a reconciliation of net earnings attributable to Match Group, Inc.

shareholders to operating income and Adjusted EBITDA.

MANAGEMENT OVERVIEW

As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer to IAC/InterActiveCorp and its subsidiaries (unless the context requires otherwise).

IAC operates Vimeo and Dotdash, among many other online businesses, and also has majority ownership of both Match Group, which includes Tinder, Match, PlentyOfFish, OkCupid and Hinge, and ANGI Homeservices, which includes HomeAdvisor, Angie’s List and Handy.

On December 19, 2019, IAC entered into a Transaction Agreement (the "Transaction Agreement") with MTCH, IAC Holdings, Inc., a direct wholly owned subsidiary of IAC ("New IAC"), and Valentine Merger Sub LLC, an indirect wholly owned subsidiary of IAC.

Subject to the terms and conditions set forth in the Transaction Agreement, the businesses of MTCH will be separated from the remaining businesses of IAC through a series of transactions that will result in the pre-transaction stockholders of IAC owning shares in two, separate public companies—(1) IAC, which will be renamed Match Group, Inc.

("New Match") and which will own the businesses of MTCH and certain IAC financing subsidiaries, and (2) New IAC, which will be renamed IAC/InterActiveCorp and which will own IAC's other businesses—and the pre-transaction stockholders of

MTCH (other than IAC) owning shares in New Match.

Completion of the Separation, which is expected to occur in mid-second quarter of 2020, is subject to a number of conditions, including approval by a majority of the disinterested shareholders of MTCH, approval of IAC’s shareholders and other customary conditions and approvals.

We refer to the full separation as the "Separation".

Match Group, Inc., through its portfolio companies, is a leading provider of dating products available globally.

Our portfolio of brands includes Tinder ® , Match ® , Meetic ® , OkCupid ® , Hinge ® , Pairs™, PlentyOfFish ® , and OurTime ® , as well as a number of other brands, each designed to increase our users’ likelihood of finding a meaningful connection.

Through our portfolio companies and their trusted brands, we provide tailored products to meet the varying preferences of our users.

Our products are available in over 40 languages to our users all over the world.

Sources of Revenue

MTCH's revenue is primarily derived directly from users in the form of recurring subscription fees, which typically provide unlimited access to a bundle of features for a specific period of time.

Revenue is also derived from à la carte features, where users pay a non-recurring fee for a specific action or event, and from online advertisers who pay to reach our large audiences.

ANGI revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by HomeAdvisor service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service) and fees from completed jobs sourced through the HomeAdvisor and Handy platforms, and (ii) HomeAdvisor service professional membership subscription fees.

Consumer connection revenue varies based upon several factors, including the service requested, product experience offered and geographic location of service.

Revenue is also derived from (i) sales of time-based website, mobile and call center advertising to service professionals, (ii) membership subscription fees from consumers and (iii) service warranty subscription and other services.

Prior to January 1, 2020, Handy recorded revenue on a net basis.

Effective January 1, 2020, we modified the Handy terms and conditions so that Handy, rather than the service professional, has the contractual relationship with the consumer to deliver the service and Handy, rather than the consumer, has the contractual relationship with the service professional.

Consumers request services and pay for such services directly through the Handy platform and then Handy fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services.

This change in contractual terms requires gross revenue accounting treatment effective January 1, 2020.

Also, in the case of certain tasks, HomeAdvisor provides a pre-priced product offering, pursuant to which consumers can request services through a HomeAdvisor platform and pay for the services directly.

HomeAdvisor then fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services.

Revenue from HomeAdvisor’s pre-priced product offering is also recorded on a gross basis effective January 1, 2020.

In addition to changing the presentation of revenue to gross from net, the timing of revenue recognition will change for pre-priced jobs and will be later than the timing of existing consumer connection revenue for HomeAdvisor because we will not be able to record revenue, generally, until the service professional completes the job on our behalf.

Vimeo revenue is derived primarily from annual and monthly SaaS subscription fees paid by subscribers for self-serve and enterprise subscription plans.

Dotdash revenue consists principally of display advertising revenue and performance marketing revenue.

Display advertising revenue is generated primarily through digital display advertisements sold directly by our sales team and through programmatic advertising networks.

Performance marketing revenue includes affiliate commerce and performance marketing commissions.

Affiliate commerce commissions is generated when Dotdash refers users to commerce partner websites resulting in a purchase or transaction.

Performance marketing commissions are generated on a cost-per-click or cost-per-new account basis.

Mosaic Group revenue consists primarily of fees related to subscription downloadable mobile applications distributed through the Apple App Store and Google Play Store, as well as display advertisements.

Revenue for the businesses within the Emerging & Other segment is generated primarily through advertising, subscriptions and media production and distribution.

For periods prior to their sales:

Dictionary.com revenue was derived principally from advertising;

and Electus revenue was primarily generated through media production and distribution.

Services Agreement with Google

A meaningful portion of the Company's revenue is attributable to a services agreement with Google (the "Services Agreement").

In addition, the Company earns certain other advertising revenue from Google that is not attributable to the Services Agreement.

For the years ended December 31, 2019 and 2018 , consolidated revenue earned from Google was $733.5 million and $825.2 million , respectively, representing 15% and 19% , respectively, of the Company's consolidated revenue.

Revenue attributable to the Services Agreement is earned by the Desktop business within the Applications segment and Ask Media Group within the Emerging & Other segment.

For the years ended December 31, 2019 and 2018, revenue earned

from the Services Agreement was $291.1 million and $426.5 million , respectively, within the Applications segment and $385.9 million and $339.0 million , respectively, within the Emerging & Other segment.

The current Services Agreement expires on March 31, 2020.

On February 11, 2019, the Company and Google amended the Services Agreement, effective as of April 1, 2020.

The amendment extends the expiration date of the agreement to March 31, 2023;

provided that during September 2020 and during each September thereafter, either party may, after discussion with the other party, terminate the services agreement, effective on September 30 of the year following the year such notice is given.

The Company believes that the amended agreement, taken as a whole, is comparable to the Company’s currently existing agreement with Google.

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 could in turn require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our consolidated financial condition and results of operations, particularly our Desktop business and Ask Media Group.

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 during both 2018 and 2019.

Google’s policy changes related to its Chrome browser, which became effective on September 12, 2018, negatively impacted the distribution of our B2C downloadable desktop products.

The resultant reduction in projected profits and revenues of this business resulted in a $27.7 million impairment of the B2C trade name, which was recorded in the fourth quarter of 2018.

On May 31, 2019, Google announced industry-wide policy changes, which became effective on July 1, 2019, related to all extensions distributed through the Chrome Web Store.

These industry-wide changes, combined with other changes to polices under the Services Agreement during the second half of 2019, have had a negative impact on the historical and expected future results of operations of the Desktop business.

As of December 31, 2019, the goodwill balance of the Desktop reporting unit and the carrying value of the related intangible asset are $265.1 million and $28.9 million , respectively.

The fair values of the Desktop reporting unit and the related intangible asset approximate their carrying values;

therefore, a modest reduction in the fair values of the Desktop reporting unit or the related intangible asset would result in an impairment charge, which would be equal to the excess of the carrying value over the fair value of such assets.

Distribution, Marketing and Advertiser Relationships

We pay traffic acquisition costs, which consist of fees paid to Apple and Google related to the distribution and the facilitation of in-app purchases of product features and payments made to partners who direct traffic to our Ask Media Group websites, who distribute our business-to-business customized browser-based applications and who integrate our paid listings into their websites.

We also pay to market and distribute our services on third-party distribution channels, such as Google and other search engines and social media websites such as Facebook.

In addition, some of our businesses manage affiliate programs, pursuant to which we pay commissions and fees to third parties based on revenue earned.

These distribution channels might also offer their own services and products, as well as those of other third parties, which compete with those we offer.

We market and offer our services and products to consumers through branded websites, allowing consumers to transact directly with us in a convenient manner.

We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to our websites and consumers and advertisers to our businesses.

All our products provide the use of certain features for free, and then offer a variety of additional features to Subscribers.

Our revenue is primarily derived directly from users in the form of recurring subscription fees.

Subscription revenue is presented net of credits and credit card chargebacks.

Subscribers pay in advance, primarily by using a credit card or through mobile app stores, and, subject to certain conditions identified in our terms and conditions, all purchases are final and nonrefundable.

Fees collected, or contractually due, in advance

for subscriptions are deferred and recognized as revenue using the straight-line method over the term of the applicable subscription period, which primarily ranges from one to six months, and corresponding in-app purchase fees incurred on such transactions, if any, are deferred and expensed over the same period.

We also earn revenue from the purchase of à la carte features and from online advertising.

Revenue from the purchase of à la carte features is recognized based on usage.

Online advertising revenue is recognized every time an ad is displayed.

Trends affecting our business

Over the last several years, we have seen significant changes in our business.

Tinder has grown from incubation to the largest contributing brand in our portfolio and in 2020 our other brands also returned to growth in the aggregate.

This in turn has allowed us to invest in or acquire brands such as Hinge and Hawaya and incubate new brands such as Chispa, BLK, and Upward, where we see additional growth opportunities.

With our evolving portfolio of brands, we have seen a number of significant trends in our business in recent years, including the following:

Lower cost users.

All of our brands rely on word-of-mouth, or free, user acquisition to varying degrees.

Word-of-mouth acquisition is typically a function of scale (with larger communities driving greater numbers of referrals), youthfulness (with the viral effect being more pronounced in younger populations due, in part, to a significantly higher concentration of single people in any given social circle and the increased adoption of social media and similar platforms among such populations), and monetization rate (with people generally more likely to talk openly about using dating products that are less heavily monetized).

Additionally, some, but not all, of our brands spend meaningfully on paid marketing.

Accordingly, the average amount we spend to acquire a user differs significantly across brands based in large part on each brand’s mix of paid and free acquisition channels.

As our mix has shifted toward younger users, our mix of acquisition channels has shifted toward lower cost channels, driving a decline over the past several years in the average amount we spend to acquire a new user across our portfolio.

As a percentage of revenue, our costs of acquiring users have declined.

Changing paid acquisition dynamics.

Even as our acquisition of lower cost users increases, paid acquisition of users remains an important driver of our business.

The channels through which we market our brands are always evolving, but we are currently in a period of rapid change as TV and video consumption patterns evolve and internet consumption occurs regularly on mobile devices.

As we adapt our paid marketing activities to maximize user engagement with our brands, we may increase our use of paid advertising at brands where we traditionally relied on word-of-mouth engagement to leverage these shifts in media consumption patterns and fuel international growth.

Other brands in our portfolio may reduce paid marketing activities to reflect the change in audience engagement.

In-App Purchase Fees.

Purchases made by our customers through mobile applications, as opposed to desktop or mobile web, continue to increase.

Purchases processed through the in-app payments systems provided by the Apple App Store and Google Play Store are subject to in-app purchase fees, which are generally 30% of the purchase price.

As a result, the percentage of our revenues paid to Apple and Google continues to be a significant expense.

In 2019, Tinder began offering subscribers an alternative payment method to Google’s in-app payment system similar to the payment alternatives other brands in our portfolio have historically offered to subscribers through mobile apps on Android.

Google has announced that beginning in September 2021, all purchases will be required to be processed through the Google Play Store and subject to in-app purchase fees.

To the extent that app stores fee change, or the mix of our revenue generated through app stores shifts, our results, in particular our profit measures, could be impacted.

Increase in acceptance and growth of dating products globally.

Over the past decade, there has been meaningful growth in dating product usage in North America and Western Europe, and we see the potential for similar growth in the rest of the world in the years ahead.

As more internet-connected singles utilize online dating products and the stigma around dating continues to erode, we believe that there is potential for accelerating growth in the use of dating products globally.

Impacts of the Coronavirus.

When the novel coronavirus (“COVID-19”) first hit Western Europe and then certain major metropolitan centers in the U.S.

in the Spring of 2020, particularly New York City, engagement (messages sent, daily active users, Swipes® on Tinder) increased significantly, but subscribers who purchase a subscription for the first time (“first-time subscribers”) declined at most of our brands as meeting in person was restricted.

Over the summer, as users began to meet outdoors first-time subscribers increased to above pre-

COVID-19 levels.

Since the end of the summer, the resurgence of COVID-19 lockdowns has once again negatively impacted first-time subscriber trends, though not as severely as in the spring of 2020.

Other factors affecting the comparability of our results

Advertising spend.

Our advertising spend, which is included in our selling and marketing expense, has consistently been one of our larger operating expenses.

