Match Group, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s long-term debt. At December 31, 2021, the Company’s outstanding long-term debt was $4.0 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 $157.6 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. At December 31, 2021, the $425 million Term Loan bore interest at a variable rate, LIBOR plus 1.75%. At December 31, 2021, the rate in effect was 1.91%. 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, 2021. The Credit Facility and the Term Loan provide for a benchmark replacement should the LIBOR rate not be available. 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 (“EU”) and Asia. We are exposed to foreign exchange risk for primarily the Euro and British Pound (“GBP”). For the years ended December 31, 2021, 2020 and 2019, international revenue accounted for 54%, 53% and 53%, respectively, of our consolidated revenue. 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. dollar. 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 average GBP and Euro exchange rates strengthened against the U.S. Dollar by 7% and 4%, respectively, in 2021 compared to 2020. Foreign currency exchange rate changes during the years ended December 31, 2021 and 2020 positively impacted revenue by $35.2 million and negatively impacted revenue by $6.4 million, respectively, or 1% and less than 1% of total revenue, respectively. See “Non-GAAP Financial Measures” 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 losses included in the Company’s earnings for the years ended December 31, 2021, 2020 and 2019 are $1.8 million, $0.6 million and $0.9 million, respectively. Foreign currency exchange gains or losses historically have not been material to the Company. As a result, we have not historically hedged any foreign currency exposures, although we may hedge foreign currencies in the future to limit the impact of foreign currency exchange gains and losses. 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. 53 Table of Contents Item 8. Consolidated Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm 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 Match Group, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, 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 24, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated 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. 54 Table of Contents Acquisition of Hyperconnect, Inc. - Valuation of Acquired Intangible Assets Description of the Matter On June 17, 2021, the Company completed its acquisition of Hyperconnect, Inc. for net consideration of $1.75 billion, as disclosed in Note 5 to the consolidated financial statements. The transaction was accounted for as a business combination. Auditing the Company's accounting for its acquisition of Hyperconnect, Inc. was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of identified intangible assets of $612 million, which principally consisted of trade names and associated trademarks and user bases. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. The Company used a discounted cash flow model to measure the intangible assets. The significant assumptions used to estimate the value of the intangible assets included discount rates, revenue growth rates, royalty rates and the projected cash flow terminal growth rates. These significant assumptions are forward looking and could be affected by future economic and market 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 the business combination. For example, we tested controls over management's review of the valuation models and the significant assumptions described above used to develop such estimates. To test the estimated fair value of the trade names and associated trademarks and user bases, we performed audit procedures that included, among others, evaluating the Company’s selection of the valuation methodologies, evaluating the methods and significant assumptions used by the Company’s valuation specialist, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For example, we compared the significant assumptions to the historical results of the acquired business as well as to current industry, market, and economic trends and to the Company’s budgets and forecasts. 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. We involved our valuation specialists to assist with our evaluation of the methodologies used by the Company and significant assumptions used in the fair value estimates. 55 Table of Contents Recoverability of Indefinite-Lived Intangible Assets Description of the Matter As of December 31, 2021, the Company’s indefinite-lived intangible asset balance, excluding goodwill, was $576.7 million and consisted of trade names and trademarks. 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 annual impairment tests for certain indefinite-lived intangible assets was complex and highly judgmental due to the significant estimation uncertainty required to determine the fair value of the indefinite-lived intangible assets. In particular, the Company’s fair value estimates for indefinite-lived intangible assets were sensitive to significant assumptions, such as discount rates, revenue growth rates, royalty rates and projected cash flow terminal growth rates, which are affected by expectations about 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 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 certain indefinite-lived intangible assets, we performed audit procedures that included, among others, assessing the methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current industry and economic trends and to other guideline public companies and evaluated whether changes to the company’s business model would affect the significant assumptions. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the indefinite-lived intangible assets that would result from changes in the assumptions. For example, we evaluated management’s forecasted revenue to identify, understand and evaluate changes as compared to historical results. 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. /s/ ERNST & YOUNG LLP We have served as the Company’s auditor since 1996. New York, New York February 24, 2022 56 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2021 2020 (In thousands, except share data) ASSETS Cash and cash equivalents $ 815,384 $ 739,164 Short-term investments 11,818 — Accounts receivable, net of allowance of $ 281 and $ 286 , respectively 188,482 137,023 Other current assets 202,568 144,025 Total current assets 1,218,252 1,020,212 Property and equipment, net 163,256 107,799 Goodwill 2,411,996 1,270,532 Intangible assets, net 771,697 230,900 Deferred income taxes 334,937 293,487 Other non-current assets 163,150 123,524 TOTAL ASSETS $ 5,063,288 $ 3,046,454 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES Current maturities of long-term debt, net $ 99,927 $ — Accounts payable 37,871 29,200 Deferred revenue 262,131 239,088 Accrued expenses and other current liabilities 768,366 231,748 Total current liabilities 1,168,295 500,036 Long-term debt, net 3,829,421 3,840,930 Income taxes payable 13,842 14,582 Deferred income taxes 130,261 17,213 Other long-term liabilities 116,051 86,428 Redeemable noncontrolling interests 1,260 640 Commitments and contingencies SHAREHOLDERS’ EQUITY Common stock; $ 0.001 par value; authorized 1,600,000,000 shares; 283,470,334 and 267,329,284 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively 283 267 Additional paid-in capital 8,164,216 7,089,007 Retained deficit ( 8,144,514 ) ( 8,422,237 ) Accumulated other comprehensive loss ( 223,754 ) ( 81,454 ) Total Match Group, Inc. shareholders’ equity ( 203,769 ) ( 1,414,417 ) Noncontrolling interests 7,927 1,042 Total shareholders’ equity ( 195,842 ) ( 1,413,375 ) TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 5,063,288 $ 3,046,454 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 57 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Years Ended December 31, 2021 2020 2019 (In thousands, except per share data) Revenue $ 2,983,277 $ 2,391,269 $ 2,051,258 Operating costs and expenses: Cost of revenue (exclusive of depreciation shown separately below) 839,308 635,833 527,184 Selling and marketing expense 566,459 479,907 427,440 General and administrative expense 414,821 311,207 256,138 Product development expense 241,049 169,811 151,960 Depreciation 41,402 41,271 34,355 Amortization of intangibles 28,559 7,525 8,727 Total operating costs and expenses 2,131,598 1,645,554 1,405,804 Operating income 851,679 745,715 645,454 Interest expense ( 130,493 ) ( 130,624 ) ( 111,008 ) Other (expense) income, net ( 465,038 ) 15,861 ( 2,026 ) Earnings from continuing operations, before tax 256,148 630,952 532,420 Income tax benefit (provision) 19,897 ( 43,273 ) ( 15,080 ) Net earnings from continuing operations 276,045 587,679 517,340 Earnings (loss) from discontinued operations, net of tax 509 ( 366,070 ) 49,187 Net earnings 276,554 221,609 566,527 Net loss (earnings) attributable to noncontrolling interests 1,169 ( 59,280 ) ( 112,689 ) Net earnings attributable to Match Group, Inc. shareholders $ 277,723 $ 162,329 $ 453,838 Net earnings per share from continuing operations: Basic $ 1.01 $ 2.36 $ 2.28 Diluted $ 0.93 $ 2.09 $ 1.95 Net earnings per share attributable to Match Group, Inc. shareholders: Basic $ 1.01 $ 0.73 $ 2.50 Diluted $ 0.93 $ 0.66 $ 2.15 Stock-based compensation expense by function: Cost of revenue $ 5,554 $ 4,201 $ 3,693 Selling and marketing expense 7,941 5,141 5,112 General and administrative expense 81,420 59,174 42,863 Product development expense 51,901 33,752 38,056 Total stock-based compensation expense $ 146,816 $ 102,268 $ 89,724 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 58 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS Years Ended December 31, 2021 2020 2019 (In thousands) Net earnings $ 276,554 $ 221,609 $ 566,527 Other comprehensive (loss) income, net of tax Change in foreign currency translation adjustment ( 142,608 ) 39,415 ( 9,961 ) Change in unrealized losses on available-for-sale securities — ( 1 ) ( 5 ) Total other comprehensive (loss) income ( 142,608 ) 39,414 ( 9,966 ) Comprehensive income 133,946 261,023 556,561 Comprehensive loss (income) attributable to noncontrolling interests: Net loss (earnings) attributable to noncontrolling interests 1,169 ( 59,280 ) ( 112,689 ) Change in foreign currency translation adjustment attributable to noncontrolling interests 308 1,072 2,023 Change in unrealized losses of available-for-sale debt securities attributable to noncontrolling interests — — 1 Comprehensive loss (income) attributable to noncontrolling interests 1,477 ( 58,208 ) ( 110,665 ) Comprehensive income attributable to Match Group, Inc. shareholders $ 135,423 $ 202,815 $ 445,896 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 59 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY Years Ended December 31, 2021, 2020, and 2019 Match Group, Inc. Shareholders’ Equity Common Stock $ 0.001 Par Value Former IAC Common Stock $ 0.001 Par Value Former IAC Class B Convertible Common Stock $ 0.001 Par Value Redeemable Noncontrolling Interests $ Shares $ Shares $ Shares Additional Paid-in Capital Retained Earnings (Deficit) Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Match Group, Inc. Shareholders’ Equity Noncontrolling Interests Total Shareholders’ Equity (In thousands) Balance as of December 31, 2018 $ 65,687 $ — — $ 262 262,303 $ 16 16,157 $ 11,968,881 $ 1,271,208 $ ( 128,722 ) $ ( 10,309,612 ) $ 2,802,033 $ 708,676 $ 