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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-02-25 compared with 2020-02-28 · 1172 added, 1530 removed, 551 unchanged (83% of the section changed)

1 unchanged sentence

Interest Rate Risk

The Company's exposure to market risk for changes in interest rates relates primarily to the Company's long-term debt, including current maturities.

At December 31, 2019 , the Company's outstanding debt was $3.5 billion , of which $2.9 billion bears interest at fixed rates.

If market rates decline, the Company runs the risk that the related required payments on the fixed rate debt will exceed those based on market rates.

The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s long-term debt.

At December 31, 2020, the Company’s outstanding long-term debt was $3.9 billion, of which $3.5 billion consists of Senior Notes and Exchangeable Senior Notes that bear interest at fixed rates.

If market rates decline, the Company runs the risk that the required payments on the fixed-rate debt will exceed those on debt based on market rates.

A 100 basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $135.5 million.

Such potential increase or decrease in fair value is based on certain simplifying assumptions, including a constant level and rate of fixed-rate debt for all maturities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period.

The $425 million MTCH Term Loan and the $247.5 million outstanding balance on the ANGI Term Loan bear interest at variable rates.

The MTCH Term Loan bears interest at LIBOR plus 2.50% .

As of December 31, 2019 , the rate in effect was 4.44% .

If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the MTCH Term Loan would increase or decrease by $4.3 million .

The ANGI Term Loan bears interest at LIBOR plus 1.50% .

As of December 31, 2019 , the rate in effect was approximately 3.25% .

If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the ANGI Term Loan would increase or decrease by $2.5 million .

At December 31, 2020, the $425 million Term Loan bore interest at a variable rate, LIBOR plus 1.75%.

At December 31, 2020, the rate in effect was 1.96%.

If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense and payments on the Term Loan would increase or decrease, respectively, by $4.3 million based upon the outstanding balance and rate in effect at December 31, 2020.

On February 13, 2020, the Credit Facility and the Term Loan were amended to, among other things, provide for a benchmark replacement should the LIBOR rate not be available in the future.

The rate used would be agreed to between the administrative agent and Match Group and may be based upon a secured overnight financing rate at the Federal Reserve Bank of New York.

Additional information about the benchmark replacement can be found Amendment No.

6 to the Credit Agreement.

Foreign Currency Exchange Risk

The Company conducts business in certain foreign markets, primarily in various jurisdictions within the European Union, and, as a result, is exposed to foreign exchange risk for both the Euro and British Pound ("GBP").

The Company conducts business in certain foreign markets, primarily in various jurisdictions within the European Union (“EU”) and Asia.

We are exposed to foreign exchange risk for primarily the Euro and British Pound (“GBP”).

For the years ended December 31, 2020, 2019 and 2018, international revenue accounted for 53%, 53% and 50%, respectively, of our consolidated revenue.

The Company has exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S.

As a result, as foreign currency exchange rates fluctuate, the translation of the statement of operations of the Company's international businesses into U.S.

We have exposure to foreign currency exchange risk related to transactions carried out in a currency other than the U.S.

dollar, and investments in foreign subsidiaries with a functional currency other than the U.S.

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.

The Company is also exposed to foreign currency transaction gains and losses to the extent it or its subsidiaries conduct transactions in and/or have assets and/or liabilities that are denominated in a currency other than the entity's functional currency.

The Company recorded foreign exchange (losses) and gains of $(1.0) million , $5.3 million and $(16.8) million for the years ended December 31, 2019, 2018 and 2017, respectively.

The increase in GBP versus the U.S.

dollar during 2018 and 2017, generated the majority of the Company's foreign currency exchange gains and losses in these years.

The foreign exchange gains and losses are primarily related to a U.S.

dollar denominated intercompany loan related to a 2016 acquisition in which the receivable is held by a foreign subsidiary with a GBP functional currency.

The foreign exchange losses in 2017 were further impacted by U.S.

dollar denominated cash, the majority of which is from the proceeds received in the PriceRunner sale in March 2016, held by a foreign subsidiary with a GBP functional currency.

Subsequent to December 31, 2017, the Company moved this U.S.

dollar denominated cash to a U.S.

dollar functional currency entity.

The average GBP and Euro exchange rates strengthened against the U.S.

Dollar by 1% and 2%, respectively, in 2020 compared to 2019.

Foreign currency exchange rate changes during the years ended December 31, 2020 and 2019 negatively impacted revenue by $6.4 million and $47.5 million, respectively, or less than 1% and 2% of total revenue, respectively.

See “Principles of Financial Reporting” in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the definition of Revenue excluding foreign exchange effects and a reconciliation of Revenue to Revenue excluding foreign exchange effects.

Foreign currency exchange gains and losses included in the Company’s earnings for the years ended December 31, 2020, 2019 and 2018 are (losses) and gains of $(0.6) million, $(0.9) million and $5.3 million, respectively.

Foreign currency exchange gains or losses historically have not been material to the Company.

As a result, historically, the Company has not hedged foreign currency exposures.

The continued growth and expansion of our international operations increases our exposure to foreign exchange rate fluctuations.

Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could have a significant impact on our future results of operations.

As a result, we have not historically, hedged any foreign currency exposures.

The continued growth and expansion of our international operations into new countries increases our exposure to foreign exchange rate fluctuations.

Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could adversely affect our future results of operations.

Consolidated Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of IAC/InterActiveCorp

To the Shareholders and the Board of Directors of Match Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of IAC/InterActiveCorp and subsidiaries (the Company) as of December 31, 2019 and 2018 , and the related consolidated statements of operations, comprehensive operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2019 , and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheet of Match Group, Inc.

and subsidiaries (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2021 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Updates

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases, which generally requires all leases be recognized in the statement of financial position, in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842) .

The Company adopted the standard effective January 1, 2019 on a prospective basis.

Additionally, as discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for the recognition, measurement, presentation and disclosure of certain equity securities due to the adoption of ASU No.

2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities .

The Company adopted the standard effective January 1, 2018 electing the measurement alternative.

Basis for Opinion

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(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business Combinations - Valuation of Acquired Intangible Assets

Description of the Matter

During the year ended December 31, 2019, the Company completed business combinations for total consideration, net of cash acquired, of $205.7 million.

As disclosed in Note 2 to the consolidated financial statements, 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.

Auditing management’s allocation of the purchase price of business combinations required complex auditor judgment due to the significant measurement uncertainty in determining the fair value of the identifiable intangible assets acquired.

In particular, the fair value of estimates for identifiable intangible assets were sensitive to changes in assumptions, including discount rates, revenue growth rates, royalty rates and the projected cash flow terminal growth rates.

These assumptions relate to the future performance of the acquired businesses and are affected by such factors as expected future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for business combinations.

For example, we tested controls over the Company’s process to identify and measure acquired intangible assets as well as controls over management's review of the significant assumptions described above.

To test the estimated fair value of the identifiable intangible assets acquired, our audit procedures included, among others, assessing the completeness of the identifiable intangible assets acquired, assessing the valuation methodologies and testing the significant assumptions described above and underlying data used by the Company.

For example, we compared the significant assumptions used by management to the historical results of the acquired businesses as well as to current industry and economic trends.

We performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of the identifiable intangible assets resulting from changes in the assumptions.

In addition, we involved an internal valuation specialist to assist in evaluating the methodologies used and the significant assumptions applied in developing the fair value estimates.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Stock-Based Compensation

Description of the Matter

During the year ended December 31, 2019, the Company recorded stock-based compensation expense of $240.8 million.

As discussed in Note 11 to the consolidated financial statements, the Company issues various types of equity awards, including stock options, restricted stock units, performance-based stock units, market-based awards and equity instruments denominated in the shares of certain subsidiaries.

Auditing the Company's accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the prevalence of modifications, the subjectivity of assumptions used to value stock-based awards (e.g.

expected term), the frequent use of performance-based vesting conditions and the existence of awards denominated in the shares of certain subsidiaries.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over stock-based compensation.

For example, we tested controls over the Company's process to assess the completeness of its share-based awards and for measuring and recording stock-based compensation, including management’s review of the underlying calculations, the significant assumptions used in valuing certain awards and related valuation reports prepared by its specialists.

Description of the Matter During the year ended December 31, 2020, the Company recorded stock-based compensation expense of $102.3 million.

As discussed in Note 11 to the consolidated financial statements, the Company issues various types of equity awards, including stock options, restricted stock units, performance-based awards, market-based awards and equity instruments denominated in the shares of certain subsidiaries.

Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the subjectivity of assumptions used to value stock-based awards (e.g., expected term), the frequent use of performance-based vesting conditions and the existence of awards denominated in the shares of certain subsidiaries.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over stock-based compensation.

For example, we tested controls over the Company’s process to assess the completeness of its share-based awards and for measuring and recording stock-based compensation, including management’s review of the underlying calculations, and the significant assumptions used in valuing certain awards.

To test stock-based compensation expense, we performed audit procedures that included, among others, assessing the completeness of the awards granted and evaluating the methodologies used to estimate the fair value of the awards granted and the significant assumptions described above.

Our procedures also included, evaluating the key terms and conditions of awards granted to assess the accounting treatment for a sample of awards, testing the clerical accuracy of the calculation of the expense recorded, and assessing the Company's accounting for award modifications.

Additionally, for certain awards issued by the Company, we involved our internal valuation specialists to assess the valuation methodologies and assumptions used in estimating the fair value of the awards.

Goodwill and Indefinite-Lived Intangible Assets - Quantitative Impairment Assessment

Description of the Matter

As of December 31, 2019, the Company’s goodwill and indefinite-lived intangible asset balances were $2.9 billion and $446.5 million, respectively.

As disclosed in Note 2 to the consolidated financial statements, goodwill and indefinite-lived intangible assets are assessed annually for impairment using either a qualitative or quantitative approach as of October 1, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value.

Auditing management’s quantitative impairment tests for goodwill and indefinite-lived intangible assets was complex and judgmental due to the measurement uncertainty in estimating the fair value of the reporting units for goodwill and the fair value of indefinite-lived intangible assets.

Specifically, the fair value estimate of the Company's Desktop reporting unit was sensitive to assumptions such as the discount rate, revenue growth rates, and the projected cash flow terminal growth rate.

The fair value estimates for indefinite-lived intangible assets were sensitive to assumptions such as discount rates, revenue growth rates, royalty rates and projected cash flow terminal growth rates.

Our procedures also included, evaluating the key terms and conditions of awards granted to assess the accounting treatment for a sample of awards and testing the clerical accuracy of the calculation of the expense recorded.

Additionally, we involved our internal valuation specialists to assess certain assumptions used in estimating the fair value of the awards.

Recoverability of Indefinite-Lived Intangible Assets

Description of the Matter As of December 31, 2020, the Company’s indefinite-lived intangible asset balance, excluding goodwill, was $226.6 million.

As disclosed in Note 2 to the consolidated financial statements, 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 an indefinite-lived intangible asset below its carrying value.

Auditing management’s impairment tests for indefinite-lived intangible assets was complex and judgmental due to the measurement uncertainty in estimating the fair value of indefinite-lived intangible assets.

Specifically, the fair value estimates for indefinite-lived intangible assets were sensitive to assumptions such as discount rates, revenue growth rates, royalty rates and projected cash flow terminal growth rates.

These assumptions are affected by such factors as expected future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its goodwill and indefinite-lived intangible assets impairment review process.

For example, we tested controls over the Company’s forecasting and budgeting process as well as controls over management's review of the significant assumptions used to estimate the fair values of the reporting unit for goodwill and the indefinite-lived intangible assets.

To test the estimated fair value of the Desktop reporting unit and the Company's indefinite-lived intangible assets, our audit procedures included, among others, assessing the methodologies and testing the significant assumptions and underlying data used by the Company.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its indefinite-lived intangible assets impairment review process.

For example, we tested controls over the Company’s forecasting and budgeting process as well as controls over management’s review of the significant assumptions used to estimate the fair values of the indefinite-lived intangible assets.

To test the estimated fair value of indefinite-lived intangible assets, our audit procedures included, among others, assessing the methodologies and testing the significant assumptions and underlying data used by the Company.

We evaluated the Company’s underlying forecast and budget information by comparing the significant assumptions to current industry and economic trends, changes in the Company’s business model and assessed the historical accuracy of management’s estimates.

For example, we evaluated management’s forecasted revenue to identify, understand and evaluate changes as compared to historical results.

We performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of the Desktop reporting unit for goodwill and the Company's indefinite-lived intangible assets resulting from changes in the assumptions.

In addition, we involved an internal valuation specialist to assist in evaluating the methodologies and significant assumptions applied in developing the fair value estimates.

We performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of indefinite-lived intangible assets resulting from changes in the assumptions.

In addition, we involved an internal valuation specialist to assist in evaluating management’s methodologies and significant assumptions applied in developing the fair value estimates.

Separation of Match Group and IAC/InterActiveCorp

Description of the Matter As described in Note 1 to the consolidated financial statements, the companies formerly known as Match Group, Inc.

(“Former Match Group”) and IAC/InterActiveCorp (“Former IAC”) completed the separation of Match Group from IAC on June 30, 2020.

At the effective date, the two public companies were fully separated as follows:

(1) Match Group, which consists of the businesses of Former Match Group and certain financing subsidiaries previously owned by Former IAC, and (2) IAC/InterActiveCorp, formerly known as IAC Holdings, Inc.

(“IAC”), consisting of Former IAC’s businesses other than Match Group and certain financing subsidiaries (the “Separation”).

As disclosed in Note 4, the operations of the Former IAC businesses other than Match Group and certain financing subsidiaries, are presented as discontinued operations.

Auditing the Separation transaction required a significant amount of audit effort due to the especially complex nature of the transaction among related parties and the presentation of the Former IAC businesses as discontinued operations.

In particular, significant audit effort was necessary to perform procedures and evaluate evidence relating to management's evaluation of the Separation transaction, including the determination of the U.S.

federal income tax consequences, which required complex auditor judgement in determining the appropriate tax treatment for the Separation.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for the Separation and basis of presentation.

For example, we tested controls over management’s analysis and review of the Separation documents, management’s review of the accounting conclusions reached related to the discounted operations presentation, management’s review of the recording of the related journal entries and management’s review and analysis of the appropriate tax treatment for the Separation.

To test the accounting for the transactions related to the Separation among related parties and the basis of presentation, our audit procedures included, among others, inspecting the Separation related documents, such as the transaction agreement and tax matters agreement;

inquiring of executive officers, key members of management, the Audit Committee of the Board of Directors and legal counsel regarding the Separation;

inspecting the Company’s minutes from meetings of the Board of Directors and related committees;

verifying that the discontinued operations were properly determined, calculated and presented and assessing the appropriateness of the composition of the consolidated financial statements.

For example, we tested the Separation journal entries recorded and vouched the cash transactions.

In addition, we involved internal tax specialists to assist in reviewing the series of steps that effectuated the Separation and the related tax opinion, verifying the appropriateness of the tax treatment for the Separation.

/s/ ERNST & YOUNG LLP

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February 25, 2021

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands, except par value amounts)

(In thousands, except share data)

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

Marketable securities

Accounts receivable, net of allowance and reserves of $24,726 and $18,860, respectively

Accounts receivable, net of allowance of $ 286 and $ 578 , respectively

137,023 116,459

Other current assets 144,025 97,850

Current assets of discontinued operations — 3,028,079

Total current assets 1,020,212 3,708,064

Right-of-use assets, net

Property and equipment, net 107,799 101,065

Goodwill 1,270,532 1,239,839

Intangible assets, net 230,900 228,324

Long-term investments

Deferred income taxes 224,013 192,496

Other non-current assets 123,524 64,232

Non-current assets of discontinued operations — 2,830,783

TOTAL ASSETS $ 2,976,980 $ 8,364,803

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current portion of long-term debt

Accounts payable, trade

Accounts payable $ 29,200 $ 20,191

Deferred revenue 239,088 218,843

Accrued expenses and other current liabilities 231,748 182,250

Current liabilities of discontinued operations — 588,896

Total current liabilities 500,036 1,010,180

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Other long-term liabilities 86,428 26,158

Non-current liabilities of discontinued operations — 447,414

Redeemable noncontrolling interests 640 44,527

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SHAREHOLDERS’ EQUITY

Common stock $.001 par value;

Common stock;

$ 0.001 par value;

authorized 1,600,000,000 shares;

issued 263,230 and 262,303 shares, respectively, and outstanding 78,890 and 77,963 shares, respectively

Class B convertible common stock $.001 par value;

267,329,284 and 0 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

Former IAC common stock;

$ 0.001 par value;

authorized 1,600,000,000 shares;

issued 16,157 shares and outstanding 5,789 shares

0 and 263,229,724 shares issued;

and 0 and 78,889,779 shares outstanding at December 31, 2020 and December 31, 2019, respectively

Former IAC Class B convertible common stock;

$ 0.001 par value;

authorized 400,000,000 shares;

0 and 16,157,499 shares issued;

and 0 and 5,789,499 shares outstanding at December 31, 2020 and December 31, 2019, respectively

Additional paid-in capital 7,394,646 11,683,799

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Accumulated other comprehensive loss ( 81,454 ) ( 136,349 )

Treasury stock 194,708 shares

Total IAC shareholders' equity

Treasury stock;

0 and 194,707,945 shares, respectively

— ( 10,309,612 )

Total Match Group, Inc.

shareholders’ equity ( 1,177,667 ) 2,928,042

Noncontrolling interests 1,042 970,276

Total shareholders’ equity

( 1,176,625 ) 3,898,318

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,976,980 $ 8,364,803

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

Years Ended December 31,

2020 2019 2018

(In thousands, except per share data)

Revenue $ 2,391,269 $ 2,051,258 $ 1,729,850

Operating costs and expenses:

Cost of revenue (exclusive of depreciation shown separately below)

635,833 527,184 410,000

Selling and marketing expense 479,907 427,440 419,954

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Product development expense 169,811 151,960 132,030

Depreciation 41,271 34,355 34,827

Amortization of intangibles 7,525 8,727 1,318

Goodwill impairment

Total operating costs and expenses 1,645,554 1,405,804 1,180,381

Operating income

745,715 645,454 549,469

Interest expense ( 174,791 ) ( 140,570 ) ( 94,568 )

Other income (expense), net

Earnings before income taxes

Income tax benefit (provision)

15,861 ( 2,026 ) 7,510

Earnings from continuing operations, before tax

586,785 502,858 462,411

Income tax provision

( 32,874 ) ( 8,225 ) ( 11,307 )

Net earnings from continuing operations

553,911 494,633 451,104

(Loss) earnings from discontinued operations, net of tax

( 366,070 ) 49,187 306,643

187,841 543,820 757,747

Net earnings attributable to noncontrolling interests

Net earnings attributable to IAC shareholders

Per share information attributable to IAC shareholders:

Basic earnings per share

Diluted earnings per share

( 59,280 ) ( 112,689 ) ( 130,786 )

Net earnings attributable to Match Group, Inc.

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

Net earnings per share from continuing operations:

Basic $ 2.21 $ 2.15 $ 2.03

Diluted $ 2.00 $ 1.88 $ 1.73

Net earnings per share attributable to Match Group, Inc.

shareholders:

Basic $ 0.58 $ 2.37 $ 3.48

Diluted $ 0.49 $ 2.08 $ 3.05

Stock-based compensation expense by function:

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The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS

Years Ended December 31,

2020 2019 2018

(In thousands)

Other comprehensive (loss) income, net of income taxes:

Net earnings $ 187,841 $ 543,820 $ 757,747

Other comprehensive income (loss), net of tax

Change in foreign currency translation adjustment

Change in unrealized gains and losses on available-for-sale securities (net of tax benefit of $3,846 in 2017)

Total other comprehensive (loss) income, net of income taxes

Comprehensive income, net of income taxes

Components of comprehensive (income) loss attributable to noncontrolling interests:

39,415 ( 9,961 ) ( 31,411 )

Change in unrealized losses and gains on available-for-sale securities

( 1 ) ( 5 ) 5

Total other comprehensive income (loss) 39,414 ( 9,966 ) ( 31,406 )

Comprehensive income 227,255 533,854 726,341

Comprehensive loss (income) attributable to noncontrolling interests:

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

Change in foreign currency translation adjustment attributable to noncontrolling interests 1,072 2,023 6,129

Change in unrealized gains and losses of available-for-sale securities attributable to noncontrolling interests

Change in unrealized losses and gains of available-for-sale debt securities attributable to noncontrolling interests — 1 ( 1 )

Comprehensive income attributable to noncontrolling interests ( 58,208 ) ( 110,665 ) ( 124,658 )

Comprehensive income attributable to IAC shareholders

Comprehensive income attributable to Match Group, Inc.

shareholders $ 169,047 $ 423,189 $ 601,683

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2020, 2019, and 2018

IAC Shareholders' Equity

Match Group, Inc.

Shareholders’ Equity

Common Stock $ 0.001 Par Value

Class B Convertible Common Stock $.001 Par Value

Comprehensive

(Loss) Income

Former IAC Common Stock

$ 0.001 Par Value

Former IAC Class B Convertible Common Stock $ 0.001

Noncontrolling

Retained Earnings

Interests $ Shares $ Shares $ Shares Additional Paid-in Capital Retained Earnings Accumulated

Comprehensive

Loss Treasury Stock Total

Match Group, Inc.

Shareholders’

Noncontrolling

Equity Noncontrolling

Interests Total

Shareholders’

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Balance as of December 31, 2017 $ 42,867 $ — — $ 261 260,624 $ 16 16,157 $ 12,165,002 $ 595,038 $ ( 103,568 ) $ ( 10,226,721 ) $ 2,430,028 $ 516,795 $ 2,946,823

Other comprehensive income, net of income tax

Net earnings for the year ended December 31, 2018 33,897 — — — — — — — 626,961 — — 626,961 96,889 723,850

Other comprehensive loss, net of tax ( 702 ) — — — — — — — — ( 25,278 ) — ( 25,278 ) ( 5,426 ) ( 30,704 )

Stock-based compensation expense 1,138 — — — — — — 75,311 — — — 75,311 161,971 237,282

Issuance of common stock pursuant to stock-based awards, net of withholding taxes

Issuance of Former IAC common stock pursuant to stock-based awards, net of withholding taxes

— — — 1 1,679 — — 21,785 — — — 21,786 — 21,786

Issuance of Former Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes

— — — — — — — ( 102,922 ) — 124 — ( 102,798 ) 35,559 ( 67,239 )

Dividends paid to Former Match Group noncontrolling interests — — — — — — — — — — ( 105,126 ) ( 105,126 )

Purchase of treasury stock — — — — — — — — ( 82,891 ) ( 82,891 ) — ( 82,891 )

Distributions to and purchases of redeemable noncontrolling interests

Purchase of noncontrolling interests

Purchase of noncontrolling interest

( 14,785 ) — — — — — — — — — ( 9,364 ) ( 9,364 )

Adjustment of redeemable noncontrolling interests to fair value

Issuance of Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes

Acquisition of Angie's List and creation of noncontrolling interests in ANGI Homeservices

4,098 — — — — — — ( 4,098 ) — — — ( 4,098 ) — ( 4,098 )

Noncontrolling interests created in acquisitions 2,261 — — — — — — — — — 14,307 14,307

Purchase of exchangeable note hedge

Equity component of exchangeable debt issuance, net of deferred financing costs and deferred tax asset

Issuance of warrants

Purchase of Match Group and ANGI treasury stock — — — — — — — ( 133,455 ) — — — ( 133,455 ) — ( 133,455 )

Cumulative effect of adoption of ASU 2014-09

— — — — — — — — 36,795 — — 36,795 3,410 40,205

Other ( 3,087 ) — — — — — — 764 — — — 764 ( 339 ) 425

Balance as of December 31, 2018 65,687 — — 262 262,303 16 16,157 12,022,387 1,258,794 ( 128,722 ) ( 10,309,612 ) 2,843,125 708,676 3,551,801

Cumulative effect of adoption of ASU No.