How we deploy our advertising spend varies among brands, with the majority of our advertising spend taking place online, including search engines, social media sites, streaming services and influencers.

Additionally, some brands utilize television and out-of-home marketing campaigns, such as on outdoor billboards.

For established brands, we seek to optimize for total return on advertising spend by frequently analyzing and adjusting spend to focus on marketing channels and markets that generate returns above our thresholds.

Our data-driven approach provides us the flexibility to scale and optimize our advertising spend.

We spend advertising dollars against an expected lifetime value of a Subscriber that is realized over a multi-year period;

and while this advertising spend is intended to be profitable on that basis, it is nearly always negative during the period in which the expense is incurred.

For newer brands that are gaining scale, or existing brands that are expanding into new geographies, we may make incremental advertising investments to establish the brand before optimizing monetization of the brand.

In general, our more established brands spend a higher proportion of their revenue on advertising while our newer brands spend a lower proportion and tend to rely more on word of mouth and other viral marketing.

Additionally, advertising spend is typically higher during the first quarter of our fiscal year, and lower during the fourth quarter.

See “Seasonality” below.

We increased our advertising spend as advertising rates declined during the COVID-19 outbreak.

Historically, our business has experienced seasonal fluctuations in quarterly operating results, particularly with respect to our profit measurements.

This is driven primarily by a higher concentration of advertising spend in the first quarter, when advertising prices tend to be the lowest and demand for our products tends to be highest, and a lower concentration of advertising spend in the fourth quarter, when advertising costs tend to be highest and demand for our products tends to be lowest.

Seasonality is not consistent across our brands, with brands targeted at older users generally showing more seasonality than brands targeted at younger users.

International markets.

Our products are available across the world.

Our international revenue represented 53% of our total revenue for both of the years ended December 31, 2020 and 2019.

We vary our pricing to align with local market conditions and our international businesses typically earn revenue in local currencies.

As foreign currency exchange rates change, translation of the statement of operations of our international businesses into U.S.

dollars affects year-over-year comparability of operating results.

2020 Consolidated Results

In 2020, revenue, operating income and Adjusted EBITDA grew 17%, 16% and 15%, respectively.

Revenue growth was primarily due to strong growth at Tinder and additional contributions from Hinge, Pairs, and PlentyOfFish.

The growth in operating income and Adjusted EBITDA was due to the higher revenue and lower selling and marketing expense as a percentage of revenue due to the continued product mix shift toward brands with lower marketing spend as a percentage of revenue.

Operating income and Adjusted EBTIDA were also impacted by an increase in cost of revenue expense primarily due to higher in-app purchase fees as a result of growing revenue sourced through mobile app stores, increased web operation costs, and live video costs.

Results of Operations for the years ended December 31, 2020, 2019 and 2018

The following discussion should be read in conjunction with “Item 8.

Consolidated Financial Statements and Supplementary Data.”

For a discussion regarding our financial condition and results of operations for the year ended December 31, 2018 compared to the year ended December 31, 2017, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 1, 2019.

Overview—Consolidated Results

Years Ended December 31,

(Dollars in thousands)

ANGI Homeservices

Emerging & Other

Inter-segment elimination

Operating Income (Loss):

ANGI Homeservices

Emerging & Other

Adjusted EBITDA:

ANGI Homeservices

Emerging & Other

_____________________

NM = Not meaningful.

Revenue increased $494.2 million , or 12% , to $4.8 billion , due to growth from MTCH of $321.4 million and ANGI of $194.0 million , increases of $36.6 million from Dotdash and $36.4 million from Vimeo, partially offset by decreases of $62.8 million from Applications and $31.4 million from Emerging & Other due, in part, to the sales of Electus, Dictionary.com and CityGrid in the fourth quarter of 2018.

Operating income increased $16.2 million , or 3% , to $581.3 million , despite the decrease in Adjusted EBITDA of $2.1 million , described below, due primarily to a change of $21.2 million in acquisition-related contingent consideration fair value adjustments (income of $19.7 million in 2019 compared to expense of $1.5 million in 2018) and a decrease of $15.8 million in amortization of intangibles, partially offset by increases of $13.0 million in depreciation and $2.4 million in stock-based compensation expense and a $3.3 million goodwill impairment charge related to the College Humor Media business.

The income from acquisition-related contingent consideration fair value adjustments in 2019 is due to the decrease in the expected amount of contingent consideration to be paid in connection with a previous acquisition.

The decrease in amortization of intangibles was due primarily to the inclusion in 2018 of an impairment charge of $27.7 million at Applications related to a trade name at the Desktop business and lower expense from the Combination, partially offset by recent acquisitions and a $6.6 million impairment charge related to a trade name at MTCH.

The increase in depreciation was due primarily to the development of capitalized software to support ANGI's products and services, as well as leasehold improvements related to additional office space at ANGI.

The increase in stock-based compensation expense was due primarily to the issuance of new equity awards since 2018, including those issued in connection with recent acquisitions, expense of $9.4 million related to the vesting of certain awards for which the market condition was met in the first quarter of 2019 and modification charges at MTCH and Corporate, partially offset by a decrease of $38.0 million in modification and acceleration charges related to the Combination ($32.6 million in 2019 compared to $70.6 million in 2018), a net decrease in a mark-to-market adjustment and the reversal of $7.6 million in cumulative expense in 2019 related to certain performance-based awards that did not vest.

Adjusted EBITDA decreased $2.1 million to $986.7 million , despite growth of $125.5 million from MTCH and $18.2 million from Dotdash, due primarily to decreases of $45.2 million from ANGI and $28.3 million from Applications, a loss of $7.8 million in 2019 from Emerging & Other compared to a profit of $36.2 million in 2018, and increased losses of $14.6 million and $13.7 million from Corporate and Vimeo, respectively.

Acquisitions and dispositions affecting year-over-year comparability include:

Acquisitions:

Reportable Segment:

Acquisition Date:

Bluecrew - controlling interest

Emerging & Other

February 26, 2018

Hinge - controlling interest *

Second quarter of 2018

March 15, 2018

October 22, 2018

October 19, 2018

January 25, 2019

NurseFly - controlling interest

Emerging & Other

June 26, 2019

2020 Change % Change 2019 Change % Change 2018

(Amounts in thousands, except ARPU)

Direct Revenue:

North America $ 1,185,307 $ 161,146 16% $ 1,024,161 $ 121,683 13% $ 902,478

International 1,159,417 176,404 18% 983,013 208,320 27% 774,693

Total Direct Revenue 2,344,724 337,550 17% 2,007,174 330,003 20% 1,677,171

Indirect Revenue 46,545 2,461 6% 44,084 (8,595) (16)% 52,679

Total Revenue

$ 2,391,269 $ 340,011 17% $ 2,051,258 $ 321,408 19% $ 1,729,850

* In the fourth quarter of 2018, MTCH acquired the remaining noncontrolling interests in Hinge.

Dispositions:

Reportable Segment:

Emerging & Other

October 29, 2018

Dictionary.com

Emerging & Other

November 13, 2018

December 31, 2018

Emerging & Other

December 31, 2018

Vimeo's hardware business

March 29, 2019

Results of Operations for the Years Ended December 31, 2019 and 2018

Years Ended December 31,

(Dollars in thousands)

ANGI Homeservices

Emerging & Other

Inter-segment elimination

MTCH revenue increased 19% to $2.1 billion driven by International Direct Revenue growth of $208.3 million , or 27% , and North America Direct Revenue growth of $121.7 million , or 13% .

Both International and North America Direct Revenue growth were driven by higher Average Subscribers, up 27% to 4.7 million and 9% to 4.6 million, respectively, due primarily to continued growth in Subscribers at Tinder and Hinge, with Pairs contributing to international growth.

Total ARPU increased 2% driven by an increase of 4% in North America ARPU, due to Tinder, as Subscribers purchased more premium subscriptions.

International ARPU was unfavorably impacted by the strengthening of the U.S.

Direct Revenue

Tinder $ 1,355,400 $ 203,355 18% $ 1,152,045 $ 346,729 43% $ 805,316

Other brands 989,324 134,195 16% 855,129 (16,726) (2)% 871,855

Total Direct Revenue $ 2,344,724 $ 337,550 17% $ 2,007,174 $ 330,003 20% $ 1,677,171

Percentage of Total Revenue:

Direct Revenue:

North America 50% 50% 52%

International 48% 48% 45%

Total Direct Revenue 98% 98% 97%

Indirect Revenue 2% 2% 3%

Total Revenue 100% 100% 100%

Average Subscribers:

North America 4,858 304 7% 4,554 393 9% 4,161

International 5,572 843 18% 4,729 1,017 27% 3,712

Total 10,430 1,147 12% 9,283 1,410 18% 7,873

(Change calculated using non-rounded numbers)

North America $ 0.65 7% $ 0.61 4% $ 0.59

International $ 0.56 —% $ 0.56 —% $ 0.56

Total $ 0.60 $ 0.02 3% $ 0.58 $ 0.01 2% $ 0.57

For the year ended December 31, 2020 compared to the year ended December 31, 2019

International Direct Revenue grew $176.4 million, or 18%, in 2020 versus 2019, driven by 18% growth in Average Subscribers.

North America Direct Revenue grew $161.1 million, or 16%, in 2020 versus 2019, driven by 7% growth in Average Subscribers, a 7% increase in ARPU, and growth of non-subscriber live streaming video revenue at PlentyOfFish.

Growth in International and North America Average Subscribers was primarily driven by Tinder.

Hinge, BLK and Chispa also contributed to North America Average Subscriber growth and Pairs contributed to International Average Subscriber growth.

North America ARPU increased primarily due to increases in à la carte purchases at Tinder and PlentyOfFish and optimized subscription pricing at Hinge.

Indirect Revenue increased $2.5 million primarily due to higher rates per impression.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

International Direct Revenue grew $208.3 million, or 27%, in 2019 versus 2018, driven by 27% growth in Average Subscribers.

North America Direct Revenue grew $121.7 million, or 13%, in 2019 versus 2018, driven by 9% growth in Average Subscribers, and a 4% increase in ARPU.

Growth in International and North America Average Subscribers was primarily driven by Tinder.

Hinge and Pairs also contributed to subscriber growth in North America and International, respectively.

North America ARPU increased primarily due to increases in ARPU at Tinder as Subscribers purchased premium subscriptions, such as Tinder Gold, as well as additional à la carte features.

International ARPU was unfavorably impacted by the strength of the U.S.

dollar relative to the Euro, British pound (“GBP”), and certain other currencies.

ANGI revenue increased 17% to $1.3 billion driven by Marketplace Revenue growth of $210.7 million , or 27% , the growth of $6.2 million , or 9% , at the European businesses, partially offset by a decrease of $23.0 million , or 8% , in Advertising & Other Revenue.

Advertising & Other Revenue decreased due primarily to the sale of Felix on December 31, 2018, partially offset by the contribution from Fixd Repair, acquired on January 25, 2019.

Marketplace Revenue growth was driven by a 17% increase in Marketplace Service Requests to 27.4 million and a 3% increase in Marketplace Paying SPs to 220,000, reflecting, in part, the contribution from Handy.

Revenue growth at the European businesses was driven by growth across several countries, partially offset by the unfavorable impact from the strengthening of the U.S.

dollar relative to the Euro and GBP.

Vimeo revenue grew 23% to $196.0 million due to Platform Revenue growth of $47.1 million , or 32% , partially offset by lower Hardware Revenue of $10.7 million due to the sale of the hardware business in the first quarter of 2019.

Platform Revenue growth was driven by a 30% increase in Vimeo Ending Subscribers to 1.2 million and a 10% increase in average revenue per subscriber, including the contribution from Magisto, acquired May 28, 2019.

Dotdash revenue increased 28% to $167.6 million due to 22% higher Display Advertising Revenue and growth of 51% in Performance Marketing Revenue.

Higher Display Advertising Revenue was due primarily to a 26% increase in traffic.

Applications revenue decreased 11% to $519.5 million , despite an increase $75.7 million , or 61% , in Mosaic Group, due to a decrease of $138.5 million , or 30% , at Desktop.

The decrease at Desktop was driven by lower queries and continuing partnership declines.

The increase at Mosaic Group was driven by the acquisitions of TelTech and iTranslate, on October 22, 2018 and March 15, 2018, respectively, growth of 12% related to the ongoing transition to subscription products and new products and the transfer of Daily Burn from the Emerging & Other segment effective April 1, 2018.

