NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Match Group, Inc., through its portfolio companies, is a leading provider of digital technologies designed to help people make meaningful connections. Our global portfolio of brands includes Tinder®, Match®, Meetic®, OkCupid®, Hinge®, Pairs™, PlentyOfFish®, OurTime®, Azar®, Hakuna Live™, and more, each built to increase our users’ likelihood of connecting with others. Through our trusted brands, we provide tailored services to meet the varying preferences of our users. Our services are available in over 40 languages to our users all over the world. Match Group has one operating segment, Connections, which is managed as a portfolio of brands.
As used herein, “Match Group,” the “Company,” “we,” “our,” “us,” and similar terms refer to Match Group, Inc. and its subsidiaries, unless the context indicates otherwise.
Basis of Presentation and Consolidation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated.
In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in management’s opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of our consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 included in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17, 2021.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments, and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates, judgments, and assumptions impact the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates and judgments including those related to: the fair values of cash equivalents, the carrying value of accounts receivable, including the determination of the allowance for credit losses; the determination of revenue reserves; the carrying value of right-of-use assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the recoverability of goodwill and indefinite-lived intangible assets; the fair value of equity securities without readily determinable fair values; contingencies; unrecognized tax benefits; the valuation allowance for deferred income tax assets; 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.
Accounting for Investments and Equity Securities
Investments in equity securities, other than those of our consolidated subsidiaries, are accounted for at fair value or under the measurement alternative of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, with any changes to fair value recognized within other income (expense), net each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or a similar investment of the same issuer; value is generally determined based on a
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors we consider in making this determination include negative change in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of our investments in equity securities, which require judgment and the use of estimates. When our assessment indicates that the fair value of the investment is below the carrying value, the Company writes down the security to its fair value and records the corresponding charge within other income (expense), net.
Revenue Recognition
Revenue is recognized when control of the promised services are transferred to our customers, and in the amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
Deferred Revenue
Deferred revenue consists of advance payments that are received or are contractually due in advance of the Company's performance. The Company’s deferred revenue is reported on a contract by contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of our performance obligation is one year or less. The current deferred revenue balance as of December 31, 2020 was $239.1 million. During the nine months ended September 30, 2021, the Company recognized $237.7 million of revenue that was included in the deferred revenue balance as of December 31, 2020. The current deferred revenue balance at September 30, 2021 is $267.1 million. At September 30, 2021 and December 31, 2020, there was no non-current portion of deferred revenue.
Practical Expedients and Exemptions
As permitted under the practical expedient available under ASU No. 2014-09, Revenue from Contracts with Customers, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.
Disaggregation of Revenue
The following table presents disaggregated revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Direct Revenue:
|
|
|
|
|
|
|
|
Americas
|
$
|
393,613
|
|
|
$
|
336,792
|
|
|
$
|
1,112,263
|
|
|
$
|
916,730
|
|
Europe
|
217,680
|
|
|
181,627
|
|
|
603,281
|
|
|
492,167
|
|
APAC and Other
|
174,432
|
|
|
109,847
|
|
|
419,684
|
|
|
300,934
|
|
Total Direct Revenue
|
785,725
|
|
|
628,266
|
|
|
2,135,228
|
|
|
1,709,831
|
|
Indirect Revenue (principally advertising revenue)
|
16,110
|
|
|
11,504
|
|
|
41,979
|
|
|
30,031
|
|
Total Revenue
|
$
|
801,835
|
|
|
$
|
639,770
|
|
|
$
|
2,177,207
|
|
|
$
|
1,739,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Recent Accounting Pronouncements
Accounting pronouncements adopted by the Company
In August 2020, the FASB issued ASU No. 2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the discount resulting from the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, which results in increased dilutive securities as the assumption of cash settlement of the notes is not available for the purpose of calculating earnings per share. The provisions of ASU 2020-06 are effective for reporting periods beginning after December 15, 2021, with early adoption permitted for reporting periods beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis.
The Company early adopted ASU No. 2020-06 as of January 1, 2021 on a fully retrospective basis. The impact of adopting ASU No. 2020-06 is as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020
|
|
Nine Months Ended September 30, 2020
|
|
Prior to the adoption of ASU No. 2020-06
|
|
After adoption of ASU No. 2020-06
|
|
Effect of adoption of ASU No. 2020-06
|
|
Prior to the adoption of ASU No. 2020-06
|
|
After adoption of ASU No. 2020-06
|
|
Effect of adoption of ASU No. 2020-06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Statement of operations impacts
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
$
|
43,189
|
|
|
$
|
32,009
|
|
|
$
|
(11,180)
|
|
|
$
|
131,485
|
|
|
$
|
98,654
|
|
|
$
|
(32,831)
|
|
Income tax provision
|
$
|
(23,568)
|
|
|
$
|
(26,122)
|
|
|
$
|
(2,554)
|
|
|
$
|
(7,257)
|
|
|
$
|
(14,776)
|
|
|
$
|
(7,519)
|
|
Net earnings from continuing operations
|
$
|
131,487
|
|
|
$
|
140,113
|
|
|
$
|
8,626
|
|
|
$
|
413,732
|
|
|
$
|
439,044
|
|
|
$
|
25,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share from continuing operations:
|
Basic
|
$
|
0.51
|
|
|
$
|
0.54
|
|
|
$
|
0.03
|
|
|
$
|
1.69
|
|
|
$
|
1.81
|
|
|
$
|
0.12
|
|
Diluted
|
$
|
0.45
|
|
|
$
|
0.47
|
|
|
$
|
0.02
|
|
|
$
|
1.53
|
|
|
$
|
1.59
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average dilutive shares outstanding
|
289,950
|
|
|
305,696
|
|
|
15,746
|
|
|
225,399
|
|
|
239,398
|
|
|
13,999
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to the adoption of ASU No. 2020-06
|
|
After adoption of ASU No. 2020-06
|
|
Effect of adoption of ASU No. 2020-06
|
|
|
|
|
|
|
|
(In thousands)
|
Balance sheet impacts at December 31, 2020:
|
|
|
|
|
|
Non-current deferred tax asset
|
$
|
224,013
|
|
|
$
|
293,487
|
|
|
$
|
69,474
|
|
Long-term debt, net
|
$
|
3,534,706
|
|
|
$
|
3,840,930
|
|
|
$
|
306,224
|
|
Additional paid-in capital
|
$
|
7,394,646
|
|
|
$
|
7,089,007
|
|
|
$
|
(305,639)
|
|
Retained deficit
|
$
|
(8,491,126)
|
|
|
$
|
(8,422,237)
|
|
|
$
|
68,889
|
|
The impact of the adoption of ASU No. 2020-06 at December 31, 2019 resulted in an increase to retained earnings of $35.1 million and a decrease in additional paid-in capital of $305.6 million.