Other comprehensive loss, net of income tax

Net earnings for the year ended December 31, 2019 2,835 — — — — — — — 431,131 — — 431,131 109,854 540,985

Other comprehensive income (loss), net of tax 39 — — — — — — — — ( 7,942 ) — ( 7,942 ) ( 2,063 ) ( 10,005 )

Stock-based compensation expense 148 — — — — — — 82,619 — — — 82,619 155,457 238,076

Issuance of common stock pursuant to stock-based awards, net of withholding taxes

Purchase of treasury stock

Distributions to and purchases of noncontrolling interests

Issuance of Former IAC common stock pursuant to stock-based awards, net of withholding taxes — — — 1 927 — — ( 82,463 ) — — — ( 82,462 ) — ( 82,462 )

Issuance of Former Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes — — — — — — — ( 236,897 ) — 315 — ( 236,582 ) ( 1,794 ) ( 238,376 )

Purchase of redeemable noncontrolling interests ( 40,432 ) — — — — — — — — — — — — —

Adjustment of redeemable noncontrolling interests to fair value

Issuance of Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes

Dividends paid to Match Group noncontrolling interests

Noncontrolling interests created in acquisitions

IAC/INTERACTIVECORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)

Years Ended December 31, 2019, 2018 and 2017

IAC Shareholders' Equity

11,554 — — — — — — ( 11,554 ) — — — ( 11,554 ) — ( 11,554 )

Noncontrolling interests created in an acquisition 4,781 — — — — — — — — — — — — —

Purchase of exchangeable note hedges — — — — — — — ( 303,428 ) — — — ( 303,428 ) — ( 303,428 )

Equity component of exchangeable Senior Notes, net of deferred financing costs and deferred tax liabilities — — — — — — — 320,998 — — — 320,998 — 320,998

Issuance of warrants — — — — — — — 166,520 — — — 166,520 — 166,520

Purchase of Match Group and ANGI treasury stock — — — — — — — ( 274,302 ) — — — ( 274,302 ) — ( 274,302 )

Other ( 85 ) — — — — — — ( 81 ) — — — ( 81 ) 146 65

Balance as of December 31, 2019 $ 44,527 $ — — $ 263 263,230 $ 16 16,157 $ 11,683,799 $ 1,689,925 $ ( 136,349 ) $ ( 10,309,612 ) $ 2,928,042 $ 970,276 $ 3,898,318

MATCH GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2020, 2019, and 2018 (continued)

Match Group, Inc.

Shareholders’ Equity

Common Stock $ 0.001 Par Value

Class B Convertible Common Stock $.001 Par Value

Comprehensive

(Loss) Income

Former IAC Common Stock

$ 0.001 Par Value

Former IAC Class B Convertible Common Stock $ 0.001

Noncontrolling

Retained Earnings

Interests $ Shares $ Shares $ Shares Additional Paid-in Capital Retained Earnings Accumulated

Comprehensive

Loss (Income) Treasury Stock Total

Match Group, Inc.

Shareholders’

Noncontrolling

Equity Noncontrolling

Interests Total

Shareholders’

1 unchanged sentence

Balance as of December 31, 2019 $ 44,527 $ — — $ 263 263,230 $ 16 16,157 $ 11,683,799 $ 1,689,925 $ ( 136,349 ) $ ( 10,309,612 ) $ 2,928,042 $ 970,276 $ 3,898,318

Other comprehensive income (loss), net of income tax

Net (loss) earnings for the year ended December 31, 2020 ( 3,136 ) — — — — — — — 128,561 — — 128,561 62,416 190,977

Other comprehensive (loss) income, net of tax ( 686 ) — — — — — — — — 40,486 — 40,486 ( 386 ) 40,100

Stock-based compensation expense 15 — — — — — — 134,528 — — — 134,528 86,363 220,891

Issuance of common stock pursuant to stock-based awards, net of withholding taxes

Distributions to and purchases of redeemable noncontrolling interests

Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes — 8 8,373 — — — — 155,285 — — — 155,293 — 155,293

Issuance of Former IAC common stock pursuant to stock-based awards, net of withholding taxes — — — 1 453 — — ( 34,518 ) — — — ( 34,517 ) — ( 34,517 )

Issuance of Former Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes — — — — — — — ( 212,270 ) — 628 — ( 211,642 ) ( 11,405 ) ( 223,047 )

Purchase of redeemable noncontrolling interests ( 3,165 ) — — — — — — — — — — —

Adjustment of redeemable noncontrolling interests to fair value 6,669 — — — — ( 6,669 ) — — — ( 6,669 ) — ( 6,669 )

Issuance of Match Group and ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes

Purchase of Match Group and ANGI Homeservices treasury stock

Noncontrolling interests created in acquisitions

Purchase of exchangeable note hedges

Equity component of exchangeable senior notes, net of deferred financing costs and deferred tax liabilities

Issuance of warrants

Purchase of Match Group and ANGI treasury stock — — — — — — — ( 187,735 ) — — — ( 187,735 ) — ( 187,735 )

Retire treasury stock — — — ( 184 ) ( 184,340 ) ( 10 ) ( 10,368 ) 194 ( 10,309,612 ) — 10,309,612 — — —

Exchange Common stock and Class B for Class M Common stock and spin off IAC ( 43,583 ) 184 183,749 ( 80 ) ( 79,343 ) ( 6 ) ( 5,789 ) ( 4,745,323 ) — 13,781 — ( 4,731,444 ) ( 498,792 ) ( 5,230,236 )

Acquire Former Match Group noncontrolling interest — 58 57,868 — — — — 608,110 — — — 608,168 ( 608,168 ) —

Issuance of common stock — 17 17,339 — — — — ( 17 ) — — — — — —

Other ( 1 ) — — — — — — ( 738 ) — — — ( 738 ) 738 —

Balance as of December 31, 2020 $ 640 $ 267 267,329 $ — — $ — — $ 7,394,646 $ ( 8,491,126 ) $ ( 81,454 ) $ — $ ( 1,177,667 ) $ 1,042 $ ( 1,176,625 )

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

Years Ended December 31,

2020 2019 2018

(In thousands)

Cash flows from operating activities:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Cash flows from operating activities attributable to continuing operations:

Net earnings from continuing operations $ 553,911 $ 494,633 $ 451,104

Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities attributable to continuing operations:

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

Bad debt expense

Goodwill impairment

Deferred income taxes 4,985 ( 19,608 ) ( 23,005 )

Gains on equity securities, net

Losses (gains) from the sale of businesses, net

Accretion of original issue discount of Exchangeable Senior Notes 44,743 30,429 13,134

Other adjustments, net 26,705 12,694 4,032

Changes in assets and liabilities, net of effects of acquisitions and dispositions:

Changes in assets and liabilities

Accounts receivable ( 24,213 ) ( 17,861 ) 17,272

Other assets ( 33,224 ) ( 24,162 ) ( 14,600 )

Accounts payable and other liabilities 24,155 33,741 21,386

1 unchanged sentence

Deferred revenue 23,513 9,478 13,058

Net cash provided by operating activities

Cash flows from investing activities:

Acquisitions, net of cash acquired

Net cash provided by operating activities attributable to continuing operations

788,552 647,989 611,455

Cash flows from investing activities attributable to continuing operations:

Net cash (used) acquired in business combinations — ( 3,759 ) 1,136

Capital expenditures ( 42,376 ) ( 39,035 ) ( 31,397 )

Proceeds from maturities of marketable debt securities

Purchases of marketable debt securities

Net proceeds from the sale of businesses and investments

Purchases of investments ( 9,115 ) — ( 3,800 )

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of IAC debt

Repurchases of IAC debt

Net cash distribution related to Separation of IAC ( 3,870,550 ) — —

Other, net ( 90 ) 1,064 ( 4,143 )

Net cash used in investing activities attributable to continuing operations

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

Cash flows from financing activities attributable to continuing operations:

Borrowings under the Credit Facility 20,000 40,000 260,000

Proceeds from Senior Notes offerings 1,000,000 350,000 —

Proceeds from Exchangeable Senior Notes offerings — 1,150,000 —

Principal payment on Senior Notes ( 400,000 ) — —

Principal payments on Credit Facility ( 20,000 ) ( 300,000 ) —

Purchase of exchangeable note hedges — ( 303,428 ) —

Proceeds from issuance of warrants — 166,520 —

Proceeds from issuance of Match Group debt

Borrowings under Match Group Credit facility

Principal payments on Match Group debt

Principal payments on Match Group Credit facility

Borrowing under ANGI Homeservices Term Loan

Principal payments on ANGI Homeservices Term Loan

Debt issuance costs ( 13,517 ) ( 27,815 ) ( 1,740 )

Purchase of IAC treasury stock

Purchase of Match Group and ANGI Homeservices treasury stock

Proceeds from the exercise of IAC stock options

Proceeds from the exercise of Match Group and ANGI Homeservices stock options

Withholding taxes paid on behalf of IAC employees on net settled stock-based awards

Withholding taxes paid on behalf of Match Group and ANGI Homeservices employees on net settled stock-based awards

Purchase of Match Group stock-based awards

Dividends paid to Match Group noncontrolling interests

Distributions to and purchases of noncontrolling interests

Acquisition-related contingent consideration payments

Net cash provided by (used in) financing activities

Total cash provided

Effect of exchange rate changes on cash and cash equivalents and restricted cash

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Purchase of Former Match Group treasury stock ( 132,868 ) ( 216,353 ) ( 133,455 )

Dividends — — ( 105,126 )

Proceeds from stock offering 1,421,801 — —

Proceeds from issuance of common stock pursuant to stock-based awards 155,402 — 12

Withholding taxes paid on behalf of employees on net settled stock-based awards ( 211,958 ) ( 203,177 ) ( 207,720 )

Purchase of noncontrolling interests ( 15,827 ) ( 1,650 ) ( 9,980 )

Other, net ( 15,187 ) ( 73 ) ( 759 )

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

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

Total cash (used in) provided by continuing operations ( 1,345,733 ) 1,260,283 374,483

Net cash provided by operating activities attributable to discontinued operations 13,630 289,949 376,672

Net cash used in investing activities attributable to discontinued operations ( 963,420 ) ( 287,798 ) ( 135,235 )

Net cash used in financing activities attributable to discontinued operations

( 110,959 ) ( 254,193 ) ( 114,030 )

Total cash (used in) provided by discontinued operations ( 1,060,749 ) ( 252,042 ) 127,407

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 5,426 ( 1,568 ) ( 1,887 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 2,401,056 ) 1,006,673 500,003

Cash, cash equivalents, and restricted cash at beginning of period 3,140,358 2,133,685 1,633,682

Cash, cash equivalents, and restricted cash at end of period $ 739,302 $ 3,140,358 $ 2,133,685

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION

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/InterActiveCorp ("IAC") entered into a Transaction Agreement (the "Transaction Agreement") with Match Group, Inc.

("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".

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).

Our Match Group segment consists of the businesses and operations of Match Group, Inc.

("Match Group" or "MTCH").

MTCH completed its initial public offering ("IPO") on November 24, 2015.

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

MTCH is a leading provider of dating products available in over 40 languages to our users all over the world through applications and websites that we own and operate.

MTCH operates a portfolio of dating brands, including Tinder, Match, Meetic, OkCupid, Hinge, Pairs, PlentyOfFish and OurTime, as well as a number of other brands, each designed to increase users' likelihood of finding a meaningful connection.

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

ANGI Homeservices

Our ANGI Homeservices segment includes the North American (United States and Canada) and European businesses and operations of ANGI Homeservices Inc.

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

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

(the "Combination").

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

ANGI connects quality home service professionals across 500 different categories, from repairing and remodeling to cleaning and landscaping, with consumers.

Over 250,000 domestic service professionals find work through ANGI and consumers turn to at least one of our brands to find a professional for more than 25 million projects each year.

We established category-transforming products with brands such as HomeAdvisor, Angie's List, Handy and Fixd Repair.

On January 25, 2019, ANGI completed the acquisition of Fixd Repair, a home warranty and service company.

On October 19, 2018, ANGI acquired Handy, a leading platform in the United States for connecting individuals looking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals.

ANGI also owns and operates mHelpDesk, a provider of cloud-based field service software for small to mid-size businesses.

Prior to its sale on December 31, 2018, ANGI also operated Felix, a pay-per-call advertising service business.

In addition to its market-leading U.S.

operations, ANGI owns leading home services online marketplaces in France (Travaux), Germany (MyHammer), Netherlands (Werkspot), United Kingdom (MyBuilder Limited or "MyBuilder," which we acquired a

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

controlling interest in on March 24, 2017), Canada (HomeStars Inc.

or "HomeStars," which we acquired a controlling interest in on February 8, 2017) and Italy (Instapro), as well as operations in Austria (MyHammer).

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.

Vimeo provides cloud-based Software-as-a-Service ("SaaS") offerings that allow customers to create, host, stream, monetize, analyze and distribute videos online and across devices.

Vimeo also sold live streaming accessories through its hardware business, which was sold on March 29, 2019.

On May 28, 2019, Vimeo completed the acquisition of Magisto, a video creation service enabling consumers and businesses to create short-form videos.

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

Our Applications segment consists of our Desktop business and Mosaic Group, our mobile business.

Through these businesses, we are a leading provider of global, advertising-driven desktop and subscription-based mobile applications.

Through our Desktop business, we own and operate a portfolio of desktop browser applications that provide users with access to a wide variety of online content, tools and services.

We provide users who download our desktop browser applications with new tab search services, as well as the option of default browser search services.

We distribute our desktop browser applications to consumers free of charge on an opt-in basis directly through direct-to-consumer (primarily Chrome Web Store) and partnership distribution channels.

Through Mosaic Group, we are a leading provider of global subscription mobile applications.

Mosaic Group's products are developed by the following owned and operated businesses:

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

Apalon is a leading mobile development company with one of the largest and most popular application portfolios worldwide.

iTranslate develops and distributes some of the world's most downloaded mobile translation applications, enabling users to read, write, speak and learn foreign languages anywhere in the world.

TelTech develops and distributes unique and innovative mobile communications applications that help protect consumer privacy.

Daily Burn is a health and fitness business that provides streaming fitness and workout videos across a variety of platforms (including mobile, web and other Internet-enabled television platforms).

Emerging & Other

Our Emerging & Other segment primarily includes:

Ask Media Group, a collection of websites providing general search services, and to a lesser extent, content that help users find the information they need;

Bluecrew, a technology driven staffing platform exclusively for flexible W-2 work, which we acquired a controlling interest in on February 26, 2018;

NurseFly, a platform to efficiently connect temporary healthcare professionals with job opportunities, which we acquired a controlling interest in on June 26, 2019;

The Daily Beast, a website dedicated to news, commentary, culture and entertainment that publishes original reporting and opinion from its roster of full-time journalists and contributors;

College Humor Media, a provider of digital content, including its subscription only property, Dropout.tv;

IAC/INTERACTIVECORP AND SUBSIDIARIES

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.

Match Group has one operating segment, Dating, which is managed as a portfolio of dating brands.

Separation of Match Group and IAC

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

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

(“IAC”), consisting of Former IAC’s businesses other than Match Group (the “Separation”).

See “Note 8—Shareholders’ Equity” for additional information about the series of transactions.

As used herein, “Match Group,” the “Company,” “we,” “our,” “us,” and similar terms refer to Match Group, Inc.

and its subsidiaries after the completion of the Separation, unless the context indicates otherwise.

The following diagram illustrates the simplified organizational and ownership structure immediately prior to the Separation.

Under the terms of the Transaction Agreement (the “Transaction Agreement”) dated as of December 19, 2019 and amended as of April 28, 2020 and as further amended as of June 22, 2020, 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.

Former Match Group stockholders (other than Former IAC) received, through the merger, in exchange for each outstanding share of Former Match Group common stock that they held, one share of Match Group common stock and, at the holder’s election, either (i) $ 3.00 in cash or (ii) a fraction of a share of Match Group common stock with a value of $ 3.00 (calculated pursuant to the Transaction Agreement).

As a result of the merger and other transactions contemplated by the Transaction Agreement, Former Match Group stockholders (other than Former IAC) became stockholders of the Company.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

IAC Films, a provider of production and producer services for feature films, primarily for initial sale and distribution through theatrical releases and video-on-demand services in the United States and internationally;

For periods prior to their sales:

CityGrid, an advertising network that integrated local content and advertising for distribution to affiliated and third-party publishers across web and mobile platforms, sold December 31, 2018.

Dictionary.com, an online and mobile dictionary and thesaurus service, sold November 13, 2018.

Electus, including Notional, a provider of production and producer services for both unscripted and scripted television and digital content, primarily for initial sale and distribution in the United States, sold October 29, 2018.

The Princeton Review, a provider of educational test preparation, academic tutoring and college counseling services, sold on March 31, 2017.

The following diagram illustrates the simplified organizational and ownership structures of IAC and Match Group immediately after the Separation.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

Intercompany transactions and accounts have been eliminated.

Discontinued Operations

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

See “Note 4—Discontinued Operations” for additional details.

Accounting for Investments in Equity Securities

Investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee, but does not have a controlling financial interest, are accounted for using the equity method and are included in "Long-term investments" in the accompanying consolidated balance sheet.

At December 31, 2019 and 2018, the Company did not have any investments accounted for using the equity method.

Investments in equity securities, other than those of our consolidated subsidiaries and those accounted for under the equity method, are accounted for at fair value or under the measurement alternative of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No.

2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , following its adoption on January 1, 2018, with any changes to fair value recognized within other income (expense), net each reporting period.

Investments in equity securities, other than those of our consolidated subsidiaries, are accounted for at fair value or under the measurement alternative of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No.

2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , with any changes to fair value recognized within other 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;

3 unchanged sentences

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 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

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

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

These estimates, judgments and assumptions impact the

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities.

These estimates, judgments, and assumptions impact the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities.

Actual results could differ from these estimates.

On an ongoing basis, the Company evaluates its estimates and judgments including those related to:

the fair values of cash equivalents and marketable debt securities;

the fair values of cash equivalents;

the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts;

5 unchanged sentences

contingencies;

the fair value of acquisition-related contingent consideration arrangements;

unrecognized tax benefits;

3 unchanged sentences

Revenue Recognition

The Company adopted ASU No.

2014-09, Revenue from Contracts with Customers, effective January 1, 2018 using the modified retrospective transition method for open contracts as of the date of initial application.

The cumulative effect to the Company's retained earnings at January 1, 2018 was an increase of $ 40.2 million , of which $ 3.4 million was related to the noncontrolling interest in ANGI;

the adjustment to retained earnings was principally related to the Company’s ANGI and Applications segments.

Within ANGI, the effect of the adoption of ASU No.

2014-09 was that commissions paid to employees pursuant to certain sales incentive programs, which represent the incremental direct costs of obtaining a service professional contract, are now capitalized and amortized over the estimated life of a service professional (also referred to as the estimated customer relationship period).

These costs were expensed as incurred prior to January 1, 2018.

The cumulative effect of the adoption of ASU No.

2014-09 was the establishment of a current and non-current asset for capitalized sales commissions of $ 29.7 million and $ 4.2 million , respectively, and a related deferred tax liability of $ 8.0 million , resulting in a net increase to retained earnings of $ 25.9 million on January 1, 2018.

Within Applications, the primary effect of the adoption of ASU No.

2014-09 was to accelerate the recognition of the portion of the revenue of certain desktop applications sold by SlimWare that qualify as functional intellectual property ("functional IP") under ASU No.

This revenue was previously deferred and recognized over the applicable subscription term.

The cumulative effect of the adoption of ASU No.

2014-09 for SlimWare was a reduction in deferred revenue of $ 20.3 million and the establishment of a deferred tax liability of $ 4.9 million , resulting in a net increase to retained earnings of $ 15.5 million on January 1, 2018.

The Company's disaggregated revenue disclosures are presented in " Note 12—Segment Information ."

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the impact of the adoption of ASU No.

2014-09 by segment under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers , as reported, and ASC 605, Revenue Recognition , for the year ended December 31, 2018.

Under ASC 606

(as reported)

Under ASC 605

Effect of adoption of ASU No.

(In thousands)

Revenue by segment:

ANGI Homeservices

Emerging & Other

Inter-segment eliminations

Operating costs and expenses by segment:

ANGI Homeservices

Emerging & Other

Operating income (loss) by segment:

ANGI Homeservices

Emerging & Other

The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance, and collectability of consideration is probable.

Revenue is recognized when control of the promised services or goods is transferred to our customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Transaction Price

The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for its services or goods, including amounts that are variable.

The Company determines the total transaction price, including an estimate of any variable consideration, at contract inception and reassesses this estimate each reporting period.

The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers.

Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.

For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASU No.

2014-09, applicable to such contracts and does not consider the time value of money.

Arrangements with Multiple Performance Obligations

The Company’s contracts with customers may include multiple performance obligations.

For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price.

The Company generally determines standalone selling prices based on the prices charged to customers, which are directly observable or based on an estimate if not directly observable.

For our multiple performance obligation arrangements that include functional IP, which comprise the downloadable apps and software of the Applications segment, the Company uses a residual approach to determine standalone selling prices for the functional IP.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs and mobile app store fees, meet the requirements to be capitalized as a cost of obtaining a contract.

Commissions paid to employees pursuant to certain sales incentive programs are amortized over the estimated customer relationship period.

The Company calculates the estimated customer relationship period as the average customer life, which is based on historical data.

When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods.

For sales incentive programs where the customer relationship period is one year or less, the Company has elected the practical expedient to expense the costs as incurred.

The Company generally capitalizes and amortizes mobile app store fees over the term of the applicable subscription.

During the years ended December 31, 2019 and 2018 , the Company recognized expense of $ 464.6 million and $ 355.3 million related to the amortization of these costs.

The current contract asset balances are $ 71.5 million , $ 69.8 million and $ 53.4 million at December 31, 2019 and 2018 , and January 1, 2018 , respectively.

The non-current contract asset balances are $ 6.2 million , $ 4.5 million and $ 4.7 million at December 31, 2019 and 2018 , and January 1, 2018 , respectively.

The current and non-current contract assets are included in "Other current assets" and "Other non-current assets," respectively, in the accompanying consolidated balance sheet.

Performance Obligations

As permitted under the practical expedient available under ASU No.

2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.

Match Group revenue is primarily derived directly from users in the form of recurring subscriptions.

Revenue is recognized when control of the promised services is transferred to our customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

The Company’s revenue is primarily derived directly from users in the form of recurring subscriptions.

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

1 unchanged sentence

Revenue is initially deferred and is recognized using the straight-line method over the term of the applicable subscription period, which generally ranges from one to six months.

Revenue is also earned from online advertising, the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

purchase of à la carte features and offline events.

Revenue is also earned from online advertising, the purchase of à la carte features and offline events.

Online advertising revenue is recognized when an advertisement is displayed.

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Revenue associated with offline events is recognized when each event occurs.

ANGI Homeservices

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.

The Company’s consumer connection revenue is generated and recognized when an in-network service professional is delivered a consumer match or when a job sourced through the HomeAdvisor and Handy platforms are completed.

Service professional membership subscription revenue is initially deferred and is recognized using the straight-line method over the applicable subscription period, which is typically one year .

Consumer connection revenue is generally billed one week following a consumer match, with payment due upon receipt of invoice or collected when a consumer schedules a job through the HomeAdvisor and Handy platforms.

The Company maintains revenue reserves for potential credits for services provided by Handy service professionals to consumers.

ANGI 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.

Angie's List service professionals generally pay for advertisements in advance on a monthly or annual basis at the option of the service professional, with the average advertising contract term being approximately one year.

Angie's List website, mobile and call center advertising revenue is recognized ratably over the contract term.

Revenue from the sale of advertising in the Angie’s List Magazine is recognized in the period in which the publication is distributed.

Angie's List prepaid consumer membership subscription fees are recognized as revenue using the straight-line method over the term of the applicable subscription period, which is typically one year .

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 HomeAdvisor 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.

Subscription revenue is recognized over the terms of the applicable subscription period, which are typically one month or one year .

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

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

Performance marketing revenue includes affiliate commerce and performance marketing commissions.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Desktop revenue largely consists of advertising revenue generated principally through the display of paid listings in response to search queries.

Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites.

The substantial majority of the paid listings displayed by our Desktop businesses is supplied to us by Google Inc.

("Google") pursuant to our services agreement with Google.

Pursuant to this agreement, Desktop businesses that provide search services transmit search queries to Google, which in turn transmits a set of relevant and responsive paid listings back to these businesses for display in search results.

This ad-serving process occurs independently of, but concurrently with, the generation of algorithmic search results for the same search queries.

Google paid listings are displayed separately from algorithmic search results and are identified as sponsored listings on search results pages.

Paid listings are priced on a price per click basis and when a user submits a search query through a Desktop business and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing and shares a portion of the fee charged to the advertiser with the Desktop business.

The Company recognizes paid listing revenue from Google when it delivers the user's click.

In cases where the user’s click is generated due to the efforts of a third-party distributor, we recognize the amount due from Google as revenue and record a revenue share or other payment obligation to the third-party distributor as traffic acquisition costs.

To a lesser extent, Desktop revenue also includes fees related to subscription-based downloadable desktop applications as well as display advertisements.

Fees related to subscription downloadable desktop applications are generally recognized over the term of the applicable subscription period, which is primarily one or two years .

Fees related to display advertisements are recognized when an advertisement is displayed.

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.

Fees related to subscription downloadable mobile applications are generally recognized at the time of the sale when the software license is delivered.

To the extent updates or maintenance is required or expected, revenue is recognized over the term of the applicable subscription period, which is primarily one or two years .

Fees related to display advertisements are recognized when an advertisement is displayed.

Emerging & Other

Revenue of Ask Media Group consists principally of advertising revenue generated principally through the display of paid listings in response to search queries, as well as from display advertisements appearing alongside content on its various websites and, to a lesser extent, affiliate commerce commission revenue.

The majority of the paid listings displayed are supplied to us by Google in the manner, and pursuant to the services agreement with Google, described above under "Applications." Revenue from display advertising is generated through advertisements sold through programmatic advertising networks.