Emerging & Other revenue decreased 6% to $496.8 million due primarily to the sales of Electus, Dictionary.com and CityGrid in the fourth quarter of 2018 and lower revenue at IAC Films, as well as from the transfer of Daily Burn to Mosaic Group, partially offset by higher revenue at Ask Media Group due to growth in paid traffic, primarily in international markets, and the contribution from Bluecrew.

Cost of revenue

Indirect Revenue decreased $8.6 million primarily due to lower impressions and a lower price per impression received from an advertising network provider.

Cost of revenue (exclusive of depreciation)

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

Cost of revenue (exclusive of depreciation shown separately below)

As a percentage of revenue

Cost of revenue in 2019 increased from 2018 due to increases of $117.2 million from MTCH and $92.3 million from Emerging & Other.

The MTCH increase was due primarily to an increase of $80.1 million in in-app purchase fees paid to Apple and Google as MTCH's revenue continues to be increasingly sourced through mobile app stores, $21.9 million in hosting fees and $11.2 million in compensation expense related to increased customer care personnel.

The Emerging & Other increase was due primarily to an increase of $116.9 million in traffic acquisition costs, principally driven by higher revenue at Ask Media Group, and an increase of $16.0 million in payments made to workers staffed by Bluecrew, partially offset by a decrease of $27.0 million in production costs, driven by the sale of Electus in 2018 and lower revenue from IAC Films, the sale of CityGrid in 2018 and the transfer of Daily Burn to Mosaic Group.

Cost of revenue $635,833 $108,649 21% $527,184 $117,184 29% $410,000

Percentage of revenue 27% 26% 24%

For the year ended December 31, 2020 compared to the year ended December 31, 2019

Cost of revenue increased due to an increase in in-app purchase fees of $50.0 million, as revenue continues to be increasingly sourced through mobile app stores;

an increase in hosting fees of $24.0 million;

an increase of $17.9 million in partner related costs associated with our live video streaming;

and an increase in compensation expense of $11.5 million related to increased headcount and other operating costs in customer care.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

C ost of revenue increased due to an increase in in-app purchase fees of $80.1 million, as revenue continues to be increasingly sourced through mobile app stores;

an increase in hosting fees of $21.9 million;

and an increase in compensation expense of $11.2 million related to increased headcount and other operating costs in customer care.

Selling and marketing expense

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

Selling and marketing expense

As a percentage of revenue

Selling and marketing expense in 2019 increased from 2018 due to increases of $191.8 million from ANGI, $24.4 million from Vimeo and $7.5 million from MTCH, partially offset by decreases of $67.3 million from Emerging & Other and $48.8 million from Applications.

The ANGI increase was due primarily to increases in advertising expense of $135.9 million and compensation expense of $24.4 million as well as $29.2 million of expense from the inclusion of Handy and Fixd Repair.

The increase in advertising expense was due primarily to increased online marketing and television spend.

The efficiency of online marketing spend was negatively impacted by traffic sourced through Google.

In 2019, the proportion of service requests through Google free traffic declined while service requests through Google paid traffic increased.

In addition, paid service requests were considerably more expensive on average than in 2018.

We have implemented new processes in the second half of 2019 and we expect the year over year increase in 2020 to be more modest, particularly in the back half of the year.

As our new processes are fully in place, we are increasingly more focused on profitability targets of our paid service requests than the cost of each service request.

Compensation expense increased due primarily to growth in the sales force.

The Vimeo increase was due primarily to higher marketing of $15.3 million, due primarily to expense from the inclusion of Magisto and a brand campaign in the first half of 2019, and an increase in compensation expense of $9.1 million, due in part, to growth in the sales force.

The MTCH increase was due primarily to increases in spending for various marketing campaigns at Tinder, Hinge and Pairs, partially offset by lower marketing spend at Meetic, Match and PlentyOfFish.

As a percentage of revenue, selling and marketing expense decreased due primarily to continued revenue growth from brands with relatively lower marketing spend.

The Emerging & Other decrease was due primarily to decreases in marketing of $50.2 million at Ask Media Group, driven by a shift in revenue resulting in the payment of traffic acquisition costs, and $5.9 million at IAC Films, the sales of Electus, CityGrid and Dictionary.com, and the transfer of Daily Burn to Mosaic Group, partially offset by an increase in compensation expense of $2.9 million at Bluecrew.

The Applications decrease was due primarily to lower online marketing of $63.7 million at Desktop as we mitigated the negative impact on revenue from Google's Chrome Web Store policy changes as well as other changes to policies under the Services Agreement, both of which occurred in 2019, partially offset by higher online marketing of $13.3 million at Mosaic Group due primarily to expense from the inclusion of TelTech and increases at iTranslate and Daily Burn.

$479,907 $52,467 12% $427,440 $7,486 2% $419,954

Percentage of revenue 20% 21% 24%

For the year ended December 31, 2020 compared to the year ended December 31, 2019

Selling and marketing expense increased primarily due to higher marketing spend at multiple brands, and an increase in compensation expense of $5.7 million.

Selling and marketing expense continued to decline as a percentage of revenue as we continue to generate revenue growth from brands with relatively lower marketing expense.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

Selling and marketing expense increased primarily due to increases in spending at Tinder, Hinge, and Pairs, partially offset by decreases at Meetic, Match, and PlentyOfFish.

Selling and marketing expense declined as a percentage of revenue as we continue to generate revenue growth from brands with relatively lower marketing expense.

General and administrative expense

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

General and administrative expense

As a percentage of revenue

General and administrative expense in 2019 increased from 2018 due to increases of $74.7 million from MTCH, $24.8 million from ANGI, $20.9 million from Corporate and $12.4 million from Vimeo, partially offset by a decrease of $11.8 million from Applications and $10.2 million from Emerging & Other.

The MTCH increase was due primarily to increases of $38.1 million in legal fees, $19.0 million in compensation expense, including an increase in stock-based compensation expense and headcount, and $4.7 million in non-income taxes, primarily related to the recently enacted French digital services tax, which is retroactive to the beginning of 2019.

The increase in stock-based compensation expense was due to the issuance of new equity awards since the prior year period and the impact from modification charges during 2019.

The ANGI increase was due primarily to $30.4 million of expense from the inclusion of Handy and Fixd Repair, including $9.5 million of stock-based compensation expense related to awards issued in connection with these acquisitions, an increase of $16.8 million in bad debt expense due to higher Marketplace Revenue, and increase of $3.0 million in software license and maintenance costs, partially offset by a decrease of $26.5 million in compensation expense and the inclusion in 2018 of $3.6 million in integration-related costs in connection with the Combination.

The decrease in compensation expense was due primarily to a decrease of $37.1 million in stock-based compensation expense reflecting a decrease of $33.8 million in expense due to the modification and acceleration charges related to the Combination ($27.2 million in 2019 compared to $61.0 million in 2018) and the reversal of $7.3 million in cumulative expense in 2019 related to certain performance-based awards that did not vest, partially offset by the issuance of new equity awards since 2018.

The Corporate increase was due primarily to an increase in stock-based compensation expense and higher professional fees, including $7.9 million in costs related to the Separation.

The increase in stock-based compensation expense was due primarily to the issuance of new equity awards since the prior year period and from modification charges in 2019, partially offset by a net decrease in a mark-to-market adjustment.

The Vimeo increase was due primarily to an increase of $5.3 million in compensation expense due primarily to higher headcount, expense from the inclusion of Magisto and a charge of $2.1 million related to vacating office space.

The Applications decrease was due primarily to a change of $20.9 million in acquisition-related contingent consideration fair value adjustments (income of $19.7 million in 2019 compared to expense of $1.1 million in 2018), partially offset by an increase of $9.3 million in compensation expense due primarily to recent acquisitions.

The Emerging & Other decrease was due primarily to sales of Electus, Dictionary.com and CityGrid in 2018 and the transfer of Daily Burn to Mosaic Group, partially offset by an increase in compensation expense of $2.7 million from Bluecrew and $1.7 million in transaction costs related to the Care.com acquisition, which closed on February 11, 2020.

General and administrative expense was further impacted by the inclusion in 2018 of a $4.8 million favorable legal settlement.

$311,207 $55,069 21% $256,138 $73,886 41% $182,252

Percentage of revenue 13% 12% 11%

For the year ended December 31, 2020 compared to the year ended December 31, 2019

General and administrative expense increased primarily due to an increase in compensation of $39.3 million primarily related to an increase in headcount and an increase in stock-based compensation expense resulting from a modification charge in 2020;

an increase of $6.7 million for non-income taxes, primarily digital services taxes;

and an increase of $6.4 million in legal expenses.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

General and administrative expense increased primarily due to an increase of $38.1 million in legal fees;

an increase in compensation of $19.0 million primarily related to stock-based compensation expense due to new equity awards made since the prior year period, modification charges during 2019, and an increase in headcount;

and an increase of $4.7 million for non-income taxes that includes the recently enacted French Digital Services Tax, which was made effective retroactively to January 1, 2019.

Product development expense

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

Product development expense

As a percentage of revenue

Product development expense in 2019 increased from 2018 due to increases of $19.9 million from MTCH, $8.1 million from Dotdash and $7.8 million from Vimeo.

The MTCH increase was due primarily to an increase of $18.6 million in compensation expense, including an increase of $10.3 million in stock-based compensation expense due primarily to expense related to the vesting of certain awards for which the market condition was met in 2019, and higher headcount at Tinder.

The Dotdash increase was due primarily to an increase of $7.4 million in compensation expense due primarily to higher headcount and an increase in expense for contractors engaged in content development.

The Vimeo increase was due primarily to an increase of $6.4 million in compensation expense due primarily to higher headcount and expense from the inclusion of Magisto.

$169,811 $17,851 12% $151,960 $19,930 15% $132,030

Percentage of revenue 7% 7% 8%

For the year ended December 31, 2020 compared to the year ended December 31, 2019

Product development expense increased primarily as a result of an increase of $18.7 million in compensation primarily due to increased headcount at Tinder.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

Product development expense increased primarily as a result of an increase of $18.6 million in compensation, including an increase of $10.3 million in stock-based compensation expense primarily due to the vesting of certain awards for which the market condition was met, and increased headcount at Tinder.

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

As a percentage of revenue

Depreciation in 2019 increased from 2018 due primarily to increased capital expenditures at ANGI, partially offset by certain fixed assets becoming fully depreciated.

Operating income (loss)

Depreciation $41,271 $6,916 20% $34,355 $(472) (1)% $34,827

Percentage of revenue 2% 2% 2%

For the year ended December 31, 2020 compared to the year ended December 31, 2019

Depreciation increased primarily due to an increase in internally developed software being placed in service.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

Depreciation decreased primarily due to certain internally developed software becoming fully depreciated, partially offset by increased depreciation related to leasehold improvements.

Operating Income and Adjusted EBITDA

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

ANGI Homeservices

Emerging & Other

As a percentage of revenue

________________________

NM = Not meaningful.

Operating income in 2019 increased from 2018, despite the decrease in Adjusted EBITDA of $2.1 million , described below, due primarily to a change of $21.2 million in acquisition-related contingent consideration fair value adjustments (income of $19.7 million in 2019 compared to expense of $1.5 million in 2018) and a decrease of $15.8 million in amortization of intangibles, partially offset by increases of $13.0 million in depreciation and $2.4 million in stock-based compensation expense and a $3.3 million goodwill impairment charge related to the College Humor Media business.

At December 31, 2019, there was $272.6 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 2.3 years.

Operating income $745,715 $100,261 16% $645,454 $95,985 17% $549,469

Percentage of revenue 31% 31% 32%

Adjusted EBITDA $896,779 $118,519 15% $778,260 $126,295 19% $651,965

Years Ended December 31,

(Dollars in thousands)

ANGI Homeservices

Emerging & Other

As a percentage of revenue

For a reconciliation of net earnings attributable to IAC shareholders to operating income to consolidated Adjusted EBITDA, see " Principles of Financial Reporting ." For a reconciliation of operating income (loss) to Adjusted EBITDA for the Company's reportable segments, see " Note 12—Segment Information " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ."

MTCH Adjusted EBITDA increased 19% to $779.4 million due primarily to the increase of $321.4 million in revenue due to growth at Tinder and lower selling and marketing expense as a percentage of revenue, partially offset by higher in-app purchase fees as revenue continues to be increasingly sourced through mobile app stores and higher legal fees.

ANGI Adjusted EBITDA decreased 18% to $202.3 million , despite higher revenue, due primarily to higher selling and marketing expense as a percentage of revenue, an increase of $16.8 million in bad debt expense due to higher Marketplace Revenue, investments in Fixd Repair and Handy, partially offset by the inclusion in 2018 of $9.0 million in costs related to the Combination (including deferred revenue write-offs, severance, retention and integration-related costs).