As the adoption of ASU No. 2020-06 did not impact cash, the operating cash flows from continuing operations were not impacted. Certain reconciliation line items to net earnings from continuing operations were adjusted to reflect the impact of the adoption of ASU No. 2020-06.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—INCOME TAXES
At the end of each interim period, the Company estimates the annual effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects, are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of beginning-of-the-year deferred tax assets in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.
The computation of the estimated annual effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or our tax environment changes. To the extent that the estimated annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in the income tax provision in the quarter in which the change occurs.
For the three months ended September 30, 2021 and 2020, the Company recorded an income tax provision of $18.6 million and $26.1 million, respectively. The effective tax rates in both three month periods benefited from excess tax benefits generated by the exercise or vesting of stock-based awards. For the nine months ended September 30, 2021 and 2020, the Company recorded an income tax provision of $38.2 million and $14.8 million, respectively. The effective tax rates in both nine-month periods benefited from excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset in the 2020 period by a non-recurring increase in the valuation allowance for foreign tax credits.
Match Group is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include a review of the timing and amount of income and deductions, and the allocation of such income and deductions among various tax jurisdictions. The Internal Revenue Service (“IRS”) has substantially completed its audit of the Company’s federal income tax returns for the years ended December 31, 2013 through 2017, resulting in reductions to the manufacturing tax deduction and research credits claimed. The statute of limitations for the years 2013 to 2017 has been extended to June 30, 2022. The IRS has begun its audit of the years ended December 31, 2018 through 2019. We are no longer subject to U.S.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
federal income tax examinations for years prior to 2013. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009. Although we believe that we have adequately reserved for our uncertain tax positions, the final tax outcome of these matters may vary significantly from our estimates.
At both September 30, 2021 and December 31, 2020, unrecognized tax benefits, including interest and penalties, were $48.8 million and $46.7 million, respectively. If unrecognized tax benefits at September 30, 2021 are subsequently recognized, income tax expense would be reduced by $42.8 million, net of related deferred tax assets and interest. The comparable amount as of December 31, 2020 was $41.8 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $1.8 million by September 30, 2022 due to settlements and expirations of statutes of limitations, all of which would reduce the income tax provision.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals of interest and penalties for the three months ended September 30, 2021 and 2020 were not material. At September 30, 2021 and December 31, 2020, noncurrent income taxes payable includes accrued interest and penalties of $1.5 million and $1.9 million, respectively.
As a result of the Company’s separation from IAC/InterActiveCorp (“IAC”), temporary differences and tax attributes from our federal and consolidated state income tax filings were allocated between the Company and IAC. The allocation attributable to IAC resulted in an increase to the Company’s net deferred tax asset and additional paid-in capital. A preliminary allocation attributable to the Company was recorded in 2020. Any subsequent adjustment to allocated tax attributes will be recognized as an adjustment to deferred taxes and additional paid-in capital. See “Note 11—Related Party Transactions” for amounts outstanding under the tax matters agreement with IAC.
NOTE 3—DISCONTINUED OPERATIONS
Pursuant to the terms of the transaction agreement dated as of December 19, 2019 (as amended, the “Transaction Agreement”), on June 30, 2020, the companies formerly known as Match Group, Inc. (referred to as “Former Match Group”) and IAC/InterActiveCorp (referred to as “Former IAC”) completed the separation of the Company from IAC through a series of transactions that resulted in two, separate public companies—(1) Match Group, which consists of the businesses of Former Match Group and certain financing subsidiaries previously owned by Former IAC, and (2) IAC, formerly known as IAC Holdings, Inc., consisting of Former IAC’s businesses other than Match Group (the “Separation”). Accordingly, the businesses of Former IAC other than Match Group are presented as discontinued operations.
The key components of loss from discontinued operations for the three and nine months ended September 30, 2021 and 2020 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Revenue
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,410,485
|
|
Operating costs and expenses
|
|
|
—
|
|
|
—
|
|
|
(1,840,178)
|
|
Operating loss
|
|
|
—
|
|
|
—
|
|
|
(429,693)
|
|
Interest expense
|
|
|
—
|
|
|
—
|
|
|
(3,772)
|
|
Other expense
|
|
|
—
|
|
|
—
|
|
|
(2,503)
|
|
Income tax benefit
|
|
|
508
|
|
|
509
|
|
|
69,898
|
|
Earnings (loss) from discontinued operations
|
|
|
$
|
508
|
|
|
$
|
509
|
|
|
$
|
(366,070)
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 4—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
(In thousands)
|
Goodwill
|
|
$
|
2,427,450
|
|
|
$
|
1,270,532
|
|
Intangible assets with indefinite lives
|
|
585,679
|
|
|
226,605
|
|
Intangible assets with definite lives, net
|
|
207,323
|
|
|
4,295
|
|
Total goodwill and intangible assets, net
|
|
$
|
3,220,452
|
|
|
$
|
1,501,432
|
|
The following table presents the balance of goodwill, including the changes in the carrying value of goodwill, for the nine months ended September 30, 2021:
|
|
|
|
|
|
|
(In thousands)
|
Balance at December 31, 2020
|
$
|
1,270,532
|
|
Additions
|
1,243,331
|
|
Foreign Exchange Translation
|
(86,413)
|
|
|
|
Balance at September 30, 2021
|
$
|
2,427,450
|
|
On June 17, 2021, Match Group completed the acquisition of all capital stock of Hyperconnect, Inc. (“Hyperconnect”), a leading social discovery and video technology company based in Seoul, South Korea. The acquisition increases our presence in certain Asian markets and enhances the real-time video capabilities of Match Group. The accounting purchase price was $1.75 billion, net of cash acquired, which consists of $863.3 million of cash, net of cash acquired, and 5.9 million shares of Match Group common stock at a basis of the closing market price on the acquisition date. The purchase price has been preliminarily allocated to goodwill of $1.2 billion that is not deductible for tax purposes, intangible assets of $615.0 million with a related deferred tax liability of $135.4 million, and $31.2 million of other net assets. The allocation of the accounting purchase price is preliminary and will be finalized within the allowable measurement period.