Affiliate commerce commission revenue is generated when an Ask Media Group property refers users to commerce partner websites resulting in a purchase or transaction.

Bluecrew revenue consists of service revenue, which is generated through staffing workers and recognized as control of the promised services is transferred to our customers.

NurseFly revenue consists of subscription revenue, which is generated through recruiting agencies that seek access to qualified healthcare professionals and is recognized at the earlier of the full delivery of the promised services or the length of the subscription period.

The Daily Beast revenue consists of advertising revenue, which is generated primarily through display advertisements (sold directly and through programmatic ad sales), and to a lesser extent, affiliate commerce commission revenue.

Revenue of College Humor Media and IAC Films is generated primarily through media production and distribution and advertising.

Production revenue is recognized when control is transferred to the customer to broadcast or exhibit, and advertising revenue is recognized when an advertisement is displayed or over the advertising period.

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As permitted under the practical expedient available under ASU No.

Transaction Price

The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for its services, including amounts that are variable.

The Company determines the total transaction price, including an estimate of any variable consideration, at contract inception and reassesses this estimate each reporting period.

Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts Receivables, Net of Allowance for Doubtful Accounts and Revenue Reserves

Accounts receivable include amounts billed and currently due from customers.

The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected.

The allowance for doubtful accounts is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history and the specific customer’s ability to pay its obligation.

The time between the Company issuance of an invoice and payment due date is not significant;

customer payments that are not collected in advance of the transfer of promised services or goods are generally due no later than 30 days from invoice date.

The Company also maintains allowances to reserve for potential credits issued to consumers or other revenue adjustments.

For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASU No.

2014-09 applicable to such contracts and does not consider the time value of money.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company has determined that certain costs, primarily mobile app store fees, meet the requirements to be capitalized as a cost of obtaining a contract.

The Company recognizes an asset for these costs if we expect to recover those costs.

Mobile app store fees are amortized over the period of contract performance.

Specifically, the Company capitalizes and amortizes mobile app store fees over the term of the applicable subscription.

During the years ended December 31, 2020 and 2019, the Company recognized expense of $ 414.7 million and $ 364.7 million, respectively, related to the amortization of these costs.

The contract asset balances at December 31, 2020 and 2019, and 2018 related to costs to obtain a contract are $ 33.5 million, $ 28.5 million, and $ 29.2 million, respectively, included in “Other current assets” in the accompanying consolidated balance sheet.

Accounts Receivables, Net of Allowance for Credit Losses and Revenue Reserves

The majority of our users purchase our products through mobile app stores.

At December 31, 2020, two mobile app stores accounted for approximately 65 % and 11 %, respectively, of our gross accounts receivables.

The comparable amounts at December 31, 2019 were 56 % and 13 %, respectively.

We evaluate the credit worthiness of these two mobile app stores on an ongoing basis and do not require collateral from these entities.

We generally collect these balances between 30 and 45 days following the purchase.

Payments made directly through our applications are processed by third-party payment processors.

We generally collect these balances within 3 to 5 days following the purchase.

The Company also maintains allowances to reserve for potential credits issued to users or other revenue adjustments.

The amounts of these reserves are based primarily upon historical experience.

Accounts receivable related to indirect revenue include amounts billed and currently due from customers.

The Company maintains an allowance for credit losses to provide for the estimated amount of accounts receivable that will not be collected.

The allowance for credit losses is based upon historical collection trends adjusted for economic conditions using reasonable and supportable forecasts.

The time between the Company issuance of an invoice and payment due date is not significant;

customer payments that are not collected in advance of the transfer of promised services are generally due no later than 30 days from invoice date.

Deferred Revenue

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The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of our performance obligation is one year or less.

The deferred revenue balance is $ 398.8 million , $ 361.7 million and $ 332.2 million at December 31, 2019 and 2018 , and January 1, 2018 , respectively.

During the years ended December 31, 2019 and 2018 , the Company recognized $ 356.4 million and $ 330.2 million of revenue that was included in the deferred revenue balance as of December 31, 2018 and January 1, 2018 , respectively.

The current deferred revenue balances are $ 397.5 million and $ 360.0 million at December 31, 2019 and 2018 , respectively.

The non-current deferred revenue balances are $ 1.3 million and $ 1.7 million at December 31, 2019 and 2018 , respectively.

Non-current deferred revenue is included in "Other long-term liabilities" in the accompanying consolidated balance sheet.

The deferred revenue balances are $ 239.1 million, $ 218.8 million, and $ 209.9 million at December 31, 2020 and 2019, and 2018, respectively.

During the years ended December 31, 2020 and 2019, the Company recognized $ 218.8 million and $ 209.9 million of revenue that was included in the deferred revenue balance as of December 31, 2019 and 2018, respectively.

At December 31, 2020 and 2019, there is no non-current portion of deferred revenue.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Disaggregation of Revenue

The following table presents disaggregated revenue:

For the Years Ended December 31,

2020 2019 2018

(In thousands)

Direct Revenue:

North America $ 1,185,307 $ 1,024,161 $ 902,478

International 1,159,417 983,013 774,693

Total Direct Revenue 2,344,724 2,007,174 1,677,171

Indirect Revenue (principally advertising revenue)

46,545 44,084 52,679

Total Revenue $ 2,391,269 $ 2,051,258 $ 1,729,850

Direct Revenue

Tinder $ 1,355,400 $ 1,152,045 $ 805,316

Other brands 989,324 855,129 871,855

Total Direct Revenue $ 2,344,724 $ 2,007,174 $ 1,677,171

Cash and Cash Equivalents

Cash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase.

Domestically, cash equivalents primarily consist of AAA rated government money market funds, treasury discount notes, time deposits and commercial paper rated A1/P1 or better.

Internationally, cash equivalents primarily consist of AAA rated government money market funds and time deposits.

Investments in Debt Securities

The Company invests in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity to fund current operations or satisfy other cash requirements as needed.

Marketable debt securities are adjusted to fair value each quarter, and the unrealized gains and losses, net of tax, are included in accumulated other comprehensive income (loss) as a separate component of shareholders' equity.

The specific-identification method is used to determine the cost of debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss) into earnings.

The Company also invests in non-marketable debt securities as part of its investment strategy.

We review our debt securities for impairment each reporting period.

The Company recognizes an unrealized loss on debt securities in net earnings when the impairment is determined to be other-than-temporary.

Factors we consider in making such determination include the duration, severity and reason for the decline in value and the potential recovery and our intent to sell the debt security.

We also consider whether we will be required to sell the security before recovery of its amortized cost basis and whether the amortized cost basis cannot be recovered because of credit losses.

If an impairment is considered to be other-than-temporary, the debt security will be written down to its fair value and the loss will be recognized within other income (expense), net.

At December 31, 2019 and 2018 , marketable debt securities consist of commercial paper rated A1/P1 or better and treasury discount notes.

Certain Risks and Concentrations

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 , 2018 and 2017 , consolidated revenue earned from Google was $ 733.5 million , $ 825.2 million and $ 740.7 million , respectively, representing 15 % , 19 % , and 22 % , respectively, of the Company's consolidated revenue.

Accounts receivable related to revenue earned from Google totaled $ 53.0 million and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 69.1 million at December 31, 2019 and 2018 , respectively.

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 , 2018 and 2017 , revenue earned from the Services Agreement was $ 291.1 million , $ 426.5 million and $ 480.6 million , respectively, within the Applications segment and $ 385.9 million , $ 339.0 million and $ 203.5 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.

The Company’s business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents and marketable debt securities.

Cash and cash equivalents are maintained with financial institutions and are in excess of Federal Deposit Insurance Corporation insurance limits.

Domestically, cash equivalents primarily consist of (i) AAA rated government money market funds and (ii) time deposits.

Internationally, cash equivalents primarily consist of money market funds.

Property and Equipment

2 unchanged sentences

Depreciation is computed using the straight-line method over the estimated useful lives of the assets or, in the case of leasehold improvements, the lease term, if shorter.

Asset Category

Buildings and leasehold improvements

3 to 39 Years

Capitalized software and computer equipment

Furniture and other equipment

3 to 12 Years

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Asset Category Estimated

Buildings and building improvements 10 to 39 years

Computer equipment and capitalized software 2 to 3 years

Furniture and other equipment 5 years

Leasehold improvements 6 to 10 years

The Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software and compensation for personnel directly associated with the development of the software.

3 unchanged sentences

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

The Company usually uses the assistance of outside valuation experts to assist in the allocation of purchase price to the identifiable intangible assets acquired.

While outside valuation experts may be used, management has 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(s) that is expected to benefit from the 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.

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

Generally, our contingent consideration arrangements are based upon financial performance and/or operating metric targets.

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

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.

See " Note 6—Financial Instruments and Fair Value Measurements " for a discussion of contingent consideration arrangements.

The Company typically engages outside valuation experts to assist in the allocation of purchase price to the identifiable intangible assets acquired, but 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 assigned to the reporting unit that is expected to benefit from the combination as of the acquisition date.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Goodwill and Indefinite-Lived Intangible Assets

The Company assesses goodwill and indefinite-lived intangible assets for impairment annually 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.

The Company assesses goodwill on its one reporting unit and indefinite-lived intangible assets for impairment annually 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.

When the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit’s goodwill is necessary;

otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined.

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

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 factors 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company quantitatively tests goodwill for impairment as of October 1 when it concludes that it is more likely than not that there may be an impairment.

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.

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

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.

The Company foregoes a qualitative assessment and tests goodwill for impairment when it concludes that it is more likely than not that there may be an impairment.

If needed, 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 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.

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

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

The Company determines the fair value of its indefinite-lived intangible assets using an avoided royalty discounted cash flow (“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.

4 unchanged sentences

The discount rates used in the Company’s annual indefinite-lived impairment assessment ranged from 10 % to 23 % in 2020 and 11 % to 26 % in 2019, and the royalty rates used ranged from 5 % to 8 % in 2020 and 3 % to 8 % in 2019.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 accompanying consolidated statement of operations.

The 2017 annual assessment of goodwill and indefinite-lived intangible assets did not identify any impairments.

The Company’s operating segments are MTCH, ANGI, Vimeo, Dotdash and Applications, which are also reportable segments, and within its Emerging & Other reportable segment, Ask Media Group, Bluecrew, Nursefly, The Daily Beast, College Humor Media and IAC Films.

The Company’s reporting units are consistent with its operating segments, with the exception of Desktop and Mosaic Group, which are separate reporting units within the Applications operating segment.

Goodwill is tested for impairment at the reporting unit level.

See " Note 12—Segment Information " for additional information regarding the Company's method of determining operating and reportable segments.

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, which is included within amortization.

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

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.

Long-Lived Assets and Intangible Assets with Definite Lives

2 unchanged sentences

If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value.

Amortization of definite-lived intangible assets is computed either on a straight-line basis or based on the pattern in which the economic benefits of the asset will be realized.

Amortization of definite-lived intangible assets is

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

computed either on a straight-line basis or based on the pattern in which the economic benefits of the asset will be realized.

Fair Value Measurements

6 unchanged sentences

Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.

See " Note 6—Financial Instruments and Fair Value Measurements " for a discussion of fair value measurements made using Level 3 inputs.

The Company’s non-financial assets, such as goodwill, intangible assets, ROU assets, and property and equipment, are adjusted to fair value only when an impairment is recognized.

The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized.

The Company’s financial assets, comprising of equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized.

Such fair value measurements are based predominantly on Level 3 inputs.

Traffic Acquisition Costs

Traffic acquisition costs consist of (i) the amortization of fees paid to Apple and Google related to the distribution and the facilitation of in-app purchases 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

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

These payments include amounts based on revenue share and other arrangements.

The Company expenses these payments in the period incurred as a component of cost of revenue.

Advertising Costs

Advertising costs are expensed in the period incurred (when the advertisement first runs for production costs that are initially capitalized) and represent online marketing, including fees paid to search engines, social media sites and third parties that distribute our B2C downloadable applications, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the brands within our MTCH and ANGI segments.

Advertising expense is $ 1.2 billion , $ 1.2 billion and $ 1.1 billion for the years ended December 31, 2019 , 2018 and 2017 , respectively.

The Company capitalizes and amortizes the costs associated with certain distribution arrangements that require us to pay a fee per access point delivered.

These access points are generally in the form of downloadable applications associated with our direct-to consumer operations.

These fees are amortized over the estimated useful lives of the access points to the extent the Company can reasonably estimate a probable future economic benefit and the period over which such benefit will be realized (generally 18 months).

Otherwise, the fees are charged to expense as incurred.

offline marketing, which is primarily television advertising;

and payments to partners who direct traffic to our websites.

Advertising expense is $ 438.7 million, $ 388.6 million and $ 386.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Legal costs are expensed as incurred.

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.

We are subject to income taxes in the United States and numerous foreign jurisdictions.

Significant judgement 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.

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 reporting amounts 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 realized or settled.

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

The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense.

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

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

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

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

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the "Tax Act").

The Tax Act imposes a new minimum tax on global intangible low-taxed income ("GILTI") earned by foreign subsidiaries beginning in 2018.

The FASB Staff Q&A, Topic 740 No.

5, Accounting for Global Intangible Low-Taxed Income, states that an entity may make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred.

The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

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.

The Company records interest and penalties related to uncertain tax positions as a component of income tax expense.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings Per Share

Basic earnings per share is computed by dividing net earnings attributable to IAC shareholders by the weighted average number of common shares outstanding during the period.

Basic earnings per share is computed by dividing net earnings attributable to Match Group shareholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company.

See “Note 10—Earnings per Share” for additional information on dilutive securities.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Translation and Transaction Gains and Losses

4 unchanged sentences

See “Note 17—Consolidated Financial Statement Details” for additional information regarding foreign currency exchange gains and losses.

Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive income (loss) into earnings.

Such losses totaled $ 0.1 million and gains totaled $ 0.7 million during the years ended December 31, 2018 and 2017 , respectively, and were included in "Other income (expense), net" in the accompanying consolidated statement of operations.

Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive loss into earnings.

Losses of $ 0.2 million and $ 0.1 million during the years ended December 31, 2020 and 2018 are included in “Other income (expense), net” in the accompanying consolidated statement of operations.

There were no such gains or losses for the year ended December 31, 2019.

8 unchanged sentences

The Company is party to fair value put and call arrangements with respect to these interests.

These put and call arrangements allow management of these businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively.

The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement.

These put and call arrangements become exercisable by the Company and the counter-party at various dates in the future.

One of these arrangements was exercised during the year ended December 31, 2019 and two of these arrangements were exercised during both of the years ended December 31, 2018 and 2017 .

These put and call arrangements allow management of these businesses to require the Company to purchase their interests, or allow the Company to acquire such interests, at fair value.

These put and call arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement.

These put and call arrangements become exercisable by the Company and the counterparty at various future dates.

One of these arrangements was exercised during each of the years ended December 31, 2020 and 2019, and two of these arrangements were exercised during the year ended December 31, 2018.

These put arrangements are exercisable by the counter-party outside the control of the Company.

2 unchanged sentences

Fair value determinations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flow projections.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Certain Risks and Concentrations

The Company’s business is subject to certain risks and concentrations, including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents.

Cash and cash equivalents are principally maintained with financial institutions that are not covered by deposit insurance.

Recent Accounting Pronouncements

Accounting Pronouncement adopted by the Company

Adoption of ASU No.

2016-02, Leases (Topic 842)

Accounting pronouncements adopted by the Company

The Company adopted ASU No.

2016-02, Leases (Topic 842) ("ASC 842") effective January 1, 2019.

ASC 842 superseded previously existing guidance on accounting for leases and generally requires all leases to be recognized in the statement of financial position.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The adoption of ASC 842 resulted in the recognition of $ 154.7 million of ROU assets and related lease liabilities as of January 1, 2019, with no cumulative effect adjustment.

The adoption of ASC 842 had no impact on the Company’s consolidated results of operations or cash flows.

The Company adopted ASC 842 prospectively and, therefore, did not revise comparative period information or disclosure.

In addition, the Company elected the package of practical expedients permitted under ASC 842.

See " Note 13—Leases " for additional information on the adoption of ASC 842.

Accounting Pronouncement Not Yet Adopted by the Company

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No.

2019-12, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The provisions of ASU No.

2019-12 are effective for reporting periods beginning after December 15, 2020 with early adoption permitted.

2016-13 effective January 1, 2020.

2016-13 replaces the “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses.

The Company adopted ASU No.

2016-13 using the modified retrospective approach and there was no cumulative effect arising from the adoption.

The adoption of ASU No.

2016-13 did not have a material impact on the Company's financial statements.

The Company adopted ASU No.

2019-12 effective January 1, 2020.

2019-12 simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

Most amendments within ASU No.

3 unchanged sentences

The adoption of ASU No.

2019-12 will not have a material impact on the Company’s consolidated financial statements.

2019-12 did not have a material impact on the Company’s consolidated financial statements.

Accounting pronouncements not yet adopted by the Company

In August 2020, the FASB issued ASU No.

2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from U.S.

GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

Similarly, the discount resulting from the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s exchangeable senior notes.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, which will result in increased dilutive securities as the assumption of cash settlement of the notes will not be available for the purpose of calculating earnings per share.

The provisions of ASU 2020-06 are effective for reporting periods beginning after December 15, 2021, with early adoption permitted for reporting periods beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis.

The Company anticipates adopting ASU No.

2020-06 as of January 1, 2021 on a fully retrospective basis.

For the year ended December 31, 2020 after adoption of ASU No.

2020-16, we expect interest expense will decrease by approximately $ 44 million and the income tax provision will increase approximately $ 10 million resulting in an increase in net earnings from continuing operations of approximately $ 34 million.

Basic earnings per share from continuing operations would increase approximately $ 0.16 and dilutive earnings per share from continuing operations would increase approximately $ 0.09 with an increase of weighted average dilutive shares outstanding of approximately 14 million shares.

As of December 31, 2020 after adoption of ASU No.

2020-06, we expect long-term debt, net to increase approximately $ 300 million, with a similar reduction in additional paid-in capital.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3—INCOME TAXES

and foreign earnings (loss) before income taxes and noncontrolling interests are as follows:

and foreign earnings before income taxes are as follows:

Years Ended December 31,

2020 2019 2018

(In thousands)

The components of the income tax provision (benefit) are as follows:

$ 503,802 $ 424,474 $ 367,567

Foreign 82,983 78,384 94,844

Total $ 586,785 $ 502,858 $ 462,411

The components of the provision (benefit) for income taxes are as follows:

Years Ended December 31,

2020 2019 2018

(In thousands)

Current income tax provision (benefit):

Current income tax provision (benefit)

Federal $ ( 2,044 ) $ 964 $ ( 688 )

State 1,640 342 341

Foreign 28,293 26,527 34,659

Current income tax provision 27,889 27,833 34,312

Deferred income tax provision (benefit):

Deferred income tax benefit

Income tax (benefit) provision

IAC/INTERACTIVECORP AND SUBSIDIARIES

Federal 21,750 ( 8,367 ) ( 14,027 )

State ( 11,575 ) ( 10,345 ) ( 2,343 )

Foreign ( 5,190 ) ( 896 ) ( 6,635 )

Deferred income tax provision (benefit) 4,985 ( 19,608 ) ( 23,005 )

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

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below.

The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.

The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below.

The valuation allowance is primarily related to deferred tax assets for foreign tax credits and net operating losses.

(In thousands)

2 unchanged sentences

Tax credit carryforwards 102,012 68,787

Disallowed interest carryforwards 56,630 28,673

Stock-based compensation 16,073 14,274

Long-term lease liabilities

Other 34,815 20,711

Total deferred tax assets 361,542 284,914

2 unchanged sentences

Deferred tax liabilities:

Investment in subsidiaries

Intangible assets ( 44,200 ) ( 43,568 )

Right-of-use assets ( 17,306 ) ( 10,056 )

Investment in Pinterest

Property and equipment ( 17,218 ) ( 3,275 )

Other ( 4,928 ) ( 891 )

Total deferred tax liabilities ( 83,652 ) ( 57,790 )

Net deferred tax assets $ 206,800 $ 174,211

The Company’s tax group for federal and consolidated state income tax purposes includes Former IAC up to and including the Separation date.

As a result of the Separation, a portion of the Company’s temporary differences and tax attributes from our federal and consolidated state income tax filings were allocated between the Company and IAC.

The allocation attributable to IAC resulted in an increase to the Company’s deferred tax asset and additional paid-in capital.

The allocation attributable to the Company was recorded in 2020 and is preliminary and subject to adjustment.

Any subsequent adjustment to allocated tax attributes will be recognized as an adjustment to deferred taxes and additional paid-in capital.

At December 31, 2020, the Company has federal and state net operating losses (“NOLs”) of $ 499.6 million and $ 344.7 million, respectively.

If not utilized, $ 80.2 million of federal NOLs can be carried forward indefinitely, and the remainder will expire at various times primarily between 2027 and 2037, and the state NOLs, if not utilized, will expire at various times between 2020 and 2039.

Federal and state NOLs of $ 617.5 million and $ 457.4 million , respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law.

If not utilized, $ 13.8 million of the federal NOLs can be carried forward indefinitely, and $ 485.8 million will expire at various times, primarily between 2034 and 2037.

Of the state NOLs, $ 168.4 million can be carried forward indefinitely and $ 176.3 million will expire at various times, primarily between 2022 and 2037.

Federal and state NOLs of $ 385.3 million and $ 300.9 million, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, federal taxable income limitations, and applicable state law.

At December 31, 2020, the Company has foreign NOLs of $ 116.8 million available to offset future income.

1 unchanged sentence

During 2020, the Company recognized tax benefits related to NOLs of $ 2.7 million.

Included in this amount is $ 26.9 million of tax benefits of acquired attributes which was recorded as a reduction to goodwill.

At December 31, 2020, the Company has federal and foreign disallowed interest carryforwards of $ 206.5 million and $ 57.1 million, respectively, that can be carried forward indefinitely and can be used against future taxable income.

At December 31, 2020, the Company has tax credit carryforwards of $ 131.0 million.

Of this amount, $ 108.4 million relates to credits for research activities, $ 48.7 million relates to credits for foreign taxes, and $ 2.4 million relates to various other credits.

Of these credit carryforwards, $ 41.2 million can be carried forward indefinitely and $ 118.3 million will expire between 2020 and 2039.

The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience.

IAC/INTERACTIVECORP AND SUBSIDIARIES

Of this amount, $ 92.8 million relates to federal and state tax credits for research activities, of which $ 59.9 million will expire at various times between 2033 and 2040.

Our credit carryforwards also include $ 38.2 million of foreign tax credits, of which $ 36.2 million will expire between 2021 and 2027.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2019 , the Company's valuation allowance increased by $ 13.8 million primarily due to an increase in foreign net operating losses, partially offset by a net decrease in unbenefited capital losses.

At December 31, 2019 , the Company has a valuation allowance of $ 129.6 million related to the portion of tax loss carryforwards, foreign tax credits and other items for which it is more likely than not that the tax benefit will not be realized.

A reconciliation of the income tax (benefit) provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:

The Company regularly assesses the realizability of deferred tax assets considering all available evidence, including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience.

During the year ended December 31, 2020, we recorded a valuation allowance of $ 29.8 million related to U.S.

foreign tax credits for which we do not believe a tax benefit is more likely than not to be realized within the carryforward period.

At December 31, 2020, the Company has a valuation allowance of $ 71.1 million related to the portion of credits, NOLs, and other items for which it is more likely than not that the tax benefit will not be realized.

A reconciliation of the income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:

Years Ended December 31,

2020 2019 2018

(In thousands)

Income tax provision at the federal statutory rate of 21% (35% for 2017)

Income tax provision at the federal statutory rate of 21%

$ 123,225 $ 105,600 $ 97,106

State income taxes, net of effect of federal tax benefit 7,679 9,627 7,246

1 unchanged sentence

Research credits ( 21,306 ) ( 27,248 ) ( 6,701 )

Realization of certain deferred tax assets

Foreign income taxed at a different statutory tax rate

Deferred tax adjustment for enacted changes in tax laws and rates

Non-deductible impairments for certain cost method investments

Transition tax

Change in valuation allowance for foreign tax credits 29,787 — —

Foreign income taxed at a different statutory rate 4,884 3,526 13,129

Withholding taxes 2,933 5,023 3,566

Income tax (benefit) provision

Change in uncertain tax positions ( 5,770 ) ( 637 ) ( 1,780 )

Non-taxable foreign currency exchange gains and losses 688 ( 557 ) ( 2,086 )

Transition tax — — ( 3,178 )

Other, net 2,957 3,265 ( 3,855 )

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

A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:

2020 2019 2018

(In thousands)

3 unchanged sentences

Reductions for tax positions of prior years ( 16,512 ) ( 283 ) ( 134 )

Expiration of applicable statutes of limitations

Expiration of applicable statute of limitations ( 778 ) ( 892 ) ( 1,740 )

Balance at December 31 $ 45,624 $ 53,324 $ 35,679

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision.