Vimeo Adjusted EBITDA loss increased 49% to a loss of $41.8 million , despite higher revenue, due primarily to higher marketing, including expense from the inclusion of Magisto and a brand campaign in the first half of 2019, as

well as higher compensation expense due primarily to an increase in headcount, including its sales force, and a charge of $2.1 million related to vacating office space.

Dotdash Adjusted EBITDA increased 85% to $39.6 million due primarily to higher revenue and lower operating expenses as a percentage of revenue, partially offset by a charge of $2.6 million related to the early termination of a lease.

Applications Adjusted EBITDA decreased 21% to $103.6 million due primarily to a decrease in revenue, partially offset by lower selling and marketing expense as a percentage of revenue.

Emerging & Other Adjusted EBITDA decreased to a loss of $7.8 million from a profit of $36.2 million in 2018 due primarily to reduced profits at Ask Media Group, reflecting an increase in traffic acquisition costs, partially offset by lower marketing, increased investments in Bluecrew and College Humor Media, and the sales of Dictionary.com and CityGrid, partially offset by the transfer of Daily Burn to Mosaic Group.

Corporate Adjusted EBITDA loss increased 20% to $88.6 million due primarily to higher professional fees, including $7.9 million in costs related to the Separation.

Percentage of revenue 38% 38% 38%

For a reconciliation of net earnings attributable to Match Group, Inc.

shareholders to operating income and Adjusted EBITDA, see “Principles of Financial Reporting.”

For the year ended December 31, 2020 compared to the year ended December 31, 2019

Operating income and Adjusted EBITDA increased 16% to $100.3 million and 15% to $118.5 million, respectively, primarily as a result of the increase in revenue of $340.0 million driven by growth at multiple brands and lower selling and marketing expense as a percentage of revenue, partially offset by an increase in cost of revenue due to higher in-app purchase fees, as revenue is increasingly sourced through mobile app stores, increased web operation costs, and live video costs.

At December 31, 2020, there was $142.5 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 2.3 years.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

Operating income and Adjusted EBITDA increased 17% to $96.0 million and 19% to $126.3 million, respectively, primarily as a result of the increase in revenue of $321.4 million and lower selling and marketing expense as a percentage of revenue due to the ongoing product mix shift toward brands with lower marketing spend as a percentage of revenue, partially offset by an increase in cost of revenue due to higher in-app purchase fees and an increase in legal fees.

Operating income was also impacted by higher stock-based compensation expense as a percentage of revenue and an increase in amortization due to the impairment of the Match brand in the UK, resulting in decreased growth compared to Adjusted EBITDA.

Interest expense

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

Interest expense

Interest expense in 2019 increased from 2018 due primarily to the increase in the average outstanding long-term debt balance compared to the prior year period.

$174,791 $34,221 24% $140,570 $46,002 49% $94,568

For the year ended December 31, 2020 compared to the year ended December 31, 2019

Interest expense increased primarily due to the issuance of the 4.125% Senior Notes on February 11, 2020 and the issuance of the 4.625% Senior Notes on May 19, 2020.

Additionally, the 2026 and 2030 Senior Exchangeable Notes were outstanding for the entire year.

Partially offsetting these increases were decreases due to the redemption of the 6.375% Senior Notes during 2020 and a lower LIBOR rate on the Term Loan.

For the year ended December 31, 2019 compared to the year ended December 31, 2018

Interest expense increased primarily due to the issuance of the 5.625% Senior Notes in February 2019.

Additionally, the interest rate on the Term Loan, which is based on LIBOR, was higher in 2019.

Other income (expense), net

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

Other income (expense), net

Other income, net in 2019 includes:

$55.0 million of interest income;

a $20.5 million gain related to the sale of our investment in Pinterest;

$14.5 million in net upward adjustments related to investments in equity securities without readily determinable fair values;

a unrealized reduction of $9.1 million in the estimated fair value of a warrant;

a realized loss of $8.2 million related to the sale of Vimeo's hardware business in the first quarter of 2019;

and a $1.7 million mark-to-market charge pertaining to a subsidiary denominated equity instrument.

Other income, net in 2018 includes:

a $26.8 million gain on the sale of certain Pinterest shares held by the Company and a $128.8 million unrealized gain (or upward adjustment) to adjust our remaining interest in Pinterest to fair value in accordance with ASU No.

2016-01, which was adopted effective January 1, 2018;

$120.6 million in gains related to the sales of Dictionary.com, Electus, Felix and CityGrid;

$30.4 million of interest income;

and $5.3 million in net foreign currency exchange gains due primarily to the strengthening of the U.S.

dollar relative to the GBP during the year ended December 31, 2019.

Income tax benefit (provision)

Other income (expense), net $15,861 $17,887 NM $(2,026) $(9,536) NM $7,510

________________________

NM = not meaningful

Other income, net, in 2020 includes a legal settlement of $35.0 million and interest income of $2.7 million, partially offset by a loss on redemption of bonds of $16.5 million, expense of $3.4 million related to mark-to-market adjustments pertaining to liability classified equity instruments, and $0.6 million in net foreign currency losses in the period.

Other expense, net, in 2019 includes a $4.0 million impairment of an equity investment, expense of $1.7 million related to a mark-to-market adjustment pertaining to a liability classified equity instrument, and $0.9 million in net foreign currency losses in the period, partially offset by interest income of $4.4 million.

Other income, net in 2018 includes $5.3 million in net foreign currency exchange gains due primarily to a strengthening of the U.S.

dollar relative to the British Pound in the period and $4.9 million of interest income, partially offset by $2.1 million related to impairments of certain equity investments and $0.7 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity instrument.

Income tax provision

Years Ended December 31,

2020 $ Change % Change 2019 $ Change % Change 2018

(Dollars in thousands)

Income tax benefit (provision)

Income tax provision

$32,874 $24,649 300% $8,225 $(3,082) (27)% $11,307

Effective income tax rate

For further details of income tax matters, see " Note 3—Income Taxes " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ."

In 2019, the Company recorded an income tax benefit of $49.3 million , despite pre-tax income, due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards and research credits.

In 2018, the Company recorded an income tax provision of $3.8 million , which represented an effective tax rate of 1%.

The effective income tax rate was lower than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards and a reduction in the estimated Transition Tax.

The Transition Tax, part of the Tax Cuts and Jobs Act, enacted on December 22, 2017 (the "Tax Act"), was recorded on a provisional basis in the fourth quarter of 2017.

In the third quarter of 2018, the Company finalized the calculation, which resulted in a $9.2 million reduction in the Transition Tax.

The net reduction in the Transition Tax was due primarily to the utilization of additional foreign tax credits and a reduction in state taxes, partially offset by additional taxable earnings and profits of our foreign subsidiaries based on guidance issued by the Internal Revenue Service subsequent to December 31, 2017.

Net earnings attributable to noncontrolling interests

Noncontrolling interests represent the noncontrolling holders’ percentage share of earnings or losses from the subsidiaries in which the Company holds a majority, but less than 100%, ownership interest and the results of which are included in our consolidated financial statements.

Years Ended December 31,

(Dollars in thousands)

Net earnings attributable to noncontrolling interests

Net earnings attributable to noncontrolling interests in 2019 represents the publicly-held interest in MTCH's and ANGI's earnings as well as third party interests in the subsidiary that held the Company's investment in Pinterest.

Net earnings attributable to noncontrolling interests in 2018 primarily represents the publicly-held interest in MTCH's and ANGI's earnings as well as third party interests in a subsidiary that held the unrealized gains related to our investment in Pinterest, which was adjusted during the second quarter of 2018 to fair value in accordance with ASU No.

2016-01, partially offset by net losses attributable to the noncontrolling interests in certain subsidiaries within the Emerging & Other and Vimeo segments.

For discussion of income taxes, see “Note 3—Income Taxes” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.”

For the years ended December 31, 2020, 2019, and 2018, the Company recorded an income tax provision of $32.9 million, $8.2 million, and $11.3 million, respectively, representing an effective tax rate of 6%, 2%, and 2%, respectively, which is lower than the U.S.

statutory rate of 21% due primarily to excess tax benefits generated by (i) the exercise and vesting of stock-based awards and (ii) research credits.

In 2020, these benefits were partially offset by an increase in the valuation allowance for foreign tax credits.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted to respond to economic challenges due to COVID-19.

The CARES Act provided Match Group accelerated depreciation deductions and a relaxation of limitations on interest expense deductions, both of which impact the timing of the realizability of our federal and state net operating loss deferred tax assets.

The CARES Act did not have a material impact on our income tax provision for the year ended December 31, 2020, or our ability to recover our deferred tax assets.

Related party transactions

For discussion of related party transactions, see “Note 15—Related Party Transactions” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.”

PRINCIPLES OF FINANCIAL REPORTING

IAC reports Adjusted EBITDA as a supplemental measure to U.S.

Match Group reports Adjusted EBITDA and Revenue excluding foreign exchange effects, both of which are supplemental measures to U.S.

generally accepted accounting principles (“GAAP”).

This measure is one of the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated.

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.

IAC 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 EBITDA is among the primary metrics by which we evaluate the performance of our business, on which our internal budget is based, and by which management is compensated.

Revenue excluding foreign exchange effects provides a comparable framework for assessing how our business performed without the effect of exchange rate differences when compared to prior periods.

We believe that investors should have access to the same set of tools that we use in analyzing our results.

These non-GAAP measures 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.

Match Group endeavors to compensate for the limitations of the non-GAAP measures 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 measures, which we discuss below.

Adjusted EBITDA

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is defined as operating income excluding:

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We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature.

The above items are excluded from our Adjusted EBITDA measure because they are non-cash in nature.

Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.

The following table reconciles net earnings attributable to IAC shareholders to operating income to consolidated Adjusted EBITDA:

Non-Cash Expenses That Are Excluded From Adjusted EBITDA

Stock-based compensation expense consists principally of expense associated with the grants of stock options, restricted stock units (“RSUs”), performance-based RSUs, and market-based awards.

These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method;

however, performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period).

To the extent that stock-based awards are settled on a net basis, we remit the required tax-withholding amounts from our current funds.

Depreciation is a non-cash expense relating to our property and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.

Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions.

At the time of acquisition, the identifiable definite-lived intangible assets of the acquired company, such as customer lists, trade names, and technology, are valued and amortized over their estimated lives.

Value is also assigned to (i) acquired indefinite-lived intangible assets, which consist of trade names and trademarks, and (ii) goodwill, which are not subject to amortization.

An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value.

We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.

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.

The following table reconciles net earnings attributable to Match Group, Inc.

shareholders to operating income and Adjusted EBITDA:

Years Ended December 31,

2020 2019 2018

(In thousands)

Net earnings attributable to IAC shareholders

Net earnings attributable to Match Group, Inc.

shareholders $ 128,561 $ 431,131 $ 626,961

Net earnings attributable to noncontrolling interests 59,280 112,689 130,786

Income tax (benefit) provision

Loss (earnings) from discontinued operations, net of tax 366,070 (49,187) (306,643)

Income tax provision 32,874 8,225 11,307

Other (income) expense, net (15,861) 2,026 (7,510)

Interest expense

174,791 140,570 94,568

Operating Income

745,715 645,454 549,469

Stock-based compensation expense 102,268 89,724 66,031

Depreciation 41,271 34,355 34,827

Amortization of intangibles

7,525 8,727 1,318

Acquisition-related contingent consideration fair value adjustments

Goodwill impairment

Adjusted EBITDA $ 896,779 $ 778,260 $ 651,965

For a reconciliation of operating income to Adjusted EBITDA for the Company's reportable segments, see " Note 12—Segment Information " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ."

Non-Cash Expenses That Are Excluded From Our Non-GAAP Measure

Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of stock options, restricted stock units ("RSUs"), performance-based RSUs and market-based awards.

These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method.

Performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period).

To the extent that stock-based awards are settled on a net basis, the Company remits the required tax-withholding amounts from its current funds.

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 technology, service professional relationships, customer lists and user base, memberships, trade names and content, 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.

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.

Effects of Changes in Foreign Exchange Rates on Revenue

The impact of foreign exchange rates on the Company, due to its global reach, may be an important factor in understanding period over period comparisons if movement in exchange rates is significant.

Since our results are reported in U.S.

dollars, international revenue is favorably impacted as the U.S.

dollar weakens relative to other currencies, and unfavorably impacted as the U.S.

dollar strengthens relative to other currencies.