Intangible assets with indefinite lives consist of trade names and trademarks acquired in various business acquisitions. At September 30, 2021 and December 31, 2020, intangible assets with definite lives are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Weighted-Average Useful Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Customer lists
|
|
$
|
128,304
|
|
|
$
|
(8,406)
|
|
|
$
|
119,898
|
|
|
4.8
|
Patents and technology
|
|
101,001
|
|
|
(13,893)
|
|
|
87,108
|
|
|
4.2
|
Trade names
|
|
5,140
|
|
|
(4,946)
|
|
|
194
|
|
|
1.3
|
Other
|
|
3,426
|
|
|
(3,303)
|
|
|
123
|
|
|
2.8
|
Total
|
|
$
|
237,871
|
|
|
$
|
(30,548)
|
|
|
$
|
207,323
|
|
|
4.6
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
|
Weighted-Average Useful Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Customer lists
|
|
$
|
288
|
|
|
$
|
(288)
|
|
|
$
|
—
|
|
|
—
|
|
Patents and technology
|
|
11,044
|
|
|
(6,943)
|
|
|
4,101
|
|
|
9.3
|
Trade names
|
|
5,114
|
|
|
(5,114)
|
|
|
—
|
|
|
—
|
|
Other
|
|
3,400
|
|
|
(3,206)
|
|
|
194
|
|
|
3.0
|
Total
|
|
$
|
19,846
|
|
|
$
|
(15,551)
|
|
|
$
|
4,295
|
|
|
9.0
|
At September 30, 2021, future amortization of intangible assets with definite lives is estimated to be as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Remainder of 2021
|
|
$
|
12,832
|
|
2022
|
|
51,256
|
2023
|
|
48,989
|
2024
|
|
47,063
|
2025
|
|
34,862
|
2026 and thereafter
|
|
12,321
|
Total
|
|
$
|
207,323
|
|
NOTE 5—FINANCIAL INSTRUMENTS
Equity securities without readily determinable fair values
At both September 30, 2021 and December 31, 2020, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $14.2 million, and is included in “Other non-current assets” in the accompanying consolidated balance sheet. The cumulative downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values through September 30, 2021 were $2.1 million. For both the nine months ended September 30, 2021 and 2020, there were no adjustments to the carrying value of equity securities without readily determinable fair values.
For all equity securities without readily determinable fair values as of September 30, 2021 and December 31, 2020, the Company has elected the measurement alternative. For the three months ended September 30, 2021 and 2020, under the measurement alternative election, the Company did not identify any fair value adjustments using observable price changes in orderly transactions for an identical or similar investment of the same issuer.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active, and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.
The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
Total
Fair Value
Measurements
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
1,780
|
|
|
$
|
—
|
|
|
|
|
$
|
1,780
|
|
Time deposits
|
—
|
|
|
6,948
|
|
|
|
|
6,948
|
|
Short-term investments:
|
|
|
|
|
|
|
|
Time deposits
|
—
|
|
|
11,874
|
|
|
|
|
11,874
|
|
Total
|
$
|
1,780
|
|
|
$
|
18,822
|
|
|
|
|
$
|
20,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
Total
Fair Value
Measurements
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
147,615
|
|
|
$
|
—
|
|
|
|
|
$
|
147,615
|
|
Time deposits
|
—
|
|
|
50,000
|
|
|
|
|
50,000
|
|
Total
|
$
|
147,615
|
|
|
$
|
50,000
|
|
|
|
|
$
|
197,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis
The Company’s non-financial assets, such as goodwill, intangible assets, property and equipment, and right-of-use assets, are adjusted to fair value only when an impairment charge is recognized. The Company’s financial assets, comprised of equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Long-term debt, net (a) (b)
|
$
|
(3,847,896)
|
|
|
$
|
(6,385,431)
|
|
|
$
|
(3,840,930)
|
|
|
$
|
(6,267,976)
|
|
______________________
(a)At September 30, 2021 and December 31, 2020, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $44.6 million and $51.6 million, respectively.
(b)At September 30, 2021, the fair value of the of the 2022 Exchangeable Notes, 2026 Exchangeable Notes, and 2030 Exchangeable Notes is $1,846.4 million, $1,080.4 million, and $1,148.0 million, respectively. At December 31, 2020, the fair value of the of the 2022 Exchangeable Notes, 2026 Exchangeable Notes, and 2030 Exchangeable Notes is $1,780.3 million, $1,052.1 million, and $1,113.9 million, respectively.
At September 30, 2021 and December 31, 2020, the fair value of long-term debt, net, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.
Embedded derivative associated with repurchase of 2022 Exchangeable Notes
On September 22, 2021, we entered into privately negotiated agreements with a limited number of holders of the 2022 Exchangeable Notes to repurchase a portion of the outstanding 2022 Exchangeable Notes. The Company determined that the terms of the repurchase agreements included an embedded derivative, indexed to the value of the Company’s stock, that required bifurcation and separate accounting as a derivative liability under ASC Topic 815, Derivatives and Hedging. The Company measures embedded derivatives at their estimated fair value and recognizes changes in their estimated fair value in net income during the current reporting period.
At the inception of these agreements on September 22, 2021, the fair value of the embedded derivative was zero and the number of shares to be issued to holders of the 2022 Exchangeable Notes was not yet determinable. At September 30, 2021, under the terms of the agreements, the number of shares to be issued became fixed at 5.5 million. The corresponding loss of $38.6 million, related to the change in the fair value of the embedded derivative, which was driven by an increase in our stock price from September 22, 2021 to September 30, 2021, was recorded within other expense, net in the statement of operations. The fair value of the embedded derivative of $38.6 million is included as a liability within accrued expenses and other current liabilities on the balance sheet as of September 30, 2021.
We completed the repurchase of a portion of the 2022 Exchangeable Notes on October 4, 2021 and settled the transaction that created the embedded derivative. Refer to “Note 12—Subsequent Events” for additional information on the closing. We will recognize a gain from the decrease in our stock price from September 30, 2021 to October 4, 2021 in the fourth quarter of 2021 related to further changes in the fair value of this derivative prior to settlement of the related agreements.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 6—LONG-TERM DEBT, NET
Long-term debt consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
(In thousands)
|
Revolving Credit Facility due February 13, 2025 (the “Credit Facility”)
|
$
|
—
|
|
|
$
|
—
|
|
Term Loan due February 13, 2027 (the “Term Loan”)
|
425,000
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.00% Senior Notes due December 15, 2027 (the “5.00% Senior Notes”); interest payable each June 15 and December 15
|
450,000
|
|
|
450,000
|
|
4.625% Senior Notes due June 1, 2028 (the “4.625% Senior Notes”); interest payable each June 1 and December 1
|
500,000
|
|
|
500,000
|
|
5.625% Senior Notes due February 15, 2029 (the “5.625% Senior Notes”); interest payable each February 15 and August 15
|
350,000
|
|
|
350,000
|
|
4.125% Senior Notes due August 1, 2030 (the “4.125% Senior Notes”); interest payable each February 1 and August 1
|
500,000
|
|
|
500,000
|
|
0.875% Exchangeable Senior Notes due October 1, 2022 (the “2022 Exchangeable Notes”); interest payable each April 1 and October 1
|
517,499
|
|
|
517,500
|
|
0.875% Exchangeable Senior Notes due June 15, 2026 (the “2026 Exchangeable Notes”); interest payable each June 15 and December 15
|
575,000
|
|
|
575,000
|
|
2.00% Exchangeable Senior Notes due January 15, 2030 (the “2030 Exchangeable Notes”); interest payable each January 15 and July 15
|
575,000
|
|
|
575,000
|
|
Total debt
|
3,892,499
|
|
|
3,892,500
|
|
|
|
|
|
Less: Unamortized original issue discount
|
5,422
|
|
|
6,029
|
|
Less: Unamortized debt issuance costs
|
39,181
|
|
|
45,541
|
|
Total long-term debt, net
|
$
|
3,847,896
|
|
|
$
|
3,840,930
|
|
Credit Facility and Term Loan
Our wholly-owned subsidiary, Match Group Holdings II, LLC (“MG Holdings II”) is the borrower under a credit agreement (as amended, the “Credit Agreement”) that provides for the Credit Facility and the Term Loan.
