NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION
Match Group, Inc. is the world's leading provider of dating products. We operate a portfolio of over
45
brands, including Match, Tinder, PlentyOfFish, Meetic, OkCupid, Pairs, Twoo, OurTime, BlackPeopleMeet and LoveScout24 (formerly known as FriendScout24), each designed to increase our users' likelihood of finding a romantic connection. Through our portfolio of trusted brands, we provide tailored products to meet the varying preferences of our users. We currently offer our dating products in
42
languages across more than
190
countries. Match Group operates in
two
segments: Dating and Non-dating.
Through the brands within our Dating business, we are a leading provider of membership-based and ad-supported dating products servicing North America, Western Europe and many other regions around the world. We provide these services through websites and applications that we own and operate. The Non-dating business consists of The Princeton Review, which provides a variety of educational test preparation, academic tutoring and college counseling services. In January 2017, we entered into a definitive agreement to sell The Princeton Review to ST Unitas, a global education technology company. The transaction is expected to close in the first half of 2017.
On November 24, 2015, the Company completed its initial public offering ("IPO") of
38.3 million
shares of its common stock at a price of
$12.00
per share for proceeds, net of fees and expenses, of
$428.3 million
. As of December 31, 2016, IAC/InterActiveCorp's ("IAC") ownership interest and voting interest in Match Group were
82.5%
and
97.9%
, respectively.
All references to "Match Group," the "Company," "we," "our," or "us" in this report are to Match Group, Inc.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The Company prepares its consolidated and combined financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company's financial statements were prepared on a consolidated basis beginning October 1, 2015 and on a combined basis for periods prior thereto. The difference in presentation is due to the fact that the final steps of the legal reorganization of the entities included in Match Group at the time of the IPO were not completed until October 1, 2015. The preparation of financial statements on a combined basis for periods prior thereto allows for the financial statements to be presented on a consistent basis for all periods presented. The combined financial statements reflect the historical financial position, results of operations and cash flows of Match Group's businesses since their respective dates of acquisition by IAC. 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.
The consolidated and combined financial statements through the date of the IPO reflect the allocation to Match Group of certain IAC corporate expenses relating to Match Group based on the historical financial statements and accounting records of IAC. Management believes the assumptions underlying the historical consolidated and combined financial statements, including the basis on which expenses have been allocated from IAC, are reasonable and that these consolidated and combined financial statements reflect all adjustments, consisting of normal and recurring adjustments necessary for the fair presentation of our financial position, results of operations and cash flows for the years presented.
For the purposes of these consolidated and combined financial statements, income taxes have been computed for Match Group on an as if stand-alone, separate tax return basis.
All intercompany transactions and balances between and among the Company, its subsidiaries and the entities comprising Match Group have been eliminated.
Accounting for Investments
Investments in common stock or in-substance common stock of entities in which the Company does not have the ability to exercise significant influence over the operating and financial matters of the investee are accounted for using the cost method. Investments in companies that the Company does not control, which are not in the form of common stock or in-substance common stock, are also accounted for using the cost method. The Company evaluates each cost method investment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
temporary. Such impairment evaluations include, but are not limited to: the current business environment, including competition; going concern considerations such as financial condition, the rate at which the investee utilizes cash and the investee's ability to obtain additional financing to achieve its business plan; the need for changes to the investee's existing business model due to changing business and regulatory environments and its ability to successfully implement necessary changes; and comparable valuations. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of a cost method investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated and combined 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 recoverability of goodwill and indefinite-lived intangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the fair value of long-term investments; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts; the determination of revenue reserves; the fair value of acquisition-related contingent consideration arrangements; the liabilities for uncertain tax positions; the valuation allowance for deferred income tax assets; 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’s Dating revenue is primarily derived directly from users in the form of recurring membership fees.
Membership revenue is presented net of credits and credit card chargebacks. Members pay in advance, primarily by using a credit card or through mobile app stores, and, subject to certain conditions identified in our terms and conditions, all purchases are final and nonrefundable. Fees collected, or contractually due, in advance for memberships are deferred and recognized as revenue using the straight-line method over the terms of the applicable membership period, which primarily range from
one
to
six
months, and corresponding mobile app store fees incurred on such transactions, if any, are deferred and expensed over the same period. Deferred revenue at the Dating business is
$161.1 million
and
$144.4 million
at
December 31, 2016
and
2015
, respectively. The Company also earns revenue from online advertising, the purchase of à la carte features and offline events. Online advertising revenue is recognized every time an ad is displayed. Revenue from the purchase of à la carte features is recognized based on usage. Revenue and the related expenses associated with offline events are recognized when each event occurs.
Non-dating revenue consists primarily of fees received directly from students for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services. Fees from classes and access to online materials are recognized over the period of the course and the period of the online access, respectively. Tutoring fees are recognized based on usage. Deferred revenue at the Non–dating business is
$23.3 million
and
$25.7 million
at
December 31, 2016
and
2015
, respectively.
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 include AAA rated government money market funds. Internationally, cash equivalents include money market funds.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Accounts Receivable
Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts and revenue reserves. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company's previous loss history, the specific customer's ability to pay its obligation to the Company and the condition of the general economy and the customer's industry. The Company writes off accounts receivable when they become uncollectible. The Company also maintains allowances to reserve for potential credits issued to customers or other revenue adjustments. The amounts of these reserves are based, in part, on historical experience.
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
|
Computer equipment and capitalized software
|
2 to 3 years
|
Furniture and other equipment
|
3 to 10 years
|
Leasehold improvements
|
3 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 was
$29.3 million
and
$20.7 million
at
December 31, 2016
and
2015
, 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 fair value of these intangible assets is based on detailed valuations that use information and assumptions provided by management. The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit from the combination as of the acquisition date.
In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. Each of these arrangements are initially recorded at its fair value at the time of the acquisition and reflected at current fair value for each subsequent reporting period thereafter until settled. The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics. The Company determines the fair value of the contingent consideration arrangements using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the consolidated and combined financial statements. Determining the fair value of these arrangements is inherently difficult and subjective. Significant changes in forecasted earnings or operating metrics would result in a significantly higher or lower fair value measurement and can have a material impact on our consolidated and combined financial statements. The changes in the estimated fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in “General and administrative expense” in the accompanying consolidated and combined statement of operations. See "Note 7—Fair Value Measurements and Financial Instruments" for a discussion of contingent consideration arrangements.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Goodwill and Indefinite-Lived Intangible Assets
Goodwill acquired in a business combination is assigned to the reporting unit(s) that is expected to benefit from the combination as of the acquisition date. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually as of October 1, or, more frequently, if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset below its carrying value. The
2016
,
2015
and
2014
annual assessments identified no material impairments. For all periods presented, the Company has
two
reporting units: Dating and Non-dating.
In performing its annual assessment, the Company has the option to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than 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, the implied fair value of the reporting unit's goodwill is calculated (in the same manner as a business combination) and an impairment loss equal to the excess is recorded. When the Company evaluates the potential for goodwill impairment using a qualitative assessment it considers factors including, but not limited to, the fair values of recent valuations, changes in the reporting unit's financial performance, forecasts, key personnel, and strategy, as well as changes in the industry conditions, including competition and demand for the reporting unit's services, and macroeconomic conditions. For the Company's annual goodwill test at October 1, 2016, a qualitative assessment of the Dating reporting unit, and a quantitative assessment of the goodwill of its Non-dating reporting unit was performed.
The primary factors that the Company considered in its qualitative assessment of the Dating reporting unit were market, industry, and cost and operating factors, including the continued growth of the Dating reporting unit and the strength of various financial performance metrics. As of October 1, 2016, the fair value of the Non-dating reporting unit exceeds its carrying value by more than
10%
.
The fair value of the Company's reporting units was determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each of the reporting unit's current results and forecast, as well as macroeconomic and industry specific factors. The discount rate used in determining the fair value of the Company's Non-dating reporting unit was
15%
in 2016 and
14%
in
2015
. The discount rate used to determine the fair value of the Company's Dating reporting unit was
12%
in 2015. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. While a primary driver in the determination of the fair values of the Company's reporting units is the estimate of future revenue and profitability, the determination of fair value is based, in part, upon the Company's assessment of macroeconomic factors, industry and competitive dynamics and the strategies of its businesses in response to these factors.
While the Company has the option to qualitatively assess whether it is more likely than not that the fair value of its indefinite-lived intangible asset are less than its carrying value, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1. The Company determines the fair values of its indefinite-lived intangible assets using avoided royalty DCF analyses. Significant judgments inherent in these analyses 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 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. 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
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
impairment assessment ranged from
11%
to
26%
in
2016
and
11%
to
16%
in
2015
, and the royalty rates used ranged from
1%
to
7%
in 2016 and
3%
to
7%
in
2015
.
Long-Lived Assets and Intangible Assets with Definite Lives
Long-lived assets, which consist of 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 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 prices for identical assets and liabilities in active markets.
|
|
|
•
|
Level 2: Other inputs which are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted 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.
|
|
|
•
|
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. See "Note 7—Fair Value Measurements and Financial Instruments" for a discussion of fair value measurements made using Level 3 inputs.
|
The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, as well as cost method investments, are adjusted to fair value only when an impairment charge 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, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to our websites. Advertising expense was
$332.5 million
,
$323.9 million
and
$309.4 million
for the years ended
December 31, 2016
,
2015
and 2014, respectively.
Legal Costs
Legal costs are expensed as incurred.
Income Taxes
Match Group is a member of IAC's consolidated federal and state income tax returns. In all periods presented, current and deferred income tax expense has been computed for Match Group on an as if stand-alone, separate return basis.
The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. The
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than
50%
likely of being realized upon ultimate settlement.
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 were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company.
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 and combined statement of operations as a component of "Other income, net".
Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive loss into earnings. Such gains totaled
$2.2 million
during the year ended December 31, 2015 and is included in "Other income, net" in the accompanying consolidated and combined statement of operations.
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 12—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, current and former senior 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 these interests or allow the Company to acquire such interests at fair value, respectively. The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. No put and call arrangements were exercised during 2016, 2015 or 2014. 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/invested capital. During the years ended
December 31, 2016
,
2015
and
2014
, the Company recorded adjustments of
$0.4 million
, less than
$(0.1) million
and
$21.1 million
, respectively, to increase (decrease) 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.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Certain Risks and Concentrations
The Company's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.
Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents. Cash and cash equivalents are principally maintained with financial institutions that are not covered by deposit insurance.
Recent Accounting Pronouncements
Accounting Pronouncements not yet adopted by the Company
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09,
Revenue from Contracts with Customers,
which clarifies the principles for recognizing revenue and develops a common standard for all industries. In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU 2014-09 for all entities by one year. In March, April, May and December 2016, the FASB issued ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20, respectively, which provide further revenue recognition guidance related to principal versus agent considerations, performance obligations and licensing, and narrow-scope improvements and practical expedients. Early adoption is permitted beginning on the original effective date of December 15, 2016. Upon adoption, ASU No. 2014-09 may either be applied retrospectively to each prior period presented or using the modified retrospective approach with the cumulative effect recognized as of the date of initial application. The Company will adopt ASU No. 2014-09, as amended by ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20, using the modified retrospective approach effective January 1, 2018. The Company is currently evaluating the impact the adoption of this standard update will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, which supersedes existing guidance on accounting for leases in
"Leases (Topic 840)"
and generally requires all leases to be recognized in the statement of financial position. The provisions of ASU No. 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU No. 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact the adoption of this standard update will have on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share-Based Payments Accounting (Topic 718).
The update is intended to simplify existing guidance on various aspects of the accounting and presentation of employee share-based payments in financial statements including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification on the statement of cash flows. The provisions of ASU No. 2016-09 are effective for reporting periods beginning after December 15, 2016; early adoption is permitted.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The primary effects of the adoption of ASU No. 2016-09 on the Company’s results of operations, cash flows and earnings per share will be due to the change in the treatment of the excess tax benefit (deficiency) related to equity awards to employees upon exercise of stock options and the vesting of restricted stock units. The table below illustrates this effect.
|
|
|
|
|
|
Excess tax benefit (deficiency) of equity awards to employees upon exercise of stock options and the vesting of restricted stock units:
|
|
Accounting under current GAAP:
|
|
Accounting following adoption of ASU No. 2016-09:
|
Statement of operations
|
|
Treated as an increase (or decrease) to additional paid-in capital when realized (i.e., reduction of income taxes payable)
|
|
Included in the determination of the income tax provision or benefit upon option exercise or share vesting
|
Statement of cash flows
|
|
Treated as a financing cash flow
|
|
Treated as an operating cash flow
|
Calculation of fully diluted shares for the determination of earnings per share
|
|
Included as a component of the assumed proceeds in applying the treasury stock method
|
|
Excluded from the assumed proceeds in applying the treasury stock method
|
The expected effect of the adoption of ASU No. 2016-09 for the Company will be to increase reported net earnings (or reduce reported net loss), operating cash flow and basic earnings per share (or reduce reported net loss per share). The number of shares used in the calculation of fully diluted earnings per share will also increase due to the reduction in assumed proceeds under the treasury stock method. The actual effect on fully diluted earnings per share could be an increase or a decrease in any period, which will depend upon the increase in reported earnings and the increase in the number of shares included in the fully diluted earnings per share calculation.
As of January 1, 2017, the Company will adopt the change in treatment of excess tax benefit (deficiency) using the modified retrospective approach with the cumulative effect recognized as of the date of initial adoption and will apply the provisions of ASU No. 2016-09 related to the presentation on the statement of cash flows using the retrospective approach.
To illustrate the effect of ASU No. 2016-09 on the Company’s results for the year ended December 31, 2016, the table below illustrates the change in the Company’s reported results after giving pro forma effect to ASU No. 2016-09 as if it had been in effect on January 1, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
Reported results under current GAAP
|
|
Pro forma results assuming ASU No. 2016-09 had been in effect on January 1, 2016
|
|
|
(In thousands, except per share data)
|
Net earnings
|
|
$
|
172,013
|
|
|
$
|
200,925
|
|
Net earnings attributable to noncontrolling interests
|
|
(562
|
)
|
|
(562
|
)
|
Net earnings attributable to Match Group, Inc. shareholders
|
|
171,451
|
|
|
200,363
|
|
Cash flows provided by operating activities
|
|
234,106
|
|
|
263,786
|
|
Cash flows used in financing activities
|
|
(31,514
|
)
|
|
(61,194
|
)
|
Basic earnings per share
|
|
$
|
0.68
|
|
|
$
|
0.80
|
|
Fully diluted earnings per share
|
|
$
|
0.64
|
|
|
$
|
0.72
|
|
In August 2016, the FASB ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
, which makes clarifications to how cash receipts and cash payments in certain transactions are presented and classified on the statement of cash flows. The provisions of ASU No. 2016-15 are effective for reporting periods beginning after December 15, 2017, including interim periods, and will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable; early adoption is permitted. The Company does not expect the adoption of this standard update to have a material impact on its consolidated financial statements and is currently evaluating the method and timing of adoption.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles
—
Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
, which is intended to simplify the accounting for goodwill impairment. The guidance will eliminate the requirement to calculate the implied fair value of goodwill under today’s two-step impairment test to measure a goodwill impairment charge. The provisions of ASU No. 2017-04 are effective for reporting periods beginning after December 15, 2019; early adoption is permitted. The provisions of ASU 2017-04 are to be applied using a prospective approach. The Company will adopt the provisions of ASU 2017-04 on January 1, 2017 and does not expect the adoption of this standard update to have a material impact on its consolidated financial statements.
Accounting Pronouncement adopted by the Company
In April 2015, the FASB issued ASU No. 2015-03,
Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,
and in August 2015, the FASB issued ASU No. 2015-15,
Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
. Together, this guidance requires that deferred debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with debt discounts and premiums, while debt issuance costs related to line-of-credit arrangements may still continue to be classified as assets. The Company adopted the provisions of ASU No. 2015-03 and ASU No. 2015-15 in the first quarter of 2016 and applied the provisions retrospectively, resulting in
$16.6 million
of deferred debt issuance costs being reclassified from other non-current assets to long-term debt, net of current maturities, in the accompanying December 31, 2015 consolidated balance sheet.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 3—INCOME TAXES
Match Group is a member of IAC's consolidated federal and state income tax returns. In all periods presented, current income tax provision and deferred income tax benefit have been computed for Match Group on an as if stand-alone, separate return basis. Match Group's payments to IAC for its share of IAC's consolidated federal and state tax return liabilities have been reflected within cash flows from operating activities in the accompanying consolidated and combined statement of cash flows.
U.S. and foreign earnings before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
U.S.
|
$
|
99,827
|
|
|
$
|
149,340
|
|
|
$
|
147,210
|
|
Foreign
|
131,759
|
|
|
30,045
|
|
|
68,426
|
|
Total
|
$
|
231,586
|
|
|
$
|
179,385
|
|
|
$
|
215,636
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Current income tax provision:
|
|
|
|
|
|
Federal
|
$
|
39,278
|
|
|
$
|
68,420
|
|
|
$
|
53,579
|
|
State
|
4,526
|
|
|
7,336
|
|
|
6,045
|
|
Foreign
|
23,964
|
|
|
5,672
|
|
|
13,557
|
|
Current income tax provision
|
67,768
|
|
|
81,428
|
|
|
73,181
|
|
Deferred income tax (benefit) provision:
|
|
|
|
|
|
Federal
|
(163
|
)
|
|
(15,131
|
)
|
|
(4,188
|
)
|
State
|
(133
|
)
|
|
(1,735
|
)
|
|
(159
|
)
|
Foreign
|
(7,899
|
)
|
|
(5,664
|
)
|
|
(1,557
|
)
|
Deferred income tax benefit
|
(8,195
|
)
|
|
(22,530
|
)
|
|
(5,904
|
)
|
Income tax provision
|
$
|
59,573
|
|
|
$
|
58,898
|
|
|
$
|
67,277
|
|
Current income tax payable was reduced by
$29.7 million
,
$38.4 million
, and
$5.3 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively, for excess tax deductions attributable to stock-based compensation which is included as financing activity on the consolidated and combined statement of cash flows.
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 net operating losses.
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Deferred tax assets:
|
|
|
|
Accrued expenses
|
$
|
9,406
|
|
|
$
|
8,088
|
|
Net operating loss carryforwards
|
33,239
|
|
|
33,373
|
|
Stock-based compensation
|
27,732
|
|
|
25,269
|
|
Other
|
7,862
|
|
|
7,756
|
|
Total deferred tax assets
|
78,239
|
|
|
74,486
|
|
Less valuation allowance
|
(23,884
|
)
|
|
(23,244
|
)
|
Net deferred tax assets
|
54,355
|
|
|
51,242
|
|
Deferred tax liabilities:
|
|
|
|
Intangible and other assets
|
(65,868
|
)
|
|
(73,172
|
)
|
Other
|
(2,772
|
)
|
|
(1,230
|
)
|
Total deferred tax liabilities
|
(68,640
|
)
|
|
(74,402
|
)
|
Net deferred tax liabilities
|
$
|
(14,285
|
)
|
|
$
|
(23,160
|
)
|
At
December 31, 2016
, the Company has federal and state net operating losses ("NOLs") of
$21.7 million
and
$13.7 million
, respectively. If not utilized, the federal NOLs will expire at various times between 2031 and 2034, and the state NOLs will expire at various times between 2017 and 2036. Utilization of federal and state NOLs will be subject to limitations under Section 382 of the Internal Revenue Code and applicable state law. At
December 31, 2016
, the Company has foreign NOLs of
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
$90.7 million
available to offset future income. Of these foreign NOLs,
$89.2 million
can be carried forward indefinitely and
$1.5 million
will expire at various times between 2017 and 2036. During
2016
, the Company recognized tax benefits related to NOLs of
$1.1 million
.
During
2016
, the Company's valuation allowance increased by
$0.6 million
primarily due to an other-than-temporary impairment charges on a cost method investment and an increase in foreign tax credits and state net operating losses. At
December 31, 2016
, the Company has a valuation allowance of
$23.9 million
related to the portion of NOLs and other items for which it is more likely than not that the tax benefit will not be realized.
A reconciliation of the income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Income tax provision at the federal statutory rate of 35%
|
$
|
81,055
|
|
|
$
|
62,785
|
|
|
$
|
75,472
|
|
Change in tax reserves, net
|
(1,049
|
)
|
|
(595
|
)
|
|
(283
|
)
|
State income taxes, net of effect of federal tax benefit
|
2,964
|
|
|
3,626
|
|
|
3,826
|
|
Foreign income taxed at a different statutory rate
|
(13,761
|
)
|
|
(2,699
|
)
|
|
(975
|
)
|
Foreign rate change
|
(4,454
|
)
|
|
—
|
|
|
—
|
|
Non-taxable contingent consideration fair value adjustments
|
(3,193
|
)
|
|
(3,898
|
)
|
|
(4,439
|
)
|
Non-taxable foreign currency exchange gains
|
(6,837
|
)
|
|
(3,776
|
)
|
|
(4,107
|
)
|
Other, net
|
4,848
|
|
|
3,455
|
|
|
(2,217
|
)
|
Income tax provision
|
$
|
59,573
|
|
|
$
|
58,898
|
|
|
$
|
67,277
|
|
No income taxes have been provided on indefinitely reinvested earnings of certain foreign subsidiaries aggregating
$312.4 million
at
December 31, 2016
. The estimated amount of the unrecognized deferred income tax liability with respect to such earnings would be
$54.4 million
.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Balance at January 1
|
$
|
24,908
|
|
|
$
|
10,935
|
|
|
$
|
11,215
|
|
Additions based on tax positions related to the current year
|
1,706
|
|
|
2,903
|
|
|
201
|
|
Additions for tax positions of prior years
|
1,414
|
|
|
12,846
|
|
|
490
|
|
Reductions for tax positions of prior years
|
(783
|
)
|
|
(902
|
)
|
|
(60
|
)
|
Settlements
|
(258
|
)
|
|
—
|
|
|
—
|
|
Expiration of applicable statute of limitations
|
(1,074
|
)
|
|
(874
|
)
|
|
(911
|
)
|
Balance at December 31
|
$
|
25,913
|
|
|
$
|
24,908
|
|
|
$
|
10,935
|
|
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At both
December 31, 2016
and
2015
, the Company had accrued
$1.5 million
and
$1.3 million
, respectively, for the payment of interest. At
December 31, 2016
and
2015
, the Company had accrued
$1.6 million
and
$1.8 million
, respectively, for penalties.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Match Group is routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company tax returns and consolidated tax returns with IAC. 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 is currently auditing IAC's federal income tax returns for the years ended December 31, 2010 through 2012, which includes the operations of Match Group. The statute of limitations for the years 2010 through 2012 has been extended to December 31, 2017. Various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. Changes to reserves from period to period and differences between amounts paid, if any, upon the resolution of audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by the Company are recorded in the period they become known.
At
December 31, 2016
and
2015
, unrecognized tax benefits, including interest, were
$27.4 million
and
$26.2 million
, respectively. At
December 31, 2016
and
2015
, approximately
$17.7 million
and
$16.4 million
, respectively, were included in unrecognized tax benefits for tax positions included in IAC's consolidated tax return filings. If unrecognized tax benefits at
December 31, 2016
are subsequently recognized,
$25.9 million
, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of
December 31, 2015
was $
25.8 million
. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately
$6.5 million
by December 31, 2017, primarily due to settlements and expirations of statutes of limitations.
NOTE 4—BUSINESS COMBINATION
On October 28, 2015, the Company completed the purchase of all the outstanding shares of Plentyoffish Media Inc. ("PlentyOfFish"), a leading provider of subscription-based and ad-supported online personals servicing North America, Europe, Latin America and Australia. Services are provided through websites and mobile applications that PlentyOfFish owns and operates. The net purchase price was
$574.1 million
in cash, which includes a
$0.9 million
working capital adjustment paid to the Company in second quarter of 2016.
The financial results of PlentyOfFish are included in Match Group's consolidated financial statements, within the Dating segment, beginning October 28, 2015. For the year ended December 31, 2015, the Company included
$8.0 million
of revenue and
$0.7 million
of net earnings in its consolidated statement of operations related to PlentyOfFish.
The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
|
|
|
|
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
4,626
|
|
Other current assets
|
4,460
|
|
Computer and other equipment
|
2,990
|
|
Goodwill
|
488,644
|
|
Intangible assets
|
84,100
|
|
Other non-current assets
|
1,073
|
|
Total assets
|
585,893
|
|
Current liabilities
|
(6,418
|
)
|
Other long-term liabilities
|
(5,325
|
)
|
Net assets acquired
|
$
|
574,150
|
|
The purchase price was based on the expected financial performance of PlentyOfFish, not on the value of the net identifiable assets at the time of acquisition, which resulted in a significant portion of the purchase price being attributed to goodwill. The expected financial performance of PlentyOfFish reflects that it is complementary and synergistic to the existing Dating businesses.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Intangible assets are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
Weighted-Average Useful Life
(Years)
|
Indefinite-lived trade name
|
$
|
66,300
|
|
|
Indefinite
|
Customer relationships
|
10,100
|
|
|
Less than 1
|
New registrants
|
3,100
|
|
|
Less than 1
|
Non-compete agreement
|
3,000
|
|
|
5
|
Developed technology
|
1,600
|
|
|
2
|
Total intangible assets acquired
|
$
|
84,100
|
|
|
|
PlentyOfFish's other current assets, property and equipment, other non-current assets, current liabilities and other long-term liabilities were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of trade names, customer relationships and the non-compete agreement were determined using variations of the income approach; specifically, in respective order, the relief from royalty, excess earnings and with or without methodologies. The fair values of new registrants and developed technology were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
Pro forma Financial Information
The unaudited pro forma financial information in the table below presents the combined results of Match Group and PlentyOfFish as if the acquisition of PlentyOfFish had occurred on January 1, 2014. The pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisition actually occurred on January 1, 2014. For the years ended December 31, 2015 and 2014, pro forma adjustments reflected below include increases of
$1.4 million
and
$14.6 million
, respectively, in amortization of intangible assets. The pro forma adjustment reflected below for the year ended December 31, 2014 also include a reduction in revenue of
$5.1 million
due to the write-off of deferred revenue at the date of acquisition.
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2015
|
|
2014
|
|
(In thousands, except per share data)
|
Revenue
|
$
|
1,098,785
|
|
|
$
|
936,614
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
156,510
|
|
|
156,444
|
|
Basic earnings per share attributable to Match Group, Inc. shareholders
|
0.74
|
|
|
0.77
|
|
Diluted earnings per share attributable to Match Group, Inc. shareholders
|
0.71
|
|
|
0.75
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 5—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net, are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Goodwill
|
$
|
1,280,843
|
|
|
$
|
1,292,775
|
|
Intangible assets with indefinite lives
|
238,361
|
|
|
243,697
|
|
Intangible assets with definite lives, net
|
10,809
|
|
|
32,711
|
|
Total goodwill and intangible assets, net
|
$
|
1,530,013
|
|
|
$
|
1,569,183
|
|
The following table presents the balance of goodwill, by reporting unit, including the changes in the carrying value of goodwill, for the year ended
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2015
|
|
Additions
|
|
(Deductions)
|
|
Foreign
Exchange
Translation
|
|
Balance at
December 31, 2016
|
|
(In thousands)
|
Dating
|
$
|
1,218,380
|
|
|
$
|
737
|
|
|
$
|
(2,984
|
)
|
|
$
|
(9,686
|
)
|
|
$
|
1,206,447
|
|
Non-dating
|
74,395
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
74,396
|
|
Total
|
$
|
1,292,775
|
|
|
$
|
737
|
|
|
$
|
(2,984
|
)
|
|
$
|
(9,685
|
)
|
|
$
|
1,280,843
|
|
The following table presents the balance of goodwill, by reporting unit, including the changes in the carrying value of goodwill, for the year ended
December 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2014
|
|
Additions
|
|
(Deductions)
|
|
Foreign
Exchange
Translation
|
|
Balance at
December 31, 2015
|
|
(In thousands)
|
Dating
|
$
|
718,129
|
|
|
$
|
549,146
|
|
|
$
|
—
|
|
|
$
|
(48,895
|
)
|
|
$
|
1,218,380
|
|
Non-dating
|
75,634
|
|
|
2,475
|
|
|
(3,711
|
)
|
|
(3
|
)
|
|
74,395
|
|
Total
|
$
|
793,763
|
|
|
$
|
551,621
|
|
|
$
|
(3,711
|
)
|
|
$
|
(48,898
|
)
|
|
$
|
1,292,775
|
|
Dating additions for the year ended December 31, 2015 primarily related to the acquisitions of PlentyOfFish and Eureka.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. At
December 31, 2016
and
2015
, intangible assets with definite lives are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Weighted-Average
Useful Life
(Years)
|
|
(In thousands)
|
|
|
Trade names
|
$
|
10,496
|
|
|
$
|
(9,308
|
)
|
|
$
|
1,188
|
|
|
3.0
|
Content
|
9,802
|
|
|
(5,992
|
)
|
|
3,810
|
|
|
4.0
|
Customer lists
|
7,500
|
|
|
(5,715
|
)
|
|
1,785
|
|
|
5.0
|
Technology
|
5,976
|
|
|
(5,231
|
)
|
|
745
|
|
|
2.0
|
Other
|
4,899
|
|
|
(1,618
|
)
|
|
3,281
|
|
|
5.0
|
Total
|
$
|
38,673
|
|
|
$
|
(27,864
|
)
|
|
$
|
10,809
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Weighted-Average
Useful Life
(Years)
|
|
(In thousands)
|
|
|
Trade names
|
$
|
11,406
|
|
|
$
|
(6,501
|
)
|
|
$
|
4,905
|
|
|
2.6
|
Content
|
9,802
|
|
|
(3,508
|
)
|
|
6,294
|
|
|
4.0
|
Customer Lists
|
23,502
|
|
|
(8,113
|
)
|
|
15,389
|
|
|
2.3
|
Technology
|
6,333
|
|
|
(4,472
|
)
|
|
1,861
|
|
|
2.4
|
Other
|
4,900
|
|
|
(638
|
)
|
|
4,262
|
|
|
5.0
|
Total
|
$
|
55,943
|
|
|
$
|
(23,232
|
)
|
|
$
|
32,711
|
|
|
2.9
|
At
December 31, 2016
, amortization of intangible assets with definite lives is estimated to be as follows:
|
|
|
|
|
|
(In thousands)
|
2017
|
$
|
6,784
|
|
2018
|
2,552
|
|
2019
|
973
|
|
2020
|
500
|
|
Total
|
$
|
10,809
|
|
NOTE 6—MARKETABLE SECURITIES AND LONG-TERM INVESTMENTS
At December 31, 2015, marketable securities consisted of an equity security that had a cost basis of
$8.7 million
, with gross unrealized gains of
$3.0 million
which was included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. This marketable security was sold in its entirety in the second quarter of 2016. Proceeds and gross realized gains from the sale of the available-for-sale marketable security were
$11.7 million
and
$3.1 million
, respectively, for the year ended December 31, 2016.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Long-term investments consist of:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Cost method investments
|
$
|
55,355
|
|
|
$
|
55,569
|
|
Total long-term investments
|
$
|
55,355
|
|
|
$
|
55,569
|
|
The Company has
four
cost method investments. The Company's largest cost method investment is a
21%
interest in the voting common stock of Zhenai Inc. ("Zhenai"), a leading provider of online dating and matchmaking services in China. However, given that our interest relative to other shareholders is not significant, we do not have the ability to exercise significant influence over the operating and financial matters of Zhenai and this investment is accounted for as a cost method investment.
NOTE 7—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
Fair Value
Measurements
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
85,225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
85,225
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Contingent consideration arrangements
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(19,418
|
)
|
|
$
|
(19,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
Fair Value
Measurements
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
3,649
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,649
|
|
Marketable securities:
|
|
|
|
|
|
|
|
Marketable equity security
|
11,622
|
|
|
—
|
|
|
—
|
|
|
11,622
|
|
Total
|
$
|
15,271
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,271
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Contingent consideration arrangements
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(28,993
|
)
|
|
$
|
(28,993
|
)
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
Contingent
Consideration
Arrangements
|
|
Contingent
Consideration
Arrangements
|
|
(In thousands)
|
Balance at January 1
|
$
|
(28,993
|
)
|
|
$
|
(20,615
|
)
|
Total net gains:
|
|
|
|
Fair value adjustments
|
9,198
|
|
|
11,056
|
|
Foreign currency exchange gains
|
—
|
|
|
626
|
|
Included in other comprehensive (loss) income
|
(1,571
|
)
|
|
1,872
|
|
Fair value at date of acquisition
|
(185
|
)
|
|
(27,442
|
)
|
Settlements
|
—
|
|
|
5,510
|
|
Other
|
2,133
|
|
|
—
|
|
Balance at December 31
|
$
|
(19,418
|
)
|
|
$
|
(28,993
|
)
|
Contingent consideration arrangements
As of December 31, 2016, there are
five
contingent consideration arrangements related to business acquisitions. The maximum contingent payments related to these arrangements is
$87.8 million
. The Company expects to make payments on
two
of the
five
contingent consideration arrangements and the aggregate fair value of these two arrangements at December 31, 2016 is
$19.4 million
.
The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics. The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate, that appropriately captures the risks associated with the obligation to determine the net amount reflected in the consolidated and combined financial statements. The number of scenarios in the probability-weighted analyses can vary; generally, more scenarios are prepared for longer duration and more complex arrangements. The fair values of the contingent consideration arrangements at December 31, 2016 and 2015 reflect a
12%
discount rate.
The fair values of the contingent consideration arrangements are sensitive to changes in the forecasts of earnings and/or the relevant operating metrics and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, including the accretion of the discount, if applicable, and changes are recognized in “General and administrative expense” in the accompanying consolidated and combined statement of operations. The contingent consideration arrangement liability at December 31, 2016 and 2015 includes a current portion of
$19.0 million
and
$0 million
, respectively, and non-current portion of
$0.4 million
and
$29.0 million
, respectively, which are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED 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, 2016
|
|
December 31, 2015
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
(In thousands)
|
Current maturities of long-term debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(40,000
|
)
|
|
$
|
(39,850
|
)
|
Long-term debt, net of current maturities
|
(1,176,493
|
)
|
|
(1,244,641
|
)
|
|
(1,176,871
|
)
|
|
(1,204,548
|
)
|
The fair value of long-term debt including current maturities is estimated using market prices or indices for similar liabilities and taking into consideration other factors such as credit quality and maturity, which are Level 3 inputs.
NOTE 8—LONG-TERM DEBT
Long-term debt consists of:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
6.375% Senior Notes due June 1, 2024 (the "2016 Senior Notes"); interest payable each June 1 and December 1, which commenced December 1, 2016
|
$
|
400,000
|
|
|
$
|
—
|
|
6.75% Senior Notes due December 15, 2022 (the "2015 Senior Notes"); interest payable each June 15 and December 15, which commenced June 15, 2016
|
445,172
|
|
|
445,172
|
|
Term Loan due November 16, 2022
(a)
|
350,000
|
|
|
800,000
|
|
Total long-term debt
|
1,195,172
|
|
|
1,245,172
|
|
Less: Current maturities of long-term debt
|
—
|
|
|
40,000
|
|
Less: Unamortized original issue discount and original issue premium, net
|
5,245
|
|
|
11,691
|
|
Less: Unamortized debt issuance costs
|
13,434
|
|
|
16,610
|
|
Total long-term debt, net of current maturities
|
$
|
1,176,493
|
|
|
$
|
1,176,871
|
|
______________________
|
|
(a)
|
The Term Loan matures on November 16, 2022; provided that, if any of the 2015 Senior Notes remain outstanding on the date that is
91 days
prior to the maturity date of the 2015 Senior Notes, the Term Loan maturity date shall be the date that is
91 days
prior to the maturity date of the 2015 Senior Notes.
|
Senior Notes
:
The 2016 Senior Notes were issued on June 1, 2016. The proceeds of
$400 million
were used to prepay a portion of indebtedness outstanding under the Term Loan. At any time prior to June 1, 2019, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on June 1 of the years
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
indicated below:
|
|
|
|
Year
|
Percentage
|
2019
|
104.781
|
%
|
2020
|
103.188
|
%
|
2021
|
101.594
|
%
|
2022 and thereafter
|
100.000
|
%
|
The 2015 Senior Notes were issued on November 16, 2015, in exchange for a portion of IAC's
4.75%
Senior Notes due December 15, 2022 (the "IAC 2012 Senior Notes") (the "Match Exchange Offer"). Promptly following the Match Exchange Offer, the Company and its subsidiaries were designated as unrestricted subsidiaries of IAC for purposes of the indentures governing the IAC
4.875%
Senior Notes due November 30, 2018, the IAC 2012 Senior Notes and the IAC Credit Facility.
Following the designation, neither Match Group nor any of its subsidiaries guarantee any debt of IAC, or are subject to any of the covenants related to such debt.
At any time prior to December 15, 2017, the 2015 Senior Notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, the 2015 Senior Notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:
|
|
|
|
Year
|
Percentage
|
2017
|
102.375
|
%
|
2018
|
101.583
|
%
|
2019
|
100.792
|
%
|
2020 and thereafter
|
100.000
|
%
|
The indentures governing the 2016 and 2015 Senior Notes contain covenants that would limit the Company's ability to pay dividends or to make distributions and repurchase or redeem Match Group stock in the event a default has occurred or Match Group's leverage ratio (as defined in the indentures) exceeds
5.0
to 1.0. At December 31, 2016, there were no limitations pursuant thereto. There are additional covenants that limit the ability of the Company and its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event the Company is not in compliance with the leverage ratio set forth in the indenture, and (ii) incur liens, enter into agreements restricting the ability of the Company's subsidiaries to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets.
Term Loan and Credit Facility
:
On November 16, 2015, under a credit agreement (the "Credit Agreement"), the Company borrowed
$800 million
in the form of a term loan (the "Term Loan"). On March 31, 2016, Match Group made a
$10 million
principal payment on the Term Loan. On June 1, 2016, the
$400 million
in proceeds from the 2016 Senior Notes, described above, were used to prepay a portion of the Term Loan. On December 8, 2016, the Company made an additional
$40 million
principal payment on the Term Loan. In addition, the remaining outstanding balance of
$350 million
, which is due at maturity, was repriced. The Term Loan provides for additional annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio contained in the Credit Agreement. The Term Loan bears interest, at our option, at a base rate or LIBOR, plus
2.25%
or
3.25%
, respectively, and in the case of LIBOR, a floor of
0.75%
. The interest rate at December 31, 2016 is
4.20%
. Interest payments are due at least semi-annually through the term of the loan.
The Company has a
$500 million
revolving credit facility (the "Credit Facility") that expires on October 7, 2020. At December 31, 2016 and 2015, there were no outstanding borrowings under the Credit Facility. The annual commitment fee on undrawn funds based on the current leverage ratio is
30 basis points
. Borrowings under the Credit Facility bear interest, at the Company's option, at a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on the Company's consolidated net leverage ratio. The terms of the Credit Facility require the Company to
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
maintain a consolidated net leverage ratio of not more than
5.0
to 1.0 and a minimum interest coverage ratio of not less than
2.5
to 1.0 (in each case as defined in the agreement).
There are additional covenants under the Credit Facility and the Term Loan that limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. While the Term Loan remains outstanding, these same covenants under the Credit Agreement are more restrictive than the covenants that are applicable to the Credit Facility. Obligations under the Credit Facility and Term Loan are unconditionally guaranteed by certain Match Group wholly-owned domestic subsidiaries, and are also secured by the stock of certain Match Group 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 2016 and 2015 Senior Notes to the extent of the value of the assets securing the borrowings under the Credit Agreement.
Long-term debt maturities:
|
|
|
|
|
Years Ending December 31,
|
(In thousands)
|
2022
|
$
|
795,172
|
|
2024
|
400,000
|
|
Total
|
1,195,172
|
|
Less: Unamortized original issue discount and original issue premium, net
|
5,245
|
|
Less: Unamortized debt issuance costs
|
13,434
|
|
Total long-term debt, net of current maturities
|
$
|
1,176,493
|
|
NOTE 9—SHAREHOLDERS' EQUITY
Description of Common Stock, Class B Convertible Common Stock and Class C Common Stock
The rights of holders of Match Group common stock, Class B common stock and Class C common stock are identical, except for voting rights, conversion rights and dividend rights. Holders of common stock are entitled to
one
vote per share on all matters to be voted upon by the stockholders. Holders of Class B common stock are entitled to
ten
votes per share on all matters to be voted upon by stockholders. Holders of Class C common stock have
no
voting rights, except as otherwise required by the laws of the State of Delaware, in which case holders of Class C common stock are entitled to
one one-hundredth
(1/100) of a vote per share. Holders of the Company's common stock, Class B common stock and Class C common stock do not have cumulative voting rights in the election of directors.
Shares of Match Group's Class B common stock are convertible into shares of our common stock at the option of the holder at any time on a share for share basis. Such conversion ratio will in all events be equitably preserved in the event of any recapitalization of Match Group by means of a stock dividend on, or a stock split or combination of, our outstanding common stock or Class B common stock, or in the event of any merger, consolidation or other reorganization of Match Group with another corporation. Upon the conversion of a share of our Class B common stock into a share of our common stock, the applicable share of Class B common stock will be retired and will not be subject to reissue. Shares of common stock and Class C common stock have no conversion rights.
The holders of shares of Match Group common stock, Class B common stock and Class C 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 therefore. In the event of a liquidation, dissolution or winding up, holders of the Company's common stock, Class B common stock and Class C common stock are entitled to receive ratably the assets available for distribution to the stockholders after payment of all liabilities and accrued but unpaid dividends and liquidation preferences on any outstanding preferred stock.
At
December 31, 2016
, IAC holds
209.9 million
shares of our Class B common stock, representing
100%
of our outstanding Class B common stock, and
1.0 million
shares of our common stock, representing
2.1%
of our outstanding common stock. IAC's ownership interest is
82.5%
and IAC holds
97.9%
of the outstanding total voting power of the Company.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
In the event that Match Group issues or proposes to issue any shares of Match Group common stock, Class B common stock or Class C common stock (with certain limited exceptions), including shares issued upon the exercise, conversion or exchange of options, warrants and convertible securities, IAC will generally have a purchase right that permits it to purchase for fair market value, as defined in the agreement, up to such number of shares of the same class as the issued shares as would (i) enable IAC to maintain the same ownership interest in the Company that it had immediately prior to such issuance or proposed issuance, with respect to issuances of our voting capital stock, or (ii) enable IAC to maintain ownership of at least
80.1%
of each class of the Company's non-voting capital stock, with respect to issuances of our non-voting capital stock.
Reserved Common Shares
In connection with equity compensation plans,
61.2 million
shares of Match Group common stock are reserved at
December 31, 2016
.
NOTE 10—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present the components of accumulated other comprehensive loss and items reclassified out of accumulated other comprehensive loss into earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Gain (Loss) on Available-For-Sale Security
|
|
Accumulated Other Comprehensive Loss
|
|
(In thousands)
|
Balance at January 1
|
$
|
(139,784
|
)
|
|
$
|
2,964
|
|
|
$
|
(136,820
|
)
|
Other comprehensive (loss) income before reclassifications
|
(36,600
|
)
|
|
94
|
|
|
(36,506
|
)
|
Gain on sale of available-for-sale security reclassified into earnings
|
—
|
|
|
(3,058
|
)
|
|
(3,058
|
)
|
Net current period other comprehensive loss
|
(36,600
|
)
|
|
(2,964
|
)
|
|
(39,564
|
)
|
Balance at December 31
|
$
|
(176,384
|
)
|
|
$
|
—
|
|
|
$
|
(176,384
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized (Loss) Gain on Available-For-Sale Security
|
|
Accumulated Other Comprehensive Loss
|
|
(In thousands)
|
Balance at January 1
|
$
|
(76,800
|
)
|
|
$
|
(1,248
|
)
|
|
$
|
(78,048
|
)
|
Other comprehensive (loss) income before reclassifications
|
(60,793
|
)
|
|
4,212
|
|
|
(56,581
|
)
|
Foreign currency translation adjustment reclassified into earnings related to the substantial liquidation of a foreign business
|
(2,191
|
)
|
|
—
|
|
|
(2,191
|
)
|
Net period other comprehensive (loss) income
|
(62,984
|
)
|
|
4,212
|
|
|
(58,772
|
)
|
Balance at December 31
|
$
|
(139,784
|
)
|
|
$
|
2,964
|
|
|
$
|
(136,820
|
)
|
At
December 31, 2016
and
2015
, there was
no
tax benefit or provision on the accumulated other comprehensive loss.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 11—EARNINGS PER SHARE
The following table sets forth the computation of the basic and diluted earnings per share attributable to Match Group shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
(In thousands, except per share data)
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
172,013
|
|
|
$
|
172,013
|
|
|
$
|
120,487
|
|
|
$
|
120,487
|
|
|
$
|
148,359
|
|
|
$
|
148,359
|
|
Net earnings attributable to redeemable noncontrolling interests
|
(562
|
)
|
|
(562
|
)
|
|
(104
|
)
|
|
(104
|
)
|
|
(595
|
)
|
|
(595
|
)
|
Net earnings attributable to Match Group, Inc. shareholders
|
$
|
171,451
|
|
|
$
|
171,451
|
|
|
$
|
120,383
|
|
|
$
|
120,383
|
|
|
$
|
147,764
|
|
|
$
|
147,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
251,522
|
|
|
251,522
|
|
|
174,784
|
|
|
174,784
|
|
|
160,756
|
|
|
160,756
|
|
Dilutive securities including subsidiary denominated equity, stock options and RSU awards
(a)(b)
|
—
|
|
|
18,203
|
|
|
—
|
|
|
10,150
|
|
|
—
|
|
|
7,323
|
|
Dilutive weighted average common shares outstanding
|
251,522
|
|
|
269,725
|
|
|
174,784
|
|
|
184,934
|
|
|
160,756
|
|
|
168,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to Match Group, Inc. shareholders
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
$
|
0.68
|
|
|
$
|
0.64
|
|
|
$
|
0.69
|
|
|
$
|
0.65
|
|
|
$
|
0.92
|
|
|
$
|
0.88
|
|
______________________
|
|
(a)
|
If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of subsidiary denominated equity, stock options and the vesting of restricted stock units ("RSUs"). For the years ended
December 31, 2016
and
2015
,
6.1 million
and
5.2 million
potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the year ended December 31, 2014, all potentially dilutive securities were included in the calculation of diluted earnings per share.
|
|
|
(b)
|
Market-based awards and performance-based stock options ("PSOs") and restricted stock units (“PSUs”) are considered contingently issuable shares. Market-based awards, PSOs 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 award, PSOs and PSUs are dilutive for the respective reporting periods. For the years ended
December 31, 2016
and
2015
,
2.5 million
and
7.5 million
market-based awards, PSOs and PSUs, respectively, were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met. For the year ended
December 31, 2014
, there were no outstanding market-based awards, PSOs, or PSUs.
|
NOTE 12—STOCK-BASED COMPENSATION
The Company currently has
one
active stock and annual incentive plan, which became effective in 2015 upon the completion of the IPO. This plan replaced two historical plans that governed equity awards prior to the IPO. The 2015 plan covers stock options to acquire shares of Match Group common stock and RSUs granted pursuant to the historical plans and stock options and stock settled stock appreciation rights denominated in the equity of certain of our subsidiaries granted prior to the IPO, as well as provides for the future grant of these and other equity awards. The 2015 plan authorizes the Company to grant awards to its employees, officers, directors and consultants. At
December 31, 2016
, there were
5.0 million
shares
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
available for the future grant of equity awards under the 2015 plan and
39.5 million
shares in the aggregate related to awards outstanding under the historical plans and subsidiary equity awards granted prior to the IPO.
The 2015 plan has a stated term of
ten
years, and provides that the exercise price of stock options granted will not be less than the market price of the Company's common stock on the grant date. The plan does not specify 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 granted subsequent to September 1, 2015 will generally vest in
four
equal annual installments over a
four
-year period. RSU awards outstanding generally vest over a
three
-year period. PSU awards outstanding generally vest in
two
equal annual installments over a
two
-year period.
Stock-based compensation expense recognized in the consolidated and combined statement of operations includes expense related to the Company's stock options and RSUs, performance-based stock options and PSUs for which vesting is considered probable, equity instruments denominated in shares of subsidiaries, and IAC denominated stock options, RSUs and market-based awards held by Match Group employees. The amount of stock-based compensation expense is reduced by 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, 2016
, there is
$90.6 million
of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately
2.7 years
.
The total income tax benefit recognized in the accompanying consolidated and combined statement of operations for the years ended
December 31, 2016
,
2015
and
2014
related to stock-based compensation is
$16.4 million
,
$16.9 million
and
$7.9 million
, respectively.
Stock Options
Stock options outstanding at
December 31, 2016
and changes during the year ended
December 31, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
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, 2016
|
34,832
|
|
|
$
|
12.08
|
|
|
|
|
|
|
Granted
|
8,710
|
|
|
11.46
|
|
|
|
|
|
|
Exercised
|
(4,753
|
)
|
|
8.36
|
|
|
|
|
|
|
Forfeited
|
(5,129
|
)
|
|
12.96
|
|
|
|
|
|
|
Expired
|
(14
|
)
|
|
11.06
|
|
|
|
|
|
Outstanding at December 31, 2016
(a)
|
33,646
|
|
|
$
|
12.31
|
|
|
7.5
|
|
$
|
161,423
|
|
Options exercisable
|
11,930
|
|
|
$
|
10.95
|
|
|
5.4
|
|
$
|
73,373
|
|
______________________
|
|
(a)
|
Included in the outstanding balance at December 31, 2016 is
4.9 million
performance-based stock options, which vest in varying amounts and years depending upon certain performance conditions. The Company expects
0.1 million
shares to vest based on our current assessment of the performance conditions. The table above includes these awards at their maximum potential payout.
|
The aggregate intrinsic value in the table above represents the difference between Match Group's closing stock price on the last trading day of 2016 and the exercise price, multiplied by the number of in-the-money options that would have been
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
received by the option holders had all option holders exercised their options on
December 31, 2016
. The total intrinsic value of stock options exercised during the years ended
December 31, 2016
,
2015
and
2014
is
$37.3 million
,
$5.7 million
and
$10.7 million
, respectively.
The following table summarizes the information about stock options outstanding and exercisable at
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of Exercise Prices
|
Outstanding at
December 31,
2016
|
|
Weighted-
Average
Remaining
Contractual
Life in Years
|
|
Weighted-Average
Exercise
Price
|
|
Exercisable at
December 31,
2016
|
|
Weighted-
Average
Remaining
Contractual
Life in Years
|
|
Weighted-Average
Exercise
Price
|
|
(Shares in thousands)
|
$0.01 to $5.00
|
925
|
|
|
3.1
|
|
$
|
4.11
|
|
|
925
|
|
|
3.1
|
|
$
|
4.11
|
|
$5.01 to $10.00
|
1,210
|
|
|
1.7
|
|
8.00
|
|
|
1,210
|
|
|
1.7
|
|
8.00
|
|
$10.01 to $15.00
|
26,136
|
|
|
7.5
|
|
12.09
|
|
|
8,707
|
|
|
5.7
|
|
11.53
|
|
$15.01 to $20.00
|
5,375
|
|
|
8.9
|
|
15.75
|
|
|
1,088
|
|
|
8.7
|
|
15.44
|
|
|
33,646
|
|
|
7.5
|
|
$
|
12.31
|
|
|
11,930
|
|
|
5.4
|
|
$
|
10.95
|
|
The fair value of stock option awards, with the exception of market-based awards, is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term. Prior to
2014
, expected stock price volatilities were estimated based on historical stock price volatilities of peer companies that were chosen on the basis for their similarity to the Company in terms of consumer use, monetization model, margin and growth characteristics and brand strength. At the beginning of
2014
, the Company concluded that the most relevant reference point for determining volatility was IAC’s historical volatility as a result of the Company representing a large percentage of the overall value of IAC. The risk-free interest rates are based on U.S. Treasuries with comparable terms as the awards, in effect at the grant date. Prior to the IPO, expected term was based on the mid-point of the first and last windows for exercise. Following the IPO, expected term is based upon the historical exercise pattern of IAC’s employees for comparable awards, a
ten
-year contractual life with vesting in
four
equal annual installments, because the Company does not have sufficient data to estimate an expected term for these awards. No dividends have been assumed. The following are the weighted average assumptions used in the Black-Scholes option pricing model:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Expected volatility
|
27
|
%
|
|
28
|
%
|
|
29
|
%
|
Risk-free interest rate
|
1.3
|
%
|
|
1.3
|
%
|
|
1.3
|
%
|
Expected term
|
4.8 years
|
|
|
4.1 years
|
|
|
4.2 years
|
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
On November 18, 2015, the Company granted
1.8 million
market-based stock options to its Chairman and Chief Executive Officer. The award has market-based conditions and service-based vesting. The market-based vesting condition was achieved in 2016. The award has a
ten
-year contractual life and vests in
four
equal annual installments beginning on the first anniversary of the grant date. The grant date fair value of this market-based award was estimated using a lattice model that incorporates a Monte Carlo simulation of Match Group's stock price. The inputs used to fair value this award included expected volatility of
27%
, a risk-free interest rate of
2.3%
and a
0%
dividend yield. Expense is recognized over the
four
-year vesting period because it exceeds the derived service period of three years, which is an output of the option pricing model.
Approximately
8.7 million
,
21.1 million
and
5.6 million
stock options were granted by the Company during the years ended
December 31, 2016
,
2015
and
2014
, respectively. The weighted average fair value of stock options granted during the years ended
December 31, 2016
,
2015
and
2014
with exercise prices equal to the market prices of Match Group's common stock on the date of grant are
$2.98
,
$3.46
and
$5.21
, respectively. There were
no
stock options issued during the years
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
ended
December 31, 2016
,
2015
and
2014
with exercise prices greater than the market value of Match Group's common stock on the date of grant.
Cash received from stock option exercises and the related tax benefit realized for the year ended
December 31, 2016
and for the period subsequent to the IPO through
December 31, 2015
are
$39.7 million
and
$13.9 million
; and
$0.1 million
and less than
$0.1 million
, respectively. For periods prior to the IPO,
no
cash was received from the exercise of stock options because they were net settled in shares of IAC’s common stock. For the periods prior to the IPO, the related tax benefit realized by the Company in
2015
and
2014
were
$1.2 million
and
$1.7 million
, respectively.
Restricted Stock Units and Performance-based Stock Units
RSUs and PSUs 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. Each RSU and PSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. PSUs also include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests. 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 and PSUs outstanding at
December 31, 2016
and changes during the year ended
December 31, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
PSUs
|
|
Number
of shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Number
of shares
(a)
|
|
Weighted
Average
Grant Date
Fair Value
|
|
(Shares in thousands)
|
Unvested at January 1, 2016
|
373
|
|
|
$
|
14.52
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
229
|
|
|
16.32
|
|
|
330
|
|
|
10.11
|
|
Vested
|
(63
|
)
|
|
15.12
|
|
|
—
|
|
|
—
|
|
Forfeited
|
—
|
|
|
—
|
|
|
(165
|
)
|
|
10.11
|
|
Unvested at December 31, 2016
|
539
|
|
|
$
|
15.21
|
|
|
165
|
|
|
$
|
10.11
|
|
______________________
|
|
(a)
|
This represents the maximum shares issuable.
|
The weighted average fair value of RSUs and PSUs granted during the year ended
December 31, 2016
and for the period subsequent to the IPO through December 31, 2015 based on market prices of Match Group's common stock on the grant date was
$12.65
and
$14.52
, respectively. There were no RSUs or PSUs granted or outstanding for the year ended
December 31, 2014
. The total fair value of RSUs and PSUs that vested during the year ended
December 31, 2016
was
$1.1 million
. No RSUs or PSUs vested during the year ended
December 31, 2015
.
Market-based Awards
During 2016 and 2015, the Company granted market-based awards to certain employees. The number of awards that ultimately vest is dependent upon Match Group's stock price. The grant date fair value of each market-based award is estimated using a lattice model that incorporates a Monte Carlo simulation of Match Group's stock price. Each market-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Market-based awards outstanding at December 31, 2016 and changes during the year ended December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
Market-based awards
|
|
Number
of shares
|
|
Weighted
Average
Grant Date
Price
|
|
(Shares in thousands)
|
Unvested at January 1, 2016
|
117
|
|
|
$
|
12.00
|
|
Granted
|
1,465
|
|
|
10.60
|
|
Vested
|
(7
|
)
|
|
12.00
|
|
Forfeited
|
(39
|
)
|
|
12.00
|
|
Unvested at December 31, 2016
|
1,536
|
|
|
$
|
10.66
|
|
The weighted average fair value of market-based awards granted during the year ended December 31, 2016 and for the period subsequent to the IPO through December 31, 2015 based on the valuation model was
$1.77
and
$2.15
, respectively. There were
no
market-based awards granted for the year ended December 31, 2014. The total fair value of market-based awards that vested during the year ended December 31, 2016 was
$0.1 million
. There were
no
market-based awards that vested during the years ended December 31, 2015 and 2014.
Equity Instruments Denominated in the Shares of Certain Subsidiaries
Stock options and stock settled stock appreciation rights denominated in the equity of Tinder and The Princeton Review have been granted to certain employees of these Match Group subsidiaries. These equity awards generally vest over a
four
-year period. The value of the stock options and stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly, these interests only have value to the extent the relevant subsidiary appreciates above the initial value utilized to determine the exercise price. These awards are granted with exercise prices of not less than the grant date fair value, which is determined by the Company using a variety of valuation techniques including a combination of market based and discounted cash flow valuation methodologies. The expense associated with these equity awards is initially measured at fair value, using the Black-Scholes option pricing model, at the grant date and is recognized as stock-based compensation over the vesting term. These dilutive securities are reflected in our share calculations underlying our dilutive earnings per share calculation contained in our financial statements for fiscal years ended December 31, 2016, 2015 and 2014.
The plans under which these awards are granted establish specific settlement dates or liquidity events for which the valuation of the relevant subsidiary is determined for purposes of settlement of the awards. The plan for The Princeton Review generally provides that Match Group establishes the fair value of the awards; for Tinder, the settlement date fair value will be established by independent third parties or mutual agreement.
These subsidiary denominated awards, when exercised, are settled by Match Group issuing shares of its common stock equal in value to the intrinsic value of the award being settled, net of shares with a value equal to the withholding taxes due, which taxes are remitted by Match Group to the government on behalf of the employees. At the time of settlement, IAC has the option to issue its own shares directly to the award holders, in which case Match Group would in turn issue its shares to IAC as reimbursement. In either settlement scenario, the same number of Match Group shares would be issued. With respect to Tinder, Match Group has the ability to extinguish its obligations to settle the Tinder awards if it completes an initial public offering of the stock of Tinder. In such an event, the Tinder denominated equity would be exercisable for shares of Tinder common shares.
The Princeton Review has liquidity events on an annual basis. Tinder’s initial liquidity event occurred in July 2016, with the next liquidity event scheduled for May 2017 and subsequent events scheduled to occur approximately every
18
months thereafter. The Company issued
1.7 million
Match Group common shares, and paid
$22.8 million
of withholding taxes, to settle awards exercised during the July 2016 Tinder liquidity event to current and former employees who exercised their subsidiary options. The aggregate intrinsic value of all subsidiary denominated equity at December 31, 2016 was
$329.1 million
, of which
$250.4 million
is related to vested shares and
$78.7 million
is related to unvested shares. The comparable aggregate amount at December 31, 2015 is
$246.3 million
. The aggregate number of Match Group common
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
shares that would have been required to settle these interests at estimated fair values on
December 31, 2016
, including vested and unvested interests (which will be reduced by the number of shares withheld to cover employee withholding taxes), is
19.2 million
shares. The comparable amount at
December 31, 2015
is
18.2 million
shares. Giving effect to withholding taxes, which will be paid by the Company on behalf of the employees at exercise, the aggregate number of shares and cash that would be required to settle the vested and unvested interests at estimated fair values on December 31, 2016 is
9.6 million
shares and
$164.6 million
, respectively, assuming a
50%
withholding rate; the comparable amounts at December 31, 2015 are
9.1 million
shares and
$123.2 million
, respectively. The number of shares ultimately needed to settle these awards may vary significantly from the estimated number as a result of both movements in our stock price and a determination of fair value of the relevant subsidiary that is different than our estimate.
Assuming no change in the value of the Company’s common stock at December 31, 2016, each incremental increase of 10% over the Company's December 31, 2016 fair value estimate of these subsidiaries would require approximately
2.7 million
incremental aggregate shares to settle these awards (which will be reduced by the number of shares withheld to cover employee withholding taxes).
During the third quarter of 2015, the Company modified certain subsidiary denominated vested equity awards and recognized a modification charge of
$6.8 million
. During the fourth quarter of 2015, the Company repurchased certain subsidiary denominated vested equity awards in exchange for
$23.4 million
in cash and fully vested modified equity awards and recognized a modification charge of
$7.7 million
. These modification charges are included in stock-based compensation for the year ended
December 31, 2015
.
During 2014, the Company granted an equity award denominated in shares of a subsidiary of the Company to a non-employee. This award is marked to market each reporting period. The award vests at multiple times a year and is fully vested in October 2017. In the third quarter of 2016, the Company settled the vested portion of the award for cash of
$13.4 million
. At
December 31, 2016
, the total fair value of the remaining award, at current estimated fair value, including vested and unvested interests, is
$14.3 million
.
IAC Denominated Stock Options
For the year ended
December 31, 2016
, there were less than
0.1 million
IAC stock options granted by IAC to employees of Match Group. There were no IAC stock options granted by IAC to employees of Match Group for the years ended December 31,
2015
and
2014
. Approximately
0.4 million
IAC stock options remain outstanding to employees of Match Group post IPO. The fair value of each stock option award was estimated on the grant date using the Black–Scholes option pricing model. IAC stock options were granted with exercise prices at least equal to the fair value on the date of grant, vest ratably in annual installments over a
four
-year period and expire
ten years
from the date of grant.
In January 2014, a portion of IAC's former Chief Executive Officer's (who became the Chairman of the Match Group) outstanding IAC stock options were canceled and replaced with equity denominated in Match Group and various subsidiaries of Match Group. The incremental expense associated with this modification was
$7.4 million
.
IAC Denominated RSUs and Market-based Awards
Less than
0.1 million
and
0.7 million
IAC RSUs and market-based awards were granted by IAC to employees of Match Group during the years ended
December 31, 2016
and
2015
, respectively. There were
no
IAC RSUs or market-based awards granted by IAC to employees of Match Group for the year ended
December 31, 2014
. RSUs are awards in the form of phantom shares or units, denominated in a hypothetical equivalent number of shares of IAC common stock and with the value of each RSU equal to the fair value of IAC common stock at the date of grant. Each RSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. The number of market-based awards that ultimately vest is dependent upon Match Group’s stock price. The grant date fair value of each market-based award is estimated using a lattice model that incorporates a Monte Carlo simulation of Match Group’s stock price. Each market-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. Some of the market-based awards contain performance targets set at the time of grant that must be achieved before an award vests.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 13—SEGMENT INFORMATION
The Company has
two
operating segments, Dating and Non-dating, which are also the Company's
two
reportable segments. The Company’s Chairman and CEO, who is the chief operating decision maker, allocates resources and assesses performance at the segment level. Our Dating segment provides dating products and the Company’s Non–dating segment provides a variety of education services including test preparation, academic tutoring and college counseling services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Revenue:
|
|
|
|
|
|
Dating
|
$
|
1,118,110
|
|
|
$
|
909,705
|
|
|
$
|
836,458
|
|
Non-dating
|
104,416
|
|
|
110,726
|
|
|
51,810
|
|
Total
|
$
|
1,222,526
|
|
|
$
|
1,020,431
|
|
|
$
|
888,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Operating Income (Loss):
|
|
|
|
|
|
Dating
|
$
|
315,549
|
|
|
$
|
212,981
|
|
|
$
|
253,725
|
|
Non-dating
|
(9,641
|
)
|
|
(19,425
|
)
|
|
(25,158
|
)
|
Total
|
$
|
305,908
|
|
|
$
|
193,556
|
|
|
$
|
228,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Adjusted EBITDA:
(a)
|
|
|
|
|
|
Dating
|
$
|
403,380
|
|
|
$
|
284,554
|
|
|
$
|
289,287
|
|
Non-dating
|
575
|
|
|
(5,887
|
)
|
|
(15,839
|
)
|
Total
|
$
|
403,955
|
|
|
$
|
278,667
|
|
|
$
|
273,448
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Segment Assets:
(b)
|
|
|
|
Dating
|
$
|
487,989
|
|
|
$
|
301,452
|
|
Non-dating
|
30,676
|
|
|
38,757
|
|
Total
|
$
|
518,665
|
|
|
$
|
340,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Capital expenditures:
|
|
|
|
|
|
Dating
|
$
|
46,098
|
|
|
$
|
25,246
|
|
|
$
|
19,734
|
|
Non-dating
|
2,805
|
|
|
3,910
|
|
|
2,059
|
|
Total
|
$
|
48,903
|
|
|
$
|
29,156
|
|
|
$
|
21,793
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
______________________
|
|
(a)
|
The Company's primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced. Adjusted EBITDA has certain limitations in that it does not take into account the impact to Match Group's statement of operations of certain expenses.
|
|
|
(b)
|
Consistent with the Company's primary metric (described in (a) above), the Company excludes, if applicable, goodwill and intangible assets from the measure of segment assets presented above.
|
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,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Revenue
|
|
|
|
|
|
United States
|
$
|
775,454
|
|
|
$
|
695,149
|
|
|
$
|
578,139
|
|
All other countries
|
447,072
|
|
|
325,282
|
|
|
310,129
|
|
Total
|
$
|
1,222,526
|
|
|
$
|
1,020,431
|
|
|
$
|
888,268
|
|
The United States is the only country whose revenue is greater than 10 percent of total revenue.
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Long-lived assets (excluding goodwill and intangible assets)
|
|
|
|
United States
|
$
|
48,445
|
|
|
$
|
28,169
|
|
All other countries
|
21,283
|
|
|
19,898
|
|
Total
|
$
|
69,728
|
|
|
$
|
48,067
|
|
The only country, other than the United States, with greater than 10 percent of total long-lived assets (excluding goodwill and intangible assets), was France with
$14.3 million
and
$14.5 million
as of
December 31, 2016
and
2015
.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
The following tables reconcile operating income (loss) for the Company's reportable segments and net earnings attributable to Match Group, Inc. shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
Operating Income (Loss)
|
|
Stock-based compensation
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
Acquisition-related Contingent Consideration Fair Value Adjustments
|
|
Adjusted EBITDA
|
|
|
|
|
Dating
|
$
|
315,549
|
|
|
$
|
52,370
|
|
|
$
|
27,726
|
|
|
$
|
16,932
|
|
|
$
|
(9,197
|
)
|
|
$
|
403,380
|
|
Non-dating
|
(9,641
|
)
|
|
618
|
|
|
3,501
|
|
|
6,097
|
|
|
—
|
|
|
575
|
|
Total
|
305,908
|
|
|
$
|
52,988
|
|
|
$
|
31,227
|
|
|
$
|
23,029
|
|
|
$
|
(9,197
|
)
|
|
$
|
403,955
|
|
Interest expense—third party
|
(82,214
|
)
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
7,892
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
231,586
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
(59,573
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
172,013
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to redeemable noncontrolling interests
|
(562
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
$
|
171,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
Operating Income (Loss)
|
|
Stock-based compensation
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
Acquisition-related Contingent Consideration Fair Value Adjustments
|
|
Adjusted EBITDA
|
|
|
|
|
|
Dating
|
$
|
212,981
|
|
|
$
|
49,401
|
|
|
$
|
19,791
|
|
|
$
|
13,437
|
|
|
$
|
(11,056
|
)
|
|
$
|
284,554
|
|
Non-dating
|
(19,425
|
)
|
|
682
|
|
|
6,192
|
|
|
6,664
|
|
|
—
|
|
|
(5,887
|
)
|
Total
|
193,556
|
|
|
$
|
50,083
|
|
|
$
|
25,983
|
|
|
$
|
20,101
|
|
|
$
|
(11,056
|
)
|
|
$
|
278,667
|
|
Interest expense—third party
|
(18,049
|
)
|
|
|
|
|
|
|
|
|
|
|
Interest expense—related party
|
(8,009
|
)
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
11,887
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
179,385
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
(58,898
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
120,487
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to redeemable noncontrolling interests
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
$
|
120,383
|
|
|
|
|
|
|
|
|
|
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014
|
|
Operating Income (Loss)
|
|
Stock-based compensation
|
|
Depreciation
|
|
Amortization
of Intangibles
|
|
Acquisition-related Contingent Consideration Fair Value Adjustments
|
|
Adjusted EBITDA
|
|
|
|
Dating
|
$
|
253,725
|
|
|
$
|
19,543
|
|
|
$
|
21,502
|
|
|
$
|
7,429
|
|
|
$
|
(12,912
|
)
|
|
$
|
289,287
|
|
Non-dating
|
(25,158
|
)
|
|
1,308
|
|
|
4,045
|
|
|
3,966
|
|
|
—
|
|
|
(15,839
|
)
|
Total
|
228,567
|
|
|
$
|
20,851
|
|
|
$
|
25,547
|
|
|
$
|
11,395
|
|
|
$
|
(12,912
|
)
|
|
$
|
273,448
|
|
Interest expense—related party
|
(25,541
|
)
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
12,610
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
215,636
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
(67,277
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
148,359
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to redeemable noncontrolling interests
|
(595
|
)
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
$
|
147,764
|
|
|
|
|
|
|
|
|
|
|
|
The following tables reconcile segment assets to total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Segment Assets
|
|
Goodwill
|
|
Indefinite-Lived
Intangible Assets
|
|
Definite-Lived
Intangible Assets
|
|
Total Assets
|
|
(In thousands)
|
Dating
|
$
|
487,989
|
|
|
$
|
1,206,447
|
|
|
$
|
214,461
|
|
|
$
|
3,221
|
|
|
$
|
1,912,118
|
|
Non-dating
|
30,676
|
|
|
74,396
|
|
|
23,900
|
|
|
7,588
|
|
|
136,560
|
|
Total
|
$
|
518,665
|
|
|
$
|
1,280,843
|
|
|
$
|
238,361
|
|
|
$
|
10,809
|
|
|
$
|
2,048,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Segment Assets
|
|
Goodwill
|
|
Indefinite-Lived
Intangible Assets
|
|
Definite-Lived
Intangible Assets
|
|
Total Assets
|
|
(In thousands)
|
Dating
|
$
|
301,452
|
|
|
$
|
1,218,380
|
|
|
$
|
219,797
|
|
|
19,026
|
|
|
$
|
1,758,655
|
|
Non-dating
|
38,757
|
|
|
74,395
|
|
|
23,900
|
|
|
13,685
|
|
|
150,737
|
|
Total
|
$
|
340,209
|
|
|
$
|
1,292,775
|
|
|
$
|
243,697
|
|
|
$
|
32,711
|
|
|
$
|
1,909,392
|
|
NOTE 14—COMMITMENTS
The Company leases office space, data center facilities and equipment used in connection with its operations under various operating leases, many of which contain escalation clauses. The Company is also committed to pay a portion of the related operating expenses under certain lease agreements. These operating expenses are not included in the table below.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Future minimum payments under operating lease agreements are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
2017
|
|
$
|
12,066
|
|
2018
|
|
11,479
|
|
2019
|
|
7,991
|
|
2020
|
|
7,527
|
|
2021
|
|
6,401
|
|
Thereafter
|
|
17,941
|
|
Total
|
|
$
|
63,405
|
|
Expenses charged to operations under these agreements are
$20.3 million
,
$13.9 million
and
$14.7 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. See "Note 17—Related Party Transactions" for additional information related to related party transactions.
The Company also has funding commitments in the form of a purchase obligation and surety bonds. The purchase obligation relates to web hosting services with
$10.0 million
due for each of the years ended December 31, 2017 and 2018. The surety bonds of
$0.1 million
expire within twelve months of
December 31, 2016
.
NOTE 15—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.
NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental Disclosure of Non-Cash Transactions:
The Company recorded acquisition-related contingent consideration liabilities of
$0.2 million
,
$27.4 million
and
$0.3 million
during the years ended December 31, 2016,
2015
and 2014, respectively, in connection with various acquisitions. See "Note 7—Fair Value Measurements and Financial Instruments" for additional information on contingent consideration arrangements.
On November 16, 2015, the Company exchanged
$445.3 million
of IAC 2012 Senior Notes for
$445.2 million
of Match Group Senior Notes. See "Note 8—Long-term Debt" for additional information on the note exchange.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Cash paid (received) during the year for:
|
|
|
|
|
|
Interest
|
$
|
82,494
|
|
|
$
|
8,696
|
|
|
$
|
7,017
|
|
Income tax payments, including amounts paid to IAC for Match Group's share of IAC's consolidated tax liability
|
44,733
|
|
|
46,657
|
|
|
68,905
|
|
Income tax refunds
|
(962
|
)
|
|
(1,583
|
)
|
|
(3,826
|
)
|
NOTE 17 —RELATED PARTY TRANSACTIONS
Relationship with IAC post IPO
In connection with the IPO, the Company entered into certain agreements relating to our relationship with IAC after the IPO. These agreements include a master transaction agreement; an investor rights agreement; a tax sharing agreement; a services agreement; an employee matters agreement and a subordinated loan agreement.
For the year ended December 31, 2016 and for the period from the date of the IPO through December 31, 2015, the Company was charged
$11.8 million
and
$0.7 million
, respectively, by IAC for services rendered pursuant to a services agreement. These amounts were paid in full by the Company at December 31, 2016 and 2015, respectively. The Company entered into a sublease arrangement in a data center with an IAC subsidiary prior to the IPO; the Company paid this IAC subsidiary approximately
$1.2 million
for the year ended December 31, 2016.
Master Transaction Agreement
The master transaction agreement sets forth the agreements between IAC and the Company regarding the principal transactions necessary to separate our business from IAC, as well as govern certain aspects of our relationship with IAC post IPO. Under the master transaction agreement, the Company agrees to assume all of the assets and liabilities related to its business and agrees to indemnify IAC against any losses arising out of any breach by the Company of the master transaction agreement or the other transaction related agreements described below. IAC also agrees to indemnify the Company against losses arising out of any breach by IAC of the master transaction agreement or any of the other transaction related agreements.
Investor Rights Agreement
Under the investor rights agreement, the Company provides IAC with (i) specified registration and other rights relating to its shares of our common stock and (ii) anti-dilution rights. See "Note 9—Shareholders' Equity" for additional information on the anti-dilution rights.
Tax Sharing Agreement
The tax sharing agreement governs the rights, responsibilities, and obligations of the Company and IAC with respect to tax liabilities and benefits, entitlements to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S. federal, state, local and foreign income taxes. Under the tax sharing agreement, the Company is generally responsible and required to indemnify IAC for: (i) all taxes imposed with respect to any consolidated, combined or unitary tax return of IAC or one of its subsidiaries that includes the Company or any of our subsidiaries to the extent attributable to the Company or any of our subsidiaries, as determined under the tax sharing agreement, and (ii) all taxes imposed with respect to any of the Company's subsidiaries’ consolidated, combined, unitary or separate tax returns.
At December 31, 2016, the Company had a tax receivable of
$9.0 million
due from IAC pursuant to the tax sharing agreement, which is included in "Other current assets" in the accompanying consolidated balance sheet. Payments made to IAC during 2016 pursuant to this agreement were
$19.9 million
.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
Services Agreement
The services agreement governs services that IAC provides to the Company including, among others: (i) assistance with certain legal, finance, internal audit, treasury, information technology support, insurance and tax affairs, including assistance with certain public company reporting obligations; (ii) payroll processing services; (iii) tax compliance services; and (iv) such other services as to which IAC and the Company may agree. In addition, under the services agreement the Company provides IAC informational technology services and such other services as to which IAC and the Company may agree. The services agreement had an initial term of
one year
from the date of the IPO, and provides for automatic renewals for additional
one year
periods, subject to IAC’s continued ownership of a majority of the combined voting power of the Company's voting stock.
Employee Matters Agreement
The employee matters agreement covers a wide range of compensation and benefit issues related to the allocation of liabilities associated with: (i) employment or termination of employment, (ii) employee benefit plans and (iii) equity awards. Under the employee matters agreement, the Company's employees participate in IAC’s U.S. health and welfare plans, 401(k) plan and flexible benefits plan and the Company reimburses IAC for the costs of such participation. In the event IAC no longer retains shares representing at least
80%
of the aggregate voting power of shares entitled to vote in the election of the Company’s Board of Directors, Match Group will no longer participate in IAC’s employee benefit plans, but will establish its own employee benefit plans that will be substantially similar to the plans sponsored by IAC.
The employee matters agreement also requires the Company to reimburse IAC for the cost of any IAC equity awards held by Match Group’s employees and former employees and that IAC may elect to receive payment either in cash or the Company common stock. With respect to equity awards in the Company's subsidiaries, IAC may require those awards to be settled in either shares of IAC’s common stock or in shares of the Company's common stock and, to the extent shares of IAC common stock are issued in settlement, the Company will reimburse IAC for the cost of those shares by issuing to IAC additional shares of the Company's common stock.
During the year ended December 31, 2016,
1.0 million
shares of Company common stock were issued to IAC pursuant to the employee matters agreement;
0.5 million
of which were issued as reimbursement for shares of IAC common stock issued in connection with the exercise and settlement of equity awards denominated in shares of a subsidiary of the Company; and
0.5 million
of which were issued as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by Company employees.
IAC Subordinated Loan Facility
Prior to the IPO, the Company entered into an uncommitted subordinated loan facility with IAC (the "IAC Subordinated Loan Facility"), which allows the Company to make one or more requests to IAC to borrow funds from it. If IAC agrees to fulfill any such borrowing request from the Company, such indebtedness will be incurred in accordance with the terms of the IAC Subordinated Loan Facility. Any indebtedness outstanding under the IAC Subordinated Loan Facility will be by its terms subordinated in right of payment to the obligations under the Match Group Credit Agreement and the Match Group Senior Notes, and will bear interest at the applicable rate set forth in the pricing grid in the Match Group Credit Agreement, which rate is based on the Company's consolidated net leverage ratio at the time of borrowing, plus an additional amount to be agreed upon. The IAC Subordinated Loan Facility has a scheduled final maturity date of no earlier than
90 days
after the maturity date of the Match Group Credit Facility or the latest maturity date in respect of any class of Term Loans outstanding under the Match Group Credit Agreement. At
December 31, 2016
, the Company had
no
indebtedness outstanding under the IAC Subordinated Loan Facility.
Relationship with IAC pre-IPO
For periods prior to the IPO, the Company's consolidated and combined statement of operations includes allocations of general and administrative costs, including stock-based compensation expense, related to IAC's accounting, treasury, legal, tax, corporate support and internal audit functions. These allocations were based on Match Group's revenue as a percentage of IAC's total revenue. Allocated general and administrative costs, inclusive of stock-based compensation expense, were
$6.9 million
and
$6.6 million
in the years ended December 31,
2015
and
2014
, respectively, and are included in "General and administrative expense" in the accompanying consolidated and combined statement of operations. It is not practicable to
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
determine the actual expenses that would have been incurred for these services had the Company operated as a stand-alone entity. Management considers the allocation method to be reasonable.
The Company and IAC entered into certain arrangements in the ordinary course of business, for: (i) the leasing of office space for certain of our businesses at properties owned by IAC, for which we paid IAC approximately
$1.7 million
and
$1.0 million
for the years ended December 31, 2015 and 2014, respectively, and (ii) the subleasing of space in a data center from an IAC subsidiary, for which we paid such IAC subsidiary approximately
$1.2 million
for each of the years ended December 31, 2015 and 2014, respectively.
The portion of interest income reflected in the consolidated and combined statement of operations that is intercompany in nature was
$3.8 million
and
$2.1 million
for the years ended December 31,
2015
and
2014
, respectively.
The following summarizes the components of the net (increase)/decrease in IAC's investment in the Match Group prior to the IPO for the years ended December 31,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2015
|
|
2014
|
|
|
Capital contribution from IAC to partially fund the acquisition of PlentyOfFish
|
$
|
(155,000
|
)
|
|
$
|
—
|
|
Cash transfers to IAC related to its centrally managed U.S. treasury management function, acquisitions and cash expenses paid by IAC on behalf of Match Group, net
|
126,275
|
|
|
165,782
|
|
Taxes
|
(57,041
|
)
|
|
(54,761
|
)
|
Interest income (expense), net
(a)
|
3,813
|
|
|
(12,936
|
)
|
Allocation of general and administrative expense
|
(6,898
|
)
|
|
(6,648
|
)
|
Net (increase) decrease in IAC's investment in the Match Group
|
$
|
(88,851
|
)
|
|
$
|
91,437
|
|
______________________
|
|
(a)
|
Does not include long-term debt, related party.
|
Dividend to IAC
During the fourth quarter of 2015, the Company made a dividend to IAC in the amount of
$1.5 billion
, of which
$1.0 billion
was paid in cash and
$445.3 million
was assumed in the Match Exchange Offer. See "Note 8—Long-Term Debt" for additional information on this note exchange.
NOTE 18—BENEFIT PLANS
Match Group employees are eligible to participate in a retirement savings plan sponsored by IAC in the United States, which is qualified under Section 401(k) of the Internal Revenue Code. Under the IAC/InterActiveCorp Retirement Savings Plan (the "Plan"), participating employees may contribute up to
50%
of their pre-tax earnings, but not more than statutory limits. The employer match under the Plan is
fifty cents for each dollar
a participant contributes in this Plan, with a maximum contribution of
3%
of a participant's eligible earnings, but not more than statutory limits. Matching contributions are invested in the same manner as each participant’s voluntary contributions in the investment options provided under the Plan. An investment option in the Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock. Matching contributions under the Plan for the years ended
December 31, 2016
,
2015
and
2014
were
$2.4 million
,
$2.1 million
and
$1.6 million
, respectively. The increase in matching contributions in 2016 is due primarily to an increase in participation in the Plan due to increased headcount. The increase in matching contributions in
2015
was due primarily to an increase in participation in the Plan due to acquisitions and increased headcount.
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, 2016
,
2015
and
2014
were
$1.9 million
,
$2.0 million
, and
$2.1 million
, respectively.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 19—STREAMLINING OF TECHNOLOGY SYSTEMS AND CONSOLIDATION OF EUROPEAN OPERATIONS
The Company has been in the process of modernizing and streamlining its underlying Dating technology infrastructure that supports both its mobile and desktop platforms, as well as consolidating its European operations from
seven
principal locations down to
three
. The project is complete at
December 31, 2016
. For the year ended
December 31, 2016
, the Company incurred
$4.9 million
in costs related to this project, compared to
$16.8 million
for the year ended December 31, 2015. A summary of the costs incurred, payments made and the related accruals at December 31, 2016 and 2015 is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Severance
|
|
Professional Fees & Other
|
|
Total
|
|
(In thousands)
|
Accrual as of January 1
|
$
|
3,013
|
|
|
$
|
564
|
|
|
$
|
3,577
|
|
Charges incurred
|
345
|
|
|
4,576
|
|
|
4,921
|
|
Payments made
|
(2,404
|
)
|
|
(4,844
|
)
|
|
(7,248
|
)
|
Accrual as of December 31
|
$
|
954
|
|
|
$
|
296
|
|
|
$
|
1,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Severance
|
|
Professional Fees & Other
|
|
Total
|
|
(In thousands)
|
Accrual as of January 1
|
$
|
795
|
|
|
$
|
933
|
|
|
$
|
1,728
|
|
Charges incurred
|
8,350
|
|
|
8,417
|
|
|
16,767
|
|
Payments made
|
(6,132
|
)
|
|
(8,786
|
)
|
|
(14,918
|
)
|
Accrual as of December 31
|
$
|
3,013
|
|
|
$
|
564
|
|
|
$
|
3,577
|
|
The costs are allocated as follows in the statement of operations:
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Cost of revenue
|
$
|
566
|
|
|
$
|
2,947
|
|
Selling and marketing expense
|
560
|
|
|
1,678
|
|
General and administrative expense
|
1,647
|
|
|
8,160
|
|
Product development expense
|
2,148
|
|
|
3,982
|
|
Total
|
$
|
4,921
|
|
|
$
|
16,767
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 20—CONSOLIDATED AND COMBINED FINANCIAL STATEMENT DETAILS
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Other current assets:
|
|
|
|
Prepaid expenses
|
$
|
14,382
|
|
|
$
|
18,983
|
|
Other
|
29,083
|
|
|
20,066
|
|
Other current assets
|
$
|
43,465
|
|
|
$
|
39,049
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Property and equipment, net:
|
|
|
|
Computer equipment and capitalized software
|
$
|
120,906
|
|
|
$
|
100,325
|
|
Leasehold improvements
|
20,742
|
|
|
11,342
|
|
Furniture and other equipment
|
5,788
|
|
|
4,040
|
|
Projects in progress
|
6,787
|
|
|
3,004
|
|
|
154,223
|
|
|
118,711
|
|
Accumulated depreciation and amortization
|
(84,495
|
)
|
|
(70,644
|
)
|
Property and equipment, net
|
$
|
69,728
|
|
|
$
|
48,067
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Accrued expenses and other current liabilities:
|
|
|
|
Accrued employee compensation and benefits
|
$
|
35,135
|
|
|
$
|
30,012
|
|
Accrued advertising expense
|
20,812
|
|
|
23,201
|
|
Contingent consideration
|
18,972
|
|
|
—
|
|
Other
|
42,572
|
|
|
65,343
|
|
Accrued expenses and other current liabilities
|
$
|
117,491
|
|
|
$
|
118,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Other income (expense), net:
|
|
|
|
|
|
Foreign currency exchange gains, net
|
$
|
19,955
|
|
|
$
|
2,387
|
|
|
$
|
2,583
|
|
Foreign currency exchange gain related to Euro denominated long-term debt - related party
|
—
|
|
|
7,558
|
|
|
8,307
|
|
Interest income
|
633
|
|
|
4,715
|
|
|
2,898
|
|
Other
|
(12,696
|
)
|
|
(2,773
|
)
|
|
(1,178
|
)
|
Other income, net
|
$
|
7,892
|
|
|
$
|
11,887
|
|
|
$
|
12,610
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
NOTE 21—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, 2016
|
|
|
|
|
|
|
|
Revenue
|
$
|
285,283
|
|
|
$
|
301,119
|
|
|
$
|
316,447
|
|
|
$
|
319,677
|
|
Cost of revenue
|
53,677
|
|
|
56,547
|
|
|
61,161
|
|
|
62,561
|
|
Operating income
|
29,188
|
|
|
73,668
|
|
|
91,754
|
|
|
111,298
|
|
Net earnings
|
7,219
|
|
|
34,101
|
|
|
56,704
|
|
|
73,989
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
7,152
|
|
|
34,078
|
|
|
56,410
|
|
|
73,811
|
|
Per share information attributable to the Match Group, Inc. shareholders:
|
|
|
|
|
Basic
(a)
|
$
|
0.03
|
|
|
$
|
0.14
|
|
|
$
|
0.22
|
|
|
$
|
0.29
|
|
Diluted
(a)
|
$
|
0.03
|
|
|
$
|
0.13
|
|
|
$
|
0.21
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
Revenue
|
$
|
235,069
|
|
|
$
|
248,817
|
|
|
$
|
268,971
|
|
|
$
|
267,574
|
|
Cost of revenue
|
38,953
|
|
|
44,529
|
|
|
47,636
|
|
|
46,870
|
|
Operating income
|
27,040
|
|
|
40,522
|
|
|
58,356
|
|
|
67,638
|
|
Net earnings
|
25,880
|
|
|
23,431
|
|
|
35,437
|
|
|
35,739
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
26,206
|
|
|
23,325
|
|
|
35,259
|
|
|
35,593
|
|
Per share information attributable to the Match Group, Inc. shareholders:
|
|
|
|
|
Basic
(a)
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
Diluted
(a)
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
0.20
|
|
|
$
|
0.16
|
|
______________________
|
|
(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.
|