We believe the presentation of revenue excluding the effects from foreign exchange, in addition to reported revenue, helps improve the ability to understand the Company’s performance because it excludes the impact of foreign currency volatility that is not indicative of Match Group’s core operating results.

Revenue excluding foreign exchange effects compares results between periods as if exchange rates had remained constant period over period.

Revenue excluding foreign exchange effects is calculated by translating current period revenue using prior period exchange rates.

The percentage change in revenue excluding foreign exchange effects is calculated by determining the change in current period revenue over prior period revenue where current period revenue is translated using prior period exchange rates.

The following tables presents the impact of foreign exchange on total revenue, ARPU, and International ARPU for the year ended December 31, 2020 compared to the year ended December 31, 2019 and the year ended December 31, 2019 compared to the year ended December 31, 2018:

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands, except ARPU)

Revenue, as reported $ 2,391,269 $ 340,011 17% $ 2,051,258

Foreign exchange effects 6,412

Revenue excluding foreign exchange effects $ 2,397,681 $ 346,423 17% $ 2,051,258

(Percentage change calculated using non-rounded numbers)

ARPU, as reported $ 0.60 3% $ 0.58

Foreign exchange effects 0.00

ARPU, excluding foreign exchange effects $ 0.60 3% $ 0.58

International ARPU, as reported $ 0.56 0% $ 0.56

Foreign exchange effects 0.00

International ARPU, excluding foreign exchange effects $ 0.56 0% $ 0.56

Years Ended December 31,

2019 $ Change % Change 2018

(Dollars in thousands, except ARPU)

Revenue, as reported $ 2,051,258 $ 321,408 19% $ 1,729,850

Foreign exchange effects 47,459

Revenue excluding foreign exchange effects $ 2,098,717 $ 368,867 21% $ 1,729,850

(Percentage change calculated using non-rounded numbers)

ARPU, as reported $ 0.58 2% $ 0.57

Foreign exchange effects 0.02

ARPU, excluding foreign exchange effects $ 0.60 4% $ 0.57

International ARPU, as reported $ 0.56 —% $ 0.56

Foreign exchange effects 0.03

International ARPU, excluding foreign exchange effects $ 0.59 5% $ 0.56

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Position

December 31, 2020 December 31, 2019

(In thousands)

MTCH cash and cash equivalents:

United States

All other countries

Total MTCH cash and cash equivalents

ANGI cash and cash equivalents and marketable securities:

United States

All other countries

Total cash and cash equivalents

Marketable securities (United States)

Total ANGI cash and cash equivalents and marketable securities

IAC (excluding MTCH and ANGI) cash and cash equivalents and marketable securities:

Cash and cash equivalents:

United States

$ 581,038 $ 322,267

All other countries

158,126 143,409

Total cash and cash equivalents $ 739,164 $ 465,676

Marketable securities (United States)

Total IAC (excluding MTCH and ANGI) cash and cash equivalents and marketable securities

Total cash and cash equivalents and marketable securities

MTCH Term Loan

MTCH Credit Facility

6.375% MTCH Senior Notes

5.00% MTCH Senior Notes

5.625% MTCH Senior Notes

Total MTCH long-term debt

unamortized original issue discount

unamortized debt issuance costs

Total MTCH debt, net

ANGI Term Loan

current portion of ANGI Term Loan

unamortized debt issuance costs

Total ANGI debt, net

Long-term debt, net:

Credit Facility due February 13, 2025 $ — $ —

Term Loan due February 13, 2027 425,000 425,000

6.375% Senior Notes — 400,000

5.00% Senior Notes due December 15, 2027

450,000 450,000

4.625% Senior Notes due June 1, 2028 500,000 —

5.625% Senior Notes due February 15, 2029 350,000 350,000

4.125% Senior Notes due August 1, 2030 500,000 —

2022 Exchangeable Notes 517,500 517,500

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2030 Exchangeable Notes 575,000 575,000

4.75% Senior Notes

Total IAC long-term debt

unamortized original issue discount

Total long-term debt 3,892,500 3,292,500

unamortized original issue discount and original issue premium, net

312,891 357,887

unamortized debt issuance costs 44,903 44,987

Total IAC debt, net

Total long-term debt, net $ 3,534,706 $ 2,889,626

IAC, MTCH and ANGI Long-term Debt

For a detailed description of IAC, MTCH and ANGI long-term debt, see " Note 7—Long-term Debt " to the consolidated financial statements included in " Item 8.

Long-term Debt

For a detailed description of long-term debt, see “Note 7—Long-term Debt, net” to the consolidated financial statements included in “Item 8.

Consolidated Financial Statements and Supplementary Data.”

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Years ended December 31,

2020 2019 2018

(In thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net cash provided by operating activities consists of earnings adjusted for non-cash items, the effect of changes in working capital and acquisition-related contingent consideration payments (to the extent greater than the liability initially recognized at the time of acquisition).

Non-cash adjustments include stock-based compensation expense, deferred income taxes, net gains on equity securities, net losses (gains) from the sale of businesses, amortization of intangibles, depreciation, bad debt expense and goodwill impairments.

Adjustments to earnings consist primarily of $240.8 million of stock-based compensation expense, $92.6 million of amortization of intangibles, $88.4 million of depreciation, and $65.8 million of bad debt expense, partially offset by $80.1 million of deferred income taxes and $37.6 million of net gains on equity securities.

The deferred income tax benefit primarily relates to an increase in tax attribute carryforwards and the realization of gains on certain equity securities.

The decrease from changes in working capital primarily consists of increases in accounts receivable of $91.4 million and other assets of $17.7 million , partially offset by increases in accounts payable and other liabilities of $41.9 million and deferred revenue of $37.6 million .

The increase in accounts receivable is primarily due to revenue growth at ANGI, MTCH and Dotdash.

The increase in other assets is due, in part, to an increase in prepaid hosting services at MTCH, partially offset by a decrease in capitalized downloadable search toolbar costs at Applications.

The increase in accounts payable and other liabilities is due, in part, to increases in (i) accrued legal and professional fees at MTCH and IAC, and (ii) accrued interest primarily related to the 5.625% MTCH Senior Notes issued in the first quarter of 2019, the timing of interest payments at MTCH, and the 2026 and 2030 Exchangeable Notes issued in the second quarter of 2019.

The increase in deferred revenue is due primarily to growth in subscription sales at Vimeo, Mosaic Group and MTCH.

Net cash used in investing activities includes cash used for investments and acquisitions of $459.4 million , principally related to the investment in Turo and acquisitions of Magisto and Fixd Repair, and capital expenditures of $136.7 million , primarily related to investments in the development of capitalized software at ANGI and MTCH to support their products and services, leasehold improvements at ANGI, and the payment of a deposit of $23.0 million for an ownership interest in an aircraft at Corporate, partially offset by net proceeds from the sale of investments and businesses of $165.1 million , principally related to the sale of our investment in Pinterest and the proceeds received in 2019 related to the December 31, 2018 sale of Felix, and proceeds from maturities (net of purchases) of marketable debt securities of $103.9 million .

Net cash provided by financing activities includes $1.2 billion in proceeds from the issuance of the 2026 and 2030 Exchangeable Notes, $350.0 million in proceeds from the 5.625% MTCH Senior Notes, $40.0 million in borrowings under the MTCH Credit Facility, and $10.7 million in proceeds from the exercise of IAC stock options, partially offset by $300.0 million to repay the outstanding borrowings under the MTCH Credit Facility, $216.4 million for the repurchase of 3.1 million shares of MTCH common stock, on a settlement date basis, at an average price of $70.02 per share, $203.2 million and $35.3 million for withholding taxes paid on behalf of MTCH and ANGI employees, respectively, for stock-based awards that were net settled, $136.9 million used to pay the net premium on the exchangeable note hedge and warrant transactions, $93.1 million for withholding taxes paid on behalf of IAC employees for stock-based awards that were net settled, $56.9 million for the repurchase of 7.2 million shares of ANGI common stock, on a settlement date basis, at an average price of $7.90 per share, $35.0 million for repurchases of IAC debt, $29.2 million for distributions to and purchases of noncontrolling interests, $27.8

million of debt issuance costs, and $13.8 million in principal payments on ANGI debt.

Adjustments to earnings consist primarily of $238.4 million of stock-based compensation expense, $108.4 million of amortization of intangibles, $75.4 million of depreciation, $48.4 million of bad debt expense, partially offset by $152.0 million of net gains on equity securities, $120.0 million of net gains from the sale of businesses, and $34.7 million of deferred income taxes.

The deferred income tax benefit primarily relates to amortization of intangibles, a decrease in the valuation allowance, and an increase in credit carryforwards, partially offset by the deferred income tax provision on the net unrealized gains on certain equity securities.

The increase from changes in working capital primarily consists of an increase in accounts payable and other liabilities of $53.6 million , an increase in deferred revenue of $49.5 million , and an increase in income taxes payable and receivable of $27.0 million , partially offset by an increase in other assets of $44.6 million and an increase in accounts receivable of $34.8 million .

The increase in accounts payable and other liabilities is primarily due to increases in (i) accrued employee compensation due, in part, to the timing of payments of cash bonuses, (ii) payables and accruals at Ask Media Group due to growth in paid traffic, primarily in international markets, (iii) accrued advertising at MTCH and (iv) payables at Vimeo due to timing of payments.

The increase in deferred revenue is due primarily to growth in subscription sales at Vimeo, MTCH and Applications.

The increase in income taxes payable and receivable is due to 2018 income tax accruals in excess of 2018 income tax payments.

The increase in other assets is primarily due to increases in (i) capitalized mobile app store fees at MTCH and Applications, (ii) capitalized production costs of various production deals at College Humor Media, Electus, and IAC Films, and (iii) capitalized sales commissions at ANGI.

The increase in accounts receivable is primarily due to revenue growth at ANGI, Ask Media Group, and Dotdash, partially offset by decreases at MTCH and Applications due to an accelerated cash receipt from a mobile app store provider.

Net cash used in investing activities includes cash used for acquisitions and investments of $117.5 million , which includes the TelTech, iTranslate, Bluecrew, and Handy acquisitions, purchases (net of maturities and sales) of marketable debt securities of $116.1 million , capital expenditures of $85.6 million , primarily related to investments in the development of capitalized software at ANGI and MTCH to support their products and services and computer hardware, partially offset by net proceeds from the sale of businesses and investments of $136.7 million , which includes the sales of Dictionary.com and Electus, and $10.4 million in net proceeds from the sale of Angie's List's campus located in Indianapolis.

Net cash used in financing activities includes $207.7 million and $29.8 million for withholding taxes paid on behalf of MTCH and ANGI employees, respectively, for stock-based awards that were net settled, $133.5 million for the repurchase of 3.1 million shares, on a settlement date basis, of MTCH common stock at an average price of $43.72 per share, $105.1 million for dividends paid to MTCH's noncontrolling interest holders, $82.9 million for the repurchase of 0.5 million shares, on a settlement date basis, of IAC common stock at an average price of $152.23 per share, $22.5 million for distributions to and purchases of noncontrolling interests, $19.0 million for withholding taxes paid on behalf of IAC employees for stock-based awards that were net settled and $13.8 million in principal payments on ANGI debt, partially offset by $260.0 million in borrowings under the MTCH Credit Facility and $41.7 million in proceeds from the exercise of IAC stock options.

Net cash provided by operating activities attributable to continuing operations

$ 788,552 $ 647,989 $ 611,455

Net cash used in investing activities attributable to continuing operations

(3,922,131) (41,730) (38,204)

Net cash provided by (used in) financing activities attributable to continuing operations

1,787,846 654,024 (198,768)

Net cash provided by operating activities attributable to continuing operations in 2020 includes adjustments to earnings consisting primarily of $102.3 million of stock-based compensation expense;

$44.7 million of original issue discount accretion on the Exchangeable Senior Notes;

$41.3 million of depreciation;

$7.5 million of amortization of intangibles;

other adjustments of $26.7 million, which includes a loss on bond

redemption of $16.5 million;

and deferred income tax of $5.0 million.

The increase in cash from changes in working capital primarily consists of an increase from income taxes payable and receivable of $16.9 million due primarily to the timing of tax payments and refunds;

an increase in accounts payable and accrued expenses and other current liabilities of $24.2 million due mainly to the timing of payments, including interest payments;

and an increase in deferred revenue of $23.5 million, due mainly to growth in subscription sales.

These increases in cash were partially offset by a decrease related to an increase in other assets of $33.2 million primarily related to an increase in prepaid hosting services and an increase in accounts receivable of $24.2 million primarily related to an increase in revenue.