Included in the income tax provision for the years ended December 31, 2019 , 2018 and 2017 is a $ 0.5 million benefit, $ 0.3 million benefit and $ 0.1 million expense, respectively, net of related deferred taxes of $ 0.2 million , less than $ 0.1 million and $ 0.1 million , respectively, for interest on unrecognized tax benefits.

At December 31, 2019 and 2018 , the Company has accrued $ 4.1 million and $ 3.4 million , respectively, for the payment of interest.

At December 31, 2019 and 2018 , the Company has accrued $ 1.1 million and $ 1.4 million , respectively, for penalties.

The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax.

These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions

IAC/INTERACTIVECORP AND SUBSIDIARIES

Our income tax provision, for the years ended December 31, 2020, 2019, and 2018, includes a (decrease) or increase of interest and penalties of $( 1.7 ) million, $ 0.1 million, and $( 0.1 ) million, respectively.

At December 31, 2020 and 2019, noncurrent income taxes payable include accrued interest and penalties of $ 1.9 million and $ 3.1 million, respectively.

Match Group is routinely under audit by federal, state, local and foreign authorities in the area of income tax.

These audits include questioning the timing and the amount of income and deductions and the allocation of

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

among various tax jurisdictions.

The Internal Revenue Service ("IRS") is currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2016.

The statute of limitations for the years 2010 through 2012 has been extended to November 30, 2020 and the statute of limitations for the years 2013 through 2015 has been extended to December 31, 2020.

Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009.

Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns.

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

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

At December 31, 2019 and 2018 , unrecognized tax benefits, including interest and penalties, were $ 74.4 million and $ 52.3 million , respectively.

income and deductions among various tax jurisdictions.

The Internal Revenue Service (“IRS”) has substantially completed its audit of the Company’s federal income tax returns for the years ended December 31, 2010 through 2016 resulting in reductions to the manufacturing deduction and research credits claimed.

The IRS began an audit of the year ended December 31, 2017 in the second quarter of 2020.

The statute of limitations for years 2010 through 2012 has been extended to May 31, 2021, and the statute of limitations for years 2013 through 2017 has been extended to June 30, 2022.

Various other jurisdictions are open to examination for tax years beginning with 2009.

Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns.

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

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

To the extent that the final tax 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.

At December 31, 2020 and 2019, unrecognized tax benefits, including interest, were $ 46.7 million and $ 55.5 million, respectively.

If unrecognized tax benefits at December 31, 2020 are subsequently recognized, $ 41.8 million, net of related deferred tax assets and interest, would reduce income tax expense.

The comparable amount as of December 31, 2019 was $ 51.9 million.

The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $ 24.5 million by December 31, 2020 , due to expirations of statutes of limitations or other settlements;

$ 24.3 million of which would reduce the income tax provision.

The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $ 4.5 million by December 31, 2021, primarily due to settlements and expirations of statutes of limitations.

On December 22, 2017, the U.S.

enacted the Tax Act.

The Tax Act subjected to U.S.

taxation certain previously deferred earnings of foreign subsidiaries as of December 31, 2017 ("Transition Tax") and implemented a number of changes that took effect on January 1, 2018, including but not limited to, a reduction of the U.S.

federal corporate tax rate from 35% to 21% and a new minimum tax on GILTI earned by foreign subsidiaries.

The Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional tax expense in the fourth quarter of 2018.

In the third quarter of 2018, the Company finalized this 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 IRS subsequent to December 31, 2017.

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 judgment.

NOTE 4— BUSINESS COMBINATION

Through the Combination, ANGI acquired 100 % of the common stock of Angie's List on September 29, 2017 for a total purchase price valued at $ 781.4 million .

The purchase price of $ 781.4 million was determined based on the sum of (i) the fair value of the 61.3 million shares of Angie's List common stock outstanding immediately prior to the Combination based on the closing stock price of Angie's List common stock on the NASDAQ on September 29, 2017 of $ 12.46 per share;

(ii) the cash consideration of $ 1.9 million paid to holders of Angie's List common stock who elected to receive $ 8.50 in cash per share;

and (iii) the fair value of vested equity awards (including the pro rata portion of unvested awards attributable to pre-combination services) outstanding under Angie's List stock plans on September 29, 2017 .

Each stock option to purchase shares of Angie's List common stock that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an option to purchase (i) that number of Class A shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List option immediately prior to the effective time of the Combination, (ii) at a per-share exercise price equal to the exercise price per share of Angie's List common stock at which such Angie's List option was exercisable immediately prior to the effective time of the Combination.

Each award of Angie's List restricted stock units that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an ANGI Homeservices restricted stock unit award with respect to a number of Class A

IAC/INTERACTIVECORP AND SUBSIDIARIES

enacted the Tax Cuts and Jobs Act (the “TCJA”), which, among other things, reduced the U.S.

federal corporate income tax rate from 35% to 21%, subjected to U.S.

taxation certain previously deferred earnings of foreign subsidiaries as of December 31, 2017 (“Transition Tax”) and generally eliminated U.S.

taxes on foreign subsidiary distributions.

The Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional transition tax expense in 2017.

During 2018, the Company finalized this calculation, which resulted in a $ 3.2 million reduction in the Transition Tax.

The net reduction in the Transition Tax was due primarily to the utilization of additional foreign tax credits, partially offset by additional taxable earnings and profits of our foreign subsidiaries based on guidance issued by the IRS subsequent to December 21, 2017.

Generally, our ability to distribute the $ 158.1 million cash and cash equivalents held by our foreign subsidiaries at December 31, 2020 is limited to that subsidiary’s distributable reserves and after considering other corporate legal restrictions.

As a result of the TCJA, our earnings in foreign jurisdictions are generally available for distribution to the U.S.

without significant tax consequences.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List restricted stock unit award immediately prior to the effective time of the Combination.

The table below summarizes the purchase price:

(In thousands)

Class A common stock

Cash consideration for holders who elected to receive $8.50 in cash per share of Angie's List common stock

Fair value of vested and pro rata portion of unvested stock options attributable to pre-combination services

Fair value of the pro rata portion of unvested restricted stock units attributable to pre-combination services

Total purchase price

The financial results of Angie's List are included in the Company's consolidated financial statements, within the ANGI Homeservices segment, beginning September 29, 2017 .

For the year ended December 31, 2017 , the Company included $ 58.9 million of revenue and $ 21.8 million of net loss in its consolidated statement of operations related to Angie's List.

The net loss of Angie's List reflects $ 28.7 million in stock-based compensation expense related to (i) the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination and (ii) the expense related to previously issued Angie's List equity awards, severance and retention costs of $ 19.8 million related to the Combination and a reduction in revenue of $ 7.8 million due to the write-off of deferred revenue related to the Combination.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of combination:

NOTE 4—DISCONTINUED OPERATIONS

On June 30, 2020, as part of the Separation described in “Note 1—Organization,” the operations of Former IAC businesses other than Match Group are presented as discontinued operations.

The components of assets and liabilities of discontinued operations in the accompanying consolidated balance sheet at December 31, 2019 consisted of the following:

December 31, 2019

(In thousands)

Cash and cash equivalents $ 2,673,619

Marketable securities 19,993

Accounts receivable, net 181,875

Other current assets 152,592

Property and equipment

Intangible assets

Total current assets in discontinued operations $ 3,028,079

Property and equipment, net $ 270,288

Goodwill 1,614,623

Intangible assets, net 350,150

Long-term investments 347,976

Other non-current assets 247,746

Total non-current assets in discontinued operations $ 2,830,783

Current portion of long-term debt $ 13,750

Accounts payable, trade 74,166

Deferred revenue 178,647

Other current liabilities

Long-term debt—related party

Accrued expenses and other current liabilities 322,333

Total current liabilities in discontinued operations $ 588,896

Long-term debt, net $ 231,946

Income taxes payable 6,410

Deferred income taxes 28,751

Other long-term liabilities 180,307

Net assets acquired

The purchase price was based on the expected financial performance of Angie's List, not on the value of the net identifiable assets at the time of combination.

This resulted in a significant portion of the purchase price being attributed to goodwill because Angie's List is complementary and synergistic to the other North America businesses of ANGI Homeservices.

IAC/INTERACTIVECORP AND SUBSIDIARIES

Total long-term liabilities in discontinued operations $ 447,414

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of the identifiable intangible assets acquired at the date of combination are as follows:

The key components of (loss) earnings from discontinued operations for the years ended December 31, 2020, 2019, and 2018 consist of the following:

Years Ended December 31,

2020 2019 2018

(In thousands)

Weighted-Average Useful Life

Indefinite-lived trade name and trademarks

Service professionals

Developed technology

Total identifiable intangible assets acquired

Other current assets, current liabilities and other long-term liabilities of Angie's List were reviewed and adjusted to their fair values at the date of combination, as necessary.

The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis.

The fair value of the trade name and trademarks was determined using an income approach that utilized the relief from royalty methodology.

The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology.

The fair values of the service professionals and memberships were determined using an income approach that utilized the excess earnings methodology.

The valuations of deferred revenue and intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows, cost and profit margins related to deferred revenue and the determination of royalty and discount rates.

The amount attributed to goodwill is not tax deductible.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information in the table below presents the combined results of the Company and Angie's List as if the Combination had occurred on January 1, 2016.

The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the Combination actually occurred on January 1, 2016.

For the year ended December 31, 2017, pro forma adjustments include (i) reductions in stock-based compensation expense of $ 77.1 million and transaction related costs of $ 34.1 million because they are one-time in nature and will not have a continuing impact on operations;

and (ii) an increase in amortization of intangibles of $ 31.9 million .

The stock-based compensation expense is 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.

The transaction related costs include severance and retention costs of $ 19.8 million related to the Combination.

December 31, 2017

(In thousands, except per share data)

Net earnings attributable to IAC shareholders

Basic earnings per share attributable to IAC shareholders

Diluted earnings per share attributable to IAC shareholders

Revenue $ 1,410,485 $ 2,705,797 $ 2,533,042

Operating costs and expenses ( 1,840,178 ) ( 2,769,918 ) ( 2,517,372 )

Operating (loss) income ( 429,693 ) ( 64,121 ) 15,670

Interest expense ( 3,772 ) ( 12,993 ) ( 14,759 )

Other (expense) income ( 2,503 ) 68,767 298,236

Income tax benefit 69,898 57,534 7,496

(Loss) earnings from discontinued operations $ ( 366,070 ) $ 49,187 $ 306,643

NOTE 5—GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets, net, are as follows:

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

Goodwill $ 1,270,532 $ 1,239,839

Intangible assets with indefinite lives 226,605 221,199

Intangible assets with definite lives, net of accumulated amortization

Intangible assets with definite lives, net 4,295 7,125

Total goodwill and intangible assets, net $ 1,501,432 $ 1,468,163

The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2019 :

December 31, 2018

December 31, 2019

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

During the year ended December 31, 2020, the Company recognized additional impairment charges totaling $ 4.6 million related to the Match brand in the UK and the Meetic brand in Europe as the outbreak of COVID-19 placed additional pressure on projected 2020 revenues at these brands.

These charges are included within amortization expense in the consolidated statement of operations for the years then ended.

The following table presents the balance of goodwill, including the changes in the carrying value of goodwill, for the years ended December 31, 2020 and 2019:

(In thousands)

ANGI Homeservices

Applications:

Total Applications

Emerging & Other

Additions primarily relate to the acquisitions of Magisto (included in the Vimeo segment) and Fixd Repair (included in the ANGI Homeservices segment).

Deductions primarily relate to tax benefits of acquired attributes related to the acquisition of Handy (included in the ANGI Homeservices segment).

During the fourth quarter of 2019, the Company recorded an impairment charge of $ 3.3 million related to the goodwill of the College Humor Media business (included in the Emerging & Other Segment).

IAC/INTERACTIVECORP AND SUBSIDIARIES

Balance at January 1 $ 1,239,839 $ 1,245,012

Additions — 3,553

Foreign Exchange Translation 30,948 ( 8,726 )

Other ( 255 ) —

Balance at December 31 $ 1,270,532 $ 1,239,839

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2018 :

December 31, 2017

Transfers In/(Out)

December 31, 2018

(In thousands)

ANGI Homeservices

Applications:

Total Applications

Emerging & Other

Additions primarily relate to the acquisitions of Handy (included in the ANGI Homeservices segment), TelTech and iTranslate (included in the Applications segment), Hinge (included in the Match Group segment), and Bluecrew (included in the Emerging & Other segment).

Deductions relate to the sales of Felix (included in the ANGI Homeservices segment) and Electus (included in the Emerging & Other segment).

Prior to the fourth quarter of 2018, IAC Publishing was a reportable segment consisting of one operating segment and one reporting unit.

In the fourth quarter of 2018, IAC Publishing was split into the Dotdash and the Emerging & Other segments (related to the remaining businesses previously included in the IAC Publishing segment).

The accumulated goodwill impairment of IAC Publishing was allocated to these businesses based upon their relative fair values as of October 1, 2018.

The December 31, 2019 and 2018 goodwill balances reflect accumulated impairment losses of $ 529.1 million , $ 399.7 million and $ 198.3 million at Applications, the businesses previously included in the IAC Publishing segment (excluding Dotdash, included in the Emerging & Other segment) and Dotdash, respectively.

The December 31, 2019 and 2018 goodwill balances also reflect accumulated impairment losses of $ 14.9 million and $ 11.6 million , respectively, at College Humor Media (included in the Emerging & Other segment).

Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions.

1 unchanged sentence

December 31, 2020

Weighted-Average

Amount Accumulated

Amortization Net Weighted-Average

(In thousands)

Service professional relationships

Customer lists and user base

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Patent and technology $ 11,044 $ ( 6,943 ) $ 4,101 9.3

Trade names 5,114 ( 5,114 ) — —

Other 3,688 ( 3,494 ) 194 3.0

Total $ 19,846 $ ( 15,551 ) $ 4,295 9.0

December 31, 2019

Weighted-Average

(In thousands)

Service professional relationships

Customer lists and user base

At December 31, 2019 , amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:

Years Ending December 31,

(In thousands)

NOTE 6— FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Marketable Securities

At December 31, 2019 and 2018 , the fair value of marketable securities are as follows:

(In thousands)

Available-for-sale marketable debt securities

Marketable equity security

Total marketable securities

At December 31, 2019 , current available-for-sale marketable debt securities are as follows:

(In thousands)

Commercial paper

Total available-for-sale marketable debt securities

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The contractual maturities of debt securities classified as current available-for-sale at December 31, 2019 are within one year .

There are no investments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of December 31, 2019 and 2018 .

At December 31, 2018 , current available-for-sale marketable debt securities are as follows:

(In thousands)

Treasury discount notes

Commercial paper

Total available-for-sale marketable debt securities

The following table presents the proceeds from maturities of available-for-sale marketable debt securities:

Amount Accumulated

Amortization Net Weighted-Average

(In thousands)

Proceeds from maturities of available-for-sale marketable debt securities

There were no gross realized gains or losses from the sales of available-for-sale marketable debt securities for the years ended December 31, 2019 , 2018 , and 2017 .

Long-term investments

Long-term investments consist of:

Patent and technology $ 10,797 $ ( 5,876 ) $ 4,921 8.9

Trade names 6,297 ( 4,986 ) 1,311 3.0

Other 3,775 ( 2,882 ) 893 4.0

Total $ 20,869 $ ( 13,744 ) $ 7,125 7.2

At December 31, 2020, amortization of intangible assets with definite lives is estimated to be as follows:

(In thousands)

Equity securities without readily determinable fair values

Total long-term investments

2025 and thereafter 1,730

Total $ 4,295

NOTE 6—FINANCIAL INSTRUMENTS

Equity securities without readily determinable fair values

In the third quarter of 2019, the Company made a $ 250 million investment in Turo, a peer-to-peer car sharing marketplace.

As part of its investment, the Company received a warrant that is net settleable at the Company's option and is recorded at fair value each reporting period with any change included in "Other income, net" in the accompany consolidated statement of operations.

The warrant is measured using significant unobservable inputs and is classified in the fair value hierarchy table below as Level 3.

The warrant is included in "Other non-current assets" in the accompanying consolidated balance sheet.

The Company had an investment in Pinterest, which was carried at fair value following the initial public offering of Pinterest in April 2019.

Prior to this, the Company accounted for its investment in Pinterest as an equity security without a readily determinable fair value.

The Company sold its remaining shares in Pinterest during the fourth quarter of 2019.

For the year ended December 31, 2019 , the Company recognized a net gain of $ 20.5 million related to its investment in Pinterest, which is included in "Other income, net" in the accompanying consolidated statement of operations.

The following table presents a summary of realized and unrealized gains and losses recorded in other income (expense), net,

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

as adjustments to the carrying value of equity securities without readily determinable fair values held as of December 31, 2019 and 2018 .

Years Ended December 31,

(In thousands)

Upward adjustments (gross unrealized gains)

Downward adjustments including impairments (gross unrealized losses)

The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at December 31, 2019 were $ 19.9 million and $ 7.0 million , respectively.

Realized and unrealized gains and losses for the Company's marketable equity security and investments without readily determinable fair values for the years ended December 31, 2019 and 2018 are as follows:

Years Ended December 31,

(In thousands)

Realized gains, net, for equity securities sold

Unrealized gains, net, on equity securities held

Total gains recognized, net, in other income (expense), net

Equity method investments

In 2018 and 2017 , the Company recorded other-than-temporary impairment charges on certain of its investments of $ 0.6 million and $ 2.7 million , respectively.

These charges are included in "Other income (expense), net" in the accompanying consolidated statement of operations.

Cost method investments (prior to the adoption of ASU No.

In 2017 , the Company recorded $ 9.5 million of other-than-temporary impairment charges for certain of its investments as a result of our assessment of the near-term prospects and financial condition of the investees.

This charge is included in "Other income (expense), net" in the accompanying consolidated statement of operations.

On October 23, 2017, Match Group sold a cost method investment for net proceeds of $ 60.2 million .

The gain on sale of $ 9.1 million is included in "Other income (expense), net" in the accompanying consolidated statement of operations.

IAC/INTERACTIVECORP AND SUBSIDIARIES

At December 31, 2020 and 2019, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $ 14.2 million and $ 5.1 million, respectively, and is included in “Other non-current assets” in the accompanying consolidated balance sheet.

The cumulative downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held as of December 31, 2020, since the adoption of ASU 2016-01 on January 1, 2018 through December 31, 2020, were $ 2.1 million.

For the year ended December 31, 2020, there were no adjustments to the carrying value of equity securities without readily determinable fair values.

For the years ended December 31, 2019 and 2018, we recognized impairments of $ 4.0 million and $ 2.1 million, respectively, which are included in “Other income (expense), net” in the accompanying consolidated statement of operations.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5 unchanged sentences

Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Total

(In thousands)

1 unchanged sentence

Money market funds $ 147,615 $ — $ 147,615

Treasury discount notes

Time deposits — 50,000 50,000

Commercial paper

Marketable securities:

Commercial paper

Other non-current assets:

Contingent consideration arrangements

Total $ 147,615 $ 50,000 $ 197,615

December 31, 2019

2 unchanged sentences

Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Total

(In thousands)

1 unchanged sentence

Money market funds $ 150,865 $ — $ 150,865

Treasury discount notes

Commercial paper

Time deposits — 30,000 30,000

Marketable securities:

Treasury discount notes

Commercial paper

Marketable equity security

Contingent consideration arrangements

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Years Ended December 31,

Consideration

(In thousands)

Balance at January 1

Fair value at date of acquisition

Total net (losses) gains:

Included in earnings:

Fair value adjustments

Included in other comprehensive (loss) income

Balance at December 31

Contingent consideration arrangements

At December 31, 2019 , the Company has one outstanding contingent consideration arrangement related to a business acquisition.

The arrangement has a total maximum contingent payment of $ 45.0 million .

At December 31, 2019 , the gross fair value of this arrangement, before unamortized discount, is $ 12.5 million .

During the first quarter of 2019, the Company paid $ 2.0 million to settle a contingent consideration arrangement that was outstanding at December 31, 2018.

Generally, our contingent consideration arrangements are based upon financial performance and/or operating metric targets and the Company generally determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangements are initially long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligations to determine the net amount reflected in the consolidated financial statements.

The fair value of the contingent consideration arrangement at December 31, 2019 reflects a discount rate of 25 % .

The fair values of the contingent consideration arrangements at December 31, 2018 reflect discount rates ranging from 12 % to 25 % .

The fair value of contingent consideration arrangements is sensitive to changes in the expected achievement of the applicable targets and changes in discount rates.

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

The contingent consideration arrangement liability at December 31, 2019 includes a non-current portion of $ 6.9 million .

The contingent consideration arrangement liability at December 31, 2018 includes a current portion of $ 2.0 million and a non-current portion of $ 26.6 million , respectively.

The current and non-current portions of the contingent consideration liability are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total $ 150,865 $ 30,000 $ 180,865

Financial instruments measured at fair value only for disclosure purposes

The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes.

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Carrying Value Fair Value Carrying Value Fair Value

(In thousands)

Current portion of long-term debt

Long-term debt, net (a)

$ ( 3,534,706 ) $ ( 6,267,976 ) $ ( 2,889,626 ) $ ( 3,904,406 )

At December 31, 2019 and 2018 , the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $ 404.7 million and $ 88.9 million , respectively .

At December 31, 2019 and 2018 , the fair value of long-term debt is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.

At December 31, 2018, the Company considered the outstanding borrowings under the MTCH's $ 500 million revolving credit facility ("MTCH Credit Facility"), which has a variable interest rate, to have a fair value equal to its carrying value.

The outstanding borrowings under the MTCH Credit Facility were repaid with a portion of the net proceeds from MTCH's $ 350 million aggregate principal amount of its 5.625 % Senior Notes issued on February 15, 2019.

See " Note 7—Long-Term Debt " for additional information on the repayment of the MTCH Credit Facility.

IAC/INTERACTIVECORP AND SUBSIDIARIES

______________________

(a) At December 31, 2020 and 2019, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $ 357.8 million and $ 402.9 million, respectively.

At December 31, 2020 and 2019, the fair value of long-term debt, net is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7— LONG-TERM DEBT

Long-term debt consists of:

NOTE 7—LONG-TERM DEBT, NET

Long-term debt, net consists of:

(In thousands)

MTCH Term Loan due November 16, 2022

MTCH Credit Facility due December 7, 2023

6.375% Senior Notes due June 1, 2024 (the "6.375% MTCH Senior Notes");

Credit Facility due February 13, 2025 $ — $ —

Term Loan due February 13, 2027

425,000 425,000

6.375 % Senior Notes (the “6.375% Senior Notes”)

5.00 % Senior Notes due December 15, 2027 (the “5.00% Senior Notes”);

interest payable each June 15 and December 15

5.00% Senior Notes due December 15, 2027 (the "5.00% MTCH Senior Notes");

450,000 450,000

4.625 % Senior Notes due June 1, 2028 (the “4.625% Senior Notes”);

interest payable each June 1 and December 1

5.625% Senior Notes due February 15, 2029 (the "5.625% MTCH Senior Notes");

5.625 % Senior Notes due February 15, 2029 (the “5.625% Senior Notes”);

interest payable each February 15 and August 15

Total MTCH long-term debt

unamortized original issue discount

unamortized debt issuance costs

Total MTCH debt, net

ANGI Term Loan due November 5, 2023

current portion of ANGI Term Loan

unamortized debt issuance costs

Total ANGI debt, net

350,000 350,000

4.125 % Senior Notes due August 1, 2030 (the “4.125% Senior Notes”);

interest payable each February 1 and August 1

0.875 % Exchangeable Senior Notes due October 1, 2022 (the “2022 Exchangeable Notes”);

interest payable each April 1 and October 1

517,500 517,500

0.875 % Exchangeable Senior Notes due June 15, 2026 (the “2026 Exchangeable Notes”);

interest payable each June 15 and December 15

575,000 575,000

2.00 % Exchangeable Senior Notes due January 15, 2030 (the “2030 Exchangeable Notes”);

interest payable each January 15 and July 15

commencing on January 15, 2020

4.75% Senior Notes due December 15, 2022 (the "4.75% Senior Notes");

interest payable each June 15 and December 15

Total IAC long-term debt

575,000 575,000

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

Unamortized original issue discount 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/INTERACTIVECORP AND SUBSIDIARIES

Term Loan and Credit Facility

In connection with the Separation, Former Match Group was merged into and with MG Holdings II.

MG Holdings II replaced Former Match Group as borrower under the Credit Agreement and assumed its obligations thereunder and under the Term Loan and Credit Facility, as successor to Former Match Group.

MG Holdings II, an indirect wholly-owned subsidiary of the Company, entered into the Term Loan under a credit agreement (the “Credit Agreement”) on November 16, 2015.

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.

Additionally, the amendment provided for a benchmark replacement should the LIBOR rate not be available in the future.

The rate used would be agreed to between the administrative agent and the Company and may be based upon a secured overnight financing rate at the Federal Reserve Bank of New York.

Additional information about the benchmark replacement can be found in Amendment No.

6 to the Credit Agreement.

At both December 31, 2020 and December 31, 2019, the outstanding balance on the Term Loan was $ 425 million and the interest rate of the Term Loan was 1.96 % and 4.44 % as of those dates, respectively.

Interest payments are due at least quarterly through the term of the loan.

The Term Loan provides for annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio contained in the Credit Agreement.

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 to February 13, 2025.

At December 31, 2020 and December 31, 2019, there were no outstanding borrowings under the Credit Facility.

At December 31, 2020, there were letters of credit of $ 0.2 million outstanding.

At December 31, 2020, we had $ 749.8 million available under the Credit Facility.

No letters of credit

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MTCH Senior Notes

The 6.375 % MTCH Senior Notes were issued on June 1, 2016, and are currently redeemable.

These notes may be redeemed at redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:

were outstanding at December 31, 2019.

The annual commitment fee on undrawn funds, which was 25 basis points as of December 31, 2020, is based on the current leverage ratio.

Borrowings under the Credit Facility bear interest, at MG Holdings II’s option, at a base rate or LIBOR, in each case plus an applicable margin, based on MG Holdings II’s consolidated net leverage ratio.

The terms of the Credit Facility require MG Holdings II to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0.

The Credit Facility and Term Loan contain covenants that would limit the ability of MG Holdings II to pay dividends, make distributions, or repurchase MG Holdings II’s stock in the event MG Holdings II’s secured net leverage ratio exceeds 2.0 to 1.0, while the Term Loan remains outstanding and, thereafter, if MG Holdings II’s consolidated net leverage ratio exceeds 4.0 to 1.0, or in the event a default has occurred.

There are additional covenants under these debt agreements that limit the ability of MG Holdings II and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions.

Obligations under the Credit Facility and Term Loan are unconditionally guaranteed by certain MG Holdings II wholly-owned domestic subsidiaries and are also secured by the stock of certain MG Holdings II domestic and foreign subsidiaries.

The Term Loan and outstanding borrowings, if any, under the Credit Facility rank equally with each other, and have priority over the Senior Notes to the extent of the value of the assets securing the borrowings under the Credit Agreement.

In connection with the Separation on June 30, 2020, MG Holdings II replaced the Former Match Group as issuer of each of the Senior Notes and assumed its obligations thereunder and under the indentures governing each of the Senior Notes, respectively, as successor to Former Match Group.

The 4.625 % Senior Notes were issued on May 19, 2020.

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

At any time prior to June 1, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes.

Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years indicated below:

Beginning June 1, Percentage

2023 102.313 %

2024 101.156 %

2025 and thereafter 100.000 %

The 5.00 % MTCH Senior Notes were issued on December 4, 2017.

The proceeds from these notes, along with cash on hand, were used to redeem the $ 445.2 million outstanding balance of the 6.75 % MTCH Senior Notes, which were due on December 15, 2022, and pay the related call premium.

At any time prior to December 15, 2022, the 5.00 % MTCH Senior Notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes.

Thereafter, these notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:

The 4.125 % Senior Notes were issued on February 11, 2020.

The proceeds from these notes were used to fund a portion of the $ 3.00 per common share of Former Match Group that was payable in connection with the Separation.

At any time prior to May 1, 2025, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes.

Beginning May 1, Percentage

2025 102.063 %

2026 101.375 %

2027 100.688 %

2028 and thereafter 100.000 %

The 5.625 % MTCH Senior Notes were issued on February 15, 2019.

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.

At any time prior to February 15, 2024, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes.

Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on February 15 of the years indicated below:

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 5.625 % Senior Notes were issued on February 15, 2019.

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

At any time prior to February 15, 2024, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes.

Thereafter, these notes may be redeemed at redemption prices set forth below, together with accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on February 15 of the years indicated below:

Beginning February 15, Percentage

2024 102.813 %

2025 101.875 %

2026 100.938 %

2027 and thereafter 100.000 %

The indentures governing the 6.375 % and 5.00 % MTCH Senior Notes contain covenants that would limit MTCH's ability to pay dividends, make distributions or repurchase MTCH stock in the event a default has occurred or MTCH's consolidated leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0 .

The 5.00 % Senior Notes were issued on December 4, 2017.

The proceeds, along with cash on hand, were used to redeem then outstanding senior notes and pay the related call premium.

At any time prior to December 15, 2022, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes.

Beginning December 15, Percentage

2022 102.500 %

2023 101.667 %

2024 100.833 %

2025 and thereafter 100.000 %

The 6.375 % Senior Notes were redeemed on June 11, 2020 with proceeds from the 4.625 % Senior Notes.

The related call premium of $ 12.8 million and $ 2.9 million of unamortized original issue discount and debt issuance costs related to the 6.375 % Senior Notes are included in “Other (expense) income, net” in the consolidated statement of operations for the year ended December 31, 2020.

The indentures governing the 5.00 % Senior Note contain covenants that would limit MG Holdings II’s ability to pay dividends or to make distributions and repurchase or redeem MG Holdings II’s stock in the event a default has occurred or MG Holdings II’s consolidated leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0.

At December 31, 2020, there were no limitations pursuant thereto.

There are additional covenants in these indentures that limit MTCH's ability and the ability of its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MTCH is not in compliance with certain ratios set forth in the indentures, and (ii) incur liens, enter into agreements restricting MTCH subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets.

The indenture governing the 5.625 % MTCH Senior Notes is less restrictive than the indentures governing the 6.375 % and 5.00 % MTCH

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Senior Notes and generally only limits MTCH's ability and the ability of its subsidiaries to, among other things, create liens on assets and limits MTCH's ability to consolidate, merge, sell or otherwise dispose of all or substantially all of its assets.

MTCH's Senior Notes are ranked equally with each other.

MTCH Term Loan and MTCH Credit Facility

At both December 31, 2019 and 2018 , the outstanding balance on the MTCH Term Loan was $ 425 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.

The MTCH Term Loan provides for annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio contained in the credit agreement.

Interest payments are due at least quarterly through the term of the loan.

On December 7, 2018, the MTCH $ 500 million revolving credit facility (the "MTCH Credit Facility") was amended and restated, and is due 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 approximately 4.00 % .

The annual commitment fee on undrawn funds is based on the current consolidated net leverage ratio and is 25 basis points at both December 31, 2019 and 2018 , respectively.

Borrowings under the MTCH Credit Facility bear interest, at MTCH's option, at a base rate or LIBOR, in each case plus an applicable margin, which is based on MTCH's consolidated net leverage ratio.

The terms of the MTCH Credit Facility require MTCH to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0 (in each case as defined in the agreement).

The MTCH Term Loan and MTCH Credit Facility contain covenants that would limit MTCH’s ability to pay dividends, make distributions or repurchase MTCH stock in the event MTCH’s secured net leverage ratio exceeds 2.0 to 1.0 , while the MTCH Term Loan remains outstanding and, thereafter, if the consolidated net leverage ratio exceeds 4.0 to 1.0 , or in the event a default has occurred.

There are additional covenants under these MTCH debt agreements that limit the ability of MTCH and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions.

Obligations under the MTCH Credit Facility and MTCH Term Loan are unconditionally guaranteed by certain MTCH wholly-owned domestic subsidiaries and are also secured by the stock of certain MTCH domestic and foreign subsidiaries.

The MTCH Term Loan and outstanding borrowings, if any, under the MTCH Credit Facility rank equally with each other, and have priority over the MTCH Senior Notes to the extent of the value of the assets securing the borrowings under the MTCH credit agreement.

ANGI Term Loan and ANGI Credit Facility

On November 1, 2017, ANGI borrowed $ 275 million under a five -year term loan facility ("ANGI Term Loan").

On November 5, 2018, the ANGI Term Loan was amended and restated, and is now due on November 5, 2023.

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

The spread over LIBOR is subject to change in future periods based on ANGI's consolidated net leverage ratio.

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

Interest payments are due at least quarterly through the term of the loan.

Additionally, there are quarterly principal payments of $ 3.4 million through December 31, 2021, $ 6.9 million for the one-year period ending December 31, 2022 and $ 10.3 million through maturity of the loan when the final amount of $ 161.6 million is due.

The terms of the ANGI Term Loan require ANGI to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0 (in each case as defined in the credit agreement).

The ANGI Term Loan also contains covenants that would limit ANGI’s ability to pay dividends, make distributions or repurchase ANGI stock in the event a default has occurred or ANGI’s consolidated net leverage ratio exceeds 4.25 to 1.0 .

There are additional covenants under the ANGI Term Loan that limit the ability of ANGI and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions.

On November 5, 2018, ANGI entered into a five -year $ 250 million revolving credit facility (the "ANGI Credit Facility").

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

The annual commitment fee on undrawn funds is based on the consolidated net leverage ratio most recently reported and is 25 basis points at both December 31, 2019 and 2018 .

Borrowings under the ANGI Credit Facility bear interest, at ANGI's option, at either a

IAC/INTERACTIVECORP AND SUBSIDIARIES

There are additional covenants in those indentures that limit the ability of MG Holdings II and its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MG Holdings II is not in compliance with certain financial ratios set forth therein, and (ii) incur liens, enter into agreements restricting the ability of MG Holdings II’s subsidiaries to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets.

The indentures governing the 4.125 %, 4.625 %, and 5.625 % Senior Notes are less restrictive than the indentures governing the 5.00 % Senior Notes and generally only limit MG Holdings II’s and its subsidiaries’ ability to, among other things, create liens on assets, and our ability to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.

The Senior Notes all rank equally in right of payment.

Exchangeable Notes

During 2017, Match Group FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, issued $ 517.5 million aggregate principal amount of its 2022 Exchangeable Notes.

During 2019, Match Group FinanceCo 2, Inc.

and Match Group FinanceCo 3, Inc., direct, wholly-owned subsidiaries of the Company, issued $ 575.0 million aggregate principal amount of its 2026 Exchangeable Notes and $ 575.0 million aggregate principal amount of its 2030 Exchangeable Notes, respectively.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

base rate or LIBOR, in each case plus an applicable margin, which is based on ANGI's consolidated net leverage ratio.

The financial and other covenants are the same as those for the ANGI Term Loan.

The ANGI Term Loan and ANGI Credit Facility are guaranteed by ANGI's wholly-owned material domestic subsidiaries and are secured by substantially all assets of ANGI and the guarantors, subject to certain exceptions.

IAC Exchangeable Notes

On October 2, 2017, IAC FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, issued $ 517.5 million aggregate principal amount of its 2022 Exchangeable Notes.

During 2019, IAC FinanceCo 2, Inc.

and IAC FinanceCo 3, Inc., direct, wholly-owned subsidiaries of the Company, issued $ 575.0 million aggregate principal amount of its 2026 Exchangeable Notes and $ 575.0 million aggregate principal amount of its 2030 Exchangeable Notes, respectively.

The net proceeds from the sales of the 2026 Exchangeable Notes and the 2030 Exchangeable Notes were approximately $ 1.1 billion , after deducting fees and expenses.

A portion of the net proceeds from the offerings were used to pay the net premium of $ 136.9 million on the 2026 Exchangeable Notes Hedge and Warrants and the 2030 Exchangeable Notes Hedge and Warrants (described below).

The remainder will be used for general corporate purposes.

The 2022, 2026 and 2030 Exchangeable Notes (collectively the "Exchangeable Notes") are guaranteed by the Company.

At December 31, 2019 , the Company, excluding MTCH and ANGI, held $ 2.3 billion in cash and cash equivalents and marketable securities, which is in excess of $ 1.7 billion of the Exchangeable Notes outstanding.

The following table presents detail of the exchangeable feature:

Number of shares of the Company's Common Stock into which each $1,000 of Principal of the Exchangeable Notes is Exchangeable*

Approximate Equivalent Exchange Price per Share*

The 2022, 2026, and 2030 Exchangeable Notes (collectively the “Exchangeable Notes”) are guaranteed by the Company but are not guaranteed by MG Holdings II or any of its subsidiaries.

Following the Separation, the number of shares of the Company’s common stock into which each $1,000 of principal of the Exchangeable Notes is exchangeable and the approximate equivalent exchange price per share were adjusted under the terms of each of the respective Exchangeable Notes to reflect the conversion of each from Former IAC amounts to Match Group amounts.

The following table presents details of the exchangeable features under the amended Match Group terms:

Number of shares of the Company’s Common Stock into which each $1,000 of Principal of the Exchangeable Notes is Exchangeable (a)

Approximate Equivalent Exchange Price per Share (a)

Exchangeable Date

2022 Exchangeable Notes

2026 Exchangeable Notes

March 15, 2026

2030 Exchangeable Notes

October 15, 2029

2022 Exchangeable Notes 22.7331 $ 43.99 July 1, 2022

2026 Exchangeable Notes 11.4259 $ 87.52 March 15, 2026

2030 Exchangeable Notes 11.8739 $ 84.22 October 15, 2029

______________________

* Subject to adjustment upon the occurrence of specific events.

(a) Subject to adjustment upon the occurrence of specified events.

The Exchangeable Notes are exchangeable under the following circumstances:

2 unchanged sentences

(3) if the issuer calls the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate events as further described under the indenture governing the Exchangeable Notes.

On or after the respective exchangeable dates noted in the table above, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may exchange all or any portion of their Exchangeable Notes

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

regardless of the foregoing conditions.

(4) upon the occurrence of specified corporate events as further described under the indentures governing the respective Exchangeable Notes.

Upon exchange, the Company, in its sole discretion, has the option to settle the Exchangeable Notes with any of the three following alternatives:

1 unchanged sentence

It is the Company’s intention to settle the Exchangeable Notes with cash equal to the face amount of the notes upon exchange.

any shares issued would be offset by shares received upon exercise of the Exchangeable Note Hedges (described below).

The Company’s 2022 Exchangeable Notes are currently exchangeable;

during year ended December 31, 2019, no notes were exchanged.

The if-converted value of the 2022 Exchangeable Notes exceeded its principal amount of $ 517.5 million by $ 329.6 million and $ 105.0 million based on the Company's stock price on December 31, 2019 and 2018 , respectively.

Any dilution arising from the 2022 Exchangeable Notes would be mitigated by the 2022 Exchangeable Notes Hedge.

Additionally, each of IAC FinanceCo 2, Inc.

and IAC FinanceCo 3, Inc.

Any dilution arising from the 2022, 2026, and 2030 Exchangeable Notes would be mitigated by the 2022, 2026, and 2030 Exchangeable Notes Hedges, respectively.

The Company’s 2022, 2026, and 2030 Exchangeable Notes were exchangeable as of December 31, 2020;

during the three and twelve months ended December 31, 2020, no notes were exchanged.

The following table presents the if-converted value that exceeded the principal of each note based on the Company’s stock price December 31, 2020 and December 31, 2019, respectively.

The amounts for December 31, 2020 represent the exchange occurring under the Match Group terms and for December 31, 2019 represent the exchange occurring under Former IAC terms.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2020 December 31, 2019

(In millions)

2022 Exchangeable Notes $ 1,261.2 $ 329.6

2026 Exchangeable Notes $ 418.3 N/A

2030 Exchangeable Notes $ 457.2 N/A

Additionally, each of Match Group FinanceCo 2, Inc.

and Match Group FinanceCo 3, Inc.

may redeem for cash all or any portion of its applicable notes, at its option, on or after June 20, 2023 and July 20, 2026, respectively, if the last reported sale price of the common stock underlying the respective notes has been at least 130 % of the exchange price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the notice of redemption is provided, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the applicable issuer provides notice of redemption, at a redemption price equal to 100 % of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

We separately account for the debt and the equity components of the Exchangeable Notes and therefore, the Company recorded an original issue discount and corresponding increase to additional paid-in capital, which is the fair value attributed to the exchange feature of each series of debt at issuance.

The Company separately accounts for the debt and equity components of the Exchangeable Notes, and therefore, the Company recorded an original issue discount and corresponding increase to additional paid-in capital, which is the fair value attributed to the exchange feature of each series of debt at issuance.

The Company is amortizing the original issue discount and debt issuance costs utilizing the effective interest method over the life of the Exchangeable Notes.

The effective interest rates for the 2022, 2026, and 2030 Exchangeable Notes are 4.73 %, 5.35 %, and 6.59 %, respectively.

The following table sets forth the components of the Exchangeable Notes as of December 31, 2019 and 2018 (in thousands):

2022 Exchangeable Notes

2026 Exchangeable Notes

2030 Exchangeable Notes

The following tables sets forth the components of the Exchangeable Notes:

December 31, 2020

2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes

(In thousands)

Liability component:

Principal $ 517,500 $ 575,000 $ 575,000

unamortized original issue discount 26,525 111,806 168,531

1 unchanged sentence

Equity component $ 70,363 $ 138,796 $ 189,213

2022 Exchangeable Notes

December 31, 2019

2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes

(In thousands)

Liability component:

Principal $ 517,500 $ 575,000 $ 575,000

unamortized original issue discount 40,768 129,037 181,800

1 unchanged sentence

Equity component $ 70,363 $ 138,796 $ 189,213

The following table sets forth interest expense recognized related to Exchangeable Notes (in thousands):

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth interest expense recognized related to the Exchangeable Notes:

Year Ended December 31, 2020

2022 Exchangeable Notes

2026 Exchangeable Notes

2030 Exchangeable Notes

2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes

(In thousands)

Contractual interest expense $ 4,528 $ 5,031 $ 11,500

3 unchanged sentences

Year Ended December 31, 2019

2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes

(In thousands)

Contractual interest expense $ 4,528 $ 2,963 $ 6,772

Amortization of original issue discount 13,256 9,759 7,413

Amortization of debt issuance costs 2,981 758 420

Total interest expense recognized $ 20,765 $ 13,480 $ 14,605

Year Ended December 31, 2018

2022 Exchangeable Notes

(In thousands)

Contractual interest expense $ 4,528

3 unchanged sentences

Exchangeable Notes Hedge and Warrants

In connection with the Exchange Notes offerings, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon the occurrence of specified events) the same number of shares that would be issuable upon the exchange of the applicable Exchangeable Notes at the price per share set forth below (the "Exchangeable Notes Hedge"), and sold warrants allowing the counterparty to purchase (subject to adjustment upon the occurrence of specified events) shares at the per share price set forth below (the "Exchangeable Notes Warrants").

Exchangeable Notes Hedges are expected to reduce the potential dilutive effect on the Company's common stock upon any exchange of notes and/or offset any cash payment IAC FinanceCo, Inc., IAC FinanceCo 2, Inc.

or IAC FinanceCo 3, Inc.

In connection with the Exchangeable Notes offerings, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon the occurrence of specified events) the same number of shares that would be issuable upon the exchange of the applicable Exchangeable Notes at the price per share set forth below (the “Exchangeable Notes Hedge”), and sold warrants allowing the counterparty to purchase (subject to adjustment upon the occurrence of specified events) shares at the per share price set forth below (the “Exchangeable Notes Warrants”).

The Exchangeable Notes Hedges are expected to reduce the potential dilutive effect on the Company’s common stock upon any exchange of notes and/or offset any cash payment Match Group FinanceCo, Inc., Match Group FinanceCo 2, Inc.

or Match Group FinanceCo 3, Inc.

is required to make in excess of the principal amount of the exchanged notes.

The Exchangeable Notes Warrants have a dilutive effect on the Company’s common stock to the extent that the market price per share of the Company common stock exceeds their respective strike prices.

The following tables presents details of the Exchangeable Notes Hedges and Warrants (shares in millions):

Number of Shares*

Approximate Equivalent Exchange Price per Share*

Following the Separation, the number of shares and the approximate equivalent exchange price per share for the related Exchangeable Notes Hedge were adjusted to reflect the conversion from Former IAC to Match Group.

The Exchangeable Notes Warrants also had adjustments in the number of shares and strike price per

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

share to reflect the conversion from Former IAC to Match Group.

The following tables present details of the Exchangeable Notes Hedges and Warrants under the amended Match Group terms:

Number of Shares (a)

Approximate Equivalent Exchange Price per Share (a)

(Shares in millions)

2022 Exchangeable Notes Hedge 11.8 $ 43.99

1 unchanged sentence

2030 Exchangeable Notes Hedge 6.8 $ 84.22

Number of Shares*

Strike Price per Share*

Number of Shares (a)

Weighted Average Strike Price per Share (a)

(Shares in millions)

2022 Exchangeable Notes Warrants 11.8 $ 68.22

2 unchanged sentences

______________________

* Subject to adjustment upon occurrence of specific events.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

IAC Senior Notes

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

At December 31, 2019, IAC has a $ 250 million revolving credit facility (the "IAC Credit Facility"), under which IAC Group, LLC, a subsidiary of the Company is the borrower ("Borrower"), that expires on November 5, 2023.

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

The annual commitment fee on undrawn funds is based on the consolidated net leverage ratio (as defined in the agreement) most recently reported and is 20 basis points at both December 31, 2019 and 2018 .

Borrowings under the IAC Credit Facility bear interest, at the Borrower's option, at a base rate or LIBOR, in each case, plus an applicable margin, which is based on the Borrower's consolidated net leverage ratio.

The terms of the IAC Credit Facility require that the Borrower maintains a consolidated net leverage ratio of not more than 3.25 to 1.0 before the date on which the Borrower no longer holds majority of the outstanding voting stock of each of ANGI and MTCH ("Trigger Date") and no greater than 2.75 to 1.0 on or after the Trigger Date.

The terms of the IAC Credit Facility also restrict our ability to incur additional indebtedness.

Borrowings under the IAC Credit Facility are unconditionally guaranteed by certain of our wholly-owned domestic subsidiaries and are also secured by the stock of certain of our domestic and foreign subsidiaries, including the shares of MTCH and ANGI owned by the Borrower.

(a) Subject to adjustment upon the occurrence of specified events.

Long-term debt maturities

Years Ending December 31,

(In thousands)

current portion of long-term debt

Years Ending December 31, (In thousands)

2022 $ 517,500

2030 1,075,000

Total 3,892,500

Unamortized original issue discount 312,891

2 unchanged sentences

NOTE 8—SHAREHOLDERS’ EQUITY

Description of Common Stock and Class B Convertible Common Stock

Except as described herein, shares of IAC common stock and IAC Class B common stock are identical.

Each holder of shares of IAC common stock and IAC Class B common stock vote together as a single class with respect to matters that may be submitted to a vote or for the consent of IAC's shareholders generally, including the election of directors.

In connection with any such vote, each holder of IAC common stock is entitled to one vote for each share of IAC common stock held and each holder of IAC Class B common stock is entitled to ten votes for each share of IAC Class B common stock held.

Notwithstanding the foregoing, the holders of shares of IAC common stock, acting as a single class, are entitled to elect 25 % of the total number of IAC's directors, and, in the event that 25 % of the total number of directors shall result in a fraction of a director, then the holders of shares of IAC common stock, acting as a single class, are entitled to elect the next higher whole number of IAC's directors.

In addition, Delaware law requires that certain matters be approved by the holders of shares of IAC common stock or holders of IAC Class B common stock voting as a separate class.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Shares of IAC Class B common stock are convertible into shares of IAC common stock at the option of the holder thereof, at any time, on a share-for-share basis.

Such conversion ratio will in all events be equitably preserved in the event of any recapitalization of IAC by means of a stock dividend on, or a stock split or combination of, outstanding shares of IAC common stock or IAC Class B common stock, or in the event of any merger, consolidation or other reorganization of IAC with another corporation.

Upon the conversion of shares of IAC Class B common stock into shares of IAC common stock, those shares of IAC Class B common stock will be retired and will not be subject to reissue.

Shares of IAC common stock are not convertible into shares of IAC Class B common stock.

The holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, share for share, such dividends as may be declared by IAC's Board of Directors out of funds legally available therefor.

In the event of a liquidation, dissolution, distribution of assets or winding-up of IAC, the holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, share for share, all the assets of IAC available for distribution to its stockholders, after the rights of the holders of any IAC preferred stock have been satisfied.

Description of Common Stock

Holders of Match Group common stock are entitled to one vote per share on all matters to be voted upon by the stockholders.

Holders of Match Group common stock are entitled to receive, share for share, such dividends as may be declared by Match Group’s Board of Directors out of funds legally available therefor.

In the event of a liquidation, dissolution, or winding up, holders of the Company’s common stock are entitled to receive ratably the assets available for distribution to stockholders after payment of all liabilities.

Reserved Common Shares

In connection with equity compensation plans, the Exchangeable Notes and warrants, 33.7 million shares of IAC common stock are reserved at December 31, 2019 .

Exchangeable Notes and Warrants

During the years ended December 31, 2019 , 2018 and 2017 , no warrants were exercised and no Exchangeable Notes were exchanged.

See " Note 7—Long-term Debt " for additional information on the Exchangeable Notes Warrants.

Common Stock Repurchases

There were no common stock repurchases during the year ended December 31, 2019 .

During the years ended December 31, 2018 and 2017 , the Company repurchased 0.5 million and 0.7 million shares of IAC common stock for aggregate consideration, on a trade date basis, of $ 82.9 million and $ 50.1 million , respectively.

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

In connection with equity compensation plans, the Exchangeable Notes, and warrants, 95.9 million shares of Match Group common stock are reserved at December 31, 2020.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Retirement of Treasury Stock

On June 30, 2020, prior to the Separation, Former IAC retired all Former IAC common stock and Class B common stock then held in treasury.

There are no shares of common stock held in treasury at December 31, 2020.

Preferred Stock

The Company has authorized 100,000,000 shares, $ 0.01 par value per share, of preferred stock.

No shares have been issued under this authorization.

Series of equity transactions related to the Separation of Former IAC

Upon the consummation of the Separation, holders of Former IAC common stock exchanged each share of common stock for (i) one share of Series 1 Mandatorily Exchangeable Preferred Stock, which was immediately exchanged for one share of IAC common stock and then retired;

and (ii) 2.1584 shares of Match Group common stock, par value $ 0.001 per share.

Upon the consummation of the Separation, holders of Former IAC Class B common stock exchanged each share of Class B common stock for (i) one share of Series 2 Mandatorily Exchangeable Preferred Stock, which was immediately exchanged for one share of IAC Class B common stock and then retired;

and (ii) 2.1584 shares of Match Group common stock, par value $ 0.001 per share.

Issuance of Common Stock

In July 2020, in connection with the Separation, Former IAC closed the sale of an additional 17.3 million newly issued Match Group common shares.

The proceeds of $ 1.4 billion, net of associated fees, were transferred directly to IAC.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9—ACCUMULATED OTHER COMPREHENSIVE LOSS

1 unchanged sentence

Year Ended December 31, 2020

Foreign Currency Translation Adjustment

Unrealized Gains On Available-For-Sale Securities

Accumulated Other Comprehensive Loss

Foreign Currency Translation Adjustment Unrealized (Loss) Gain on Available-For-Sale Security Accumulated Other Comprehensive (Loss) Income

(In thousands)

Balance at January 1 $ ( 136,349 ) $ — $ ( 136,349 )

Other comprehensive loss

Net current period other comprehensive loss

Allocation of accumulated other comprehensive loss related to noncontrolling interests

Other comprehensive income (loss) before reclassifications 40,655 ( 1 ) 40,654

Amounts reclassified into earnings

( 168 ) — ( 168 )

Net current period other comprehensive income (loss)

40,487 ( 1 ) 40,486

Allocation of accumulated other comprehensive loss related to the noncontrolling interests

Separation of IAC 13,780 1 13,781

Balance at December 31 $ ( 81,454 ) $ — $ ( 81,454 )

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2019

Foreign Currency Translation Adjustment

Unrealized Gains On Available-For-Sale Securities

Accumulated Other Comprehensive Loss

Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Available-For-Sale Security Accumulated Other Comprehensive (Loss) Income

(In thousands)

Balance at January 1 $ ( 128,726 ) $ 4 $ ( 128,722 )

Other comprehensive (loss) income before reclassifications

Amounts reclassified to earnings

Net current period other comprehensive (loss) income

Allocation of accumulated other comprehensive loss related to noncontrolling interests

Other comprehensive loss ( 7,938 ) ( 4 ) ( 7,942 )

Net period other comprehensive loss ( 7,938 ) ( 4 ) ( 7,942 )

Allocation of accumulated other comprehensive loss related to the noncontrolling interests 315 — 315

Balance at December 31 $ ( 136,349 ) $ — $ ( 136,349 )

Year Ended December 31, 2018

Foreign Currency Translation Adjustment

Unrealized Gains On Available-For-Sale Securities

Accumulated Other Comprehensive (Loss) Income

Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Available-For-Sale Security Accumulated Other Comprehensive (Loss) Income

(In thousands)

Balance at January 1 $ ( 103,568 ) $ — $ ( 103,568 )

Other comprehensive income before reclassifications

Amounts reclassified to earnings

Net current period other comprehensive income (loss)

Allocation of accumulated other comprehensive loss related to noncontrolling interests

Other comprehensive (loss) income before reclassifications ( 25,230 ) 4 ( 25,226 )

Amounts reclassified into earnings ( 52 ) — ( 52 )

Net period other comprehensive (loss) income ( 25,282 ) 4 ( 25,278 )

Allocation of accumulated other comprehensive loss related to the noncontrolling interests 124 — 124

Balance at December 31 $ ( 128,726 ) $ 4 $ ( 128,722 )

The amounts reclassified out of foreign currency translation adjustment into earnings for the years ended 2018 and 2017 relate to the liquidation of international subsidiaries.

The amount reclassified out of unrealized gains on available-for-sale securities into earnings for the year ended December 31, 2017 , include a tax benefit of $ 3.8 million .

IAC/INTERACTIVECORP AND SUBSIDIARIES

At December 31, 2020, 2019 and 2018, there was no tax benefit or provision on the accumulated other comprehensive loss.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share attributable to IAC shareholders:

As a result of the Separation, weighted average basic and dilutive shares outstanding for all periods prior to the Separation reflect the share position of Former IAC multiplied by the Separation exchange ratio of 2.1584 .

The following table sets forth the computation of the basic and diluted earnings per share attributable to Match Group shareholders:

Years Ended December 31,

2020 2019 2018

Basic Diluted Basic Diluted Basic Diluted

(In thousands, except per share data)

Net earnings from continuing operations

$ 553,911 $ 553,911 $ 494,633 $ 494,633 $ 451,104 $ 451,104

Net earnings attributable to noncontrolling interests

Impact from public subsidiaries' dilutive securities (a)

Net earnings attributable to IAC shareholders

( 59,599 ) ( 59,599 ) ( 103,401 ) ( 103,401 ) ( 85,187 ) ( 85,187 )

Impact from subsidiaries' dilutive securities of continuing operations (a)

— ( 9,999 ) — ( 25,997 ) — ( 24,783 )

Net earnings from continuing operations attributable to Match Group, Inc.

$ 494,312 $ 484,313 $ 391,232 $ 365,235 $ 365,917 $ 341,134

(Loss) earnings from discontinued operations, net of tax

$ ( 366,070 ) $ ( 366,070 ) $ 49,187 $ 49,187 $ 306,643 $ 306,643

Net loss (earnings) attributable to noncontrolling interests of discontinued operations

319 319 ( 9,288 ) ( 9,288 ) ( 45,599 ) ( 45,599 )

Impact from subsidiaries’ dilutive securities of discontinued operations (a)

— ( 240 ) — ( 67 ) — ( 445 )

Net (loss) earnings from discontinued operations attributable to shareholders

( 365,751 ) ( 365,991 ) 39,899 39,832 261,044 260,599

Net earnings attributable to Match Group, Inc.

$ 128,561 $ 118,322 $ 431,131 $ 405,067 $ 626,961 $ 601,733

Weighted average basic shares outstanding

Dilutive securities (a) (b) (c) (d) (e)

Denominator for earnings per share—weighted average shares (a) (b) (c) (d) (e)

Earnings per share attributable to IAC shareholders:

Earnings per share

223,433 223,433 181,869 181,869 180,025 180,025

IAC has the option to settle certain MTCH and ANGI stock-based awards in its shares.

For the years ended December 31, 2019 and 2017 , it is more dilutive for MTCH to settle these MTCH equity awards.

For the year ended December 31, 2018 , it is more dilutive for IAC to settle these MTCH equity awards.

For the years ended December 31, 2019 , 2018 and 2017 , it is more dilutive for IAC to settle these ANGI equity awards.

If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options, warrants and subsidiary denominated equity, exchange of the Company's Exchangeable Notes and vesting of restricted stock units ("RSUs").

Dilutive securities (a)(b)(c)(d)

— 19,031 — 12,480 — 17,085

Denominator for earnings per share—weighted average shares (a)(b)(c)(d)

223,433 242,464 181,869 194,349 180,025 197,110

Earnings (loss) per share:

Earnings per share from continuing operations

$ 2.21 $ 2.00 $ 2.15 $ 1.88 $ 2.03 $ 1.73

(Loss) earnings per share from discontinued operations, net of tax

$ ( 1.64 ) $ ( 1.51 ) $ 0.22 $ 0.20 $ 1.45 $ 1.32

Earnings per share attributable to Match Group, Inc.

$ 0.58 $ 0.49 $ 2.37 $ 2.08 $ 3.48 $ 3.05

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

______________________

(a) Prior to the Separation, Former IAC had the option to settle certain Former Match Group and ANGI Homeservices (“ANGI”) stock-based awards with Former IAC shares.

For the period prior to the Separation in the year ended December 31, 2020, for continuing operations it was more dilutive for Former Match Group to settle certain Former Match Group equity awards;

and for discontinued operations it was more dilutive for ANGI to settle certain ANGI equity awards.

For the year ended December 31, 2019, for continuing operations it was more dilutive for Former Match Group to settle certain Former Match Group equity awards;

and for discontinued operations, it was more dilutive for Former IAC to settle certain ANGI equity awards.

For the year ended December 31, 2018, for continuing operations it was more dilutive for Former IAC to settle certain Former Match Group equity awards;

and for discontinued operations it was more dilutive for Former IAC to settle certain ANGI equity awards.

(b) If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options, warrants, and subsidiary denominated equity;

exchange of the Company’s Exchangeable Notes;

and vesting of restricted stock units.

For the years ended December 31, 2020, 2019, and 2018, 13.4 million, 24.1 million and 7.5 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Market-based awards and performance-based stock units ("PSUs") are considered contingently issuable shares.

Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods.

For the years ended December 31, 2019 , 2018 and 2017 , 0.2 million , 0.1 million and 0.1 million shares underlying market-based awards and PSUs were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met.

It is the Company's intention to settle the Exchangeable Notes through a combination of cash, equal to the face amount of the notes, and shares;

therefore, the Exchangeable Notes are only dilutive for periods during which the average price of IAC common stock exceeds the approximate $ 152.18 , $ 302.77 and $ 291.35 per share exchange price per $1,000 principal amount of the 2022 Exchangeable Notes, the 2026 Exchangeable Notes and the 2030 Exchangeable Notes, respectively.

The average price of IAC common stock was $ 223.89 and $ 167.61 for the years ended December 31, 2019 and 2018, respectively, and the dilutive impact of the 2022 Exchangeable Notes, which is the only series of Exchangeable Notes that is currently dilutive, was 1.1 million and 0.3 million shares, respectively.

For the year ended December 31, 2017 , the 2022 Exchangeable Notes were anti-dilutive as the average price of IAC common stock was $ 100.54 .

See " Note 11—Stock-based Compensation " for additional information on equity instruments denominated in the shares of certain subsidiaries.

NOTE 11— STOCK-BASED COMPENSATION

IAC currently has two active plans under which awards denominated in shares of IAC common stock have been granted.

These plans cover stock options to acquire shares of IAC common stock, RSUs, including those that are linked to the achievement of the Company's stock price, known as market-based awards ("MSUs") and those that are linked to the achievement of a performance target, known as performance-based awards ("PSUs"), denominated in shares of IAC common stock, as well as provide for the future grant of these and other equity awards.

These plans authorize the Company to grant

IAC/INTERACTIVECORP AND SUBSIDIARIES

For the years ended December 31, 2020, 2019, and 2018, 0.4 million, 0.4 million, and 0.2 million market-based awards and PSUs, respectively, were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met.

(d) It is the Company's intention to settle the Exchangeable Notes through a combination of cash, equal to the face amount of the notes, and shares.

As a result of the Separation, the dilutive impact for the year ended December 31, 2020 was determined by calculating the dilutive impact for the period after the Separation using the Match Group average price and for the period prior to the Separation using the Former IAC average price.

The resulting dilutive impact for each period was then weighted proportionally.

The Exchangeable Notes are only dilutive for periods after the Separation during which the average price of Match Group’s common stock exceeded the approximate per share exchange price per $1,000 principal amount of $ 43.99 , $ 87.52 and $ 84.22 for the 2022 Exchangeable Notes, the 2026 Exchangeable Notes, and the 2030 Exchangeable Notes, respectively.

The average price of Match Group’s common stock was $ 119.08 for the six months ended December 31, 2020.

For periods prior to the Separation, the Company determined the dilutive impact of the Exchangeable Notes when the average price of Former IAC common stock exceeded the approximately per share exchange price per $1,000 principal amount of $ 152.18 , $ 302.77 and $ 291.35 for the 2022 Exchangeable Notes, the 2026 Exchangeable Notes, and the 2030 Exchangeable Notes, respectively.

The average price of Former IAC’s common stock was $ 235.09 for the six months ended June 30, 2020.

For the year ended December 31, 2020, the dilutive impact for the 2022 Exchangeable Notes, 2026 Exchangeable Notes, and 2030 Exchangeable Notes was 5.0 million, 0.9 million, and 1.0 million shares, respectively, after weighting the respective periods of 2020 as described above.

For the years ended December 31, 2019 and 2018, the average price of Former IAC’s common stock was $ 223.89 and $ 167.61 , respectively, and the dilutive impact of the 2022 Exchangeable Notes, which was the only series of Exchangeable Notes that was dilutive for those periods, was 2.4 million and 0.7 million shares, respectively.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

awards to its employees, officers, directors and consultants.

At December 31, 2019 , there are 12.6 million shares available for grant under the plans.

The plans were adopted in 2013 and 2018, have a stated term of ten years , and provide that the exercise price of stock options granted will not be less than the market price of the Company's common stock on the grant date.

The plans do not specify grant dates or vesting schedules of awards as those determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee").

NOTE 11—STOCK-BASED COMPENSATION

The Company currently has three active stock and annual incentive plans;

two Former Match Group plans were assumed as part of the Separation (the 2015 and 2017 plans) and another plan was approved by shareholders on June 25, 2020 (the 2020 plan).

The 2015 and 2017 plans cover stock options to acquire shares of Match Group common stock, RSUs, and stock settled stock appreciation rights denominated in the equity of certain of our subsidiaries, in each case with respect to awards previously granted by Former Match Group prior to the Separation, as well as provide for the future grant of equity awards by the Company.

The 2015 and 2017 plans authorize the Company to grant awards to its employees, officers, directors and consultants.

At December 31, 2020, there were 33.6 million shares available for the future grant of equity awards under the 2015 and 2017 plans collectively.

The 2020 plan covers options previously granted by Former IAC that converted into Match Group options as a result of the Separation;

no additional grants can be made from this plan.

The 2015 and 2017 plans have a stated term of ten years and provide that the exercise price of stock options granted will not be less than the market price of the Company’s common stock on the grant date.

Neither plan specifies grant dates or vesting schedules of awards as those determinations have been delegated to the Compensation and Human Resources Committee of Match Group’s Board of Directors (the “Committee”).

Each grant agreement reflects the vesting schedule for that particular grant as determined by the Committee.

Broad-based stock option awards issued to date have generally vested in equal annual installments over a four -year period and RSU awards currently outstanding generally vest in either equal annual installments over a four -year period or cliff-vest after a three -year period, in each case, from the grant date.

MSU awards currently outstanding cliff-vest after the market condition has been met either within a three -year or five -year period from the date of grant.

PSU awards issued to date cliff-vest after a three -year period from the date of grant.

The amount of stock-based compensation expense recognized in the consolidated statement of operations is net of estimated forfeitures.

Stock options outstanding will generally vest in four equal annual installments over a four-year period.

RSUs outstanding generally vest over a three - or four-year period.

Market-based awards outstanding generally vest over a two - to four-year period.

Stock-based compensation expense recognized in the consolidated statement of operations includes expense related to the Company’s stock options and RSUs, market-based RSUs and PSUs for which vesting is considered probable, equity instruments denominated in shares of subsidiaries, and instruments previously issued by Former IAC denominated in stock options, RSUs, and market-based awards of IAC held by Match Group employees.

The amount of stock-based compensation expense recognized is net of estimated forfeitures, as the expense recorded is based on awards that are ultimately expected to vest.

The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate.

The expense ultimately recorded is for the awards that vest.

At December 31, 2019 , there is $ 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.

At December 31, 2020, there is $ 142.5 million of unrecognized compensation cost, net of estimated forfeitures, related to all outstanding equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.3 years.

The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2020, 2019 and 2018 related to all stock-based compensation is $ 136.6 million, $ 110.4 million and $ 107.2 million, respectively.

The aggregate income tax benefit recognized related to the exercise of stock options for the years ended December 31, 2020, 2019, and 2018 is $ 105.5 million, $ 73.4 million, and $ 103.3 million, respectively.

As the Company is currently in a NOL position, there will be some delay in the timing of the realization of the cash benefit of the income tax deductions related to stock-based compensation because it will be dependent upon the amount and timing of future taxable income and the timing of estimated income tax payments.

IAC Stock Options

As the Company is currently in a NOL position there will be some delay in the timing of the realization of cash benefit of income tax deductions related to stock-based compensation because it will be dependent upon the amount and timing of future taxable income and the timing of estimated income tax payments.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Options

Stock options outstanding at December 31, 2020 and changes during the year ended December 31, 2020 are as follows:

December 31, 2020

Term (In Years)

Shares Weighted

Price Weighted

Term (In Years) Aggregate

(Shares and intrinsic value in thousands)

Options outstanding at January 1, 2019

Options outstanding at December 31, 2019

Former IAC options outstanding at January 1, 2020

4,887 $ 64.63

Activity between January 1, 2020 and June 30, 2020

Exercised ( 380 ) 51.73

Forfeited ( 10 ) 65.22

Former IAC options outstanding at June 30, 2020 prior to the Separation adjustment

Options outstanding as of June 30, 2020 representing Former IAC options converted into Match Group options in conjunction with the Separation (a)

Assumption of the 2015 and 2017 plans of the Former Match Group

Outstanding at June 30, 2020 after Separation adjustment and adoption of the 2015 and 2017 plans of Former Match Group 15,451 19.52

Activity between July 1, 2020 and December 31, 2020

Exercised ( 7,955 ) 19.53

Forfeited ( 67 ) 22.43

Expired ( 4 ) 14.79

Outstanding at December 31, 2020 7,425 $ 19.48 5.7 $ 977,957

Options exercisable 5,411 $ 19.03 5.4 $ 715,083

The aggregate intrinsic value in the table above represents the difference between IAC's closing stock price on the last trading day of 2019 and the exercise price, multiplied by the number of in-the-money options that would have been exercised had all option holders exercised their options on December 31, 2019 .

The total intrinsic value of stock options exercised during the years ended December 31, 2019 , 2018 and 2017 is $ 167.4 million , $ 83.7 million and $ 164.6 million , respectively.

IAC/INTERACTIVECORP AND SUBSIDIARIES

______________________

(a) Immediately prior to the Separation, the vesting of all outstanding, unvested Former IAC stock options was accelerated, and all Former IAC options outstanding were converted into IAC options and Match Group options pursuant to the Employee Matters Agreement entered into on June 30, 2020 between Match Group and IAC.

Each Former IAC option outstanding converted into (i) one IAC stock option;

and (ii) 2.1584 Match Group stock options, which are reflected here.

The exercise price of each Former IAC option was allocated between the newly created options of IAC and Match Group based on the relative value of IAC and Match Group, respectively, to the Former IAC value at the close of business on the day of Separation.

The aggregate intrinsic value in the table above represents the difference between Match Group’s closing stock price on the last trading day of 2020 and the exercise price, multiplied by the number of in-the-money options that would have been exercised had option holders exercised their options on December 31, 2020.

The total intrinsic value of stock options exercised during the period from July 1, 2020 to December 31, 2020 is $ 737.9 million.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the Separation, Match Group assumed all outstanding Former Match Group stock options on the same terms and conditions (including applicable vesting requirements).

Each assumed option was adjusted to reflect the $ 3.00 per share merger consideration paid to Former Match Group stockholders in connection with the Separation.

The following table summarizes the information about stock options outstanding and exercisable at December 31, 2020:

Options Outstanding

Options Exercisable

Range of Exercise Prices

Outstanding at

Life in Years

Exercisable at

Life in Years

Options Outstanding Options Exercisable

Range of Exercise Prices Outstanding at December 31, 2020 Weighted-

Life in Years Weighted-Average

Price Exercisable at December 31, 2020 Weighted-

Life in Years Weighted-Average

(Shares in thousands)

$ 0.01 to $ 10.00

$30.01 to $40.00

$40.01 to $50.00

$50.01 to $60.00

1,105 5.3 $ 8.57 1,079 5.3 $ 8.56

$ 10.01 to $ 20.00

2,633 5.7 15.12 1,559 5.4 14.35

$ 20.01 to $ 30.00

3,345 5.7 24.20 2,570 5.4 24.11

$ 30.01 to $ 50.00

Greater than $90.01

There were no stock options granted by the Company during 2019.

Less than 0.1 million and approximately 1.2 million stock options were granted by the Company during the years ended December 31, 2018 and 2017 , respectively.

During 2018, the Company granted market-based stock options that only vest if the price of IAC common stock exceeds the relevant price threshold for a twenty -day consecutive period and the service requirement is met.

The market-based vesting condition was achieved in the fourth quarter of 2018.

The service requirement provides that this award vests in two installments, the first 50 % in 2021 and the second 50 % in 2022.

The fair value of stock option awards, with the exception of market-based awards, is estimated on the grant date using the Black-Scholes option pricing model.

The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term.

During 2018 and 2017 , expected stock price volatilities were estimated based on the Company's historical volatility.

The risk-free interest rates are based on U.S.

Treasuries with comparable terms as the awards, in effect at the grant date.

Expected term is based upon the historical exercise behavior of our employees and the dividend yields are based on IAC's historical dividend payments.

The following are the weighted average assumptions used in the Black-Scholes option pricing model:

Years Ended December 31,

Expected volatility

Risk-free interest rate

Expected term

Dividend yield

The weighted average fair value of stock options granted during the years ended December 31, 2018 and 2017 are $ 53.94 and $ 22.94 , respectively.

Cash received from stock option exercises for the years ended December 31, 2019 , 2018 and 2017 was $ 10.7 million , $ 41.7 million and $ 82.4 million , respectively.

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

Assuming all stock options outstanding on December 31, 2019 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 stock options and 0.4 million is related to unvested stock options) and would have remitted $ 450.8 million (of which

IAC/INTERACTIVECORP AND SUBSIDIARIES

342 7.1 42.18 203 7.2 46.30

7,425 5.7 $ 19.48 5,411 5.4 $ 19.03

There were no stock options granted by the Company during the years ended December 31, 2020 and 2019.

Cash received from Match Group stock option exercises for the period between July 1, 2020 and December 31, 2020 was $ 155.4 million.

No cash was received from stock option exercises for the year ended December 31, 2019 and the period from January 1, 2020 to June 30, 2020.

The Company discontinued the practice of net settling options as of July 1, 2020.

Restricted Stock Units, Performance-Based Stock Units, and Market-Based Awards

RSUs, PSUs, and market-based awards are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of Match Group common stock and with the value of each RSU and PSU equal to the fair value of Match Group common stock at the date of grant.

For market-based awards, the grant date fair value was estimated using a lattice model that incorporates a Monte Carlo simulation of the valuation of a wholly-owned business.

Each RSU, PSU, and market-based award grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests.

PSUs also include performance-based vesting conditions, where certain performance targets set at the time of grant must be achieved before an award vests.

The number of market-based awards that ultimately vest is based on a valuation of a wholly-owned business.

For RSU 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.

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.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 358.7 million is related to vested stock options and $ 92.1 million is related to unvested stock options) in cash for withholding taxes (assuming a 50 % withholding rate).

IAC Restricted Stock Units, Market-based Stock Units and Performance-based Stock Units

RSUs, MSUs and PSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of IAC common stock and with the value of each RSU and PSU equal to the fair value of IAC common stock at the date of grant.

The value of each MSU is estimated using a lattice model that incorporates a Monte Carlo simulation of IAC's stock price.

Each RSU and PSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests.

PSUs also include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests.

The vesting of MSUs is tied to the stock price of IAC.

For RSU grants, the expense is measured at the grant date as the fair value of IAC common stock and expensed as stock-based compensation over the vesting term.

For MSU grants, the expense is measured using a lattice model and expensed as stock-based compensation over the derived service period.

For PSU grants, the expense is measured at the grant date as the fair value of IAC common stock and expensed as stock-based compensation over the vesting term if the performance targets are considered probable of being achieved.

Unvested RSUs, MSUs and PSUs outstanding at December 31, 2019 and changes during the year ended December 31, 2019 are as follows:

Unvested RSUs, PSUs, and market-based awards outstanding at December 31, 2020 and changes during the year ended December 31, 2020 are as follows:

RSUs PSUs Market-based awards

Number of shares Weighted Average Grant Date Fair Value Number of shares (a)

Weighted Average Grant Date Fair Value Number of shares (a)

Weighted Average Grant Date Fair Value

(Shares in thousands)

Unvested at January 1, 2020 202 $ 132.37 — $ — 159 $ 153.43

Activity between January 1, 2020 and June 30, 2020

Granted 8 295.37 — — — —

Vested ( 78 ) 104.62 — — ( 53 ) 167.32

Forfeited ( 3 ) 222.34 — — — —

Converted to IAC awards, no longer outstanding at Match Group due to Separation ( 129 ) 158.27 — — ( 106 ) 146.49

Assumption of the 2015 and 2017 plans of the Former Match Group

3,464 58.52 355 53.00 912 21.11

Activity between July 1, 2020 and December 31, 2020

Granted 277 106.17 195 102.70 — —

Vested ( 304 ) 48.80 — — ( 111 ) 22.56

Forfeited ( 138 ) 67.99 — — ( 65 ) 23.84

Expired — — — — ( 22 ) 23.35

Unvested at December 31, 2020 3,299 $ 63.02 550 $ 74.59 714 $ 19.34

The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2019 , 2018 and 2017 based on market prices of IAC's common stock on the grant date was $ 220.77 , $ 178.29 and $ 90.04 , respectively.

The weighted average fair value of MSUs granted during the year ended December 31, 2019 based on the lattice model was $ 153.43 .

There were no MSUs granted or outstanding during the years ended December 31, 2018 and 2017.

The total fair value of RSUs and PSUs that vested during the years ended December 31, 2019 , 2018 and 2017 was $ 69.3 million , $ 8.9 million and $ 32.5 million , respectively.

There were no MSUs that vested during the year ended December 31, 2019 .

Equity Instruments Denominated in the Shares of Certain Subsidiaries

Non-publicly-traded Subsidiaries

The following description excludes awards denominated in the shares of the Company's publicly-traded subsidiaries, MTCH and ANGI.

MTCH and ANGI stock-based awards are issued pursuant to their respective stock incentive plans.

______________________

(a) Represents the maximum shares issuable.

All RSUs, PSUs, and market-based awards outstanding immediately prior to the Separation were converted to IAC awards.

All expense, income tax benefits, and cash flow activity related to these awards is included in discontinued operations.

The weighted average fair value of RSUs and PSUs granted during the period between July 1, 2020 and December 31, 2020, based on market prices of Match Group’s common stock on the grant date, was $ 104.74 .

The total fair value of RSUs that vested during the period between July 1, 2020 and December 31, 2020 was $ 14.8 million.

No PSUs vested during the period between July, 1, 2020 and December 31, 2020.

There were no market-based awards granted during the period between July 1, 2020 and December 31, 2020.

The total fair value of market-based awards that vested during the period between July 1, 2020 and December 31, 2020 was $ 2.5 million.

In connection with the Separation, Match Group assumed the Former Match Group outstanding RSUs, PSUs, and Market-based awards on the same terms and conditions (including applicable vesting requirements).

Each assumed RSU, PSU, and Market-based award was adjusted to reflect the same adjustment Former Match Group stockholders received if they elected a fractional stock election instead of the $ 3.00 cash election in conjunction with the Separation.

Equity Instruments Denominated in Shares of Certain Subsidiaries

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 vest over a period of years or upon the occurrence of certain prescribed events.

The value of the stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries.

Accordingly, these interests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price.

These interests can have significant value in the event of significant appreciation.

The fair value of these interest is generally determined by negotiation or arbitration when settled, which will occur at various dates through 2026.

These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IAC common shares equal to the intrinsic value of the award at exercise less an amount equal to the

IAC/INTERACTIVECORP AND SUBSIDIARIES

These equity awards vest over a specified period of time or upon the occurrence of certain specified events.

The value of the stock settled stock

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

required cash tax withholding payment.

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

appreciation rights is based on the equity value of these subsidiaries.

Accordingly, these awards only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price.

These awards can have significant value in the event of significant appreciation.

The fair value of the common stock of these subsidiaries is generally determined through a third-party valuation pursuant to the terms of the respective subsidiary equity plan.

These equity awards are settled on a net basis, with the award holder entitled to receive a payment in shares of Match Group common stock with a total value equal to the intrinsic value of the award at exercise.

The number of shares of Match Group common stock ultimately needed to settle these awards may vary significantly from the estimated number below as a result of movements in our stock price and/or a determination of fair value of the relevant subsidiary that differs from our estimate.

The expense associated with these equity awards is initially measured at fair value at the grant date and is expensed as stock-based compensation over the vesting term.

The number of IAC common shares that would be required to settle these interests at current estimated fair values, including vested and unvested interests, at December 31, 2019 is 0.1 million shares.

Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $ 20.2 million at December 31, 2019 , assuming a 50 % wit hholding rate.

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

Assuming all MTCH equity awards outstanding on December 31, 2019 were net settled on that date, MTCH would have issued 8.0 million common shares (of which 2.6 million is related to vested shares and 5.4 million is related to unvested shares) and would have remitted $ 655.9 million (of which $ 209.5 million is related to vested shares and $ 446.4 million is related to unvested shares) in cash for withholding taxes (assuming a 50 % withholding rate).

If MTCH decided to issue a sufficient number of shares to cover the $ 655.9 million employee withholding tax obligation, 8.0 million additional shares would be issued by MTCH.

Following the completion of the MTCH IPO, certain subsidiary denominated equity awards, including those issued by Tinder, Inc., were settleable, at IAC's election, in shares of IAC common stock or MTCH common stock.

Pursuant to the Employee Matters Agreement between IAC and MTCH, to the extent shares of IAC common stock are issued in settlement of these awards, MTCH reimburses IAC for the cost of those shares in cash or by issuing IAC shares of MTCH common stock.

In July 2017, Tinder was merged into MTCH and as a result, all Tinder denominated equity awards were converted into MTCH tandem stock options ("Tandem Awards").

All of the MTCH Tandem Awards exercised during 2019, 2018 and 2017 were exercised on a net basis and were settled in IAC common shares;

the Company issued 0.2 million , 0.7 million and 2.0 million shares, respectively, of its common stock to settle these awards and MTCH issued 0.6 million , 2.5 million and 11.3 million shares, respectively, of its common stock to IAC as reimbursement.

The Company is no longer settling the Tandem Awards in IAC common stock.

During 2017, MTCH also purchased certain fully vested Tandem Awards, and made cash payments of approximately $ 520 million to cover both the withholding taxes paid on behalf of employees exercising these converted awards and the purchase of certain fully vested awards.

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 December 31, 2019 were net settled on that date, ANGI would have issued 6.8 million shares of ANGI Class A stock and ANGI would have remitted $ 57.3 million in cash for withholding taxes (assuming a 50 % withholding rate).

If ANGI decided to issue a sufficient number of shares to cover the $ 57.3 million employee withholding tax obligation, 6.8 million additional Class A shares would be issued by ANGI.

Assuming all other ANGI equity awards outstanding on December 31, 2019 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 $ 43.4 million in cash for withholding taxes (assuming a 50 % withholding rate).

Prior to the Combination in 2017, the Company issued a number of IAC denominated PSUs to certain ANGI employees.

Vesting of the PSUs was contingent upon ANGI's performance for the year ended December 31, 2019 .

These awards did not vest because the performance conditions were not achieved.

Modification of awards

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2019, the Company modified certain equity awards and recognized modification charges of $ 13.1 million .

During 2018 , the Company modified certain equity awards and recognized modification charges of $ 7.9 million .

In addition, in connection with the ANGI chief executive officer transition during the fourth quarter of 2018, ANGI accelerated $ 3.9 million of expense into 2018 from 2019.

In connection with the Combination, the previously issued HomeAdvisor (US) stock appreciation rights were converted into ANGI equity awards resulting in a modification charge of $ 217.7 million of which $ 29.0 million , $ 56.9 million , and $ 93.4 million were recognized as stock-based compensation expense in the years ended December 31, 2019 , 2018 , and 2017 respectively, and the remaining charge will be recognized over the vesting period of the modified awards.

During the second quarter of 2017, the Company modified certain HomeAdvisor (US) denominated equity awards and recognized a modification charge of $ 6.6 million .

During 2014, the Company granted an equity award denominated in shares of a subsidiary of the Company to a non-employee, which was marked to market each reporting period.

In the third quarter of 2017, the award was modified and MTCH settled the remaining portion of the award for cash of $ 33.9 million .

NOTE 12— SEGMENT INFORMATION

The overall concept that IAC employs in determining its operating segments is to present the financial information in a manner consistent with:

how the chief operating decision maker views the businesses;

how the businesses are organized as to segment management;

and the focus of the businesses with regards to the types of services or products offered or the target market.

Operating segments are combined for reporting purposes if they meet certain aggregation criteria, which principally relate to the similarity of their economic characteristics or, in the case of the Emerging & Other reportable segment, do not meet the quantitative thresholds that require presentation as separate reportable segments.

The following table presents revenue by reportable segment:

Years Ended December 31,

(In thousands)

ANGI Homeservices

Emerging & Other

Inter-segment elimination

The following table presents the revenue of the Company's segments disaggregated by type of service:

Years Ended December 31,

(In thousands)

Direct revenue:

North America

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years Ended December 31,

(In thousands)

International

Total Direct revenue

Indirect revenue (principally advertising revenue)

Total Match Group revenue

Supplemental information on Direct revenue

Total Direct revenue

ANGI Homeservices

Consumer connection revenue

Service professional membership subscription revenue

Other revenue

Total Marketplace revenue

Advertising and other revenue

Total North America revenue

Consumer connection revenue

Service professional membership subscription revenue

Advertising and other revenue

Total Europe revenue

Total ANGI Homeservices revenue

Platform revenue

Hardware revenue

Total Vimeo revenue

Display advertising revenue

Performance marketing revenue

Total Dotdash revenue

Advertising revenue:

Google advertising revenue

Non-Google advertising revenue

Total advertising revenue

Subscription and other revenue

Total Desktop revenue

Mosaic Group:

Subscription and other revenue

Advertising revenue

Total Mosaic Group revenue

Total Applications revenue

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years Ended December 31,

(In thousands)

Emerging & Other

Advertising revenue:

Google advertising revenue

Non-Google advertising revenue

Total advertising revenue

Other revenue

Test preparation revenue

Total Emerging & Other revenue

At December 31, 2020, the number of shares of Match Group common stock that would be required to settle these awards at current estimated fair values, including vested and unvested awards is 0.5 million shares.

Capitalization of Stock-Based Compensation

For the year ended December 31, 2020, $ 5.1 million of stock-based compensation was capitalized related to internal use software development.

No amounts were capitalized for the years ended December 31, 2019 and 2018.

Modifications of awards

During the years ended December 31, 2020, 2019 and 2018, the Company modified certain equity awards and recognized modification charges in continuing operations of $ 21.2 million, $ 7.1 million and $ 3.2 million, respectively.

NOTE 12—GEOGRAPHIC INFORMATION

Revenue by geography is based on where the customer is located.

1 unchanged sentence

Years Ended December 31,

2020 2019 2018

(In thousands)

1 unchanged sentence

All other countries 1,269,312 1,078,511 856,873

Total $ 2,391,269 $ 2,051,258 $ 1,729,850

The United States is the only country from which revenue is greater than 10 percent of total revenue.

(In thousands)

2 unchanged sentences

All other countries 16,116 17,435

The following tables present operating income (loss) and Adjusted EBITDA by reportable segment:

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years Ended December 31,

(In thousands)

Operating income (loss):

ANGI Homeservices

Emerging & Other

Years Ended December 31,

(In thousands)

Adjusted EBITDA:

ANGI Homeservices

Emerging & Other

_______________________________________________________________________________

(a) The Company's primary financial measure is Adjusted EBITDA, which is defined as operating income excluding:

(1) stock-based compensation expense;

(2) depreciation;

and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements.

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

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

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

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables reconcile operating income (loss) for the Company's reportable segments and net earnings attributable to IAC shareholders to Adjusted EBITDA:

Year Ended December 31, 2019

of Intangibles

Acquisition-related Contingent Consideration Fair Value Adjustments

Goodwill Impairment

Adjusted EBITDA

(In thousands)

ANGI Homeservices

Emerging & Other

Interest expense

Other income, net

Earnings before income taxes

Income tax benefit

Net earnings attributable to noncontrolling interests

Net earnings attributable to IAC shareholders

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2018

of Intangibles

Acquisition-related Contingent Consideration Fair Value Adjustments

Adjusted EBITDA

(In thousands)

ANGI Homeservices

Emerging & Other

Interest expense

Other income, net

Earnings before income taxes

Income tax provision

Net earnings attributable to noncontrolling interests

Net earnings attributable to IAC shareholders

IAC/INTERACTIVECORP AND SUBSIDIARIES

Total $ 107,799 $ 101,065

The United States is the only country from which long-lived assets (excluding goodwill and intangible assets) is greater than 10 percent of total long-lived assets (excluding goodwill and intangible assets).

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2017

of Intangibles

Acquisition-related Contingent Consideration Fair Value Adjustments

Adjusted EBITDA

(In thousands)

ANGI Homeservices

Emerging & Other

Interest expense

Other expense, net

Earnings before income taxes

Income tax benefit

Net earnings attributable to noncontrolling interests

Net earnings attributable to IAC shareholders

The following table presents capital expenditures by reportable segment:

Years Ended December 31,

(In thousands)

Capital expenditures:

ANGI Homeservices

Emerging & Other

NOTE 13—LEASES

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

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ROU assets represent the Company’s right to use the underlying assets for the lease term and lease liabilities represent the present value of the Company’s obligation to make payments arising from these leases.

ROU assets and related lease liabilities are based on the present value of fixed lease payments over the lease term using the Company's and its publicly-traded subsidiaries' respective incremental borrowing rates on the lease commencement date or January 1, 2019 for leases that commenced prior to that date.

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.

One of these lease agreements relates to a property owned by IAC.

See “Note 15—Related Party Transactions” for additional information on the intercompany lease agreement.

ROU assets and related lease liabilities are based on the present value of fixed lease payments over the lease term using the Company’s incremental borrowing rates on the lease commencement date or January 1, 2019 for leases that commenced prior to that date.

The Company combines the lease and non-lease components of lease payments in determining ROU assets and related lease liabilities.

If the lease includes one or more options to extend the term of the lease, the renewal option is considered in the lease term if it is reasonably certain the Company will exercise the option(s).

If the lease includes one or more options to extend the term of the lease, the renewal option is considered in the lease term if it is reasonably certain the Company will exercise the options.

Lease expense is recognized on a straight-line basis over the term of the lease.

2 unchanged sentences

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Balance Sheet Classification

December 31, 2019

Leases Balance Sheet Classification December 31, 2020 December 31, 2019

(In thousands)

Right-of-use assets

Right-of-use assets, net

Current lease liabilities

Accrued expenses and other current liabilities

Long-term lease liabilities

Other long-term liabilities

Right-of-use assets Right-of-use assets $ 85,009 $ 34,448

Current lease liabilities Accrued expenses and other current liabilities $ 7,143 $ 9,674

Long-term lease liabilities Other long-term liabilities 83,489 25,985

Total lease liabilities $ 90,632 $ 35,659

Income Statement Classification

Year Ended December 31, 2019

Lease Cost Income Statement Classification Year Ended December 31, 2020 Year Ended December 31, 2019

(In thousands)

Fixed lease cost

Cost of revenue

Fixed lease cost

Selling and marketing expense

Fixed lease cost

General and administrative expense

Fixed lease cost

Product development expense

Fixed lease cost Cost of revenue $ 3,215 $ 3,560

Fixed lease cost General and administrative expense 15,548 12,638

Total fixed lease cost (a)

Variable lease cost

Cost of revenue

Variable lease cost

Selling and marketing expense

Variable lease cost

General and administrative expense

Variable lease cost

Product development expense

18,763 16,198

Variable lease cost Cost of revenue 312 358

Variable lease cost General and administrative expense 2,882 2,248

Total variable lease cost 3,194 2,606

1 unchanged sentence

______________________

(a) Includes approximately $ 5.3 million of short-term lease cost and $ 2.1 million of sublease income for the year ended December 31, 2019 .

Maturities of lease liabilities as of December 31, 2019 (in thousands) (b) :

IAC/INTERACTIVECORP AND SUBSIDIARIES

(a) Includes approximately $ 2.7 million and $ 3.0 million of short-term lease cost, and $ 1.2 million and $ 0.8 million of sublease income, for the years ended December 31, 2020 and December 31, 2019, respectively.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years Ended December 31,

Present value of lease liabilities

Maturities of lease liabilities as of December 31, 2020:

(In thousands)

2021 $ 14,806

(b) Lease payments exclude $ 37.7 million of legally binding minimum lease payments for leases signed but not yet commenced.

The following are the weighted average assumptions used for lease term and discount rate as of December 31, 2019 :

Remaining lease term

After 2024 62,458

Total 118,249

Interest ( 21,882 )

Tenant improvement receivables ( 5,735 )

Present value of lease liabilities $ 90,632

The following are the weighted average assumptions used for lease term and discount rate:

December 31, 2020 December 31, 2019

Remaining lease term 10.6 years 4.0 years

Discount rate 3.80 % 5.05 %

Year Ended December 31, 2019

Year Ended December 31, 2020 Year Ended December 31, 2019

(In thousands)

3 unchanged sentences

NOTE 14—COMMITMENTS AND CONTINGENCIES

The Company has entered into certain off-balance sheet commitments that require the future purchase of services ("purchase obligations").

Future payments under noncancelable unconditional purchase obligations as of December 31, 2019 are as follows:

Amount of Commitment Expiration Per Period

(In thousands)

Purchase obligations

Purchase obligations include (i) a $ 150.0 million three-year cloud computing contract, of which $ 50.0 million was paid in 2019 and had a related prepaid asset of $ 40.3 million at December 31, 2019 included in "Other current assets" on the consolidated balance sheet, and two remaining minimum payments of $ 50.0 million each that are due in 2020 and 2021, (ii) remaining payments of $ 59.3 million related to a two-year cloud computing contract, which $ 40.9 million and $ 18.3 million are estimated to be paid in 2020 and 2021, respectively, (iii) remaining payments of $ 23.8 million related to advertising

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

commitments to be made in 2020, and (iv) a remaining payment of $ 13.1 million related to the purchase of a 50 % interest in a corporate aircraft that is expected to be made in 2021.

The Company has funding commitments in the form of purchase obligations and surety bonds.

The purchase obligations due in less than one year are $ 54.0 million, the purchase obligations due between one and three years are $ 9.0 million, and purchase obligations due between three and five years are $ 12.0 million, for a total of $ 75.0 million in purchase obligations.

The purchase obligations primarily relate to web hosting services.

Letters of credit and surety bonds totaling $ 0.2 million are currently outstanding as of December 31, 2020.

Contingencies

4 unchanged sentences

The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss.

It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company.

It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

material impact on the liquidity, results of operations, or financial condition of the Company.

See “Note 3—Income Taxes” for additional information related to income tax contingencies.

Tinder Optionholder Litigation against IAC and Match Group

Pursuant to the Transaction Agreement, we have agreed to indemnify IAC for matters relating to any business of Former Match Group, including indemnifying IAC for costs related to the matters described below.

The official names of legal proceedings in the descriptions below (shown in italics) reflect the original names of the parties when the proceedings were filed as opposed to the current names of the parties following the separation of Match Group and IAC.

Tinder Optionholder Litigation Against Former Match Group and Match Group

On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc.

("Tinder"), an operating business of Match Group, filed a lawsuit in New York state court against IAC and Match Group.

(“Tinder”), a former subsidiary of Former Match Group, filed a lawsuit in New York state court against Former Match Group and Match Group.

See Sean Rad et al.

2 unchanged sentences

The complaint alleges that in 2017, the defendants:

(i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Match Group, thereby depriving certain of the plaintiffs of their contractual right to later valuations of Tinder on a stand-alone basis.

The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Match Group only), and interference with prospective economic advantage, and seeks compensatory damages in the amount of at least $ 2 billion , as well as punitive damages.

On August 31, 2018, four plaintiffs who were still employed by Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs.

On October 9, 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expert determination any challenge to which is both time-barred under applicable law and available only on narrow substantive grounds that the plaintiffs have not pleaded in their complaint;

the plaintiffs opposed the motion.

On June 13, 2019, the court issued a decision and order (i) granting the motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment, (ii) granting the motion to dismiss the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and (iii) otherwise denying the motion to dismiss.

On June 21, 2019, the defendants filed a notice of appeal from the trial court’s partial denial of their motion to dismiss, and the parties thereafter briefed the appeal.

On October 29, 2019, the Appellate Division, First Department, issued an order affirming the lower court’s decision.

On November 22, 2019, the defendants filed a motion for reargument or, in the alternative, leave to appeal the Appellate Division's order to the New York Court of Appeals;

the plaintiffs opposed the motion, which remains pending.

On June 3, 2019, the defendants filed a second motion to dismiss based upon certain provisions of the plaintiffs' agreement with a litigation funding firm;

the plaintiffs have opposed the motion, which remains pending.

Document discovery in the case is substantially complete, and deposition discovery is underway.

On January 30, 2020, the parties participated in a mediation that did not result in resolution of the matter.

IAC and Match Group believe that the allegations in this lawsuit are without merit and will continue to defend vigorously against it.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Former Match Group, thereby depriving certain of the plaintiffs of their contractual right to later valuations of Tinder on a stand-alone basis.

The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Former Match Group only), and interference with prospective economic advantage, and seeks compensatory damages in the amount of at least $ 2 billion, as well as punitive damages.

On August 31, 2018, four plaintiffs who were still employed by Former Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs.

On June 13, 2019, the court issued a decision and order granting defendants’ motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichments, as well as the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and otherwise denying defendants’ motion to dismiss.

On July 13, 2020, the four former plaintiffs filed arbitration demands with the American Arbitration Association asserting the same valuation claims and on September 3, 2020, the four arbitrations were consolidated.

The four former plaintiffs’ request to stay the arbitration was denied on January 28, 2021, and arbitration is scheduled to begin on February 7, 2022.

On November 17, 2020, the defendants’ motion to stay the trial in Rad was denied.

Trial has been scheduled for November 2021.

We believe that the allegations against Former Match Group and Match Group in this lawsuit are without merit and will continue to defend vigorously against them.

FTC Lawsuit Against Former Match Group

On September 25, 2019, the FTC filed a lawsuit in federal district court in Texas against Former Match Group.

Match Group, Inc.

3:19:cv-02281-K (Northern District of Texas).

The complaint alleges that, prior to mid-2018, for marketing purposes Match.com notified non-paying users that other users were attempting to communicate with them, even though Match.com had identified those subscriber accounts as potentially fraudulent, thereby inducing non-paying users to subscribe and exposing them to the risk of fraud should they subscribe.

The complaint also challenges the adequacy of Match.com’s disclosure of the terms of its six-month guarantee, the efficacy of its cancellation process, and its handling of chargeback disputes.

The complaint seeks among other things permanent injunctive relief, civil penalties, restitution, disgorgement, and costs of suit.

On October 9, 2020, the court granted the Company’s motion to stay the case until the United States Supreme Court issues a decision in the consolidated appeal of Federal Trade Commission v.

Credit Bureau Center, LLC and AMG Capital Management, LLC v.

We believe that the FTC’s claims regarding Match.com’s practices, policies, and procedures are without merit and will defend vigorously against them.

NOTE 15—RELATED PARTY TRANSACTIONS

IAC and MTCH:

IAC and MTCH, in connection with MTCH's IPO, entered into the following agreements:

A Master Transaction Agreement, under which MTCH agrees to assume all of the assets and liabilities related to its business and agrees to indemnify IAC against any losses arising out of any breach by MTCH of the Master Transaction Agreement or other IPO related agreements;

An Investor Rights Agreement that provides IAC with (i) specified registration and other rights relating to shares of MTCH common stock and (ii) anti-dilution rights with respect to MTCH common stock;

An Employee Matters Agreement, which governs the respective rights, responsibilities and obligations of IAC and MTCH after the IPO with respect to a range of compensation (including stock-based compensation) and benefit issues;

A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and MTCH with respect to tax liabilities and benefits, entitlement to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S.

federal, state, local and foreign income taxes;

A Services Agreement, under which IAC has agreed to provide a range of services to MTCH, including, among others, (i) assistance with certain legal, finance, internal audit, treasury, information technology support, insurance and tax affairs, including assistance with certain public company reporting obligations;

(ii) payroll processing services;

(iii) tax compliance services;

and (iv) such other services as to which IAC and MTCH may agree, and MTCH agrees to provide IAC informational technology services and such other services as to which IAC and MTCH may agree.

During the years ended December 31, 2019 , 2018 and 2017 , 0.8 million , 3.0 million and 11.9 million shares, respectively, of MTCH common stock were issued to IAC pursuant to the employee matters agreement;

0.7 million , 2.5 million and 11.3 million , respectively, of which were issued as reimbursement for shares of IAC common stock issued in connection with the exercise and settlement of MTCH tandem stock options and equity awards denominated in shares of a subsidiary of MTCH, respectively;

and 0.1 million , 0.5 million and 0.6 million , respectively, of which were issued as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by MTCH employees.

For the years ended December 31, 2019 , 2018 and 2017 , MTCH was charged $ 7.9 million , $ 7.6 million and $ 9.9 million , respectively, by the Company for services rendered pursuant to a services agreement.

Included in these amounts are $ 5.8 million , $ 5.2 million and $ 5.1 million , respectively, for leasing of office space for certain of MTCH's businesses at properties owned by IAC.

These amounts were paid in full by MTCH at December 31, 2019 , 2018 and 2017 , respectively.

At December 31, 2019 , MTCH had taxes payable of $ 0.2 million due to the Company pursuant to the tax sharing agreement.

At December 31, 2018 , there were no outstanding receivables or payables pursuant to the tax sharing agreement.

Refunds made by the Company during 2018 and 2017 pursuant to this agreement were $ 7.0 million and $ 10.9 million , respectively.

For the year ended December 31, 2019 , there were no payments to or refunds from MTCH pursuant to the tax sharing agreement.

In December 2017, certain international subsidiaries of MTCH agreed to sell NOLs that were not expected to be utilized to an IAC subsidiary for $ 0.9 million .

IAC and ANGI:

IAC and ANGI, in connection with the Combination, entered into the following agreements:

A Contribution Agreement under which the Company separated its HomeAdvisor business from its other businesses and caused the HomeAdvisor business to be transferred to ANGI prior to the Combination.

Under the Contribution

IAC/INTERACTIVECORP AND SUBSIDIARIES

Relationship with IAC following the Separation

In connection with the Separation, the Company entered into certain agreements with IAC to govern the relationship between the Company and IAC following the Separation.

These agreements, in certain cases, supersede the agreements entered into between Former Match Group and Former IAC in connection with

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Agreement, ANGI agrees to indemnify IAC against any losses arising out of any breach by ANGI of the Contribution Agreement;

An Investor Rights Agreement that provides IAC with (i) specified registration and other rights relating to shares of ANGI common stock owned by IAC;

(ii) anti-dilution rights with respect to ANGI common stock;

and (iii) specified board matters with respect to designation of ANGI directors;

A Services Agreement, under which IAC has agreed to provide a range of services to ANGI, including, among others, (i) assistance with certain legal, M&A, human resources, finance, risk management, internal audit and treasury functions, health and wellness, information security services and insurance and tax affairs, including assistance with certain public company and unclaimed property reporting obligations;

(ii) accounting, controllership and payroll processing services;

(iii) investor relations services;

(iv) tax compliance services;

and (v) such other services as to which IAC and ANGI may agree.

A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and ANGI with respect to tax matters, including taxes attributable to ANGI, entitlement to refunds, allocation of tax attributes, preparation of tax returns, certain tax elections, control of tax contests and other tax matters regarding U.S.

federal, state, local and foreign income taxes;

An Employee Matters Agreement, which governs the respective rights, responsibilities and obligations of IAC and ANGI after the closing of the Combination w ith respect to a range of compensation (including stock-based compensation) and benefit issues.

Pursuant to this agreement, t he Compensation Committee of the IAC Board of Directors has the exclusive authority to determine the treatment of outstanding IAC equity awards in the event of a distribution of ANGI capital stock to IAC stockholders in a transaction intended to qualify as tax-free for U.S.

federal income tax purposes.

Such authority includes (but is not limited to) the ability to convert all or part of IAC equity awards outstanding immediately prior to the distribution into equity awards denominated in shares of ANGI Class A Common Stock, which ANGI would be obligated to assume and which would be dilutive to ANGI's stockholders.

Additionally, on September 29, 2017, the Company and ANGI entered into two intercompany notes (collectively referred to as "Intercompany Notes") to ANGI as follows:

(i) a Payoff Intercompany Note, which provided the funds necessary to repay the outstanding balance under Angie's List's previously existing credit agreement, totaling $ 61.5 million ;

and (ii) a Working Capital Intercompany Note, which provided ANGI with $ 15 million for working capital purposes.

These Intercompany Notes were repaid on November 1, 2017, with a portion of the proceeds from the ANGI Term Loan that were received on the same date.

For the years ended December 31, 2019 and 2018 , and for the period subsequent to the Combination through December 31, 2017, 0.5 million , 0.9 million and 0.4 million shares, respectively, of ANGI Class B common stock were issued to IAC pursuant to the employee matters agreement as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by ANGI employees.

On October 10, 2018, IAC was issued 5.1 million shares of Class B common stock of ANGI pursuant to the post-closing adjustment provision of the Angie's List merger agreement.

For the years ended December 31, 2019 and 2018 , and for the period subsequent to the Combination through December 31, 2017, ANGI was charged $ 4.8 million , $ 5.7 million and $ 1.7 million , respectively, by the Company for services rendered pursuant to the services agreement.

There were no outstanding receivables or payables pursuant to the services agreement as of December 31, 2019 .

At December 31, 2018 , the Company had a $ 0.1 million outstanding payable to ANGI, pursuant to the services agreement.

This amount was deducted from the charges due from ANGI pursuant to the services agreement discussed above during the first quarter of 2019.

At December 31, 2019 and 2018 , ANGI had taxes payable of $ 0.2 million and $ 12.1 million , respectively, due to the Company pursuant to the tax sharing agreement.

During the first quarter of 2019, $ 11.4 million was paid to the Company pursuant to this agreement.

IAC/INTERACTIVECORP AND SUBSIDIARIES

Former Match Group’s IPO in November 2015 (the “IPO Agreements”) and include:

a tax matters agreement;

a transition services agreement;

and an employee matters agreement.

The IPO Agreements that were not superseded were terminated at closing of the Separation.

In addition to the agreements entered into at the time of the Separation, Match Group leases office space to IAC in a building owned by the Company in Los Angeles.

Match Group also leases office space from IAC in New York City on a month-to-month basis, which the Company expects to vacate in the first half of 2021.

For the year ended December 31, 2020, the Company received less than $ 0.1 million from IAC pursuant to the Los Angeles lease and the Company paid $ 1.1 million to IAC pursuant to the New York City lease.

Match Group has a payable to IAC of $ 3.4 million as of December 31, 2020, excluding items discussed in the “Tax Matters Agreement” section below.

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.

Tax Matters Agreement

Pursuant to the tax matters agreement, each of Match Group and IAC is responsible for certain tax liabilities and obligations following the transfer by Former IAC (i) to Match Group of certain assets and liabilities of, or related to, the businesses of Former IAC (other than Former Match Group), and (ii) to holders of Former IAC common stock and Former IAC Class B common stock, as a result of the reclassification and mandatory exchange of certain series of Former IAC exchangeable preferred stock (collectively, the “IAC Distribution”).

Under the tax matters agreement, IAC generally is responsible for, and has agreed to indemnify Match Group against, any liabilities incurred as a result of the failure of the IAC Distribution to qualify for the intended tax-free treatment unless, subject to certain exceptions, the failure to so qualify is attributable to Match Group's or Former Match Group’s actions or failure to act, Match Group's or Former Match Group’s breach of certain representations or covenants or certain acquisitions of equity securities of Match Group, in each case, described in the tax matters agreement (a "Match Group fault-based action").

If the failure to so qualify is attributable to a Match Group fault-based action, Match Group is responsible for liabilities incurred as a result of such failure and will indemnify IAC against such liabilities so incurred by IAC or its affiliates.

Under the tax matters agreement, as of December 31, 2020, Match Group is obligated to remit to IAC $ 1.6 million of expected state tax refunds relating to tax years prior to the Separation.

This obligation is included in “Accrued expenses and other current liabilities” in the accompanying consolidated balance sheet.

Additionally, IAC is obligated to indemnify Match Group for IAC’s share of tax liabilities related to various periods prior to the Separation.

At December 31, 2020, a receivable of $ 1.9 million is included in “Other current assets” in the accompanying consolidated balance sheet representing an estimate of the amount that Match Group is expected to be indemnified under this arrangement.

At December 31, 2020, Match Group has an indemnification asset of $ 0.6 million included in “Other non-current assets” in the accompanying consolidated balance sheet for uncertain tax positions that related to Former IAC prior to the Separation.

For the year ended December 31, 2020, the Company paid IAC $ 20.9 million pursuant to the tax matters agreement related to income tax refunds received by the Company.

Additionally, the Company received $ 4.3 million from IAC under the tax matters agreement.

Transition Services Agreement

Pursuant to the transition services agreement, IAC continues to provide certain services to Match Group that Former IAC had historically provided to Former Match Group.

Match Group also provides certain services to IAC that Former Match Group previously provided to Former IAC.

The transition services agreement also provides that Match Group and IAC will make efforts to replace, amend, or divide certain joint contracts with third-parties relating to services or products used by both Match Group and IAC.

Match Group and IAC also agreed to continue sharing certain services provided pursuant to certain third-party vendor contracts that were not replaced, amended, or divided prior to closing of the Separation.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company subleases office space from ANGI and was charged $ 1.4 million of rent for the year ended December 31, 2019 .

There were outstanding payables of $ 0.9 million due to ANGI at December 31, 2019 , pursuant to sublease agreements.

IAC and Expedia:

Each of IAC and Expedia has a 50 % ownership interest in two aircraft that may be used by both companies.

The Company and Expedia purchased an aircraft during the second quarter of 2017 to replace a previously owned aircraft, which was subsequently sold on February 13, 2018.

The Company paid $ 17.4 million ( 50 % of the total purchase price and refurbish costs) for its interest in the new aircraft.

In addition, in 2019 , the Company and Expedia entered into an agreement to jointly acquire a new corporate aircraft for a total expected cost of $ 72.3 million (including purchase price and related costs), with each company to bear 50 % of such expected cost.

The Company paid approximately $ 23 million in 2019 in connection with our joint entry into the purchase agreement, and the respective share of the balance is due upon delivery of the new aircraft, which is expected to occur in early 2021.

Members of the aircraft flight crews are employed by an entity in which each of the Company and Expedia has a 50 % ownership interest.

The Company and Expedia have agreed to share costs relating to flight crew compensation and benefits pro-rata according to each company's respective usage of the aircraft, for which they are separately billed by the entity described above.

The Company and Expedia are related parties since they are under common control, given that Mr.

Diller serves as Chairman and Senior Executive of both IAC and Expedia.

For the years ended December 31, 2019 , 2018 and 2017 , total payments made to this entity by the Company were not material.

For the year ended December 31, 2020, the Company paid IAC $ 0.3 million related to services provided by IAC under the transitions services agreement.

Additionally, the Company received $ 2.4 million from IAC for services provided under the transitions services agreement.

Employee Matters Agreement

Pursuant to the amended and restated employee matters agreement, Match Group will reimburse IAC for the cost of any IAC equity awards held by the Company’s employees and former employees upon exercise or vesting.

In addition, Match Group employees continued to participate in IAC’s U.S.

health and welfare plans, 401(k) plan and flexible benefits plan through December 31, 2020.

Match Group reimbursed IAC for the costs of such participation pursuant to the amended and restated employee matters agreement.

Match Group established its own employee benefit plans effective January 1, 2021.

For the year ended December 31, 2020, the Company paid IAC $ 2.0 million for the cost of IAC equity awards held by the Company’s employees upon vesting.

At December 31, 2020, the Company has accrued $ 1.6 million as the estimated cost due to IAC for IAC equity awards held by Match Group employees.

Additionally, the Company paid IAC $ 18.3 million for health and welfare plans and 401(k) plan, inclusive of employee contributions to both.

Other Agreements

The Transaction Agreement provides that each of Match Group and IAC has agreed to indemnify, defend and hold harmless the other party from and against any liabilities arising out of:

(i) any asset or liability allocated to such party or the other members of such party's group under the Transaction Agreement or the businesses of such party's group after the closing of the Separation;

(ii) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of a member of such party's group contained in the Transaction Agreement that survives the closing of the Separation or is contained in any ancillary agreement;

and (iii) any untrue or misleading statement or alleged untrue or misleading statement of a material fact or omission, with respect to information contained in or incorporated into the Form S-4 Registration Statement (the “Form S-4”) filed with the Securities and Exchange Commission (the “SEC”) by IAC and Former IAC in connection with the Separation or the joint proxy statement/prospectus filed by Former IAC and Former Match Group with the SEC pursuant to the Form S-4.

NOTE 16—BENEFIT PLANS

IAC has a retirement savings plan in the United States that qualifies under Section 401(k) of the Internal Revenue Code.

Under the IAC/InterActiveCorp Retirement Savings Plan ("the Plan"), participating employees may contribute up to 50 % of their pre-tax earnings, but not more than statutory limits.

Prior to July 2019, IAC contributed a dollar for each dollar a participant contributed in this plan, with a maximum contribution of 3 % of a participant's eligible earnings.

In June 2019, the Company approved a change to its matching contribution to 100 % of the first 10 % of compensation, subject to IRS limits on the Company's matching contribution, that a participant contributes to the Plan.

This change is being phased in beginning July 1, 2019 and will be fully implemented by all IAC subsidiaries participating in the Plan no later than January 1, 2020.

Matching contributions for the Plan for the years ended December 31, 2019 , 2018 and 2017 are $ 21.0 million , $ 12.9 million and $ 11.1 million , respectively.

Matching contributions are invested in the same manner as each participant's voluntary contributions in the investment options provided under the Plan.

An investment option in the Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock.

The increase in matching contributions in 2019 is due primarily to the aforementioned change to the Company's matching contribution.

The increase in matching contributions in 2018 is due primarily to an increase in participation in the Plan due to increases in headcount from the Combination and continued corporate growth at ANGI, MTCH, Vimeo and Dotdash.

IAC also has or participates in various benefit plans, principally defined contribution plans, for its international employees.

IAC's contributions for these plans for the years ended December 31, 2019 , 2018 and 2017 are $ 4.0 million , $ 3.4 million and $ 2.5 million , respectively.

Pursuant to the Employee Matters Agreement with IAC, Match Group employees are eligible to participate in a retirement savings plan sponsored by IAC in the United States, which is qualified under Section 401(k) of the Internal Revenue Code.

Under the IAC Retirement Savings Plan (the “IAC Plan”), participating employees may contribute up to 50 % of their pre-tax earnings, but not more than statutory limits.

The employer match under the IAC Plan is 100 % of the first 10 % of a participant’s eligible earnings, subject to IRS limits on the Company’s matching contribution that a participant contributes to the IAC Plan.

Prior to July 2019, the employer match under the Plan was fifty cents for each dollar a participant contributed in the Plan, with a maximum contribution of 3 % of a participant’s eligible earnings.

Matching contributions under the Plan for the years ended December 31, 2020, 2019 and 2018 were $ 8.6 million, $ 5.8 million and $ 2.8 million, respectively.

Matching contributions are invested in the same manner as each participant’s voluntary contributions in the investment options provided under the IAC Plan.

Under the IAC Plan and prior to the Separation, an available investment option was IAC common stock, but neither participant nor matching contributions were required to be invested in IAC common stock.

The increase in matching contributions in 2020 and 2019 is primarily due to the aforementioned change of the Company’s matching contribution in the second half of 2019.

Beginning January 1, 2021, all investments in the IAC Plan were transferred to the Match Group Retirement Savings Plan (the “Match Group Plan”).

The employer match under the Match Group Plan will continue to be 100 % of the first 10 % of a participant’s eligible earnings, subject to IRS limits on the Company’s matching contribution that a participant contributes to the Match Group Plan.

Under the Match Group Plan, the Company’s common stock is not an available investment option.

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Internationally, Match Group also has or participates in various benefit plans, primarily defined contribution plans.

The Company’s contributions for these plans for the years ended December 31, 2020, 2019 and 2018 were $ 3.8 million, $ 3.1 million and $ 2.8 million, respectively.

NOTE 17—CONSOLIDATED FINANCIAL STATEMENT DETAILS

2 unchanged sentences

Prepaid expenses $ 71,793 $ 55,698

Capitalized costs to obtain a contract with a customer

Capitalized downloadable search toolbar costs, net

Income taxes receivable

Capitalized mobile app fees 33,539 28,478

Other 38,693 13,674

Other current assets $ 144,025 $ 97,850

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

Property and equipment, net:

Buildings and leasehold improvements

Capitalized software and computer equipment

Computer equipment and capitalized software $ 167,863 $ 145,353

Buildings and building improvements 74,187 73,614

Land 11,565 11,590

Furniture and other equipment 9,031 10,152

Projects in progress 14,474 8,025

Property and equipment

277,120 248,734

Accumulated depreciation and amortization ( 169,321 ) ( 147,669 )

2 unchanged sentences

Accrued expenses and other current liabilities:

Accrued employee compensation and benefits

Accrued advertising expense $ 46,788 $ 32,201

Accrued employee compensation and benefits 65,239 47,745

Accrued interest expense 26,922 22,236

Accrued non-income taxes 29,600 18,179

Accrued professional fees 15,616 22,728

Other 47,583 39,161

Accrued expenses and other current liabilities $ 231,748 $ 182,250

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years Ended December 31,

2020 2019 2018

(In thousands)

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

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:

$ 26.8 million realized gain on the sale of certain Pinterest shares held by the Company and a $ 128.8 million unrealized gain 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 British Pound ("GBP") during the year ended December 31, 2019.

Other expense, net in 2017 includes:

$ 16.8 million in net foreign currency exchange losses due primarily to the weakening of the U.S.

dollar relative to the GBP;

$ 15.4 million expense related to the extinguishment of the 6.75 % MTCH Senior Notes and repricing of the MTCH Term Loan;

$ 13.0 million mark-to-market charge principally pertaining to a subsidiary denominated equity award held by a non-employee;

$ 12.2 million in other-than-temporary impairment charges related to certain investments;

$ 1.2 million expense related to the write-off of deferred financing costs associated with the repayment of the 4.875 % Senior Notes;

$ 34.9 million in realized gains related to the sales of certain investments;

and $ 11.4 million of interest income.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 a mark-to-market adjustment pertaining to a liability classified equity instrument, 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.

Cash and Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheet to the total amounts shown in the consolidated statement of cash flows:

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2016

2020 2019 2018 2017

(In thousands)

1 unchanged sentence

Restricted cash included in other current assets

Restricted cash included in other assets

Total cash and cash equivalents and restricted cash as shown on the consolidated statement of cash flows

Restricted cash at December 31, 2019 primarily consists of a deposit related to corporate credit cards.

Restricted cash at December 31, 2018 primarily consists of a cash collateralized letter of credit and a deposit related to corporate credit cards.

Restricted cash at December 31, 2017 primarily supports a letter of credit to a supplier, which was released to the Company in the second quarter of 2018.

Restricted cash at December 31, 2016 primarily included funds held in escrow for the redemption and repurchase of IAC Senior Notes and the MyHammer tender offer.

In the first quarter of 2018, the Senior Notes were redeemed and repurchased and the funds held in escrow for the MyHammer tender offer were returned to the Company.

Supplemental Disclosure of Non-Cash Transactions:

The Company recorded an acquisition-related contingent consideration liability of $ 25.5 million during the year ended December 31, 2018 , in connection with an acquisition.

There were no acquisition-related contingent consideration liabilities recorded for the years ended December 31, 2019 and 2017.

See " Note 6—Financial Instruments and Fair Value Measurements " for additional information on contingent consideration arrangements.

On October 19, 2018, ANGI issued 8.6 million shares of its Class A common stock valued at $ 165.8 million in connection with the acquisition of Handy.

On September 29, 2017, ANGI issued 61.3 million shares of its Class A common stock valued at $ 763.7 million in connection with the Combination.

Supplemental Disclosure of Cash Flow Information:

138 127 193 137

Cash, cash equivalents, and restricted cash included in current assets of discontinued operations

— 2,674,146 1,946,125 1,360,921

Restricted cash included in non-current assets of discontinued operations

Total cash, cash equivalents and restricted cash as shown on the consolidated statement of cash flow

$ 739,302 $ 3,140,358 $ 2,133,685 $ 1,633,682

Supplemental Disclosures of Cash Flow Information

Years Ended December 31,

2020 2019 2018

(In thousands)

Cash paid (received) during the year for:

Interest $ 115,957 $ 85,559 $ 75,824

Income tax payments

41,024 34,583 40,703

Income tax refunds ( 30,048 ) ( 2,589 ) ( 33,289 )

IAC/INTERACTIVECORP AND SUBSIDIARIES

MATCH GROUP, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1 unchanged sentence

Quarter Ended

September 30 (a)

March 31 Quarter Ended

June 30 Quarter Ended

Quarter Ended

December 31 (a)

(In thousands, except per share data)

Year Ended December 31, 2020

Revenue $ 544,642 $ 555,450 $ 639,770 $ 651,407

Cost of revenue 143,894 148,853 169,823 173,263

Operating income 137,372 195,594 200,167 212,582

Net earnings attributable to IAC shareholders

Per share information attributable to IAC shareholders:

Basic earnings per share (f)

Diluted earnings per share (f)

Quarter Ended

September 30 (d)

Quarter Ended

December 31 (e)

(In thousands, except per share data)

Earnings from continuing operations 149,324 132,921 131,487 140,179

(Loss) earnings from discontinued operations ( 331,967 ) ( 34,611 ) 508 —

Net (loss) earnings attributable to Match Group, Inc.

shareholders ( 211,040 ) 66,441 132,581 140,579

Per share information from continuing operations attributable to the Match Group, Inc.

shareholders:

$ 0.65 $ 0.56 $ 0.51 $ 0.53

$ 0.59 $ 0.51 $ 0.45 $ 0.48

Per share information attributable to the Match Group, Inc.

shareholders:

$ ( 1.15 ) $ 0.36 $ 0.51 $ 0.53

$ ( 1.13 ) $ 0.32 $ 0.46 $ 0.48

Year Ended December 31, 2019

Revenue $ 464,625 $ 497,973 $ 541,493 $ 547,167

Cost of revenue 120,224 126,665 138,225 142,070

Operating income 117,560 171,309 175,236 181,349

Net earnings attributable to IAC shareholders

Per share information attributable to IAC shareholders:

Basic earnings per share (f)

Diluted earnings per share (f)

Earnings from continuing operations 117,682 119,226 137,791 119,934

(Loss) earnings from discontinued operations ( 4,697 ) 27,565 21,981 4,338

Net earnings attributable to Match Group, Inc.

shareholders 88,695 113,467 128,544 100,425

Per share information from continuing operations attributable to the Match Group, Inc.

shareholders:

$ 0.52 $ 0.52 $ 0.60 $ 0.52

The first, second, third and fourth quarters of 2019 include after-tax stock-based compensation expense of $ 2.2 million , $ 1.9 million , $ 1.7 million , and $ 1.7 million , respectively, related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination.

The first quarter of 2018 includes after-tax stock-based compensation expense of $ 14.6 million 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, as well as after-tax costs of $ 4.1 million related to the Combination (including $ 2.8 million of deferred revenue write-offs).

The second quarter of 2018 includes:

after-tax stock-based compensation expense of $ 12.8 million 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, as well as after-tax costs of $ 2.0 million related to the Combination (including $ 1.8 million of deferred revenue write-offs).

after-tax realized and unrealized gains of $ 133.3 million related to the sale of a certain equity investment.

The third quarter of 2018 includes after-tax stock-based compensation expense of $ 12.3 million related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination.

The fourth quarter of 2018 includes:

after-tax stock-based compensation expense of $ 14.4 million 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.

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

combined after-tax gains of $ 92.5 million related to the sales of Dictionary.com, Electus, Felix and CityGrid.

after-tax impairment charges related to indefinite-lived intangible assets of $ 21.3 million .

Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.

NOTE 19— SUBSEQUENT EVENTS

On January 31, 2020 , the Company received 1.4 million shares of Match Group common stock in exchange for the contribution of certain real estate to Match Group.

On February 11, 2020 , the Company completed the acquisition of Care.com, a leading global platform for finding and managing family care, for approximately $ 500 million , net of cash acquired.

Care.com will be reflected in the consolidated financial statements of the Company from the date of its acquisition.

On February 11, 2020, MTCH completed a private offering of $ 500 million aggregate principal amount of 4.125 % Senior Notes due August 1, 2030 .

The net proceeds from the offering, in the event the Separation is consummated, will be used to fund the cash consideration of $ 3.00 per MTCH common share that will be payable in connection with the Separation.

If the Separation is not consummated, the net proceeds will be used by MTCH for general corporate purposes.

On February 13, 2020 , the $ 500 million MTCH Credit Facility was amended to, among other things, increase the available borrowing capacity to $ 750 million , reduce the interest rate to LIBOR plus 1.375 % , and extend its maturity to February 13, 2025 .

Additionally, the $ 425 million MTCH Term Loan was amended to reprice the outstanding balance to LIBOR plus 1.75 % and extend its maturity to February 13, 2027 .

IAC/INTERACTIVECORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 0.45 $ 0.45 $ 0.52 $ 0.46

Per share information attributable to the Match Group, Inc.

shareholders:

$ 0.49 $ 0.62 $ 0.71 $ 0.55

$ 0.42 $ 0.55 $ 0.63 $ 0.48

______________________

(a) Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.

NOTE 19—SUBSEQUENT EVENT

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.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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 7A. Quantitative and Qualitative Disclosures About Market Risk