The Credit Facility has a borrowing capacity of $750 million and matures on February 13, 2025. At both September 30, 2021 and December 31, 2020, there were no outstanding borrowings under the Credit Facility. At September 30, 2021 there was $0.4 million in outstanding letters of credit and $749.6 million of availability under the Credit Facility. At December 31, 2020 there was $0.2 million in outstanding letters of credit and $749.8 million of availability under the Credit Facility. The annual commitment fee on undrawn funds, which is based on MG Holdings II’s consolidated net leverage ratio, was 25 basis points as of September 30, 2021. Borrowings under the Credit Facility bear interest, at MG Holdings II’s option, at a base rate or LIBOR, in each case plus an applicable margin, based on MG Holdings II’s consolidated net leverage ratio. If MG Holdings II borrows under the Credit Facility, it will be required to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0.
At both September 30, 2021 and December 31, 2020, the outstanding balance on the Term Loan was $425 million. The Term Loan bears interest at LIBOR plus 1.75%, which was 1.87% and 1.96% at September 30, 2021 and December 31, 2020, respectively. The Term Loan matures on February 13, 2027. Interest payments are due at least quarterly through the term of the loan. The Term Loan provides for annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio as set forth in the Credit Agreement.
On March 26, 2021, MG Holdings II amended the Credit Agreement to provide for a $400 million Delayed Draw Term Loan, the proceeds of which could have been used only to finance a portion of the consideration for
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
the acquisition of Hyperconnect, Inc. The Delayed Draw Term Loan was terminated effective June 18, 2021, in accordance with its terms.
The Credit Agreement includes covenants that would limit the ability of MG Holdings II to pay dividends, make distributions, or repurchase MG Holdings II’s stock in the event MG Holdings II’s secured net leverage ratio exceeds 2.0 to 1.0, while the Term Loan remains outstanding and, thereafter, if MG Holdings II’s consolidated net leverage ratio exceeds 4.0 to 1.0, or if an event of default has occurred. The Credit Agreement includes additional covenants that limit the ability of MG Holdings II and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. Obligations under the Credit Facility and Term Loan are unconditionally guaranteed by certain MG Holdings II wholly-owned domestic subsidiaries and are also secured by the stock of certain MG Holdings II domestic and foreign subsidiaries. The Term Loan and outstanding borrowings, if any, under the Credit Facility, rank equally with each other, and have priority over the Senior Notes to the extent of the value of the assets securing the borrowings under the Credit Agreement.
Senior Notes
The 5.00% Senior Notes were issued on December 4, 2017. At any time prior to December 15, 2022, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 4.625% Senior Notes were issued on May 19, 2020. At any time prior to June 1, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 5.625% Senior Notes were issued on February 15, 2019. At any time prior to February 15, 2024, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 4.125% Senior Notes were issued on February 11, 2020. At any time prior to May 1, 2025, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The indenture governing the 5.00% Senior Notes contains covenants that would limit MG Holdings II’s ability to pay dividends or to make distributions and repurchase or redeem MG Holdings II’s stock in the event a default has occurred or MG Holdings II’s consolidated leverage ratio (as defined in the indenture) exceeds 5.0 to 1.0. No such limitations were in effect at September 30, 2021. There are additional covenants in the 5.00% Senior Notes indenture that limit the ability of MG Holdings II and its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MG Holdings II is not in compliance with specified financial ratios, and (ii) incur liens, enter into agreements restricting their ability to pay dividends, enter into transactions with affiliates, or consolidate, merge or sell substantially all of their assets. The indentures governing the 4.125%, 4.625%, and 5.625% Senior Notes are less restrictive than the indenture governing the 5.00% Senior Notes and generally only limit MG Holdings II’s and its subsidiaries’ ability to, among other things, create liens on assets, or consolidate, merge, sell or otherwise dispose of all or substantially all of their assets.
The Senior Notes all rank equally in right of payment.
Exchangeable Notes
During 2017, Match Group FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, issued $517.5 million aggregate principal amount of its 2022 Exchangeable Notes. During 2019, Match Group FinanceCo 2, Inc. and Match Group FinanceCo 3, Inc., direct, wholly-owned subsidiaries of the Company, issued
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
$575.0 million aggregate principal amount of its 2026 Exchangeable Notes, and $575.0 million aggregate principal amount of its 2030 Exchangeable Notes, respectively.
The 2022, 2026, and 2030 Exchangeable Notes (collectively the “Exchangeable Notes”) are guaranteed by the Company but are not guaranteed by MG Holdings II or any of its subsidiaries.
The following table presents details of the exchangeable features:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares of the Company’s Common Stock into which each $1,000 of Principal of the Exchangeable Notes is Exchangeable(a)
|
|
Approximate Equivalent Exchange Price per Share(a)
|
|
Exchangeable Date
|
2022 Exchangeable Notes
|
22.7331
|
|
$
|
43.99
|
|
|
July 1, 2022
|
2026 Exchangeable Notes
|
11.4259
|
|
$
|
87.52
|
|
|
March 15, 2026
|
2030 Exchangeable Notes
|
11.8739
|
|
$
|
84.22
|
|
|
October 15, 2029
|
______________________
(a)Subject to adjustment upon the occurrence of specified events.
As more specifically set forth in the applicable indentures, the Exchangeable Notes are exchangeable under the following circumstances:
(1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day;
(2) during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the exchange rate on each such trading day;
(3) if the issuer calls the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
(4) upon the occurrence of specified corporate events as further described in the indentures governing the respective Exchangeable Notes.
On or after the respective exchangeable dates noted in the table above, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may exchange all or any portion of their Exchangeable Notes regardless of the foregoing conditions. Upon exchange, the issuer, in its sole discretion, has the option to settle the Exchangeable Notes with cash, shares of the Company’s common stock, or a combination of cash and shares of the Company's common stock. Any shares issued in further settlement of the notes would be offset by shares received upon exercise of the Exchangeable Note Hedges (described below).
The Company’s 2022, 2026, and 2030 Exchangeable Notes were exchangeable as of September 30, 2021. $1,000 of the 2022 Exchangeable Notes were settled during the three and nine months ended September 30, 2021; no Exchangeable Notes were exchanged during the year ended December 31, 2020.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following table presents the if-converted value that exceeded the principal of each note based on the Company’s stock price on September 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
(In millions)
|
2022 Exchangeable Notes
|
$
|
1,329.4
|
|
|
$
|
1,261.2
|
|
2026 Exchangeable Notes
|
$
|
456.4
|
|
|
$
|
418.3
|
|
2030 Exchangeable Notes
|
$
|
496.8
|
|
|
$
|
457.2
|
|
Additionally, each of Match Group FinanceCo 2, Inc. and Match Group FinanceCo 3, Inc. may redeem for cash all or any portion of its applicable notes, at its option, on or after June 20, 2023 and July 20, 2026, respectively, if the last reported sale price of the Company’s common stock has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the notice of redemption is provided, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the applicable issuer provides notice of redemption, at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The following table sets forth the components of the Exchangeable Senior Notes within long-term debt, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Principal
|
$
|
517,499
|
|
|
$
|
575,000
|
|
|
$
|
575,000
|
|
|
$
|
517,500
|
|
|
$
|
575,000
|
|
|
$
|
575,000
|
|
Less: Unamortized debt issuance costs
|
3,754
|
|
|
7,522
|
|
|
8,883
|
|
|
6,511
|
|
|
8,700
|
|
|
9,627
|
|
Net carrying value included in long-term debt, net
|
$
|
513,745
|
|
|
$
|
567,478
|
|
|
$
|
566,117
|
|
|
$
|
510,989
|
|
|
$
|
566,300
|
|
|
$
|
565,373
|
|
The following table sets forth interest expense recognized related to the Exchangeable Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021
|
|
Three Months Ended September 30, 2020
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Contractual interest expense
|
$
|
1,132
|
|
|
$
|
1,257
|
|
|
$
|
2,875
|
|
|
$
|
1,132
|
|
|
$
|
1,257
|
|
|
$
|
2,875
|
|
Amortization of debt issuance costs
|
930
|
|
|
390
|
|
|
244
|
|
|
915
|
|
|
386
|
|
|
239
|
|
Total interest expense recognized
|
$
|
2,062
|
|
|
$
|
1,647
|
|
|
$
|
3,119
|
|
|
$
|
2,047
|
|
|
$
|
1,643
|
|
|
$
|
3,114
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021
|
|
Nine Months Ended September 30, 2020
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
|
2022 Exchangeable Notes
|
|
2026 Exchangeable Notes
|
|
2030 Exchangeable Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Contractual interest expense
|
$
|
3,396
|
|
|
$
|
3,773
|
|
|
$
|
8,625
|
|
|
$
|
3,396
|
|
|
$
|
3,773
|
|
|
$
|
8,625
|
|
Amortization of debt issuance costs
|
2,757
|
|
|
1,178
|
|
|
744
|
|
|
2,718
|
|
|
1,146
|
|
|
711
|
|
Total interest expense recognized
|
$
|
6,153
|
|
|
$
|
4,951
|
|
|
$
|
9,369
|
|
|
$
|
6,114
|
|
|
$
|
4,919
|
|
|
$
|
9,336
|
|
The effective interest rates for the 2022, 2026, and 2030 Exchangeable Notes are 1.6%, 1.2%, and 2.2%, respectively.
Repurchase of 2022 Exchangeable Notes
In September 2021, we entered into agreements to repurchase approximately $414 million aggregate principal amount of our outstanding 2022 Exchangeable Notes and commenced a private offering of $500 million aggregate principal amount of senior notes due 2031.
In connection with these transactions, our balance sheet as of September 30, 2021 reflects an obligation to pay cash in excess of the principal amount of the 2022 Exchangeable Notes we agreed to repurchase, which has been allocated between current and long-term liabilities in relation to the amounts expected to be funded by short and long-term assets, respectively.
See “Note 5—Financial Instruments” for additional information regarding the embedded derivative associated with the repurchase of the 2022 Exchangeable Notes and see “Exchangeable Notes Hedges and Warrants” below for additional information regarding the unwind of the related notes hedges and warrants. See “Note 12—Subsequent Events” for additional information regarding the closing of these and related transactions.
Exchangeable Notes Hedges and Warrants
In connection with the Exchangeable Notes offerings, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon the occurrence of specified events) the same number of shares that would be issuable upon the exchange of the applicable Exchangeable Notes at the prices per share set forth below (the “Exchangeable Notes Hedge”), and sold warrants allowing the counterparty to purchase (subject to adjustment upon the occurrence of specified events) shares at the per share prices set forth below (the “Exchangeable Notes Warrants”).
The Exchangeable Notes Hedges are expected to reduce the potential dilutive effect on the Company’s common stock upon any exchange of notes and/or offset any cash payment Match Group FinanceCo, Inc., Match Group FinanceCo 2, Inc. or Match Group FinanceCo 3, Inc. is required to make in excess of the principal amount of the exchanged notes. The Exchangeable Notes Warrants have a dilutive effect on the Company’s common stock to the extent that the market price per share of the Company common stock exceeds their respective strike prices.
On September 23, 2021, we entered into agreements to unwind a portion of the 2022 Exchangeable Notes Hedges and 2022 Exchangeable Notes Warrants for cash, each representing 9.4 million underlying shares, resulting in a net asset receivable at September 30, 2021 of $200.8 million.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following tables present details of the Exchangeable Notes Hedges and Warrants as of September 30, 2021 following the unwind transactions described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares(a)
|
|
Approximate Equivalent Exchange Price per Share(a)
|
|
|
|
|
|
(Shares in millions)
|
2022 Exchangeable Notes Hedge
|
2.4
|
|
$
|
43.99
|
|
2026 Exchangeable Notes Hedge
|
6.6
|
|
$
|
87.52
|
|
2030 Exchangeable Notes Hedge
|
6.8
|
|
$
|
84.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares(a)
|
|
Weighted Average Strike Price per Share(a)
|
|
|
|
|
|
(Shares in millions)
|
2022 Exchangeable Notes Warrants
|
2.4
|
|
$
|
68.22
|
|
2026 Exchangeable Notes Warrants
|
6.6
|
|
$
|
134.76
|
|
2030 Exchangeable Notes Warrants
|
6.8
|
|
$
|
134.82
|
|
______________________
(a)Subject to adjustment upon the occurrence of specified events.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 7—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the components of accumulated other comprehensive loss and items reclassified out of accumulated other comprehensive loss into earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021
|
|
Foreign Currency Translation Adjustment
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
(In thousands)
|
Balance at July 1
|
$
|
(104,089)
|
|
|
$
|
(104,089)
|
|
Other comprehensive loss
|
(99,308)
|
|
|
(99,308)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30
|
$
|
(203,397)
|
|
|
$
|
(203,397)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020
|
|
Foreign Currency Translation Adjustment
|
|
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
|
|
|
|
|
|
(In thousands)
|
Balance at July 1
|
$
|
(124,312)
|
|
|
|
|
$
|
(124,312)
|
|
Other comprehensive income before reclassifications
|
16,205
|
|
|
|
|
16,205
|
|
Amounts reclassified into earnings
|
(4)
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
Net period other comprehensive income
|
16,201
|
|
|
|
|
16,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30
|
$
|
(108,111)
|
|
|
|
|
$
|
(108,111)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021
|
|
Foreign Currency Translation Adjustment
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
(In thousands)
|
Balance at January 1
|
$
|
(81,454)
|
|
|
|
|
$
|
(81,454)
|
|
Other comprehensive loss
|
(121,943)
|
|
|
|
|
(121,943)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30
|
$
|
(203,397)
|
|
|
|
|
$
|
(203,397)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Loss on Available-For-Sale Security
|
|
Accumulated Other Comprehensive (Loss) Income
|
|
|
|
|
|
|
|
(In thousands)
|
Balance at January 1
|
$
|
(136,349)
|
|
|
$
|
—
|
|
|
$
|
(136,349)
|
|
Other comprehensive income (loss) before reclassifications
|
13,998
|
|
|
(1)
|
|
|
13,997
|
|
Amounts reclassified into earnings
|
(168)
|
|
|
—
|
|
|
(168)
|
|
|
|
|
|
|
|
Net period other comprehensive income (loss)
|
13,830
|
|
|
(1)
|
|
|
13,829
|
|
Allocation of accumulated other comprehensive loss related to the noncontrolling interests
|
628
|
|
|
—
|
|
|
628
|
|
Separation of IAC
|
13,780
|
|
|
1
|
|
|
13,781
|
|
Balance at September 30
|
$
|
(108,111)
|
|
|
$
|
—
|
|
|
$
|
(108,111)
|
|
At both September 30, 2021 and 2020, there was no tax benefit or provision on the accumulated other comprehensive loss.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 8—EARNINGS PER SHARE
As a result of the Separation on June 30, 2020, weighted average basic and dilutive shares outstanding for all periods prior to the Separation reflect the share position of Former IAC multiplied by the Separation exchange ratio of 2.1584. The following table sets forth the computation of the basic and diluted earnings per share attributable to Match Group shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
2021
|
|
2020
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Numerator
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
$
|
130,901
|
|
|
$
|
130,901
|
|
|
$
|
140,113
|
|
|
$
|
140,113
|
|
Net loss attributable to noncontrolling interests
|
309
|
|
|
309
|
|
|
586
|
|
|
586
|
|
Impact from subsidiaries’ dilutive securities from continuing operations
|
—
|
|
|
(51)
|
|
|
—
|
|
|
(395)
|
|
Interest on dilutive Exchangeable Notes, net of income tax(b)
|
—
|
|
|
4,075
|
|
|
—
|
|
|
4,070
|
|
Net earnings from continuing operations attributable to Match Group, Inc. shareholders
|
$
|
131,210
|
|
|
$
|
135,234
|
|
|
$
|
140,699
|
|
|
$
|
144,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings from discontinued operations attributable to shareholders
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
508
|
|
|
$
|
508
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
$
|
131,210
|
|
|
$
|
135,234
|
|
|
$
|
141,207
|
|
|
$
|
144,882
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding
|
276,955
|
|
|
276,955
|
|
|
260,744
|
|
|
260,744
|
|
Dilutive securities(c)(d)
|
—
|
|
|
14,834
|
|
|
—
|
|
|
19,790
|
|
Dilutive shares from Exchangeable Notes, if-converted(b)
|
—
|
|
|
25,162
|
|
|
—
|
|
|
25,162
|
|
Denominator for earnings per share—weighted average shares(b)(c)(d)
|
276,955
|
|
|
316,951
|
|
|
260,744
|
|
|
305,696
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
Earnings per share from continuing operations
|
$
|
0.47
|
|
|
$
|
0.43
|
|
|
$
|
0.54
|
|
|
$
|
0.47
|
|
Earnings per share from discontinued operations, net of tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Earnings per share attributable to Match Group, Inc. shareholders
|
$
|
0.47
|
|
|
$
|
0.43
|
|
|
$
|
0.54
|
|
|
$
|
0.47
|
|
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
Numerator
|
|
|
|
|
|
|
|
Net earnings from continuing operations
|
$
|
444,769
|
|
|
$
|
444,769
|
|
|
$
|
439,044
|
|
|
$
|
439,044
|
|
Net loss (earnings) attributable to noncontrolling interests
|
1,077
|
|
|
1,077
|
|
|
(59,999)
|
|
|
(59,999)
|
|
Impact from subsidiaries’ dilutive securities from continuing operations(a)
|
—
|
|
|
(907)
|
|
|
—
|
|
|
(9,823)
|
|
Interest on dilutive Exchangeable Notes, net of income tax(b)
|
—
|
|
|
12,225
|
|
|
—
|
|
|
12,209
|
|
Net earnings from continuing operations attributable to Match Group, Inc. shareholders
|
$
|
445,846
|
|
|
$
|
457,164
|
|
|
$
|
379,045
|
|
|
$
|
381,431
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations, net of tax
|
$
|
509
|
|
|
$
|
509
|
|
|
$
|
(366,070)
|
|
|
$
|
(366,070)
|
|
Net loss attributable to noncontrolling interests of discontinued operations
|
—
|
|
|
—
|
|
|
319
|
|
|
319
|
|
Impact from subsidiaries’ dilutive securities from discontinued operations(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(240)
|
|
Net earnings (loss) from discontinued operations attributable to shareholders
|
509
|
|
|
509
|
|
|
(365,751)
|
|
|
(365,991)
|
|
Net earnings attributable to Match Group, Inc. shareholders
|
$
|
446,355
|
|
|
$
|
457,673
|
|
|
$
|
13,294
|
|
|
$
|
15,440
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
Weighted average basic shares outstanding
|
272,316
|
|
|
272,316
|
|
|
209,113
|
|
|
209,113
|
|
Dilutive securities(c)(d)
|
—
|
|
|
15,439
|
|
|
—
|
|
|
11,432
|
|
Dilutive shares from Exchangeable Notes, if-converted(b)
|
—
|
|
|
25,162
|
|
|
—
|
|
|
18,853
|
|
Denominator for earnings per share—weighted average shares(b)(c)(d)
|
272,316
|
|
|
312,917
|
|
|
209,113
|
|
|
239,398
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
Earnings per share from continuing operations
|
$
|
1.64
|
|
|
$
|
1.46
|
|
|
$
|
1.81
|
|
|
$
|
1.59
|
|
Earnings (loss) per share from discontinued operations, net of tax
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
(1.75)
|
|
|
$
|
(1.53)
|
|
Earnings per share attributable to Match Group, Inc. shareholders
|
$
|
1.64
|
|
|
$
|
1.46
|
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
______________________
(a)Former IAC had the option to settle certain Former Match Group and ANGI Homeservices (“ANGI”) stock-based awards with Former IAC shares. For the nine months ended September 30, 2020, it was more dilutive for Former Match Group to settle certain Former Match Group equity awards and ANGI to settle certain ANGI equity awards.