Net cash used in investing activities attributable to continuing operations in 2020 consists primarily of the $3.9 billion of net cash distributed to IAC related to the Separation, which was partially funded by $1.4 billion of net proceeds from the stock issuance in connection with the Separation as noted below, and capital expenditures of $42.4 million that are primarily related to internal development of software and computer hardware to support our products and services.

Net cash provided by financing activities attributable to continuing operations in 2020 is primarily due to proceeds of $1.4 billion from the stock offering in connection with the Separation, which were subsequently transferred to IAC as noted above, proceeds of $1.0 billion from the issuance of the 4.125% and 4.625% Senior Notes, partially offset by the redemption of the $400.0 million 6.375% Senior Notes, payments of $212.0 million for withholding taxes paid on behalf of employees for net settled equity awards of both Former Match Group and Match Group, and purchases of treasury stock of Former Match Group of $132.9 million.

Net cash provided by operating activities attributable to continuing operations in 2019 includes adjustments to earnings consisting primarily of $89.7 million of stock-based compensation expense, $34.4 million of depreciation, $30.4 million of original issue discount accretion on the Exchangeable Senior Notes, and $8.7 million of amortization of intangibles.

Partially offsetting these adjustments was deferred income tax of $19.6 million primarily related to net operating loss created by settlement of stock-based awards.

The decrease in cash from changes in working capital primarily consists of an increase in other assets of $24.2 million primarily related to an increase in prepaid hosting services, an increase in accounts receivable of $17.9 million primarily related to an increase in revenue, and a decrease from income taxes payable and receivable of $4.2 million due primarily to the timing of tax payments.

These decreases in cash were partially offset by an increase in accounts payable and accrued expenses and other current liabilities of $33.7 million due mainly to the timing of payments, including interest payments;

and an increase in deferred revenue of $9.5 million, due mainly to growth in subscription sales.

Net cash used in investing activities attributable to continuing operations in 2019 consists primarily of capital expenditures of $39.0 million that are primarily related to internal development of software and computer hardware to support our products and services.

Net cash provided by financing activities attributable to continuing operations in 2019 is primarily due to $1.2 billion from the issuance of the 2026 and 2030 Exchangeable Notes;

proceeds of $350.0 million from the issuance of the 5.625% Senior Notes and proceeds of $40.0 million from borrowings under the Credit Facility.

Partially offsetting these proceeds were cash payments of $300.0 million for the repayment of borrowings under the Credit Facility, purchases of treasury stock of $216.4 million, $203.2 million for withholding taxes paid on behalf of employees for net settled equity awards, and $136.9 million used to pay the net premium on the 2026 and 2030 Exchangeable Notes hedge and warrant transactions.

Net cash provided by operating activities attributable to continuing operations in 2018 includes adjustments to earnings consisting primarily of $66.0 million of stock-based compensation expense, $34.8 million of depreciation, and $1.3 million of amortization of intangibles.

Partially offsetting these adjustments was deferred income tax of $23.0 million primarily related to an increase in tax credit carryforwards, partially offset by the utilization of net operating losses.

The increase in cash from changes in working capital primarily consists of an increase in accounts payable and accrued expenses and other current liabilities of $21.4 million due to the timing of payments;

a decrease in accounts receivable of $17.3 million primarily related to an accelerated cash receipt from a mobile app store provider;

an increase in deferred revenue of $13.1 million, due mainly to growth

in subscription sales;

and an increase from income taxes payable and receivable of $26.9 million due primarily to the timing of tax payments.

These increases in cash were partially offset by an increase in other assets of $14.6 million primarily related to an increase in capitalized mobile app fees.

Net cash used in investing activities attributable to continuing operations in 2018 consists primarily of capital expenditures of $31.4 million that are primarily related to computer hardware and internal development of software to support our products and services and purchases of investments of $3.8 million, partially offset by net cash acquired in a business combination of $1.1 million.

Net cash used in financing activities attributable to continuing operations in 2018 is primarily due to withholding taxes paid on behalf of employees for net settled stock awards of $207.7 million, purchases of treasury stock of $133.5 million, a cash dividend of $105.1 million, purchases of non-controlling interests of $10.0 million, and debt issuance costs of $1.7 million.

Partially offsetting these payments were proceeds of $260.0 million from a draw on the Credit Facility.

Liquidity and Capital Resources

The Company's principal sources of liquidity are its cash and cash equivalents and marketable securities, cash flows generated from operations and available borrowings under the IAC Credit Facility.

IAC's consolidated cash and cash equivalents and marketable securities at December 31, 2019 were $3.2 billion , of which $465.7 million was held by MTCH and $390.6 million was held by ANGI.

The Company generated $937.9 million of operating cash flows for the year ended December 31, 2019 , of which $658.4 million was generated by MTCH and $214.2 million was generated by ANGI.

Each of MTCH and ANGI is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds.

As a result, the Company cannot freely access the cash of MTCH and ANGI and their respective subsidiaries.

In addition, certain agreements governing MTCH and ANGI indebtedness limit the payment of dividends or distributions and loans or advances to stockholders, including the Company, in the event a default has occurred or in the case of MTCH, its secured net leverage ratio (as defined in the MTCH Term Loan) exceeds 2.0 to 1.0 or its consolidated leverage ratio (as defined in certain MTCH indentures) exceeds 5.0 to 1.0 , and in the case of ANGI, its consolidated net leverage ratio (as defined in the ANGI Term Loan) exceeds 4.5 to 1.0 .

There were no such limitations at December 31, 2019 .

There were no outstanding borrowings under the IAC, MTCH and ANGI credit facilities at December 31, 2019 .

The Company anticipates that it will need to make capital and other expenditures in connection with the development and

expansion of its operations.

The Company's 2020 capital expenditures are expected to be lower than 2019 capital expenditures of $136.7 million by approximately 5% to 10% , driven by lower capital expenditures at Corporate due to timing of payments related to the purchase of an aircraft and ANGI related to lower leasehold improvements, partially offset by higher capital expenditures at MTCH due to building improvements related to the expansion of office space at MTCH's Tinder business and the development of capitalized software to support its products and services.

The remaining payment of $13.1 million related to the purchase of a 50% interest in the aforementioned aircraft is expected to be made in 2021.

At December 31, 2019 , IAC has 8.0 million shares remaining in its share repurchase authorization.

On August 30, 2019, the Board of Directors of MTCH authorized MTCH to repurchase an additional 10 million shares of its common stock;

this authorization was in addition to the 1.3 million shares remaining under a previous authorization.

During the year ended December 31, 2019, MTCH repurchased 3.1 million shares, on a trade date basis, of its common stock at an average price of $70.02 per share, or $216.4 million in aggregate.

MTCH has 9.9 million shares remaining in its share repurchase authorization as of December 31, 2019.

On February 6, 2019, the Board of Directors of ANGI authorized ANGI to repurchase up to 15 million shares of its common stock.

During the year ended December 31, 2019, ANGI repurchased 7.3 million shares, on a trade date basis, of its common stock at an average price of $7.91 per share, or $57.9 million in aggregate.

From January 1, 2020 through February 4, 2020, ANGI repurchased an additional 0.3 million shares at an average price of $8.29 per share, or $2.1 million in aggregate.

ANGI had 7.4 million shares remaining in its share repurchase authorization as of February 4, 2020.

IAC, MTCH and ANGI may purchase shares over an indefinite period of time on the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.

The Company has granted stock settled stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries to employees and management of those subsidiaries.

These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IAC shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment which, for purposes of this paragraph is assumed at a 50% withholding rate.

The number of IAC common shares that would be required to net settle these vested and unvested interests at current estimated fair values, other than for MTCH, ANGI and their subsidiaries, at January 31, 2020 , is 0.1 million shares.

In addition, withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $20.2 million at January 31, 2020 .

The number of IAC common shares ultimately needed to settle these awards may vary significantly as a result of both movements in the Company's stock price and the determination of fair value of the relevant subsidiary that is different than the Company's estimate.

The Company currently settles all stock options on a net basis.

Assuming all stock options outstanding on January 31, 2020 , were net settled on that date, the Company would have issued 1.8 million common shares (of which 1.4 million is related to vested options and 0.4 million is related to unvested options) and would have remitted $430.9 million (of which $341.6 million is related to vested options and $89.3 million is related to unvested options) in cash for withholding taxes (in each case assuming a 50% withholding rate).

The Company's RSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of IAC common stock.

These equity awards are settled on a net basis.

The number of IAC common shares that would be required to net settle these awards at January 31, 2020 is 0.2 million shares.

In addition, withholding taxes, which will be paid by the Company on behalf of the employees upon vest, would have been $38.3 million at January 31, 2020 .

MTCH currently settles substantially all equity awards on a net basis.

Assuming all MTCH equity awards outstanding on January 31, 2020 were net settled on that date, MTCH would have issued 7.6 million common shares (of which 2.2 million is related to vested shares and 5.4 million is related to unvested shares) and would have remitted $597.0 million (of which $174.7 million is related to vested shares and $422.2 million is related to unvested shares) in cash for withholding taxes (in each case assuming a 50% withholding rate).

While certain MTCH stock options ("Tandem Awards") can be settled in MTCH or IAC common stock at the Company's election, the Company is no longer settling the Tandem Awards in IAC stock.

ANGI currently settles all equity awards on a net basis.

In connection with the Combination, previously issued stock appreciation rights related to the common stock of HomeAdvisor (US) were converted into ANGI stock appreciation rights that are settleable, at ANGI's option, on a net basis with ANGI remitting withholding taxes on behalf of the employee or on a gross basis with ANGI issuing a sufficient number of Class A shares to cover the withholding taxes.

While these awards can be

settled in either Class A shares of ANGI or shares of IAC common stock at IAC's option, these awards are currently being settled in shares of ANGI.

If settled in IAC common stock, ANGI reimburses IAC in either cash or through the issuance of Class A shares to IAC.

Assuming all of the stock appreciation rights outstanding on January 31, 2020 were net settled on that date, ANGI would have issued 6.5 million shares of ANGI Class A stock and ANGI would have remitted $52.3 million in cash for withholding taxes (assuming a 50% withholding rate).

Assuming all other ANGI equity awards outstanding on January 31, 2020 were net settled on that date, including stock options, RSUs and subsidiary denominated equity, ANGI would have issued 5.1 million shares and would have remitted $41.2 million in cash for withholding taxes (assuming a 50% withholding rate).

As of December 31, 2019 , IAC's economic interest and voting interest in MTCH is 80.7% and 97.5% , respectively, and in ANGI is 84.1% and 98.1% , respectively.

IAC intends to take steps if necessary to maintain an economic interest in each of MTCH and ANGI of at least 80%.

In addition, the Transaction Agreement requires MTCH to undertake such steps as necessary to ensure that IAC maintains its 80% economic ownership.

The Company’s principal sources of liquidity are its cash flows generated from operations as well as cash and cash equivalents.

At December 31, 2020, $749.8 million was available under the Credit Facility that expires on February 13, 2025.

The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations.

The Company expects that 2021 cash capital expenditures will be between $80 million and $90 million, an increase from 2020 cash capital expenditures primarily related to leasehold improvements in our new leased New York office space, and building improvements at our company owned buildings in Los Angeles.

In February 2021, the Company entered into a definitive agreement to acquire Hyperconnect, Inc.

(“Hyperconnect”), a leading social discovery and video technology company based in Seoul, South Korea.

The acquisition is valued at approximately $1.725 billion, subject to customary adjustments for cash, debt-like items, and net working capital at the closing of the acquisition.

The Company has the option to pay up to 50% of the consideration in common stock of the Company, with the remaining balance of the consideration paid in cash.

The Company expects to fund the cash portion of the consideration with cash on hand and its existing revolving credit facility.

The Company may also opt to use additional third-party financing.

The acquisition is anticipated to close in the second quarter of 2021, subject to customary closing conditions and receipt of certain regulatory approvals.

At December 31, 2020, all of the Company’s international cash can be repatriated without significant tax consequences.

The Company believes its existing cash, cash equivalents, marketable securities, available borrowings under the IAC Credit Facility and expected positive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments for the foreseeable future.

The Company's liquidity could be negatively affected by a decrease in demand for its products and services.

The Company’s indebtedness could limit its ability to:

Our indebtedness could limit our ability to:

(i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures, debt service, or other requirements;

and (ii) use operating cash flow to make acquisitions or capital expenditures, or invest in other areas, such as developing business opportunities.

and (ii) use operating cash flow to pursue acquisitions or invest in other areas, such as developing properties and exploiting business opportunities.