3,510,709 Net earnings for the year ended December 31, 2019 2,835 — — — — — — — 453,838 — — 453,838 109,854 563,692 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 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 11,554 — — — — — — ( 11,554 ) — — — ( 11,554 ) — ( 11,554 ) Noncontrolling interests created in acquisitions 4,781 — — — — — — — — — — — — — Purchase of exchangeable note hedges, net of deferred tax assets — — — — — — — ( 234,563 ) — — — ( 234,563 ) — ( 234,563 ) 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 11,378,160 1,725,046 ( 136,349 ) ( 10,309,612 ) 2,657,524 970,276 3,627,800 Net (loss) earnings for the year ended December 31, 2020 ( 3,136 ) — — — — — — — 162,329 — — 162,329 62,416 224,745 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 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 ) Purchase of Match Group and ANGI treasury stock — — — — — — — ( 187,735 ) — — — ( 187,735 ) — ( 187,735 ) Retirement of 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 $ — — $ — — $ 7,089,007 $ ( 8,422,237 ) $ ( 81,454 ) $ — $ ( 1,414,417 ) $ 1,042 $ ( 1,413,375 ) 60 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY Years Ended December 31, 2021, 2020, and 2019 (continued) Match Group, Inc. Shareholders’ Equity Common Stock $ 0.001 Par Value Redeemable Noncontrolling Interests $ Shares Additional Paid-in Capital Retained (Deficit) Earnings Accumulated Other Comprehensive Loss Total Match Group, Inc. Shareholders’ Equity Noncontrolling Interests Total Shareholders’ Equity (In thousands) Balance as of December 31, 2020 $ 640 $ 267 267,329 $ 7,089,007 $ ( 8,422,237 ) $ ( 81,454 ) $ ( 1,414,417 ) $ 1,042 $ ( 1,413,375 ) Net (loss) earnings for the year ended December 31, 2021 ( 2,047 ) — — — 277,723 — 277,723 878 278,601 Other comprehensive loss, net of tax — — — — — ( 142,300 ) ( 142,300 ) ( 308 ) ( 142,608 ) Stock-based compensation expense — — — 153,692 — — 153,692 — 153,692 Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes — 5 4,678 42,709 — — 42,714 — 42,714 Issuance of common stock for the acquisition of Hyperconnect — 6 5,929 890,845 — — 890,851 — 890,851 Adjustment of redeemable noncontrolling interests to fair value 2,667 ( 2,667 ) — — ( 2,667 ) — ( 2,667 ) Adjustment of noncontrolling interests to fair value — ( 1,835 ) — — ( 1,835 ) 1,835 — Purchase of noncontrolling interest — 943 — — 943 ( 2,571 ) ( 1,628 ) Noncontrolling interest created by the exercise of subsidiary denominated equity award — — — ( 7,102 ) — — ( 7,102 ) 7,361 259 Settlement and exercises of note hedges and warrants — — — 246,842 — — 246,842 — 246,842 Settlement and exchanges of 2022 Exchangeable Notes — 5 5,534 ( 238,777 ) — — ( 238,772 ) — ( 238,772 ) Other — — — ( 9,441 ) — — ( 9,441 ) ( 310 ) ( 9,751 ) Balance as of December 31, 2021 $ 1,260 $ 283 283,470 $ 8,164,216 $ ( 8,144,514 ) $ ( 223,754 ) $ ( 203,769 ) $ 7,927 $ ( 195,842 ) The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 61 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, 2021 2020 2019 (In thousands) Cash flows from operating activities attributable to continuing operations: Net earnings $ 276,554 $ 221,609 $ 566,527 Add back: (earnings) loss from discontinued operations, net of tax ( 509 ) 366,070 ( 49,187 ) Net earnings from continuing operations 276,045 587,679 517,340 Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities attributable to continuing operations: Stock-based compensation expense 146,816 102,268 89,724 Depreciation 41,402 41,271 34,355 Amortization of intangibles 28,559 7,525 8,727 Deferred income taxes ( 57,969 ) 15,384 ( 12,753 ) Other adjustments, net 27,690 27,281 13,561 Changes in assets and liabilities Accounts receivable ( 34,021 ) ( 24,213 ) ( 17,861 ) Other assets 1,743 ( 33,224 ) ( 24,162 ) Accounts payable and other liabilities 458,757 24,155 33,741 Income taxes payable and receivable ( 2,854 ) 16,913 ( 4,161 ) Deferred revenue 26,331 23,513 9,478 Net cash provided by operating activities attributable to continuing operations 912,499 788,552 647,989 Cash flows from investing activities attributable to continuing operations: Acquisitions, net of cash ( 859,905 ) — ( 3,759 ) Capital expenditures ( 79,971 ) ( 42,376 ) ( 39,035 ) Purchases of investments — ( 9,115 ) — Net cash distribution related to Separation of IAC — ( 3,870,550 ) — Other, net 51 ( 90 ) 1,064 Net cash used in investing activities attributable to continuing operations ( 939,825 ) ( 3,922,131 ) ( 41,730 ) Cash flows from financing activities attributable to continuing operations: Borrowings under the Credit Facility — 20,000 40,000 Proceeds from Senior Notes offerings 500,000 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 ) Payments to settle exchangeable notes ( 630,658 ) — — Purchase of exchangeable note hedges — — ( 303,428 ) Proceeds from issuance of warrants — — 166,520 Proceeds from the settlement of exchangeable note hedges 1,089,592 — — Payments to settle warrants related to exchangeable notes ( 882,187 ) — — Debt issuance costs ( 7,124 ) ( 13,517 ) ( 27,815 ) Purchase of Former Match Group treasury stock — ( 132,868 ) ( 216,353 ) Proceeds from stock offering — 1,421,801 — Proceeds from issuance of common stock pursuant to stock-based awards 58,424 155,402 — Withholding taxes paid on behalf of employees on net settled stock-based awards ( 15,726 ) ( 211,958 ) ( 203,177 ) Purchase of noncontrolling interests ( 1,473 ) ( 15,827 ) ( 1,650 ) Other, net 258 ( 15,187 ) ( 73 ) Net cash provided by financing activities attributable to continuing operations 111,106 1,787,846 654,024 Total cash provided by (used in) continuing operations 83,780 ( 1,345,733 ) 1,260,283 62 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (continued) Years Ended December 31, 2021 2020 2019 (In thousands) Net cash provided by operating activities attributable to discontinued operations — 13,630 289,949 Net cash used in investing activities attributable to discontinued operations — ( 963,420 ) ( 287,798 ) Net cash used in financing activities attributable to discontinued operations — ( 110,959 ) ( 254,193 ) Total cash used in discontinued operations — ( 1,060,749 ) ( 252,042 ) Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 7,570 ) 5,426 ( 1,568 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 76,210 ( 2,401,056 ) 1,006,673 Cash, cash equivalents, and restricted cash at beginning of period 739,302 3,140,358 2,133,685 Cash, cash equivalents, and restricted cash at end of period $ 815,512 $ 739,302 $ 3,140,358 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 63 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1—ORGANIZATION Match Group, Inc., through its portfolio companies, is a leading provider of digital technologies designed to help people make meaningful connections. Our global portfolio of brands includes Tinder ® , Match ® , Hinge ® , Meetic ® , OkCupid ® , Pairs™, PlentyOfFish ® , OurTime ® , Azar ® , Hakuna Live™, and more, each built to increase our users’ likelihood of connecting with others. Through our trusted brands, we provide tailored services to meet the varying preferences of our users. Our services are available in over 40 languages to our users all over the world. Match Group has one operating segment, Connections, which is managed as a portfolio of brands. 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. NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated. Separation of Match Group and IAC and Discontinued Operations 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. 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. 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 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; value is generally determined based on a market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are 64 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) qualitative factors or events that indicate possible impairment. Factors we consider in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of our investments in equity securities, which require judgment and the use of estimates. When our assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge within Other (expense) income, net. Accounting Estimates 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 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; the carrying value of accounts receivable, including the determination of the allowance for credit losses; the determination of revenue reserves; the carrying value of right-of-use assets (“ROU assets”); the useful lives and recoverability of definite-lived intangible assets and property and equipment; the recoverability of goodwill and indefinite-lived intangible assets; the fair value of equity securities without readily determinable fair values; contingencies; unrecognized tax benefits; the valuation allowance for deferred income tax assets; the fair value of derivatives; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets, and other factors that the Company considers relevant. Revenue Recognition The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Revenue is recognized when control of the promised services 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. Subscribers pay in advance, primarily by credit card or through mobile app stores, and, subject to certain conditions identified in our terms and conditions, generally all purchases are final and nonrefundable. 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 purchase of à la carte features and offline events. Online advertising revenue is recognized when an advertisement is displayed. Revenue from the purchase of à la carte features is recognized based on usage. Revenue associated with offline events is recognized when each event occurs. 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. 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. 65 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. 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, 2021 and 2020, the Company recognized expense of $ 552.6 million and $ 414.7 million, respectively, related to the amortization of these costs. The contract asset balances at December 31, 2021, 2020, and 2019 related to costs to obtain a contract are $ 41.7 million, $ 33.5 million, and $ 28.5 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 services through mobile app stores. At December 31, 2021, two mobile app stores accounted for approximately 67 % and 12 %, respectively, of our gross accounts receivables. The comparable amounts at December 31, 2020 were 65 % and 11 %, 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 Deferred revenue consists of advance payments that are received or are contractually due in advance of the Company’s performance. The Company’s deferred revenue is reported on a contract by contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of our performance obligation is one year or less. The deferred revenue balances are $ 262.1 million, $ 239.1 million, and $ 218.8 million at December 31, 2021 and 2020, and 2019, respectively. During the years ended December 31, 2021 and 2020, the Company recognized $ 239.1 million and $ 218.8 million of revenue that was included in the deferred revenue balance as of December 31, 2020 and 2019, respectively. At December 31, 2021 and 2020, there is no non-current portion of deferred revenue. 66 Table of Contents 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, 2021 2020 2019 (In thousands) Direct Revenue: Americas $ 1,512,057 $ 1,247,961 $ 1,090,158 Europe 821,827 680,128 584,412 APAC and Other 588,987 416,635 332,604 Total Direct Revenue 2,922,871 2,344,724 2,007,174 Indirect Revenue (principally advertising revenue) 60,406 46,545 44,084 Total Revenue $ 2,983,277 $ 2,391,269 $ 2,051,258 Direct Revenue Tinder $ 1,649,757 $ 1,355,400 $ 1,152,045 Other brands 1,273,114 989,324 855,129 Total Direct Revenue $ 2,922,871 $ 2,344,724 $ 2,007,174 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 (i) AAA rated government money market funds and (ii) time deposits. Internationally, cash equivalents primarily consist of (i) time deposits and (ii) money market funds. Property and Equipment Property and equipment, including significant improvements, are recorded at cost. Repairs and maintenance costs are expensed as incurred. 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 Estimated Useful Lives 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. Capitalization of such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended purpose. The net book value of capitalized internal use software is $ 53.5 million and $ 39.7 million at December 31, 2021 and 2020, respectively. Business Combinations 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 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 67 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) recorded as goodwill and assigned to the reporting unit that is expected to benefit from the combination as of the acquisition date. Goodwill and Indefinite-Lived Intangible Assets 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 loss equal to the excess is recorded. As a result of the Separation in 2020, the Company had a negative carrying value for the Company’s annual goodwill test at both October 1, 2020 and 2021. 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, 2021. 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. Due to the recent acquisition of Hyperconnect and the process to allocate the purchase price as of the purchase date, the intangible assets of Hyperconnect were considered qualitatively as of October 1, 2021. For assets in which a quantitative assessment was performed, 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. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company’s trade names and trademarks. The future cash flows are based on the Company’s most recent forecast and budget and, for years beyond the budget, the Company’s estimates, which are based, in part, on forecasted growth rates. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company’s annual indefinite-lived impairment assessment ranged from 10 % to 16 % in 2021 and 10 % to 23 % in 2020, and the royalty rates used ranged from 5 % to 8 % in both 2021 and 2020. 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, 2021 and 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 Long-lived assets, which consist of ROU assets, property and equipment, and intangible assets with definite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the 68 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. 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. Fair Value Measurements The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are: • Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets. • Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active, and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used. • Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. The 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 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. 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 and social media sites; offline marketing, which is primarily television advertising; and payments to partners who direct traffic to our websites. Advertising expense is $ 510.3 million, $ 438.7 million and $ 388.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Legal Costs Legal costs are expensed as incurred. Income Taxes 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. 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 69 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Company records interest and penalties related to uncertain tax positions as a component of income tax expense. Earnings Per Share 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 using the treasury stock or the as if converted methods, as applicable. See “Note 10—Earnings per Share” for additional information on dilutive securities. Foreign Currency Translation and Transaction Gains and Losses The financial position and operating results of foreign entities whose primary economic environment is based on their local currency are consolidated using the local currency as the functional currency. These local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses of these operations are translated at average rates of exchange during the period. Translation gains and losses are included in accumulated other comprehensive income as a component of shareholders’ equity. Transaction gains and losses resulting from assets and liabilities denominated in a currency other than the functional currency are included in the consolidated statement of operations as a component of “other (expense) income, net.” 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 loss into earnings. A loss of $ 0.2 million during the year ended December 31, 2020 is included in “other (expense) income, net” in the accompanying consolidated statement of operations. There were no such gains or losses for the years ended December 31, 2021 and 2019. Stock-Based Compensation Stock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite service period. See “Note 11—Stock-based Compensation” for a discussion of the Company’s stock-based compensation plans. Redeemable Noncontrolling Interests Noncontrolling interests in the consolidated subsidiaries of the Company are ordinarily reported on the consolidated balance sheet within shareholders’ equity, separately from the Company’s equity. However, securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of shareholders’ equity. Accordingly, all noncontrolling interests that are redeemable at the option of the holder are presented outside of shareholders’ equity in the accompanying consolidated balance sheet. In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these businesses to require the Company to purchase their interests, or allow the Company to acquire such interests, at fair value. 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. These put arrangements are exercisable by the counter-party outside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. During the years ended December 31, 2021, 2020, and 2019, the Company recorded adjustments of $ 2.7 million, $ 6.7 million, and $ 11.6 million, respectively, to increase these interests to fair value. Fair value determinations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flow projections. 70 Table of Contents 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 and are not covered by deposit insurance. Recent Accounting Pronouncements Accounting pronouncements 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. ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, which results in increased dilutive securities as the assumption of cash settlement of the notes is not 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 early adopted ASU No. 2020-06 as of January 1, 2021 on a fully retrospective basis. The impact of adopting ASU No. 2020-06 is as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Prior to the adoption of ASU No. 2020-06 After adoption of ASU No. 2020-06 Effect of adoption of ASU No. 2020-06 Prior to the adoption of ASU No. 2020-06 After adoption of ASU No. 2020-06 Effect of adoption of ASU No. 2020-06 (In thousands, except per share data) Statement of operations impacts Interest expense $ 174,791 $ 130,624 $ ( 44,167 ) $ 140,570 $ 111,008 $ ( 29,562 ) Income tax provision $ 32,874 $ 43,273 $ 10,399 $ 8,225 $ 15,080 $ 6,855 Net earnings from continuing operations $ 553,911 $ 587,679 $ 33,768 $ 494,633 $ 517,340 $ 22,707 Net earnings per share from continuing operations: Basic $ 2.21 $ 2.36 $ 0.15 $ 2.15 $ 2.28 $ 0.13 Diluted $ 2.00 $ 2.09 $ 0.09 $ 1.88 $ 1.95 $ 0.07 Weighted average dilutive shares outstanding 242,464 256,020 13,556 194,349 201,782 7,433 71 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Prior to the adoption of ASU No. 2020-06 After adoption of ASU No. 2020-06 Effect of adoption of ASU No. 2020-06 (In thousands) Balance sheet impacts at December 31, 2020: Non-current deferred tax asset $ 224,013 $ 293,487 $ 69,474 Long-term debt, net $ 3,534,706 $ 3,840,930 $ 306,224 Additional paid-in capital $ 7,394,646 $ 7,089,007 $ ( 305,639 ) Retained deficit $ ( 8,491,126 ) $ ( 8,422,237 ) $ 68,889 The impact of the adoption of ASU No. 2020-06 at December 31, 2018 resulted in an increase to retained earnings of $ 12.4 million and a decrease in additional paid-in capital of $ 53.5 million. As the adoption of ASU No. 2020-06 did not impact cash, the operating cash flows from continuing operations were not impacted. Certain reconciliation line items to net earnings from continuing operations were adjusted to reflect the impact of the adoption of ASU No. 2020-06. Accounting pronouncements not yet adopted by the Company In October 2021, the FASB issued ASU No. 2021-08, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers . The update will generally result in an entity recognizing contract assets and contract liabilities as if the acquirer had originated the contracts, which, for the most part, results in no change to the value of deferred revenue when measured in purchase accounting. The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The adoption of the new standard is not expected to have a material impact on our operating results, financial position, or cash flows. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 3—INCOME TAXES U.S. and foreign earnings before income taxes are as follows: Years Ended December 31, 2021 2020 2019 (In thousands) U.S. $ 184,835 $ 547,969 $ 454,036 Foreign 71,313 82,983 78,384 Total $ 256,148 $ 630,952 $ 532,420 72 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of the provision (benefit) for income taxes are as follows: Years Ended December 31, 2021 2020 2019 (In thousands) Current income tax provision (benefit): Federal $ 15 $ ( 2,044 ) $ 964 State 3,192 1,640 342 Foreign 34,865 28,293 26,527 Current income tax provision 38,072 27,889 27,833 Deferred income tax provision (benefit): Federal ( 32,723 ) 31,025 ( 2,159 ) State ( 18,627 ) ( 10,451 ) ( 9,698 ) Foreign ( 6,619 ) ( 5,190 ) ( 896 ) Deferred income tax (benefit) provision ( 57,969 ) 15,384 ( 12,753 ) Income tax (benefit) provision $ ( 19,897 ) $ 43,273 $ 15,080 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 net operating losses and U.S. foreign tax credits. December 31, 2021 2020 (In thousands) Deferred tax assets: Net operating loss carryforwards $ 85,613 $ 152,346 Tax credit carryforwards 128,731 102,012 Disallowed interest carryforwards 52,104 56,630 Stock-based compensation 15,491 16,073 Accrued expenses 116,415 9,283 Exchangeable notes 52,177 64,212 Other 33,211 25,532 Total deferred tax assets 483,742 426,088 Less valuation allowance ( 86,071 ) ( 71,090 ) Net deferred tax assets 397,671 354,998 Deferred tax liabilities: Intangible assets ( 165,551 ) ( 44,200 ) Right-of-use assets ( 21,784 ) ( 17,306 ) Property and equipment ( 4,923 ) ( 17,218 ) Other ( 737 ) — Total deferred tax liabilities ( 192,995 ) ( 78,724 ) Net deferred tax assets $ 204,676 $ 276,274 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, the Company’s net deferred tax asset was adjusted via additional paid-in capital for tax attributes allocated to Match Group from our consolidated federal and state income tax returns. A preliminary allocation was recorded as of June 30, 2020. The final adjustment 73 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) recorded in 2021 as a result of filing the 2020 consolidated federal and state income tax returns was not significant. At December 31, 2021, the Company has federal and state net operating losses (“NOLs”) of $ 174.1 million and $ 276.5 million, respectively. If not utilized, $ 17.3 million of the federal NOLs can be carried forward indefinitely, and $ 156.8 million will expire at various times between 2031 and 2037. Of the state NOLs, $ 3.8 million can be carried forward indefinitely and $ 272.7 million will expire at various times between 2024 and 2041. Federal and state NOLs of $ 142.6 million and $ 252.1 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, 2021, the Company has foreign NOLs of $ 131.9 million available to offset future income. Of these foreign NOLs, $ 99.6 million can be carried forward indefinitely and $ 32.3 million will expire at various times between 2022 and 2038. During 2021, the Company recognized tax benefits related to NOLs of $ 2.2 million. At December 31, 2021, the Company has federal and foreign disallowed interest carryforwards of $ 154.6 million and $ 69.4 million, respectively, that can be carried forward indefinitely and can be used against future taxable income. At December 31, 2021, the Company has tax credit carryforwards of $ 162.7 million. Of this amount, $ 125.1 million relates to federal and state tax credits for research activities, of which $ 80.8 million will expire at various times between 2033 and 2041. Our credit carryforwards also include $ 37.0 million of foreign tax credits, of which $ 35.1 million will expire primarily in 2027. 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, 2021, we recorded an increase to the valuation allowance of $ 15.0 million primarily related to foreign losses for which we do not believe a tax benefit is more likely than not to be realized. At December 31, 2021, the Company had a valuation allowance of $ 86.1 million related to the portion of credits, NOLs, and other deferred tax assets 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, 2021 2020 2019 (In thousands) Income tax provision at the federal statutory rate of 21% $ 53,791 $ 132,500 $ 111,808 State income taxes, net of effect of federal tax benefit 4,530 8,803 10,274 Stock-based compensation ( 63,751 ) ( 112,203 ) ( 90,374 ) Research credits ( 25,830 ) ( 21,306 ) ( 27,248 ) Change in valuation allowance 8,523 29,787 — Foreign income taxed at a different statutory rate 5,808 4,884 3,526 Withholding taxes 1,057 2,933 5,023 Change in uncertain tax positions ( 948 ) ( 5,770 ) ( 637 ) Other, net ( 3,077 ) 3,645 2,708 Income tax (benefit) provision $ ( 19,897 ) $ 43,273 $ 15,080 74 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows: December 31, 2021 2020 2019 (In thousands) Balance at January 1 $ 45,624 $ 53,324 $ 35,679 Additions based on tax positions related to the current year 8,107 7,818 11,221 Additions for tax positions of prior years 1,353 1,772 7,599 Reductions for tax positions of prior years ( 1,028 ) — ( 283 ) Settlements ( 2,348 ) ( 16,512 ) — Expiration of applicable statute of limitations ( 878 ) ( 778 ) ( 892 ) Balance at December 31 $ 50,830 $ 45,624 $ 53,324 The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Our income tax provision, for the years ended December 31, 2021, 2020, and 2019, includes a (decrease) or increase of interest and penalties of $( 0.3 ) million, $( 1.7 ) million, and $ 0.1 million, respectively. At December 31, 2021 and 2020, noncurrent income taxes payable include accrued interest and penalties of $ 1.5 million and $ 1.9 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 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, 2013 through 2017 and has begun its audit of the years ended December 31, 2018 and 2019. The statute of limitations for years 2013 through 2019 has been extended to December 31, 2023. We are no longer subject to U.S. federal income tax examinations for years prior to 2013. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009. 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. At December 31, 2021 and 2020, unrecognized tax benefits, including interest, were $ 51.8 million and $ 46.7 million, respectively. If unrecognized tax benefits at December 31, 2021 are subsequently recognized, $ 46.0 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2020 was $ 41.8 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $ 0.9 million by December 31, 2022, primarily due to settlements and expirations of statutes of limitations. Generally, our ability to distribute the $ 172.7 million cash and cash equivalents held by our foreign subsidiaries at December 31, 2021 is limited to that subsidiary’s distributable reserves and after considering other corporate legal restrictions. Our earnings in foreign jurisdictions are generally available for distribution to the U.S. without significant tax consequences. 75 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4—DISCONTINUED OPERATIONS 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 key components of earnings (loss) from discontinued operations for the years ended December 31, 2021, 2020, and 2019 consist of the following: Years Ended December 31, 2021 2020 2019 (In thousands) Revenue $ — $ 1,410,485 $ 2,705,797 Operating costs and expenses — ( 1,840,178 ) ( 2,769,918 ) Operating loss — ( 429,693 ) ( 64,121 ) Interest expense — ( 3,772 ) ( 12,993 ) Other (expense) income — ( 2,503 ) 68,767 Income tax benefit 509 69,898 57,534 Earnings (loss) from discontinued operations $ 509 $ ( 366,070 ) $ 49,187 NOTE 5—GOODWILL AND INTANGIBLE ASSETS Goodwill and intangible assets, net, are as follows: December 31, 2021 2020 (In thousands) Goodwill $ 2,411,996 $ 1,270,532 Intangible assets with indefinite lives 576,653 226,605 Intangible assets with definite lives, net 195,044 4,295 Total goodwill and intangible assets, net $ 3,183,693 $ 1,501,432 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, 2021 and 2020: December 31, 2021 2020 (In thousands) Balance at January 1 $ 1,270,532 $ 1,239,839 Additions 1,243,063 — Foreign Exchange Translation ( 101,599 ) 30,948 Other — ( 255 ) Balance at December 31 $ 2,411,996 $ 1,270,532 76 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On June 17, 2021, Match Group completed the acquisition of all capital stock of Hyperconnect, Inc. (“Hyperconnect”), a leading social discovery and video technology company based in Seoul, South Korea. The acquisition increases our presence in certain Asian markets and enhances the real-time video capabilities of Match Group. The accounting purchase price was $ 1.75 billion, which consisted of $ 859.9 million of cash, net of cash acquired, and 5.9 million shares of Match Group common stock at a basis of the closing market price on the acquisition date. The purchase price has been preliminarily allocated to goodwill of $ 1.2 billion that is not deductible for tax purposes; intangible assets of $ 612.0 million primarily consisting of tradenames and associated trademarks, both of which are indefinite life intangible assets, with a related deferred tax liability of $ 134.7 million; and $ 30.4 million of other net assets. The allocation of the accounting purchase price, which is based on Level 3 inputs, is substantially complete and will be finalized within the allowable measurement period. Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. At December 31, 2021 and 2020, intangible assets with definite lives are as follows: December 31, 2021 Gross Carrying Amount Accumulated Amortization Net Weighted-Average Useful Life (Years) (In thousands) Customer lists $ 129,427 $ ( 15,487 ) $ 113,940 4.9 Patent and technology 99,512 ( 18,657 ) 80,855 4.2 Trade names 1,354 ( 1,193 ) 161 1.3 Other 425 ( 337 ) 88 2.7 Total $ 230,718 $ ( 35,674 ) $ 195,044 4.6 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Weighted-Average Useful Life (Years) (In thousands) Customer lists $ 288 $ ( 288 ) $ — — Patent and technology 11,044 ( 6,943 ) 4,101 9.3 Trade names 5,114 ( 5,114 ) — — Other 3,400 ( 3,206 ) 194 3.0 Total $ 19,846 $ ( 15,551 ) $ 4,295 9.0 At December 31, 2021, amortization of intangible assets with definite lives is estimated to be as follows: (In thousands) 2022 $ 51,336 2023 49,081 2024 47,164 2025 35,035 2026 and thereafter 12,428 Total $ 195,044 77 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6—FINANCIAL INSTRUMENTS Equity securities without readily determinable fair values At both December 31, 2021 and 2020, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $ 14.2 million, 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, 2021, since the adoption of ASU 2016-01 on January 1, 2018 through December 31, 2021, were $ 2.1 million. For both the years ended December 31, 2021 and 2020, there were no adjustments to the carrying value of equity securities without readily determinable fair values. For the year ended December 31, 2019, we recognized an impairment charge of $ 4.0 million which is included in “Other (expense) income, net” in the accompanying consolidated statement of operations. Fair Value Measurements The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis: December 31, 2021 Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Fair Value Measurements (In thousands) Assets: Cash equivalents: Money market funds $ 260,582 $ — $ 260,582 Time deposits — 36,831 36,831 Short-term investments: Time deposits — 11,818 11,818 Total $ 260,582 $ 48,649 $ 309,231 December 31, 2020 Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Total Fair Value Measurements (In thousands) Assets: Cash equivalents: Money market funds $ 147,615 $ — $ 147,615 Time deposits — 50,000 50,000 Total $ 147,615 $ 50,000 $ 197,615 78 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Current maturities of long-term debt, net (a)(b)(c) $ ( 84,333 ) $ ( 254,472 ) $ — $ — Long-term debt, net (b)(c) $ ( 3,829,421 ) $ ( 4,725,403 ) $ ( 3,840,930 ) $ ( 6,267,976 ) ______________________ (a) The carrying value excludes the $ 15.6 million aggregate principal amount of the exchanged 2022 Exchangeable Notes as that amount is carried at fair value as described below. (b) At December 31, 2021, the carrying value of current maturities of long-term debt, net includes unamortized debt issuance costs of $ 0.6 million. At December 31, 2021 and 2020, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $ 45.6 million and $ 51.6 million, respectively. (c) At December 31, 2021, the fair value of the outstanding 2022 Exchangeable Notes, 2026 Exchangeable Notes, and 2030 Exchangeable Notes is $ 302.2 million, $ 932.6 million, and $ 1,017.7 million, respectively. At December 31, 2020, the fair value of the outstanding 2022 Exchangeable Notes, 2026 Exchangeable Notes, and 2030 Exchangeable Notes is $ 1,780.3 million, $ 1,052.1 million, and $ 1,113.9 million, respectively. At December 31, 2021 and 2020, the fair value of long-term debt, net is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs. Derivatives associated with the repurchase and exchanges of 2022 Exchangeable Notes On September 22, 2021, we entered into privately negotiated agreements with a limited number of holders of the 2022 Exchangeable Notes to repurchase a portion of the outstanding 2022 Exchangeable Notes. The Company determined that the terms of the repurchase agreements included an embedded derivative, indexed to the value of the Company’s stock, that required bifurcation and separate accounting as a derivative liability under ASC Topic 815, Derivatives and Hedging . The Company measures embedded derivatives at their estimated fair value and recognizes changes in their estimated fair value in net income during the current reporting period. At the inception of these agreements on September 22, 2021, the fair value of the embedded derivative was zero and the number of shares to be issued to holders of the 2022 Exchangeable Notes was not yet determinable. At September 30, 2021, under the terms of the agreements, the number of shares to be issued became fixed at 5.5 million. The corresponding loss of $ 14.5 million, related to the change in the fair value of the embedded derivative, which was driven by an increase in our stock price from September 22, 2021 to October 4, 2021, the settlement date of the transaction, was recorded within “other (expense) income, net” in the accompanying consolidated statement of operations. During the year ended December 31, 2021, $ 18.6 million aggregate principal amount of the 2022 Exchangeable Notes were presented for exchange prior to maturity at the option of the noteholder, $ 3.0 million of which was settled during the year ended December 31, 2021 and $ 15.6 million of which will be settled in January 2022. In accordance with the 2022 Exchangeable Notes Indenture, the Company elected to settle these exchanges entirely in cash with the settlement amount determined by the volume weighted average price of Match Group common stock over a 40-day measurement period. At the time that the Company elected cash settlement, the embedded derivative for the conversion option of the 2022 Exchangeable Notes no longer qualified for the derivative scope exception for contracts indexed to an entity’s own equity. We recognized an obligation of $ 48.5 million in “accrued expenses and other current liabilities” to settle the conversion option as of the date of the exchanges, with an offset to paid-in capital. Subsequently, we recognized $ 9.7 million in gains, which is included in “other (expense) income, net” within the accompanying consolidated statement of 79 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) operations for the year ended December 31, 2021 related to the change in the fair value of the embedded derivative between the date we elected to settle in cash and the end of the 40-day measurement period, or December 31, 2021, if the measurement period extended past year-end. For the exchanged 2022 Exchangeable Notes that were still outstanding at December 31, 2021 and were settled in January 2022, the following items were outstanding on the consolidated balance sheet at December 31, 2021: • The fair value of the outstanding embedded derivative of $ 7.4 million, which is included as an asset within “other current assets;” • the aggregate principal amount of $ 15.6 million for 2022 Exchangeable Notes presented for exchange, which is presented within “current maturities of long-term debt, net;” and • an incremental $ 39.5 million liability recorded on the date of exchange, which is presented within “accrued expenses and other current liabilities.“ Additionally, when the Company elected to settle the exchanged 2022 Exchangeable Notes entirely in cash, a proportionate amount of note hedges were also exercised and were settled in cash based on the same 40-day measurement period to determine the settlement value. Similar to the exchanged 2022 Exchangeable Notes, the derivative scope exception for contracts indexed to an entity’s own equity no longer applied to the exercised note hedges as a result of the requirement to settle the securities in cash. We recognized an asset of $ 48.5 million related to the settlement of these note hedges, with an offset to paid-in capital. Subsequently, we recognized a loss of $ 9.7 million, which is included in “other (expense) income, net” in the accompanying consolidated statement of operations for the year ended December 31, 2021 related to the change in the related derivative fair value between the date we elected to settle in cash and the end of the 40-day measurement period, or December 31, 2021, if the measurement period extended past year-end. For the exercised note hedges that were settled in January 2022, the fair value of the outstanding note hedges at December 31, 2021 is $ 32.1 million, which is included as an asset within “other current assets” on the consolidated balance sheet. At December 31, 2021, the net position of the various assets and liabilities associated with the unsettled exchanged 2022 Exchangeable Notes and the note hedges, described above, is a $ 15.6 million liability, representing the principal amount of the exchanged 2022 Exchangeable Notes, which was settled in January 2022. 80 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7—LONG-TERM DEBT, NET Long-term debt, net consists of: December 31, 2021 2020 (In thousands) Credit Facility due February 13, 2025 $ — $ — Term Loan due February 13, 2027 425,000 425,000 5.00 % Senior Notes due December 15, 2027 (the “5.00% Senior Notes”); interest payable each June 15 and December 15 450,000 450,000 4.625 % Senior Notes due June 1, 2028 (the “4.625% Senior Notes”); interest payable each June 1 and December 1 500,000 500,000 5.625 % Senior Notes due February 15, 2029 (the “5.625% Senior Notes”); interest payable each February 15 and August 15 350,000 350,000 4.125 % Senior Notes due August 1, 2030 (the “4.125% Senior Notes”); interest payable each February 1 and August 1 500,000 500,000 3.625 % Senior Notes due October 1, 2031 (the “3.625% Senior Notes”); interest payable each April 1 and October 1 commencing on April 1, 2022 500,000 — 0.875 % Exchangeable Senior Notes due October 1, 2022 (the “2022 Exchangeable Notes”); interest payable each April 1 and October 1 100,500 517,500 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 15 575,000 575,000 Total long-term debt 3,975,500 3,892,500 Less: Current maturities of long-term debt 100,500 — Less: Unamortized original issue discount 5,215 6,029 Less: Unamortized debt issuance costs 40,364 45,541 Total long-term debt, net $ 3,829,421 $ 3,840,930 Credit Facility and Term Loan Our wholly-owned subsidiary, Match Group Holdings II, LLC (“MG Holdings II”) is the borrower under a credit agreement (as amended, the “Credit Agreement”) that provides for the Credit Facility and the Term Loan. The Credit Agreement provides 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. The Credit Facility has a borrowing capacity of $ 750 million and matures on February 13, 2025. At both December 31, 2021 and 2020, there were no outstanding borrowings under the Credit Facility. At December 31, 2021, there was $ 0.4 million in outstanding letters of credit and $ 749.6 million of availability under the Credit Facility. At December 31, 2020, there was $ 0.2 million in outstanding letters of credit and $ 749.8 million of availability under the Credit Facility. The annual commitment fee on undrawn funds, which is based on MG Holdings II’s consolidated net leverage ratio, was 25 basis points as of December 31, 2021. 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. If MG Holdings II borrows under the Credit Facility, it will be required to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0. At both December 31, 2021 and 2020, the outstanding balance on the Term Loan was $ 425 million. The Term Loan bears interest at LIBOR plus 1.75 %, which was 1.91 % and 1.96 % at December 31, 2021 and 2020, 81 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) respectively. The Term Loan matures on February 13, 2027. 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 set forth in the Credit Agreement. On March 26, 2021, MG Holdings II entered into an amendment of the Credit Agreement to provide for a $ 400 million Delayed Draw Term Loan, the proceeds of which could have been used only to finance a portion of the consideration for the acquisition of Hyperconnect. The Delayed Draw Term Loan was terminated effective June 18, 2021, in accordance with its terms. The Credit Agreement includes 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 if an event of default has occurred. The Credit Agreement includes additional covenants 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. Senior Notes The 3.625 % Senior Notes were issued on October 4, 2021. The proceeds from these notes were used to redeem a portion of the 2022 Exchangeable Notes and for general corporate purposes. At any time prior to October 1, 2026, 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 the redemption prices set forth below, together with accrued and unpaid interest to the applicable redemption date: Beginning October 1, Percentage 2026 101.813 % 2027 101.208 % 2028 100.604 % 2029 and thereafter 100.000 % 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 the redemption prices set forth below, together with accrued and unpaid interest to the applicable redemption date: Beginning June 1, Percentage 2023 102.313 % 2024 101.156 % 2025 and thereafter 100.000 % 82 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Thereafter, these notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest to the applicable redemption date: Beginning May 1, Percentage 2025 102.063 % 2026 101.375 % 2027 100.688 % 2028 and thereafter 100.000 % 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 the redemption prices set forth below, together with accrued and unpaid interest to the applicable redemption date: Beginning February 15, Percentage 2024 102.813 % 2025 101.875 % 2026 100.938 % 2027 and thereafter 100.000 % 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. 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: 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 indenture governing the 5.00 % Senior Notes contains 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 indenture) exceeds 5.0 to 1.0. At December 31, 2021, there were no limitations pursuant thereto. There are additional covenants in the 5.00 % Senior Notes indenture 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 specified financial ratios, and (ii) incur liens, enter into agreements restricting their ability to pay dividends, enter into transactions with affiliates, or consolidate, merge or sell substantially all of their assets. The indentures 83 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) governing the 3.625 % , 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, or consolidate, merge, sell or otherwise dispose of all or substantially all of their 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. 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. The following table presents details of the exchangeable features: 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 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 ______________________ (a) Subject to adjustment upon the occurrence of specified events. As more specifically set forth in the applicable indentures, the Exchangeable Notes are exchangeable under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the exchange price on each applicable trading day; (2) during the five -business day period after any five -consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company's common stock and the exchange rate on each such trading day; (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; or (4) upon the occurrence of specified corporate events as further described in the indentures governing the respective 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 regardless of the foregoing conditions. Upon exchange, the issuer, in its sole discretion, has the option to settle the Exchangeable Notes with any of the three following alternatives: (1) shares of the Company’s common stock, (2) cash or (3) a combination of cash and shares of the Company's common stock. It is the Company’s intention to settle the Exchangeable Notes with cash equal to the face amount of the notes upon exchange. Any dilution arising from the 2022, 2026, and 2030 Exchangeable Notes would be mitigated by the 2022, 2026, and 2030 Exchangeable Notes Hedges (defined below), respectively. 84 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company’s 2022, 2026, and 2030 Exchangeable Notes were all exchangeable as of December 31, 2021. During the year ended December 31, 2021, a portion of the 2022 Exchangeable Notes were presented for exchange, see “Redemption and exchange of 2022 Exchangeable Notes and related note hedges and warrants” below for details. No other Exchangeable Notes were presented for exchange during the year ended December 31, 2021. None of the Exchangeable Notes were exchanged, or presented for exchange, during the year ended December 31, 2020. The following table presents the if-converted value that exceeded the principal of each Exchangeable Note outstanding as of December 31, 2021 and 2020 based on the Company’s stock price on December 31, 2021 and 2020, respectively. December 31, 2021 December 31, 2020 (In millions) 2022 Exchangeable Notes $ 170.4 $ 1,261.2 2026 Exchangeable Notes $ 293.9 $ 418.3 2030 Exchangeable Notes $ 327.9 $ 457.2 Additionally, all or any portion of the 2026 Exchangeable Notes and 2030 Exchangeable Notes may be redeemed for cash, at the respective issuer’s option, on or after June 20, 2023 and July 20, 2026, respectively, if the last reported sale price of the Company’s common stock 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. The following table sets forth the components of the outstanding Exchangeable Notes as of December 31, 2021 and 2020: December 31, 2021 December 31, 2020 2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes 2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes (In thousands) Principal $ 100,500 $ 575,000 $ 575,000 $ 517,500 $ 575,000 $ 575,000 Less: unamortized debt issuance costs 573 7,130 8,638 6,511 8,700 9,627 Net carrying value included in current maturities of long-term debt, net $ 99,927 $ — $ — $ — $ — $ — Net carrying value included in long-term debt, net $ — $ 567,870 $ 566,362 $ 510,989 $ 566,300 $ 565,373 85 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth interest expense recognized related to the Exchangeable Notes for the years ended December 31, 2021, 2020, and 2019: Year Ended December 31, 2021 2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes (In thousands) Contractual interest expense $ 3,525 $ 5,031 $ 11,500 Amortization of debt issuance costs 2,939 1,570 989 Total interest expense recognized $ 6,464 $ 6,601 $ 12,489 Year Ended December 31, 2020 2022 Exchangeable Notes 2026 Exchangeable Notes 2030 Exchangeable Notes (In thousands) Contractual interest expense $ 4,528 $ 5,031 $ 11,500 Amortization of debt issuance costs 3,646 1,533 950 Total interest expense recognized $ 8,174 $ 6,564 $ 12,450 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 debt issuance costs 3,578 897 550 Total interest expense recognized $ 8,106 $ 3,860 $ 7,322 The effective interest rates for the 2022, 2026, and 2030 Exchangeable Notes are 1.6 %, 1.2 %, and 2.2 %, respectively. Exchangeable Notes Hedges and Warrants 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. 86 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables present details of the Exchangeable Notes Hedges and Warrants outstanding at December 31, 2021: Number of Shares (a) Approximate Equivalent Exchange Price per Share (a) (Shares in millions) 2022 Exchangeable Notes Hedge 1.9 $ 43.99 2026 Exchangeable Notes Hedge 6.6 $ 87.52 2030 Exchangeable Notes Hedge 6.8 $ 84.22 Number of Shares (a) Weighted Average Strike Price per Share (a) (Shares in millions) 2022 Exchangeable Notes Warrants 2.4 $ 68.22 2026 Exchangeable Notes Warrants 6.6 $ 134.76 2030 Exchangeable Notes Warrants 6.8 $ 134.82 ______________________ (a) Subject to adjustment upon the occurrence of specified events. Redemption and exchanges of 2022 Exchangeable Notes and related note hedges and warrants During the year ended December 31, 2021, $ 18.6 million aggregate principal amount of the 2022 Exchangeable Notes were presented for exchange, of which $ 15.6 million aggregate principal amount was not settled as of December 31, 2021. The principal amount of this remaining $ 15.6 million is classified as “current maturities of long-term debt, net” and the fair value in excess of the principal value on the date of exchange is recorded as a current liability within “accrued expenses and other current liabilities.” These obligations were settled in January 2022. See “Note 6—Financial Instruments” for additional information. In connection with the 2022 Exchangeable Notes presented for exchange during the year ended December 31, 2021, we exercised 0.4 million underlying shares of the related 2022 Exchangeable Notes Hedges, which were valued based on the volume weighted average price of Match Group common stock over a 40-day measurement period. During the year ended December 31, 2021, the Company received $ 6.6 million in cash related to these hedge settlements and a $ 32.1 million derivative asset is included in other current assets at December 31, 2021 with respect to the hedges that were still subject to the 40-day measurement period as of year-end. On October 4, 2021, we repurchased $ 414.0 million aggregate principal amount of our outstanding 2022 Exchangeable Notes, pursuant to privately negotiated agreements executed on September 22, 2021, for approximately $ 1.5 billion, including accrued and unpaid interest on the repurchased notes, funded with (i) net proceeds of $ 879.0 million from a registered direct offering to the holders of the 2022 Exchangeable Notes being repurchased of 5,534,098 shares of our common stock at a price of $ 158.83 per share, (ii) approximately $ 420 million of net proceeds from the 3.625 % Senior Notes offering; and (iii) net proceeds of approximately $ 201 million from the unwind of a proportionate amount of outstanding hedges and warrants, each representing 9.4 million underlying shares, corresponding to the 2022 Exchangeable Notes repurchased. See “Note 6—Financial Instruments” for additional information. 87 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Long-term debt maturities Years Ending December 31, (In thousands) 2022 $ 100,500 2026 575,000 2027 875,000 2028 500,000 2029 350,000 2030 1,075,000 2031 500,000 Total 3,975,500 Less: Current maturities of long-term debt 100,500 Less: Unamortized original issue discount 5,215 Less: Unamortized debt issuance costs 40,364 Total long-term debt, net $ 3,829,421 NOTE 8—SHAREHOLDERS’ EQUITY 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, 75.0 million shares of Match Group common stock are reserved at December 31, 2021. 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, 2021 and 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. 88 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Issuance of Common Stock In July 2020, in connection with the Separation, Former IAC completed 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. In October 2021, we completed the sale of 5.5 million common shares. The net proceeds of $ 879.0 million were used to repurchase $ 414.0 million aggregate principal amount of our outstanding 2022 Exchangeable Notes. See “Note 7—Long-term Debt, net” for additional information on the redemption of a portion of the 2022 Exchangeable Notes. 89 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9—ACCUMULATED OTHER COMPREHENSIVE LOSS The following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated other comprehensive loss into earnings. Year Ended December 31, 2021 Foreign Currency Translation Adjustment Accumulated Other Comprehensive (Loss) (In thousands) Balance at January 1 $ ( 81,454 ) $ ( 81,454 ) Other comprehensive loss ( 142,300 ) ( 142,300 ) Balance at December 31 $ ( 223,754 ) $ ( 223,754 ) Year Ended December 31, 2020 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 income (loss) before reclassifications 40,655 ( 1 ) 40,654 Amounts reclassified into earnings ( 168 ) — ( 168 ) Net period other comprehensive income (loss) 40,487 ( 1 ) 40,486 Allocation of accumulated other comprehensive loss related to the noncontrolling interests 628 — 628 Separation of IAC 13,780 1 13,781 Balance at December 31 $ ( 81,454 ) $ — $ ( 81,454 ) Year Ended December 31, 2019 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 ( 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 ) At December 31, 2021, 2020 and 2019, there was no tax benefit or provision on the accumulated other comprehensive loss. NOTE 10—EARNINGS PER SHARE 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, 2021 2020 2019 Basic Diluted Basic Diluted Basic Diluted (In thousands, except per share data) Numerator Net earnings from continuing operations $ 276,045 $ 276,045 $ 587,679 $ 587,679 $ 517,340 $ 517,340 Net loss (earnings) attributable to noncontrolling interests 1,169 1,169 ( 59,599 ) ( 59,599 ) ( 103,401 ) ( 103,401 ) Impact from subsidiaries' dilutive securities of continuing operations (a) — ( 993 ) — ( 9,999 ) — ( 25,997 ) Interest on dilutive Exchangeable Notes, net of income tax (b) — 6,616 — 16,300 — 5,791 Net earnings from continuing operations attributable to Match Group, Inc. shareholders $ 277,214 $ 282,837 $ 528,080 $ 534,381 $ 413,939 $ 393,733 Earnings (loss) from discontinued operations, net of tax $ 509 $ 509 $ ( 366,070 ) $ ( 366,070 ) $ 49,187 $ 49,187 Net earnings (loss) attributable to noncontrolling interests of discontinued operations — — 319 319 ( 9,288 ) ( 9,288 ) Impact from subsidiaries’ dilutive securities of discontinued operations (a) — — — ( 240 ) — ( 67 ) Net earnings (loss) from discontinued operations attributable to shareholders 509 509 ( 365,751 ) ( 365,991 ) 39,899 39,832 Net earnings attributable to Match Group, Inc. shareholders $ 277,723 $ 283,346 $ 162,329 $ 168,390 $ 453,838 $ 433,565 Denominator Weighted average basic shares outstanding 275,004 275,004 223,433 223,433 181,869 181,869 Dilutive securities (a)(c)(d) — 13,866 — 12,157 — 10,129 Dilutive shares from Exchangeable Notes, if-converted (b) — 15,970 — 20,430 — 9,784 Denominator for earnings per share—weighted average shares (a)(c)(d) 275,004 304,840 223,433 256,020 181,869 201,782 Earnings (loss) per share: Earnings per share from continuing operations $ 1.01 $ 0.93 $ 2.36 $ 2.09 $ 2.28 $ 1.95 (Loss) earnings per share from discontinued operations, net of tax $ — $ — $ ( 1.64 ) $ ( 1.43 ) $ 0.22 $ 0.20 Earnings per share attributable to Match Group, Inc. shareholders $ 1.01 $ 0.93 $ 0.73 $ 0.66 $ 2.50 $ 2.15 90 Table of Contents 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. (b) The Company uses the if-converted method for calculating the dilutive impact of the outstanding Exchangeable Notes. For the year ended December 31, 2021, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income taxes, incurred on the 2022 and 2026 Exchangeable Notes and dilutive shares were included for the same set of notes at the Match Group exchange rates. For the year ended December 31, 2021 the 2030 Exchangeable Notes were not more dilutive under the if-converted method and therefore the weighted average 6.8 million shares related to the 2030 Exchangeable Notes are excluded from dilutive securities. For the year ended December 31, 2020, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income taxes, incurred on the 2022, 2026, and 2030 Exchangeable Notes and dilutive shares were included for the same set of notes at the Match Group exchange rates. For the year ended December 31, 2019, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income taxes, incurred on the 2022 and 2026 Exchangeable Notes and dilutive shares were included for the same set of notes at the Former IAC exchange rates multiplied by the Separation exchange ratio. For the year ended December 31, 2019 the 2030 Exchangeable Notes were not more dilutive under the if-converted method and therefore the weighted average 2.5 million shares related to the 2030 Exchangeable Notes are excluded from dilutive securities. (c) 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 and vesting of restricted stock units. For the years ended December 31, 2021, 2020, and 2019, 0.9 million, 13.4 million and 15.7 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. (d) 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, 2021, 2020, and 2019, 1.0 million, 0.4 million, and 0.4 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. 91 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 2021, there were 32.6 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. 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, and equity instruments denominated in shares of subsidiaries. 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. At December 31, 2021, there is $ 270.9 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 2.4 years. The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2021, 2020 and 2019 related to all stock-based compensation is $ 95.1 million, $ 136.6 million and $ 110.4 million, respectively. The aggregate income tax benefit recognized related to the exercise of stock options for the years ended December 31, 2021, 2020, and 2019 is $ 53.8 million, $ 105.5 million, and $ 73.4 million, respectively. 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. 92 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Options Stock options outstanding at December 31, 2021 and changes during the year ended December 31, 2021 are as follows: December 31, 2021 Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value (Shares and intrinsic value in thousands) Outstanding at January 1, 2021 7,425 $ 19.48 Converted sub-equity options 3 37.49 Increase due to acquisition 267 30.30 Exercised ( 2,926 ) 18.52 Forfeited ( 280 ) 23.06 Expired ( 21 ) 12.55 Outstanding at December 31, 2021 4,468 $ 20.58 4.9 $ 498,936 Options exercisable 4,193 $ 19.85 4.7 $ 471,347 ______________________ The aggregate intrinsic value in the table above represents the difference between Match Group’s closing stock price on the last trading day of 2021 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, 2021. The total intrinsic value of stock options exercised during the year ended December 31, 2021 is $ 406.1 million. The total intrinsic value of stock options exercised during the period from the Separation on July 1, 2020 to December 31, 2020 is $ 737.9 million. The following table summarizes the information about stock options outstanding and exercisable at December 31, 2021: Options Outstanding Options Exercisable Range of Exercise Prices Outstanding at December 31, 2021 Weighted- Average Remaining Contractual Life in Years Weighted-Average Exercise Price Exercisable at December 31, 2021 Weighted- Average Remaining Contractual Life in Years Weighted-Average Exercise Price (Shares in thousands) $ 0.01 to $ 10.00 671 4.6 $ 7.92 631 4.3 $ 8.38 $ 10.01 to $ 20.00 1,545 4.4 14.78 1,544 4.4 14.78 $ 20.01 to $ 30.00 1,794 4.9 24.62 1,698 4.9 24.37 $ 30.01 to $ 40.00 152 6.1 35.58 147 6.1 35.76 $ 40.01 to $ 50.00 306 7.6 46.49 173 6.2 49.12 4,468 4.9 $ 20.58 4,193 4.7 $ 19.85 Cash received from Match Group stock option exercises for the years ended December 31, 2021 and 2020 was $ 58.4 million and $ 155.4 million, respectively. No cash was received from stock option exercises for the year ended December 31, 2019. 93 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Unvested RSUs, PSUs, and market-based awards outstanding at December 31, 2021 and changes during the year ended December 31, 2021 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, 2021 3,299 $ 63.02 550 $ 74.59 714 $ 19.34 Granted 1,452 157.61 212 159.23 803 159.67 Vested ( 1,195 ) 56.46 — — ( 559 ) 19.81 Forfeited ( 436 ) 93.27 ( 221 ) 97.42 ( 146 ) 148.66 Expired — — — — ( 30 ) 20.84 Unvested at December 31, 2021 3,120 $ 105.33 541 $ 98.41 782 $ 138.95 ______________________ (a) Represents the maximum shares issuable. The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2021 and 2020, based on market prices of Match Group’s common stock on the grant date, was $ 157.81 and $ 104.74 , respectively. The total fair value of RSUs that vested during the years ended December 31, 2021 and 2020 was $ 67.5 million and $ 14.8 million, respectively. No PSUs vested during the years ended December 31, 2021 and 2020. There were 0.8 million market-based awards granted during the year ended December 31, 2021. The vesting of the awards granted in the current period are dependent upon the Company’s total shareholder return relative to the Nasdaq 100 Total Return Index over the performance period. There were no market-based awards granted during the year ended December 31, 2020. The total fair value of market-based awards that vested during the years ended December 31, 2021 and 2020 was $ 11.1 million and $ 2.5 million, respectively. 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 specified period of time or upon the occurrence of certain specified events. The value of the stock settled stock 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 94 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. At December 31, 2021, the number of shares of Match Group common stock that would be required to settle these awards at estimated fair values, including vested and unvested awards, net of an assumed 50 % withholding tax, is 1.0 million shares. The withholding taxes, which would be paid by the Company on behalf of the employees at exercise, required to settle the vested and unvested awards at estimated fair values on December 31, 2021 is $ 126.9 million assuming a 50 % withholding tax rate. The corresponding number of shares and withholding tax amount as of December 31, 2020 were 0.3 million shares and $ 39.6 million. Employee Stock Purchase Plan The Match Group, Inc. 2021 Global Employee Stock Purchase Plan (the "ESPP") was approved by the Company’s shareholders on June 15, 2021. Under the ESPP, eligible employees may purchase the Company’s common stock at a 15 % discount of the stock price at the lower of the market price of our common stock on the date of commencement of the applicable offering period or on the last day of each six-month purchase period, subject to certain purchase limits. Under the ESPP, employees purchased less than 0.1 million shares at an average price per share of $ 126.16 during the year ended December 31, 2021. At December 31, 2021, there were 3.0 million shares available for future issuance under the ESPP. At December 31, 2021, there is $ 3.0 million of unrecognized compensation cost, net of estimated forfeitures, related to the ESPP, which is expected to be recognized over a weighted average period of approximately 0.6 years. Capitalization of Stock-Based Compensation For the years ended December 31, 2021 and 2020, $ 6.4 million and $ 5.1 million, respectively, of stock-based compensation was capitalized related to internal use software development. No amounts were capitalized for the year ended December 31, 2019. Modifications of awards During the years ended December 31, 2021, 2020 and 2019, the Company modified certain equity awards and recognized modification charges in continuing operations of $ 10.2 million, $ 21.2 million and $ 7.1 million, respectively. 95 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 12—GEOGRAPHIC INFORMATION Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below: Years Ended December 31, 2021 2020 2019 (In thousands) Revenue United States $ 1,362,658 $ 1,121,957 $ 972,747 All other countries 1,620,619 1,269,312 1,078,511 Total $ 2,983,277 $ 2,391,269 $ 2,051,258 The United States is the only country from which revenue is greater than 10 percent of total revenue. December 31, 2021 2020 (In thousands) Long-lived assets (excluding goodwill and intangible assets) United States $ 133,513 $ 91,683 All other countries 29,743 16,116 Total $ 163,256 $ 107,799 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). 96 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 13—LEASES 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. Through June 2021, one of these lease agreements related to a property owned by IAC. See “Note 15—Related Party Transactions” for additional information on the intercompany lease agreement. 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 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 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 options. Lease expense is recognized on a straight-line basis over the term of the lease. As permitted by ASC 842, leases with an initial term of twelve months or less (“short-term leases”) are not recorded on the accompanying consolidated balance sheet. Variable lease payments consist primarily of common area maintenance, utilities, and taxes, which are not included in the recognition of ROU assets and related lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases Balance Sheet Classification December 31, 2021 December 31, 2020 (In thousands) Assets: Right-of-use assets Other non-current assets $ 113,582 $ 85,009 Liabilities: Current lease liabilities Accrued expenses and other current liabilities $ 10,618 $ 7,143 Long-term lease liabilities Other long-term liabilities 113,533 83,489 Total lease liabilities $ 124,151 $ 90,632 Lease Cost Income Statement Classification Year Ended December 31, 2021 Year Ended December 31, 2020 (In thousands) Fixed lease cost Cost of revenue $ 2,280 $ 3,215 Fixed lease cost General and administrative expense 22,772 15,548 Total fixed lease cost (a) 25,052 18,763 Variable lease cost Cost of revenue 80 312 Variable lease cost General and administrative expense 2,768 2,882 Total variable lease cost 2,848 3,194 Net lease cost $ 27,900 $ 21,957 ______________________ (a) Includes approximately $ 3.5 million and $ 2.7 million of short-term lease cost, and $ 0.5 million and $ 1.2 million of sublease income, for the years ended December 31, 2021 and December 31, 2020, respectively. 97 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Maturities of lease liabilities as of December 31, 2021: (In thousands) 2022 $ 19,882 2023 19,768 2024 16,201 2025 15,140 2026 13,286 After 2026 66,535 Total 150,812 Less: Interest ( 20,680 ) Less: Tenant improvement receivables ( 5,981 ) Present value of lease liabilities $ 124,151 The following are the weighted average assumptions used for lease term and discount rate: December 31, 2021 December 31, 2020 Remaining lease term 9.2 years 10.6 years Discount rate 3.03 % 3.80 % Year Ended December 31, 2021 Year Ended December 31, 2020 (In thousands) Other information: Right-of-use assets obtained in exchange for lease liabilities $ 53,492 $ 69,886 Cash paid for amounts included in the measurement of lease liabilities $ 18,345 $ 14,809 NOTE 14—COMMITMENTS AND CONTINGENCIES Commitments The Company has funding commitments in the form of purchase obligations and surety bonds. The purchase obligations due in less than one year are $ 56.0 million, the purchase obligations due between one and three years are $ 15.5 million, and purchase obligations due between three and five years are $ 23.5 million, for a total of $ 95.0 million in purchase obligations. The purchase obligations primarily relate to web hosting services. Letters of credit and surety bonds totaling $ 0.5 million are currently outstanding as of December 31, 2021. Contingencies In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where we believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against us, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. The Company also evaluates other contingent matters, including 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. See “Note 3—Income Taxes” for additional information related to income tax contingencies. 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. 98 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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”), 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. v. IAC/InterActiveCorp and Match Group, Inc. , No. 654038/2018 (Supreme Court, New York County). The complaint alleged 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 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 asserted 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 sought 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. Trial commenced on November 8, 2021. On December 1, 2021, the parties entered into a Binding Global Settlement Agreement Term Sheet, pursuant to which we will pay $ 441 million in 2022 to settle all claims in trial and in arbitration. 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. See FTC v. Match Group, Inc. , No. 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. FTC . 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 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 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 leased office space from IAC in New York City through June 2021. For the year ended December 31, 2021, the Company received less than 99 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) $ 0.1 million from IAC pursuant to the Los Angeles lease and the Company paid $ 0.3 million to IAC pursuant to the New York City lease. Match Group has a receivable balance of $ 0.2 million due from IAC at December 31, 2021, 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, 2021, Match Group is obligated to remit to IAC $ 1.3 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, 2021, a receivable of $ 1.8 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, 2021, 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. Transition Services Agreement Pursuant to the transition services agreement, IAC continues to provide minimal 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. For the year ended December 31, 2021, the Company paid IAC less than $ 0.1 million related to services provided by IAC under the transition services agreement. Additionally, the Company received $ 7.6 million from IAC for services provided under the transition 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 and 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. 100 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2021, the Company paid IAC $ 0.1 million for the cost of IAC equity awards held by the Company’s employees upon vesting. At December 31, 2020, the Company has accrued $ 1.3 million as the estimated cost due to IAC for IAC equity awards held by Match Group employees. 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 Pursuant to the Match Group Retirement Savings Plan (the “Match Group Plan”), employees are eligible to participate in a retirement savings plan sponsored by the Company in the United States, which is qualified under Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 75 % of their pre-tax earnings, but not more than statutory limits. The employer match under the Match Group 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 Match Group Plan. The Company’s common stock is not an available investment option under the Match Group Plan. Prior to January 1, 2021, Match Group employees were eligible to participate in a retirement savings plan sponsored by IAC in the United States pursuant to the Employee Matters Agreement with IAC (the “IAC Plan”). Beginning January 1, 2021, all investments in the IAC plan were transferred to the Match Group Plan. The employer match under the IAC plan was 100 % of the first 10 % of a participant’s eligible earnings. Prior to July 2019, the employer match under the IAC 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 plans for the years ended December 31, 2021, 2020 and 2019 were $ 10.9 million, $ 8.6 million and $ 5.8 million, respectively. The increase in matching contributions from 2019 to 2020 is primarily due to the aforementioned change of the Company’s matching contribution in the second half of 2019. Matching contributions are invested in the same manner that each participant’s voluntary contributions are invested under the respective plans. 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. 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, 2021, 2020 and 2019 were $ 5.4 million, $ 3.8 million and $ 3.1 million, respectively. 101 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 17—CONSOLIDATED FINANCIAL STATEMENT DETAILS December 31, 2021 2020 (In thousands) Other current assets: Prepaid expenses $ 78,952 $ 71,793 Capitalized mobile app fees 41,744 33,539 Other 81,872 38,693 Other current assets $ 202,568 $ 144,025 December 31, 2021 2020 (In thousands) Property and equipment, net: Computer equipment and capitalized software $ 171,335 $ 167,863 Buildings and building improvements 61,841 45,476 Leasehold improvements 40,895 28,711 Land 11,565 11,565 Furniture and other equipment 19,593 9,031 Projects in progress 39,769 14,474 344,998 277,120 Accumulated depreciation and amortization ( 181,742 ) ( 169,321 ) Property and equipment, net $ 163,256 $ 107,799 December 31, 2021 2020 (In thousands) Accrued expenses and other current liabilities: Accrued legal settlement $ 441,000 $ — Accrued employee compensation and benefits 88,670 65,239 Accrued advertising expense 47,686 57,140 Accrued non-income taxes 32,725 29,600 Accrued interest expense 30,110 26,922 Other 128,175 52,847 Accrued expenses and other current liabilities $ 768,366 $ 231,748 Years Ended December 31, 2021 2020 2019 (In thousands) Other (expense) income, net $ ( 465,038 ) $ 15,861 $ ( 2,026 ) Other expense, net, in 2021 includes a $ 441.0 million loss related to the former Tinder employee litigation settlement, a $ 14.6 million loss related to the changes in fair value of an embedded derivative arising from the repurchase of a portion of the 2022 Exchangeable Notes, a $ 5.2 million inducement expense arising from the repurchased 2022 Exchangeable Notes, and $ 1.8 million in net foreign currency losses, partially offset by $ 2.4 million of gains on the net settlement of the note hedges and warrants. 102 Table of Contents MATCH GROUP, INC. 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. 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, partially offset by interest income of $ 4.4 million. 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, 2021 2020 2019 2018 (In thousands) Cash and cash equivalents $ 815,384 $ 739,164 $ 465,676 $ 186,947 Restricted cash included in other current assets 128 138 127 193 Cash, cash equivalents, and restricted cash included in current assets of discontinued operations — — 2,674,146 1,946,125 Restricted cash included in non-current assets of discontinued operations — — 409 420 Total cash, cash equivalents and restricted cash as shown on the consolidated statement of cash flow $ 815,512 $ 739,302 $ 3,140,358 $ 2,133,685 Supplemental Disclosures of Cash Flow Information Years Ended December 31, 2021 2020 2019 (In thousands) Cash paid (received) during the year for: Interest $ 117,528 $ 115,957 $ 85,559 Income tax payments $ 54,766 $ 41,024 $ 34,583 Income tax refunds $ ( 13,840 ) $ ( 30,048 ) $ ( 2,589 ) Noncash issuance of common stock for the acquisition of Hyperconnect $ 890,851 $ — $ — 103 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 18—QUARTERLY RESULTS (UNAUDITED) Quarter Ended March 31 Quarter Ended June 30 Quarter Ended September 30 Quarter Ended December 31 (In thousands, except per share data) Year Ended December 31, 2021 Revenue $ 667,612 $ 707,760 $ 801,835 $ 806,070 Cost of revenue 179,455 193,099 232,211 234,543 Operating income 189,258 209,914 220,590 231,917 Earnings (loss) from continuing operations (b) 173,848 140,020 130,901 ( 168,724 ) Earnings from discontinued operations — 509 — — Net earnings (loss) attributable to Match Group, Inc. shareholders (d) 174,250 140,895 131,210 ( 168,632 ) Per share information from continuing operations attributable to the Match Group, Inc. shareholders: Basic (a) $ 0.65 $ 0.52 $ 0.47 $ ( 0.60 ) Diluted (a) $ 0.57 $ 0.46 $ 0.43 $ ( 0.60 ) Per share information attributable to the Match Group, Inc. shareholders: Basic (a) $ 0.65 $ 0.52 $ 0.47 $ ( 0.60 ) Diluted (a) $ 0.57 $ 0.46 $ 0.43 $ ( 0.60 ) 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 Earnings from continuing operations (d) 157,534 141,397 140,113 148,635 (Loss) earnings from discontinued operations (c) ( 331,967 ) ( 34,611 ) 508 — Net (loss) earnings attributable to Match Group, Inc. shareholders (c)(d) ( 202,830 ) 74,917 141,207 149,035 Per share information from continuing operations attributable to the Match Group, Inc. shareholders: Basic (a)(d) $ 0.69 $ 0.61 $ 0.54 $ 0.56 Diluted (a)(d) $ 0.61 $ 0.54 $ 0.47 $ 0.50 Per share information attributable to the Match Group, Inc. shareholders: Basic (a)(c) $ ( 1.11 ) $ 0.41 $ 0.54 $ 0.56 Diluted (a)(c) $ ( 1.00 ) $ 0.36 $ 0.47 $ 0.50 ______________________ (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. (b) Loss from continuing operations for the fourth quarter ended December 31, 2021 includes $ 441 million related to the former Tinder employee litigation settlement. (c) The operations of Former IAC business other than Match Group are presented as discontinued operations as part of the Separation described in “Note 1—Organization.” 104 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (d) The Company early adopted ASU No. 2020-06 as of January 1, 2021 on a fully retrospective basis. The impact of adopting ASU No. 2020-06 on the quarter ended December 31, 2020 is as follows: Quarter Ended December 31, 2020 Prior to the adoption of ASU No. 2020-06 After adoption of ASU No. 2020-06 Effect of adoption of ASU No. 2020-06 (In thousands, except per share data) Statement of operations impacts Interest expense $ 43,306 $ 31,970 $ ( 11,336 ) Income tax provision $ ( 25,617 ) $ ( 28,497 ) $ ( 2,880 ) Net earnings from continuing operations $ 140,179 $ 148,635 $ 8,456 Net earnings per share from continuing operations: Basic $ 0.53 $ 0.56 $ 0.03 Diluted $ 0.48 $ 0.50 $ 0.02 Weighted average dilutive shares outstanding 294,975 307,582 12,607 105 Table of Contents MATCH GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.