(b)The Company uses the if-converted method for calculating the dilutive impact of the outstanding Exchangeable Notes. For the three and nine months ended September 30, 2021, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income taxes, incurred on the 2022, 2026, and 2030 Exchangeable Notes and dilutive shares were included for the same set of notes at the Match Group exchange rates. For the three and nine months ended September 30, 2020, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
taxes, incurred on the 2022, 2026, and 2030 Exchangeable Notes and dilutive shares were included for the same set of notes at the Former IAC exchange rates multiplied by the Separation exchange ratio.
(c)If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options, warrants, and subsidiary denominated equity and vesting of restricted stock units. For both the three and nine months ended September 30, 2021, 1.3 million potentially dilutive securities, and for both the three and nine months ended September 30, 2020, 13.4 million potentially dilutive securities, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
(d)Market-based awards and performance-based units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods. For both the three and nine months ended September 30, 2021, 0.6 million shares underlying market-based awards and PSUs, and for both the three and nine months ended September 30, 2020, 0.3 million shares underlying market-based awards and PSUs, were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met.
NOTE 9—CONSOLIDATED FINANCIAL STATEMENT DETAILS
Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet to the total amounts shown in the consolidated statement of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
511,311
|
|
|
$
|
739,164
|
|
|
$
|
398,884
|
|
|
$
|
465,676
|
|
Restricted cash included in other current assets
|
131
|
|
|
138
|
|
|
132
|
|
|
127
|
|
Cash, cash equivalents, and restricted cash included in current assets of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
2,674,146
|
|
Restricted cash included in non-current assets of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
409
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents, and restricted cash as shown on the consolidated statement of cash flows
|
$
|
511,442
|
|
|
$
|
739,302
|
|
|
$
|
399,016
|
|
|
$
|
3,140,358
|
|
NOTE 10—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 2—Income Taxes” for additional information related to income tax contingencies.
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Pursuant to the Transaction Agreement, we have agreed to indemnify IAC for matters relating to any business of Former Match Group, including indemnifying IAC for costs related to the matters described below.
The official names of legal proceedings in the descriptions below (shown in italics) reflect the original names of the parties when the proceedings were filed as opposed to the current names of the parties following the separation of Match Group and IAC.
Tinder Optionholder Litigation Against Former Match Group and Match Group
On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. (“Tinder”), a former subsidiary of Former Match Group, filed a lawsuit in New York state court against Former Match Group and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018 (Supreme Court, New York County). The complaint alleges that in 2017, the defendants: (i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Former Match Group, thereby depriving certain of the plaintiffs of their contractual right to later valuations of Tinder on a stand-alone basis. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Former Match Group only), and interference with prospective economic advantage, and seeks compensatory damages in the amount of at least $2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employed by Former Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs. On June 13, 2019, the court issued a decision and order granting defendants’ motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichments, as well as the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and otherwise denying defendants’ motion to dismiss. On July 13, 2020, the four former plaintiffs filed arbitration demands with the American Arbitration Association asserting the same valuation claims and on September 3, 2020, the four arbitrations were consolidated. The four former plaintiffs’ request to stay the arbitration was denied on January 28, 2021, and arbitration is scheduled to begin on February 7, 2022. On August 24, 2021, the arbitrator granted our summary judgement with respect to the merger claims. On June 9, 2021, the plaintiffs in Rad filed a Note of Issue and Certificate of Readiness for Trial in which they amended the amount of damages they are now claiming to “[m]ore than $5.6 billion”. On October 1, 2021, the court granted defendants’ motion for summary judgment on plaintiffs’ tort claims and breach of contract claims regarding the merger. Trial is scheduled to begin on November 8, 2021. Our consolidated financial statements do not reflect any provision for a loss with respect to this lawsuit, as we do not believe there is a probable likelihood of an unfavorable outcome. However, given the uncertainties inherent in jury trials and that trial is now imminent, there is at least a reasonable possibility of an exposure to loss, which could be anywhere between a nominal amount and $2.5 billion. We believe that the allegations against Former Match Group and Match Group in this lawsuit are without merit and will continue to defend vigorously against them.
FTC Lawsuit Against Former Match Group
On September 25, 2019, the United States Federal Trade Commission (the “FTC”) filed a lawsuit in federal district court in Texas against Former Match Group. See FTC v. Match Group, Inc., No. 3:19:cv-02281-K (Northern District of Texas). The complaint alleges that, prior to mid-2018, for marketing purposes Match.com notified non-paying users that other users were attempting to communicate with them, even though Match.com had identified those subscriber accounts as potentially fraudulent, thereby inducing non-paying users to subscribe and exposing them to the risk of fraud should they subscribe. The complaint also challenges the adequacy of Match.com’s disclosure of the terms of its six-month guarantee, the efficacy of its cancellation process, and its handling of chargeback disputes. The complaint seeks among other things permanent injunctive relief, civil penalties, restitution, disgorgement, and costs of suit. On October 9, 2020, the court granted the Company’s motion to stay the case until the United States Supreme Court issues a decision in the consolidated appeal of Federal Trade Commission v. Credit Bureau Center, LLC and AMG Capital Management, LLC v. FTC. On April 22, 2021, the Supreme Court issued its decision, rejecting that the FTC has the ability to seek equitable monetary relief using Section 13(b) of the FTC Act. Our consolidated financial statements do not reflect any provision for a loss with respect to this lawsuit, as we do not believe there is a probable likelihood of an unfavorable outcome.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
We believe that the FTC’s claims regarding Match.com’s practices, policies, and procedures are without merit and will defend vigorously against them.
NOTE 11—RELATED PARTY TRANSACTIONS
Relationship with IAC following the Separation
In connection with the Separation, the Company entered into certain agreements with IAC to govern the relationship between the Company and IAC following the Separation. These agreements, in certain cases, supersede the agreements entered into between Former Match Group and Former IAC in connection with Former Match Group’s IPO in November 2015 (the “IPO Agreements”) and include: a tax matters agreement; a transition services agreement; and an employee matters agreement. The IPO Agreements that were not superseded were terminated at closing of the Separation.
In addition to the agreements entered into at the time of the Separation, Match Group leases office space to IAC in a building owned by the Company in Los Angeles. Match Group also leased office space from IAC in New York City through June 2021. For the three and nine months ended September 30, 2021, the Company received less than $0.1 million from IAC pursuant to the Los Angeles lease. For the nine months ended September 30, 2021, the Company paid $0.3 million to IAC pursuant to the New York City lease.
Match Group has a receivable balance of $0.2 million due from IAC at September 30, 2021.
Tax Matters Agreement
Pursuant to the tax matters agreement, each of Match Group and IAC is responsible for certain tax liabilities and obligations following the transfer by Former IAC (i) to Match Group of certain assets and liabilities of, or related to, the businesses of Former IAC (other than Former Match Group) and (ii) to holders of Former IAC common stock and Former IAC Class B common stock, as a result of the reclassification and mandatory exchange of certain series of Former IAC exchangeable preferred stock (collectively, the “IAC Distribution”). Under the tax matters agreement, IAC generally is responsible for, and has agreed to indemnify Match Group against, any liabilities incurred as a result of the failure of the IAC Distribution to qualify for the intended tax-free treatment unless, subject to certain exceptions, the failure to so qualify is attributable to Match Group's or Former Match Group’s actions or failure to act, Match Group's or Former Match Group’s breach of certain representations or covenants or certain acquisitions of equity securities of Match Group, in each case, described in the tax matters agreement (a "Match Group fault-based action"). If the failure to so qualify is attributable to a Match Group fault-based action, Match Group is responsible for liabilities incurred as a result of such failure and will indemnify IAC against such liabilities so incurred by IAC or its affiliates.
Under the tax matters agreement, as of September 30, 2021, Match Group is obligated to remit to IAC $1.4 million of expected state tax refunds relating to tax years prior to the Separation. This obligation is included in “Accrued expenses and other current liabilities” in the accompanying consolidated balance sheet. Additionally, IAC is obligated to indemnify Match Group for IAC’s share of tax liabilities related to various periods prior to the Separation. At September 30, 2021, a receivable of $1.9 million is included in “Other current assets” in the accompanying consolidated balance sheet representing an estimate of the amount that Match Group expects to be indemnified for under this arrangement. At September 30, 2021, Match Group has an indemnification asset of $0.6 million included in “Other non-current assets” in the accompanying consolidated balance sheet for uncertain tax positions that related to Former IAC prior to the Separation.
Transition Services Agreement
Pursuant to the transition services agreement, IAC can provide certain services to Match Group that Former IAC had historically provided to Former Match Group. Match Group can also provide certain services to IAC that Former Match Group previously provided to Former IAC. The transition services agreement also provides that Match Group and IAC will make efforts to replace, amend, or divide certain joint contracts with third-parties relating to services or products used by both Match Group and IAC. Match Group and IAC also agreed to continue sharing certain services provided pursuant to certain third-party vendor contracts that were not replaced, amended, or divided prior to closing of the Separation.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
For the three and nine months ended September 30, 2021, the Company paid IAC less than $0.1 million related to services provided by IAC under the transition services agreement. For the three and nine months ended September 30, 2021, the Company received $3.7 million and $3.9 million, respectively, from IAC for services provided under the transition services agreement.
Employee Matters Agreement
Pursuant to the amended and restated employee matters agreement, Match Group will reimburse IAC for the cost of any IAC equity awards held by the Company’s employees and former employees upon exercise or vesting. In addition, Match Group employees participated in IAC’s U.S. health and welfare plans, 401(k) plan and flexible benefits plan through December 31, 2020, and Match Group reimbursed IAC for the costs of such participation pursuant to the amended and restated employee matters agreement. Match Group
established its own employee benefit plans effective January 1, 2021.
For the three and nine months ended September 30, 2021, the Company paid IAC less than $0.1 million, and $0.1 million, respectively, for the cost of IAC equity awards held by the Company’s employees upon vesting. At September 30, 2021, the Company has accrued $1.4 million as the estimated cost due to IAC for IAC equity awards held by Match Group employees.
Other Agreements
The Transaction Agreement provides that each of Match Group and IAC has agreed to indemnify, defend and hold harmless the other party from and against any liabilities arising out of: (i) any asset or liability allocated to such party or the other members of such party's group under the Transaction Agreement or the businesses of such party's group after the closing of the Separation; (ii) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of a member of such party's group contained in the Transaction Agreement that survives the closing of the Separation or is contained in any ancillary agreement; and (iii) any untrue or misleading statement or alleged untrue or misleading statement of a material fact or omission, with respect to information contained in or incorporated into the Form S-4 Registration Statement (the “Form S-4”) filed with the Securities and Exchange Commission (the “SEC”) by IAC and Former IAC in connection with the Separation or the joint proxy statement/prospectus filed by Former IAC and Former Match Group with the SEC pursuant to the Form S-4.
NOTE 12—SUBSEQUENT EVENTS
Repurchase of 2022 Exchangeable Notes
In September 2021, we entered into various transactions resulting in the repurchase of a portion of our 2022 Exchangeable Notes. In connection therewith, we:
•Entered into agreements to repurchase approximately $414 million aggregate principal amount of our outstanding 2022 Exchangeable Notes.
•Entered into agreements to unwind a proportionate amount of outstanding hedges and warrants corresponding to the 2022 Exchangeable Notes to be repurchased.
•Commenced a registered direct offering of shares of our common stock to the holders of the 2022 Exchangeable Notes to be repurchased.
•Commenced a private offering of $500 million aggregate principal amount of senior notes due 2031.
These transactions were completed on October 4, 2021, resulting in our:
•Issuance of 5,534,098 shares of our common stock at a price of $158.83 per share.
•Issuance of $500 million aggregate principal amount of 3.625% senior notes due 2031.
•Unwind of hedges and warrants for net cash proceeds of approximately $201 million.
•Repurchase of approximately $414 million aggregate principal amount of 2022 Exchangeable Notes for approximately $1.5 billion, including accrued and unpaid interest on the repurchased notes, funded with (i) the net proceeds from the common stock offering, (ii) approximately $420 million of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
the net proceeds from the senior notes offering (with the balance of the net proceeds from the senior notes offering being used for general corporate purposes), and (iii) the net proceeds from the note hedges and warrants unwind.
•Recognizing a gain from the decrease in our stock price from September 30, 2021 to October 4, 2021 related to the settlement of the embedded derivative associated with the transaction and discussed further in “Note 5—Financial Instruments.”