The Company may need to raise additional capital through future debt or equity financing to make additional acquisitions and investments or to provide for greater financial flexibility.

Additional financing may not be available on terms favorable to the Company or at all.

On February 11, 2020, IAC completed the acquisition of Care.com under the terms of an agreement dated as of December 20, 2019, for an aggregate purchase price of approximately $627 million.

Care.com’s cash and cash equivalents and marketable securities balance, which would be included as part of the assets acquired, was approximately $96.6 million as of December 31, 2019 .

If the Separation is consummated:

IAC will contribute the cash and cash equivalents held by IAC (except for cash held by ANGI and MTCH) to New IAC.

Had the Separation been consummated on December 31, 2019, the approximate amount that would have been contributed as of December 31, 2019 is $1.8 billion.

Following this contribution, New IAC’s cash and cash equivalents and marketable securities balance would have been approximately $2.7 billion.

MTCH has agreed to make a loan to IAC in an aggregate principal amount equal to the product of (i) $3.00 and (ii) the number of shares of MTCH capital stock outstanding immediately prior to the effective time of the Separation (the ‘‘Match loan’’).

As part of the Separation, all MTCH stockholders, other than IAC, in respect of each share of MTCH common stock held, may elect to receive either $3.00 in cash or an additional $3.00 worth of New Match common stock.

IAC will contribute the proceeds of the Match loan, less an amount equal to the product of $3.00 multiplied by the aggregate number of shares of MTCH capital stock in respect of which MTCH holders have made a valid cash election, to New IAC.

Based on shares outstanding on December 31, 2019, New IAC will receive a contribution of approximately $680 million, assuming all non-IAC MTCH shareholders elect to receive $3.00 in cash and an additional amount of approximately $163 million if all non-IAC MTCH shareholders elect to receive additional MTCH shares.

Following the Separation, the Match loan will remain as the obligation of New Match payable to MTCH;

New IAC will not have any obligations with regards to the Match loan.

New Match will own certain IAC financing subsidiaries that are the issuers of approximately $1.7 billion aggregate principal amount of currently outstanding Exchangeable Notes.

New IAC’s debt immediately following the consummation of the Separation will relate solely to the ANGI Term Loan, which would have been $245.7 million as of December 31, 2019.

In addition, prior to the closing of the Separation, IAC may enter into agreements with one or more third parties to sell shares of New Match common stock with a value of up to $1.5 billion.

The net proceeds of any such offering will be contributed to New IAC following the closing and the number of shares of New Match that IAC stockholders will receive will be reduced to reflect the number of New Match shares sold in this offering.

CONTRACTUAL OBLIGATIONS

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Payments Due by Period

Contractual Obligations (a)

Years More Than

5 Years Total

(In thousands)

Long-term debt (b)

$ 115,581 $ 744,102 $ 222,097 $ 3,714,837 $ 4,796,617

Operating leases (c)

Purchase obligations (d)

14,806 22,813 18,172 62,458 118,249

Purchase obligation (d)

54,000 9,000 12,000 — 75,000

Total contractual obligations $ 184,387 $ 775,915 $ 252,269 $ 3,777,295 $ 4,989,866

_______________________________________________________________________________

The Company has excluded $69.2 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid.

(a) The Company has excluded $41.8 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid.

For additional information on income taxes, see “Note 3—Income Taxes” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.”

Represents contractual amounts due including interest on both fixed and variable rate instruments.

Long-term debt at December 31, 2019 consists of $2.9 billion bearing interest at fixed rates and $0.7 billion bearing interest at variable rates.

The variable rate instruments consist of a $425.0 million MTCH Term Loan and a $247.5 million ANGI Term Loan.

The MTCH Term Loan bears interest at LIBOR plus 2.50% , or 4.44% , at December 31, 2019 .

The ANGI Term Loan bears interest at LIBOR plus 1.50% , or 3.25% at December 31, 2019 .

The amount of interest ultimately paid on the MTCH and ANGI term loans may differ based on changes in interest rates.

For additional information on long-term debt arrangements, see " Note 7—Long-term Debt " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ."

The Company leases land, office space, data center facilities and equipment used in connection with operations under various operating leases, the majority of which contain escalation clauses.

Operating lease obligations include legally binding minimum lease payments for leases signed but not yet commenced.

(b) Represents contractual amounts due including interest on both fixed and variable rate instruments.

Long-term debt at December 31, 2020 consists of the 5.00%, 5.625%, 4.125%, and 4.625% Senior Notes of $450 million, $350 million, $500 million, and $500 million, respectively, which bear interest at fixed rates;

the 2022, 2026, and 2030 Exchangeable Notes of $518 million, $575 million, and $575 million, respectively, which bear interest at fixed rates;

and the Term Loan balance of $425 million, which bears interest at a variable rate.

The Term Loan bears interest at LIBOR plus 1.75%, or 1.96%, at December 31, 2020.

The amount of interest ultimately paid on the Term Loan may differ based on changes in interest rates and outstanding balances.

For additional information on long-term debt, see “Note 7—Long-term Debt, net” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.”

(c) The Company leases office space, data center facilities and equipment used in connection with its operations under various operating leases, many of which contain escalation clauses.

The Company is also committed to pay a portion of the related operating expenses under certain lease agreements.

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For additional information on operating leases, see “Note 13—Leases” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data.”

The purchase obligations primarily consist of payments for cloud computing arrangements, advertising commitments, and a remaining payment related to a 50% interest in a corporate aircraft.

For additional information on purchase obligations, see " Note 14—Commitments and Contingencies " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data ."

(d) The purchase obligations consist primarily of a web hosting commitment.

We also had $0.2 million of letters of credit and surety bonds outstanding at December 31, 2020 that could potentially require performance by the Company in the event of demands by third parties or other contingent events.

Off-Balance Sheet Arrangements

See the commitments section of " Note 14—Commitments and Contingencies " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data " for additional information on our off-balance sheet arrangements.

Other than the items described above, the Company did not have any off-balance sheet arrangements at December 31, 2020.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following disclosure is provided to supplement the descriptions of IAC's accounting policies contained in " Note 2—Summary of Significant Accounting Policies " to the consolidated financial statements included in " Item 8—Consolidated Financial Statements and Supplementary Data " in regard to significant areas of judgment.

The following disclosure is provided to supplement the descriptions of Match Group’s accounting policies contained in “Note 2—Summary of Significant Accounting Policies” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data” in regard to significant areas of judgment.

Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financial statements in accordance with U.S.

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Business Combinations and Contingent Consideration Arrangements

Acquisitions, which are generally referred to in GAAP as business combinations, are an important part of the Company's growth strategy.

The Company invested $205.7 million and $243.3 million (including the value of ANGI Homeservices Class A common stock issued in connection with the acquisition of Handy) in acquisitions in the years ended December 31, 2019 and 2018 , respectively.

Acquisitions have been, and will continue to be, an important part of the Company’s growth strategy.

The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill.

Management makes two critical determinations at the time of an acquisition, the reporting unit that will benefit from the acquisition and to which goodwill will be assigned and the allocation of the purchase price of the business to the assets acquired and the liabilities assumed based upon their fair values.

The reporting unit determination is important beyond the initial allocation of purchase price because future impairment assessments of goodwill, as described below, are performed at the reporting unit level.

Historically, when the Company’s acquisitions have been complementary to existing reporting units, for example, the 2019 acquisition of Magisto by Vimeo and the 2018 acquisitions of Handy by ANGI and TelTech by Mosaic Group, the goodwill is allocated to these reporting units.

Acquisitions within the Emerging & Other reportable segment, such as NurseFly in 2019 and Bluecrew in 2018, usually result in the creation of new reporting units because they are standalone businesses with unique product offerings, management or target markets, for example.

The allocation of purchase price to the assets acquired and liabilities assumed based upon their fair values is complex because of the judgments involved in determining these values.

The determination of purchase price and the fair value of monetary assets acquired and liabilities assumed is typically the least complex aspect of the Company’s accounting for business combinations due to management’s experience and the inherently lower level of complexity.

Due to the higher degree of complexity associated with the valuation of intangible assets, the Company usually obtains the assistance of outside valuation experts in the allocation of purchase price to the identifiable intangible assets acquired, which can be both definite-lived, such as acquired technology, customer and contractor relationships, or indefinite lived, such as acquired trade names and trademarks.

While outside valuation experts may be used, management has ultimate responsibility for the valuation methods, models and inputs used and the resulting purchase price allocation.

The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to the reporting unit that is expected to benefit from the business combination as of the acquisition date.

In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price.

The premise underlying the accounting for contingent consideration arrangements is that there are divergent views as to the acquired company’s valuation between the Company and the selling shareholders of the acquiree.

Therefore, a model is developed with future payments of a portion of the purchase price linked to one or more financial (e.g., revenue and/or profit performance) and/or operating (e.g., number of subscribers) metrics that will be achieved over a specified time frame in the future based upon the performance of the business.

In keeping with the accounting guidance for business combinations, each of these arrangements is initially recorded at its fair value at the time of the acquisition and the fair value is included in the aggregate purchase price.

The fair value of these intangible assets is based on valuations that use information and assumptions provided by management.

In connection with certain business combinations in the past, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price.

Each of these arrangements is initially recorded at its fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled.

The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics.

The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the consolidated financial statements.

The number of scenarios used is typically greater for longer-term arrangements.

The contingent consideration arrangements are reassessed and reflected at current fair values for each subsequent reporting period thereafter until settled.

The changes in the remeasured fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in "General and administrative expense" in the consolidated statement of operations.

Significant changes in the specified forecasted financial or operating metrics can result in a significantly higher or lower fair value measurement, which can result in volatility of general and administrative expense as the resulting remeasurement gains and losses are recorded.

Significant changes in forecasted earnings or operating metrics would result in a significantly higher or lower fair value measurement.

The changes in the remeasured fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in “General and administrative expense” in the accompanying consolidated statement of operations.

Recoverability of Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangible assets are assessed annually for impairment as of October 1, or more frequently if an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset has declined below its carrying value.

The carrying value of goodwill is $2.9 billion and $2.7 billion at December 31, 2019 and 2018 , respectively.

Goodwill is the Company’s largest asset with a carrying value of $1.3 billion and $1.2 billion at December 31, 2020 and 2019, representing 43% and 15%, respectively, of the Company’s total assets.

Indefinite-lived intangible assets, which consist of the Company’s acquired trade names and trademarks, have a carrying value of $226.6 million and $221.2 million at December 31, 2020 and 2019, respectively.

Goodwill and indefinite-lived intangible assets are assessed annually for impairment as of October 1, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value.

In performing its annual goodwill impairment assessment, the Company has the option under GAAP to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value;

if the conclusion of the qualitative assessment is that there are no indicators of impairment, the Company does not perform a quantitative test, which would require a valuation of the reporting unit, as of October 1.

GAAP provides a not all-inclusive set of examples of macroeconomic, industry, market and company specific factors for entities to consider in performing the qualitative assessment described above;

management considers the factors it deems relevant in making its more likely than not assessments.

While the Company also has the option under GAAP to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent.

If the conclusion of our qualitative assessment is that there are indicators of impairment and a quantitative test is required, the annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of the Company's reporting unit that is being tested to its carrying value.

If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.

If the carrying value of a reporting unit exceeds its estimated fair value, a goodwill impairment equal to the excess is recorded.

The Company’s annual assessment of the recovery of goodwill begins with management’s reassessment of its operating segments and reporting units.

A reporting unit is an operating segment or one level below an operating segment, which is referred to as a component.

This reassessment of reporting units is also made each time the Company changes its operating segments.

Separate from the impact of the change in operating segments, the Company concluded that the Applications operating segment should be split into two reporting units - Desktop and Mosaic Group - effective October 1, 2018.

If the goodwill of a reporting unit is allocated to newly formed reporting units, the allocation is usually made to each reporting unit based upon their relative fair values.

For the Company's annual goodwill test at October 1, 2019 , a qualitative assessment of the MTCH, ANGI, Vimeo, Mosaic Group (included in the Applications segment), College Humor Media, Bluecrew and Nursefly reporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values.

The primary fact ors that the Company considered in its qualitative assessment for each of these reporting units are described below:

MTCH's October 1, 2019 market capitalization of $20.0 billion exceeded its carrying value by approximately $19.8 billion and MTCH's strong operating performance.

ANGI's October 1, 2019 market capitalization of $3.6 billion exceeded its carrying value by approximately $2.2 billion.

The Company prepared valuations of the Vimeo, Mosaic Group, Bluecrew and Nursefly reporting units primarily in connection with the issuance and/or settlement of equity awards that are denominated in the equity of these businesses subsequent to January 1, 2019 .

The valuations were prepared time proximate to, however, not as of, October 1, 2019 .

The fair value of each of these businesses was in excess of its October 1, 2019 carrying value.

For the Company's annual goodwill test at October 1, 2019, the Company quantitatively tested the Desktop reporting unit (included in the Applications segment).

The Company's quantitative test indicated that there was no impairment.

The Company's Dotdash, Ask Media Group and The Daily Beast reporting units have no goodwill.

The aggregate goodwill balance for the Desktop reporting unit for which the most recent estimate of fair value is less than 10% over its carrying value is approximately $265.1 million .

The fair value of the Company's reporting units (except for MTCH and ANGI described above) is determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year.

The Company uses the same approach in determining the fair value of its businesses in connection with its non-public subsidiary denominated stock-based compensation plans, which can be a significant factor in the decision to apply the qualitative assessment rather than a quantitative test.

Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount

and timing of expected future cash flows and appropriate discount rates.

The expected cash flows used in the DCF analyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates.

The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units.

Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reporting unit's current results and forecasted future performance, as well as macroeconomic and industry specific factors.

The discount rates used in the quantitative test for determining the fair value of the Company's reporting units was 12.5% in 2019 and ranged from 12.5% to 15% in 2018 .

Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer gr oup of companies.

From the comparable companies, a representative market multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit.

To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors.

The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis.

If needed, the annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of each reporting unit to its carrying value, including goodwill.

If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.

If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss equal to the excess is recorded.

The 2020 and 2019 annual assessments did not identify any impairments.

As a result of the Separation, the Company had a negative carrying value for the Company’s annual goodwill test at October 1, 2020.

Additionally, an impairment test of goodwill was not necessary because there were no factors identified that would indicate an impairment loss.

The Company continued to have a negative carrying value at December 31, 2020.

While the Company has the option to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company’s policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent.

The Company determines the fair value of its 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.

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If the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment equal to the excess is recorded.

The aggregate carrying value of indefinite-lived intangible assets for which the most recent estimate of the excess of fair value over carrying value is less than 10% is approximately $121.2 million.

The 2019 annual assessment of goodwill and indefinite-lived intangible assets identified a $3.3 million goodwill impairment charge and $0.7 million trade name impairment, both related to the College Humor Media business, and a $6.6 million impairment charge related to a trade name at MTCH.

The 2018 annual assessment of goodwill did not identify any impairments.

The 2018 annual assessment of indefinite-lived intangible assets identified impairment charges of $27.7 million and $1.1 million related to certain Desktop and College Humor Media indefinite-lived trade names, respectively.

The indefinite-lived intangible asset impairment charge at Desktop was due to Google’s policy changes related to its Chrome browser which became effective on September 12, 2018 and have negatively impacted the distribution of our B2C downloadable desktop products.

The impairment charge related to the B2C trade name was identified in our annual impairment assessment as of October 1, 2018 and reflects the projected reduction in profits and revenues and the resultant reduction in the assumed royalty rate from these policy changes.

The impairment charges are included in "Amortization of intangibles" in the consolidated statement of operations.

During the year ended December 31, 2020, the Company recognized an impairment charge related to the Match brand in the UK and the Meetic brand in Europe of $4.6 million.

During the year ended December 31, 2019, the Company recognized an impairment charge on the Match brand in the UK of $6.6 million.

At December 31, 2019, the aggregate indefinite-lived intangible asset balance for which the estimate of fair value at that time was less than 110% of their carrying values was approximately $92.3 million.

At December 31, 2020, no indefinite-lived intangible asset balance had an estimated fair value less than 110% of carrying value.

Recoverability and Estimated Useful Lives of Long-Lived Assets

We review the carrying value of all long-lived assets, comprising right-of-use assets ("ROU assets"), property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

We review the carrying value of all long-lived assets, consisting of property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

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In addition, the Company reviews the useful lives of its long-lived assets whenever events or changes in circumstances indicate that these lives may be changed.

The carrying value of these long-lived assets is $671.1 million and $492.1 million at December 31, 2019 and 2018 , respectively.

The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized.

At December 31, 2019 and 2018 , the balance of the Company's net deferred tax asset is $145.7 million and $41.2 million , respectively.

The Company evaluates and accounts for uncertain tax positions using a two-step approach.

Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination.

Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.

The carrying value of property and equipment and definite-lived intangible assets was $112.1 million and $108.2 million, at December 31, 2020 and 2019, respectively.

Match Group is subject to income taxes in the United States and numerous foreign jurisdictions.

Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

We record a provision for income taxes for the anticipated tax consequences of our reported results of operations using the asset and liability method.

Under this method, we recognize deferred income tax assets and liabilities for the future tax consequences of temporary differences between the financial reporting and tax bases of asset and liabilities, as well as for net operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be realized or settled.

We recognize the deferred income tax effects of a change in tax rates in the period of enactment.

A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized.

We consider all available evidence, both positive and negative,

including historical levels of income, expectations and risks associated with estimates of future taxable income, and tax planning strategies in assessing the need for a valuation allowance.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained based on the technical merits of the position.

Such tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes.

At December 31, 2019 and 2018 , the Company has unrecognized tax benefits, including interest and penalties, of $74.4 million and $52.3 million , respectively.

We consider many factors when evaluating and estimating our tax positions and unrecognized tax benefits, which may require periodic adjustment and which may not accurately anticipate actual outcomes.

Although management currently believes changes to unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

The ultimate amount of deferred income tax assets realized and the amounts paid for deferred income tax liabilities and unrecognized tax benefits may vary from our estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.

The Company has not provided for approximately $2.1 million of deferred taxes on $41.8 million of international cash earnings that are indefinitely reinvested outside the U.S.

The remaining $171.2 million of international cash can be repatriated without any significant tax consequences.

The Company reassesses its intention to remit or permanently reinvest these cash earnings each reporting period;

any required adjustment to the income tax provision would be reflected in the period that the Company changes this intention.

During the year ended December 31, 2019 , international cash totaling $70.1 million was repatriated to the U.S.

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustment.

We make adjustments to our unrecognized tax benefits when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.

Although we believe that we have adequately reserved for our uncertain tax positions, the final outcome of these matters may vary significantly from our estimates.

To the extent that the final outcome of these matters is different from the amounts recorded, such differences will affect the income tax provision in the period in which such determination is made, and could have a material impact on our financial condition and operating results.

As of December 31, 2020, $158.1 million in cash and cash equivalents was held by our foreign subsidiaries.

Generally, our ability to distribute cash from these subsidiaries is limited to that subsidiary’s distributable reserves and after considering other corporate legal restrictions.

As a result of the Tax Cuts and Jobs Act enacted in the U.S.

in 2017, earnings in our foreign jurisdictions are generally available for distribution to the U.S.

without significant tax consequences.

Stock-Based Compensation

The Company recorded stock-based compensation expense of $102.3 million and $89.7 million for the years ended December 31, 2020 and 2019, respectively.

Included in stock-based compensation expense in the years ended December 31, 2019 and 2018 is $32.6 million and $70.6 million, respectively, related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certain converted equity awards resulting from the termination of Angie's List employees in connection with the Combination.

Stock-based compensation at the Company is complex due to our desire to attract, retain, inspire and reward outstanding entrepreneurs and managers at each of our companies, including recently acquired companies, by allowing them to benefit directly from the value they help to create.

We accomplish these objectives, in part, by issuing equity awards denominated in the equity of our non-public subsidiaries as well as in IAC, MTCH and ANGI.

We further refine this approach by tailoring certain equity awards to the applicable circumstances.

For example, we issue certain equity awards for which vesting is linked to the achievement of a performance target such as revenue or profits;

these awards are referred to as performance-based awards.

In other cases, we link the vesting of equity awards to the achievement of a value target for a subsidiary or IAC, MTCH or ANGI’s stock price, as applicable;

Stock-based compensation at the Company is complex due to our desire to attract, retain, and reward employees at many of our brands by allowing them to benefit from the value they help to create.

We also utilize equity awards as part of our acquisition strategy.

We accomplish these objectives, in part, by issuing equity awards denominated in the equity of our non-public subsidiaries as well as in Match Group, Inc.

We further refine this approach by tailoring the terms of equity awards as appropriate.

For example, we issue certain equity awards with vesting conditioned on the achievement of specified performance targets such as revenue or profits;

these awards are referred to as performance awards.

In other cases, we condition the vesting of equity awards to the achievement of value targets for a specific subsidiary or the Company’s stock price;

these awards are referred to as market-based awards.

The nature and variety of these types of equity-based awards creates complexity in our determination of stock-based compensation expense.

In addition, acquisitions are an important part of the Company's growth strategy.

These transactions may result in the modification of equity awards which creates additional complexity and additional stock-based compensation expense.

For example, the Combination resulted in the conversion of previously issued HomeAdvisor and Angie’s List awards into ANGI Homeservices awards, and the recognition of additional stock-based compensation expense as described below.

In addition, our internal reorganizations can also lead to modifications of equity awards and result in additional complexity and stock-based compensation expense.

Finally, the means by which we settle our equity-based awards also introduces complexity into our financial reporting.

We provide a path to liquidity by settling the non-public subsidiary denominated awards in IAC, MTCH or ANGI shares, as applicable.

In addition, certain former MTCH and ANGI subsidiary denominated awards can be settled in IAC or MTCH and ANGI awards at the Company’s election.

These features increase the complexity of our earnings per share calculations.

The Company estimated the fair value of stock options issued (including those modified in connection with the Combination) using a Black-Scholes option pricing model and, for those with a market condition, a lattice model.

For stock options, including subsidiary denominated equity, the value of the stock option is measured at the grant date at fair value and expensed over the vesting term.

The impact on stock-based compensation expense for the year ended December 31, 2019 , assuming a 1% increase in the risk-free interest rate, a 10% increase in the volatility factor and a one-year increase in the

weighted average expected term of the outstanding options would be an increase of $3.1 million, $13.6 million and $5.0 million, respectively.

The Company also issues RSUs, performance-based RSUs and market-based RSUs.

For RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying IAC common stock and expensed as stock-based compensation expense over the vesting term.

For performance-based RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying IAC common stock and expensed as stock-based compensation over the vesting term when the performance targets are considered probable of being achieved.

For market-based RSUs, a lattice model is used to estimate the value of the awards.

Investments in Equity Securities

The Company invests in equity securities as part of its investment strategy.

Our equity securities, other than those of our consolidated subsidiaries and those accounted for under the equity method, are accounted for at fair value or under the measurement alternative of ASU No.

2016-01, following its adoption on January 1, 2018, with changes recognized within other income (expense), net each reporting period.

Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer;

value is generally determined based on a market approach as of the transaction date.

A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company.

The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment.

Factors we consider in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors.

When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of our investments in equity securities, which require judgment and the use of estimates.

When our assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge within other income (expense), net.

The carrying value of the Company’s equity securities without readily determinable fair values is $353.1 million and $235.1 million at December 31, 2019 and 2018 , respectively, which is included in "Long-term investments" in the consolidated balance sheet.

The Company had an investment in Pinterest, which became a publicly-traded company in the second quarter of 2019.

With effect from Pinterest's initial public offering, the Company's investment has been accounted for as a marketable security.

Prior to this, the Company accounted for its investment in Pinterest as an equity security without a readily determinable fair value.

During 2019, the Company recognized a gain of $20.5 million on the sale of its remaining shares of Pinterest.

During 2018, the Company recognized a gain of $26.8 million on the sale of certain Pinterest shares held by the Company and a $128.8 million unrealized gain (or upward adjustment) to adjust our remaining interest in Pinterest to fair value.

In addition, during 2019, the Company recognized $14.5 million in net upward adjustments related to equity securities without readily determinable fair values.

During 2018, the Company recognized other-than-temporary impairments (or downward adjustments) of $4.9 million related to equity securities without readily determinable fair values and $0.6 million related to an equity method investment.

The Company issues restricted stock units (“RSUs”) and performance-based stock units (“PSUs”).

The value of RSUs with vesting subject only to continued service is based on the fair value of Match Group common stock on the grant date.

The value of RSUs that include a market condition is based on fair value estimated using a lattice model.

The value of RSUs is expensed as stock-based compensation expense over the applicable vesting term.

For PSU grants, the expense is measured at the grant date as the fair value of Match Group common stock and expensed as stock-based compensation over the vesting term if the performance targets are considered probable of being achieved.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis