Document


As filed with the Securities and Exchange Commission on May 10, 2018


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2018
Or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to__________                            
Commission File No. 0-20570
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12245493&doc=14
IAC/INTERACTIVECORP
(Exact name of registrant as specified in its charter)
Delaware
 (State or other jurisdiction of
incorporation or organization)
 
59-2712887
(I.R.S. Employer
Identification No.)
 555 West 18th Street, New York, New York 10011
 (Address of registrant's principal executive offices)
 (212) 314-7300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o(Do not check if a smaller
reporting company)
 
Smaller reporting
 company o
 
Emerging growth
company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý
As of May 4, 2018, the following shares of the registrant's common stock were outstanding:
Common Stock
77,896,436

Class B Common Stock
5,789,499

Total outstanding Common Stock
83,685,935


The aggregate market value of the voting common stock held by non-affiliates of the registrant as of May 4, 2018 was $10,205,454,375. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be affiliates of the registrant.



TABLE OF CONTENTS
 
 
Page
Number
 


2

Table of Contents

PART I
FINANCIAL INFORMATION
Item 1.    Consolidated Financial Statements
IAC/INTERACTIVECORP
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
March 31, 2018
 
December 31, 2017
 
(In thousands, except par value amounts)
ASSETS
 
 
 
Cash and cash equivalents
$
1,657,537

 
$
1,630,809

Marketable securities
5,630

 
4,995

Accounts receivable, net of allowance of $14,239 and $11,489, respectively
325,263

 
304,027

Other current assets
234,502

 
185,374

Total current assets
2,222,932

 
2,125,205

 
 
 
 
Property and equipment, net of accumulated depreciation and amortization of $287,526 and $271,811, respectively
301,865

 
315,170

Goodwill
2,601,210

 
2,559,066

Intangible assets, net of accumulated amortization of $94,027 and $74,957,
respectively
653,205

 
663,737

Long-term investments
81,912

 
64,977

Deferred income taxes
84,108

 
66,321

Other non-current assets
85,742

 
73,334

TOTAL ASSETS
$
6,030,974

 
$
5,867,810

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
LIABILITIES:
 
 
 
Current portion of long-term debt
$
14,120

 
$
13,750

Accounts payable, trade
79,588

 
76,571

Deferred revenue
374,339

 
342,483

Accrued expenses and other current liabilities
361,446

 
366,924

Total current liabilities
829,493

 
799,728

 
 
 
 
Long-term debt, net
1,980,579

 
1,979,469

Income taxes payable
24,076

 
25,624

Deferred income taxes
35,938

 
35,070

Other long-term liabilities
31,398

 
38,229

 
 
 
 
Redeemable noncontrolling interests
47,099

 
42,867

 
 
 
 
Commitments and contingencies

 

 
 
 
 
SHAREHOLDERS' EQUITY:
 
 
 
Common stock $.001 par value; authorized 1,600,000 shares; issued 261,396 and 260,624 shares, respectively, and outstanding 77,601 and 76,829 shares, respectively
261

 
261

Class B convertible common stock $.001 par value; authorized 400,000 shares; issued 16,157 shares and outstanding 5,789 shares
16

 
16

Additional paid-in capital
12,093,006

 
12,165,002

Retained earnings
702,915

 
595,038

Accumulated other comprehensive loss
(74,950
)
 
(103,568
)
Treasury stock 194,163 shares, respectively
(10,226,721
)
 
(10,226,721
)
Total IAC shareholders' equity
2,494,527

 
2,430,028

Noncontrolling interests
587,864

 
516,795

Total shareholders' equity
3,082,391

 
2,946,823

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
6,030,974

 
$
5,867,810

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

3




IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands, except per share data)
Revenue
$
995,075

 
$
760,833

Operating costs and expenses:
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
201,962

 
145,958

Selling and marketing expense
402,832

 
350,411

General and administrative expense
184,184

 
143,595

Product development expense
76,937

 
54,760

Depreciation
19,257

 
19,888

Amortization of intangibles
19,953

 
9,161

Total operating costs and expenses
905,125

 
723,773

Operating income
89,950

 
37,060

Interest expense
(26,505
)
 
(24,792
)
Other expense, net
(4,619
)
 
(7,714
)
Earnings before income taxes
58,826

 
4,554

Income tax benefit
29,013

 
23,909

Net earnings
87,839

 
28,463

Net earnings attributable to noncontrolling interests
(16,757
)
 
(2,254
)
Net earnings attributable to IAC shareholders
$
71,082

 
$
26,209

 
 
 
 
Per share information attributable to IAC shareholders:
 
 
 
Basic earnings per share
$
0.86

 
$
0.34

Diluted earnings per share
$
0.71

 
$
0.29

 
 
 
 
Stock-based compensation expense by function:
 
 
 
Cost of revenue
$
710

 
$
502

Selling and marketing expense
1,765

 
1,807

General and administrative expense
45,626

 
26,940

Product development expense
10,981

 
4,726

Total stock-based compensation expense
$
59,082

 
$
33,975

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

4




IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Net earnings
$
87,839

 
$
28,463

Other comprehensive income, net of tax:
 
 
 
Change in foreign currency translation adjustment
35,393

 
21,910

Change in unrealized gains and losses of available-for-sale securities (no tax benefit in 2017)

 
2

Total other comprehensive income
35,393

 
21,912

Comprehensive income, net of tax
123,232

 
50,375

Components of comprehensive income attributable to noncontrolling interests:
 
 
 
Net earnings attributable to noncontrolling interests
(16,757
)
 
(2,254
)
Change in foreign currency translation adjustment attributable to noncontrolling interests
(7,036
)
 
(3,134
)
Comprehensive income attributable to noncontrolling interests
(23,793
)
 
(5,388
)
Comprehensive income attributable to IAC shareholders
$
99,439

 
$
44,987



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

5




IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Months Ended March 31, 2018
(Unaudited)
 
 
 
 
IAC Shareholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
Class B
Convertible
Common
Stock $.001
Par Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common
Stock $.001
Par Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
Other
Comprehensive
Loss
 
 
 
Total IAC
Shareholders'
Equity
 
 
 
 
 
Redeemable
Noncontrolling
Interests
 
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Treasury
Stock
 
 
Noncontrolling
Interests
 
Total
Shareholders'
Equity
 
$
 
Shares
 
$
 
Shares
 
 
 
 
 
 
(In thousands)
 
 
Balance at December 31, 2017
$
42,867

 
 
$
261

 
260,624

 
$
16

 
16,157

 
$
12,165,002

 
$
595,038

 
$
(103,568
)
 
$
(10,226,721
)
 
$
2,430,028

 
$
516,795

 
$
2,946,823

Cumulative effect of adoption of ASU No. 2014-09

 
 

 

 

 

 

 
36,795

 

 

 
36,795

 
3,410

 
40,205

Net (loss) earnings
(959
)
 
 

 

 

 

 

 
71,082

 

 

 
71,082

 
17,716

 
88,798

Other comprehensive income, net of tax
579

 
 

 

 

 

 

 

 
28,357

 

 
28,357

 
6,457

 
34,814

Stock-based compensation expense
410

 
 

 

 

 

 
17,214

 

 

 

 
17,214

 
41,458

 
58,672

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

 
 

 
772

 

 

 
25,275

 

 

 

 
25,275

 

 
25,275

Purchase of noncontrolling interests

 
 

 

 

 

 

 

 

 

 

 
(269
)
 
(269
)
Adjustment of redeemable noncontrolling interests to fair value
3,403

 
 

 

 

 

 
(3,403
)
 

 

 

 
(3,403
)
 

 
(3,403
)
Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes, and impact to noncontrolling interests in Match Group

 
 

 

 

 

 
(111,721
)
 

 
264

 

 
(111,457
)
 
1,414

 
(110,043
)
Issuance of ANGI Homeservices common stock pursuant to stock-based awards, net of withholding taxes, and impact to noncontrolling interests in ANGI Homeservices

 
 

 

 

 

 
(1,938
)
 

 
(3
)
 

 
(1,941
)
 
798

 
(1,143
)
Noncontrolling interests created in acquisitions
787

 
 

 

 

 

 

 

 

 

 

 

 

Other
12

 
 

 

 

 

 
2,577

 

 

 

 
2,577

 
85

 
2,662

Balance at March 31, 2018
$
47,099

 
 
$
261

 
261,396

 
$
16

 
16,157

 
$
12,093,006

 
$
702,915

 
$
(74,950
)
 
$
(10,226,721
)
 
$
2,494,527

 
$
587,864

 
$
3,082,391

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

6




IAC/INTERACTIVECORP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net earnings
$
87,839

 
$
28,463

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Stock-based compensation expense
59,082

 
33,975

Depreciation
19,257

 
19,888

Amortization of intangibles
19,953

 
9,161

Deferred income taxes
(31,895
)
 
3,717

 Bad debt expense
9,528

 
6,241

 Other adjustments, net
13,726

 
10,038

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


 
 
Accounts receivable
(29,901
)
 
(13,924
)
Other assets
(22,680
)
 
(15,873
)
Accounts payable and other liabilities
(7,592
)
 
14,872

Income taxes payable and receivable
(7,034
)
 
(38,610
)
Deferred revenue
41,725

 
9,915

Net cash provided by operating activities
152,008

 
67,863

Cash flows from investing activities:
 
 
 
Acquisitions, net of cash acquired
(21,295
)
 
(52,365
)
Capital expenditures
(14,801
)
 
(11,157
)
Proceeds from maturities and sales of marketable debt securities
5,000

 
75,350

Purchases of marketable debt securities
(4,975
)
 
(19,926
)
Purchases of investments
(18,180
)
 
(29
)
Net proceeds from the sale of businesses and investments
15

 
97,496

Other, net
9,347

 
213

Net cash (used in) provided by investing activities
(44,889
)
 
89,582

Cash flows from financing activities:
 
 
 
Principal payments on IAC debt

 
(26,590
)
Principal payment on ANGI Homeservices debt
(3,438
)
 

Purchase of IAC treasury stock

 
(56,424
)
Purchase of Match Group treasury stock
(32,465
)
 

Proceeds from the exercise of IAC stock options
24,254

 
13,252

Proceeds from the exercise of Match Group and ANGI Homeservices stock options
1,752

 
7,111

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

(282
)
 
(38,579
)
Withholding taxes paid on behalf of Match Group and ANGI Homeservices employees on net settled stock-based awards
(75,028
)
 
(2,081
)
 Purchase of noncontrolling interests
(234
)
 
(12,259
)
Acquisition-related contingent consideration payments
(185
)
 
(3,860
)
Other, net
2,476

 
250

Net cash used in financing activities
(83,150
)
 
(119,180
)
Total cash provided
23,969

 
38,265

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
2,746

 
4,002

Net increase in cash, cash equivalents, and restricted cash
26,715

 
42,267

Cash, cash equivalents, and restricted cash at beginning of period
1,633,682

 
1,360,199

Cash, cash equivalents, and restricted cash at end of period
$
1,660,397

 
$
1,402,466


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

7

Table of Contents
IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
IAC is a leading media and Internet company composed of widely known consumer brands, such as Match, Tinder, PlentyOfFish and OkCupid, which are part of Match Group's online dating portfolio, and HomeAdvisor and Angie's List, which are operated by ANGI Homeservices, as well as Vimeo, Dotdash, Dictionary.com, The Daily Beast and Investopedia.
All references to "IAC," the "Company," "we," "our" or "us" in this report are to IAC/InterActiveCorp.
As of March 31, 2018, IAC’s economic and voting interest in Match Group were 80.9%, and 97.6%, respectively. All references to "Match Group" or "MTCH" are to Match Group, Inc.
As of March 31, 2018, IAC’s economic and voting interest in ANGI Homeservices were 86.8%, and 98.5%, respectively. All reference to "ANGI Homeservices" or "ANGI" in this report are to ANGI Homeservices Inc.
Basis of Presentation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").
Basis of Consolidation and Accounting for Investments
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.
Investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee, but does not have a controlling financial interest, are accounted for using the equity method and are included in "Long-term investments" in the accompanying consolidated balance sheet.
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 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 periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
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 recoverability of goodwill and indefinite-lived intangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the fair values of marketable securities and 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.

8

Table of Contents
IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Certain Risks and Concentrations
A meaningful portion of the Company's revenue is derived from online advertising, the market for which is highly competitive and rapidly changing. Significant changes in this industry or changes in advertising spending behavior or in customer buying behavior could adversely affect our operating results. Most of the Company's online advertising revenue is attributable to a services agreement with Google Inc. ("Google"). For the three months ended March 31, 2018 and 2017, revenue from Google represents 21% and 25%, respectively, of the Company's consolidated revenue.
The services agreement became effective on April 1, 2016, following the expiration of the previous services agreement, and expires on March 31, 2020; however, the Company may choose to terminate the agreement effective March 31, 2019. The services agreement requires that the Company comply with certain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice, which could in turn require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results of operations.
For the three months ended March 31, 2018 and 2017, revenue earned from Google was $211.3 million and $187.8 million, respectively. This revenue is earned principally by the businesses comprising the Applications and Publishing segments. For the three months ended March 31, 2018 and 2017, revenue earned from Google represents 82% and 84%, respectively, of Applications revenue and 76% and 70%, respectively, of Publishing revenue. Accounts receivable related to revenue earned from Google totaled $79.2 million and $72.4 million at March 31, 2018 and December 31, 2017, respectively.
Recent Accounting Pronouncements
Accounting Pronouncements 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. ASU No. 2014-09 supersedes nearly all existing revenue recognition guidance under GAAP. The Company adopted ASU No. 2014-09 effective January 1, 2018 using the modified retrospective transition method for open contracts as of the date of initial application. The cumulative impact to the Company's retained earnings at January 1, 2018 was $40.2 million, of which $3.4 million was related to the Company's noncontrolling interest in ANGI; the adjustment to retained earnings was principally related to the Company’s ANGI Homeservices and Applications segments.
Within ANGI, the effect of the adoption of ASU No. 2014-09 is that commissions paid to employees pursuant to certain sales incentive programs, which represent the incremental direct costs of obtaining a service professional contract, are now capitalized and amortized over the estimated life of a service professional (also referred to as the estimated customer relationship period). These costs were expensed as incurred prior to January 1, 2018. The cumulative effect of the adoption of ASU No. 2014-09 was the establishment of a current and non-current asset for capitalized sales commissions of $29.7 million and $4.2 million, respectively, and a related deferred tax liability of $8.0 million, resulting in a net increase to retained earnings of $25.9 million on January 1, 2018.
Within Applications, the primary effect of the adoption of ASU No. 2014-09 is to accelerate the recognition of the portion of the revenue of certain desktop applications sold by SlimWare that qualifies as functional intellectual property ("functional IP") under ASU No. 2014-09. This revenue was previously deferred and recognized over the applicable subscription term. The cumulative effect of the adoption of ASU No. 2014-09 for SlimWare was a reduction in deferred revenue of $20.3 million and the establishment of a deferred tax liability of $4.9 million, resulting in a net increase to retained earnings of $15.5 million on January 1, 2018.
The adoption of ASU No. 2014-09 will not have a material effect on the Company’s results of operations for the year ending December 31, 2018. See "Note 2—Revenue Recognition" for additional information on the impact to the Company.
The Company's disaggregated revenue disclosures are presented in "Note 10—Segment information."
The following tables provide the impact of the adoption of ASU No. 2014-09 by segment under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, as reported, and ASC 605, Revenue Recognition.

9

Table of Contents
IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Three Months Ended March 31, 2018
 
Under ASC 606 (as reported)
 
Under ASC 605
 
Effect of adoption of ASU No. 2014-09
 
(In thousands)
Revenue by segment:
 
 
 
 
 
Match Group
$
407,367

 
$
407,367

 
$

ANGI Homeservices
255,311

 
255,311

 

Video
66,162

 
66,591

 
(429
)
Applications
131,987

 
131,517

 
470

Publishing
134,322

 
134,322

 

Inter-segment eliminations
(74
)
 
(74
)
 

Total
$
995,075

 
$
995,034

 
$
41

 
Three Months Ended March 31, 2018
 
Under ASC 606 (as reported)
 
Under ASC 605
 
Effect of adoption of ASU No. 2014-09
 
(In thousands)
Operating expense by segment:
 
 
 
 
 
Match Group
$
295,134

 
$
295,134

 
$

ANGI Homeservices
266,067

 
272,160

 
(6,093
)
Video
82,037

 
82,264

 
(227
)
Applications
106,526

 
106,007

 
519

Publishing
118,511

 
118,511

 

Corporate
36,850

 
36,850

 

Total
$
905,125

 
$
910,926

 
$
(5,801
)
 
Three Months Ended March 31, 2018
 
Under ASC 606 (as reported)
 
Under ASC 605
 
Effect of adoption of ASU No. 2014-09
 
(In thousands)
Operating income (loss) by segment:
 
 
 
 
 
Match Group
$
112,233

 
$
112,233

 
$

ANGI Homeservices
(10,756
)
 
(16,849
)
 
6,093

Video
(15,875
)
 
(15,673
)
 
(202
)
Applications
25,461

 
25,510

 
(49
)
Publishing
15,811

 
15,811

 

Corporate
(36,924
)
 
(36,924
)
 

Total
$
89,950

 
$
84,108

 
$
5,842

 
Three Months Ended March 31, 2018
 
Under ASC 606 (as reported)
 
Under ASC 605
 
Effect of adoption of ASU No. 2014-09
 
(In thousands)
Net earnings
$
87,839

 
$
83,517

 
$
4,322


10

Table of Contents
IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments, which updates certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Under ASU No. 2016-01, equity securities, other than equity method investments and investments in consolidated subsidiaries, will be measured at fair value with changes in fair value recognized in the statement of operations each reporting period. ASU No. 2016-01 is effective for reporting periods beginning after December 15, 2017. The Company's adoption of ASU No. 2016-01 effective January 1, 2018 did not have a material effect on its consolidated financial statements. The adoption of ASU No. 2016-01 may increase the volatility of the Company's results of operations as the result of the remeasurement of these instruments.
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which requires companies to explain the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. Therefore, amounts generally described as restricted cash or restricted cash equivalents are combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statement of cash flows. ASU No. 2016-18 also requires companies to disclose the nature of their restricted cash and restricted cash equivalents balances. Additionally, when cash, cash equivalents, restricted cash, and restricted cash equivalents are presented within different captions on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. ASU No. 2016-18 is effective for reporting periods beginning after December 15, 2017. The Company's adoption of ASU No. 2016-18 effective January 1, 2018, on a retrospective basis, did not have a material effect on its consolidated financial statements.
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:
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
December 31, 2016
 
(In thousands)
Cash and cash equivalents
$
1,657,537

 
$
1,630,809

 
$
1,397,038

 
$
1,329,187

Restricted cash included in other current assets
2,860

 
2,873

 
5,428

 
20,464

Restricted cash included in other assets

 

 

 
10,548

Total cash, cash equivalents and restricted cash as shown on the consolidated statement of cash flows
$
1,660,397

 
$
1,633,682

 
$
1,402,466

 
$
1,360,199

Restricted cash at March 31, 2018 and December 31, 2017 primarily supports a letter of credit to a supplier.
Restricted cash at March 31, 2017 primarily included funds held in escrow for the redemption and repurchase of IAC Senior Notes, which settled in the second quarter of 2017.
Restricted cash at December 31, 2016 primarily included funds held in escrow for the redemption and repurchase of IAC Senior Notes and the MyHammer tender offer. The Senior Notes were redeemed and repurchased and the funds held in escrow for the MyHammer tender offer were returned to the Company in the first quarter of 2017.
Accounting Pronouncement not yet adopted by the Company
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 will adopt ASU No. 2016-02 effective January 1, 2019.
In March 2018, the FASB affirmed its proposal to provide transition relief under the new lease standard. The effective date of the transition guidance is expected to coincide with the effective date of ASU No. 2016-02. Companies that elect the new transition option will not have to adjust their comparative period financial statements for the effects of the new lease standard, or make the new required lease disclosures for periods before the effective date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The Company is not a lessor, has no capitalized leases and does not expect to enter into any capitalized leases prior to the adoption of ASU No. 2016-02. Accordingly, the Company does not expect the amount or classification of rent expense in its statement of operations to be affected by the adoption of ASU No. 2016-02. The primary effect of the adoption of ASU No. 2016-02 will be the recognition of a right of use asset and related liability to reflect the Company's rights and obligations under its operating leases. The Company will also be required to provide the additional disclosures stipulated in ASU No. 2016-02.
The adoption of ASU No. 2016-02 will not have an impact on the leverage calculation set forth in any of the agreements governing the outstanding debt of the Company or its MTCH and ANGI subsidiaries, or our credit agreement or the credit agreement of MTCH because, in each circumstance, the leverage calculations are not affected by the liability that will be recorded upon adoption of the new standard.
While the Company's evaluation of the impact of the adoption of ASU No. 2016-02 on its consolidated financial statements continues, outlined below is a summary of the status of the Company's progress:
the Company has selected a software package to assist in the determination of the right of use asset and related liability as of January 1, 2019 and to provide the required information following the adoption;
the Company has prepared summaries of its leases for input into the software package;
the Company is assessing the other inputs required in connection with the adoption of ASU No. 2016-02; and
the Company is developing its accounting policy, procedures and controls related to the new standard.
The Company does not expect to have a preliminary estimate of the right of use asset and related liability as of the adoption date until the third quarter of 2018.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—REVENUE RECOGNITION
General Revenue Recognition
The Company accounts for a contract when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised services or goods is transferred to our customers, and in an amount that reflects the consideration the Company is contractually due in exchange for those services or goods.
Match Group
Match Group’s revenue is primarily derived directly from users in the form of recurring subscriptions. Subscription revenue is presented net of credits and credit card chargebacks. Subscribers pay in advance, primarily by credit card or through mobile app stores, and, subject to certain conditions identified in our terms and conditions, generally all purchases are final and nonrefundable. Revenue is initially deferred and is recognized using the straight-line method over the term of the applicable subscription period, which primarily range from one to six months. Revenue is also earned from online advertising, the purchase of à la carte features and offline events. Online advertising revenue is recognized when an advertisement is displayed. Revenue from the purchase of à la carte features is recognized based on usage. Revenue associated with offline events is recognized when each event occurs.
ANGI Homeservices
ANGI revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by service professionals for consumer matches (regardless of whether the professional ultimately provides the requested service), and (ii) membership subscription fees paid by service professionals. Consumer connection revenue varies based upon several factors, including the service requested, type of match and geographic location of service. The Company’s consumer connection

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

revenue is generated and recognized when an in-network service professional is delivered a consumer match. Membership subscription revenue from service professionals is initially deferred and is recognized using the straight-line method over the applicable subscription period, which is typically one year. Consumer connection revenue is generally billed one week following a consumer match; with payment due upon receipt of invoice.
ANGI revenue is also derived from Angie's List (i) sales of time-based website, mobile and call center advertising to service professionals and (ii) membership subscription fees from consumers. Angie's List service professionals generally pay for advertisements in advance on a monthly or annual basis at the option of the service professional, with the average advertising contract term being approximately one year. Angie's List website, mobile and call center advertising revenue is recognized ratably over the contract term. Revenue from the sale of advertising in the Angie’s List Magazine is recognized in the period in which the publication is distributed. Angie's List prepaid consumer membership subscription fees are recognized as revenue using the straight-line method over the term of the applicable subscription period, which is typically one year.
Video
Revenue of businesses in this segment is generated primarily through subscriptions, media production and distribution, and advertising. Subscription fee revenue is recognized over the terms of the applicable subscription period, which are one month or one year, production revenue is recognized when control is transferred to the customer to broadcast or exhibit, and advertising revenue is recognized when an advertisement is displayed or over the advertising period.
Applications
Substantially all of Applications' revenue consists of advertising revenue generated principally through the display of paid listings in response to search queries. The substantial majority of the paid listings displayed by our Applications businesses are supplied to us by Google pursuant to our services agreement with Google.
Pursuant to this agreement, those of our Applications businesses that provide search services transmit search queries to Google, which in turn transmits a set of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of, but concurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayed separately from algorithmic search results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per click basis and when a user submits a search query through one of our Applications businesses and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. The Company recognizes paid listing revenue from Google when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third-party distributor, we recognize the amount due from Google as revenue and record a revenue share or other payment obligation to the third-party distributor as traffic acquisition costs.
To a significantly lesser extent, Applications' revenue also consists of fees related to subscription downloadable desktop and mobile applications as well as display advertisements. Fees related to subscription downloadable desktop and paid mobile applications are generally recognized at the time of the sale when the software license is delivered. To the extent updates or maintenance is required or expected, revenue is recognized over the term of the applicable subscription period, which is primarily one or two years. Fees related to display advertisements are recognized when an advertisement is displayed.
Publishing
Publishing's revenue consists principally of advertising revenue, which is generated primarily through the display of paid listings in response to search queries and display advertisements (sold directly and through programmatic ad sales). The majority of the paid listings that our Publishing businesses display are supplied to us by Google in the manner and pursuant to the services agreement with Google, which is described above under "Applications."
Transaction Price
The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for its services or goods, including amounts that are variable. The Company determines the total transaction price, including an estimate of any variable consideration, at contract inception and reassesses this estimate each reporting period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.
For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASU No. 2014-09 applicable to such contracts and does not consider the time value of money.
Accounts Receivables, net of allowance for doubtful accounts and revenue reserves
Accounts receivable include amounts billed and currently due from customers. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivables that will not be collected. The allowance for doubtful accounts is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the specific customer’s ability to pay its obligation and the condition of the general economy and the customer’s industry. Customer payments that are not collected in advance of the transfer of promised services or goods are generally due no later than 30 days from invoice date. The term between the Company issuance of an invoice and payment due date is not significant. The Company also maintains allowances to reserve for potential credits issued to consumers or other revenue adjustments. The amounts of these reserves are based primarily upon historical experience.
Deferred Revenue
Deferred revenue consists of advance payments that are received or due in advance of the Company's performance. The Company’s liabilities are reported on a contract by contract basis at the end of each reporting period. The Company generally classifies deferred revenue as current when the term of the applicable subscription period or expected completion of our performance obligation is one year or less. The deferred revenue balance as of January 1, 2018 is $332.2 million. During the three months ended March 31, 2018, the Company recognized $217.8 million of revenue that was included in the deferred revenue balance as of January 1, 2018. The current and non-current deferred revenue balances at March 31, 2018 are $374.3 million and $1.8 million, respectively.
Arrangements with Multiple Performance Obligations
The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers, which are directly observable or based on an estimate if not directly observable. For our multiple performance obligation arrangements that include functional intellectual property ("IP"), which comprise the downloadable apps and software of the Applications segment, the Company uses a residual approach to determine standalone selling prices for the functional IP.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs and mobile app store fees, meet the requirements to be capitalized as a cost of obtaining a contract. Commissions paid to employees pursuant to certain sales incentive programs are amortized over the estimated customer relationship period. The Company calculates the estimated customer relationship period as the average customer life, which is based on historical data. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. For sales incentive programs where the customer relationship period is one year or less, the Company has elected the practical expedient to expense the costs as incurred. The Company generally capitalizes and amortizes mobile app store fees over the term of the applicable subscription.
During the three months ended March 31, 2018, the Company recognized expense of $75.1 million related to the amortization of these costs. The contract asset balance at March 31, 2018 is $68.0 million.
Performance Obligations
As permitted under the practical expedient available under ASU No. 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

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.
NOTE 3—INCOME TAXES
At the end of each interim period, the Company makes its best estimate of the annual expected 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 a beginning-of-the-year deferred tax asset in future years or the liabilities for uncertain tax positions is recognized in the interim period in which the change occurs.
The computation of the annual expected 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 expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs.
For the three months ended March 31, 2018 and 2017, the Company recorded an income tax benefit of $29.0 million and $23.9 million, respectively. The income tax benefits for the three months ended March 31, 2018 and 2017 are due primarily to excess tax benefits generated by the settlement and exercise of stock-based awards.
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act subjected to U.S. taxation certain previously deferred earnings of foreign subsidiaries as of December 31, 2017 (“Transition Tax”) and implemented a number of changes that took effect on January 1, 2018, including but not limited to, a reduction of the U.S. federal corporate tax rate from 35% to 21% and a new minimum tax on global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries. The Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional tax expense in the fourth quarter of 2017. The Company was also able to make a reasonable estimate of the impact of GILTI on the expected annual effective income tax rate and recorded a provisional tax expense in the first quarter of 2018. Any adjustment of the Company’s provisional tax expense will be reflected as a change in estimate in its results in the period in which the change in estimate is made in accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which is also included in the FASB issued ASU No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which was issued and adopted by the Company in March 2018. The Company is continuing to gather additional information to more precisely compute the amount of the Transition Tax and expects to finalize its calculation prior to the filing of its U.S. federal tax return, which is due on October 15, 2018. The additional information includes, but is not limited to, the allocation and sourcing of income and deductions in 2017 for purposes of calculating the utilization of foreign tax credits. In addition, our estimates may also be impacted and adjusted as the law is clarified and additional guidance is issued at the federal and state levels. No adjustment was made in the three months ended March 31, 2018 to the Company’s provisional tax expense as a result of the issuance of Treasury Notices 2018-26 and 2018-28 as we continue to assess their impact, which we believe is immaterial.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals for interest and penalties are not material.
The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service is currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2012. The statute of limitations for the years 2010 through 2012 has been extended to June 30, 2019, and the statute of limitations for the year 2013 has been extended to March 31, 2019. Various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Although management currently believes changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
At March 31, 2018 and December 31, 2017, unrecognized tax benefits, including interest and penalties, are $38.4 million and $39.7 million, respectively. If unrecognized tax benefits at March 31, 2018 are subsequently recognized, $35.9 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2017 was $37.2 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $2.0 million by March 31, 2019, due to expirations of statutes of limitations; all of which would reduce the income tax provision.
The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, among other things, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, the duration of statutory carryforward periods, available tax planning and historical experience, to the extent these items are applicable. As of March 31, 2018, the Company has a gross deferred tax asset of $147.5 million that the Company expects to fully utilize on a more likely than not basis.
NOTE 4—BUSINESS COMBINATION
On September 29, 2017, the Company completed the combination of the businesses in the Company's HomeAdvisor segment and Angie's List under a new publicly traded company called ANGI Homeservices (the "Combination"). Through the Combination, ANGI acquired 100% of the common stock of Angie's List on September 29, 2017 for a total purchase price valued at $781.4 million.
The unaudited pro forma financial information in the table below presents the combined results of the Company and Angie's List as if the Combination had occurred on January 1, 2016. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the Combination actually occurred on January 1, 2016. For the three months ended March 31, 2017, pro forma adjustments include increases in stock-based compensation expense of $14.7 million and amortization of intangibles of $11.5 million.
 
 
Three Months Ended
March 31, 2017
 
 
(In thousands, except per share data)
Revenue
 
$
833,294

Net earnings attributable to IAC shareholders
 
$
13,339

Basic earnings per share attributable to IAC shareholders
 
$
0.17

Diluted earnings per share attributable to IAC shareholders
 
$
0.13


NOTE 5—MARKETABLE SECURITIES
At March 31, 2018 and December 31, 2017, the fair value of marketable securities are as follows:
 
March 31, 2018
 
December 31, 2017
 
(In thousands)
Available-for-sale marketable debt securities
$
4,990

 
$
4,995

Equity security with a readily determinable fair value
640

 

     Total marketable securities
$
5,630

 
$
4,995


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

At March 31, 2018, current available-for-sale marketable debt securities are as follows:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(In thousands)
 Commercial paper
$
4,990

 
$

 
$

 
$
4,990

     Total available-for-sale marketable debt securities
$
4,990

 
$

 
$

 
$
4,990

The contractual maturities of debt securities classified as current available-for-sale at March 31, 2018 are due within one year. There are no investments in available-for-sale marketable debt securities that are in an unrealized loss position as of March 31, 2018.
At March 31, 2018, the cost basis of the equity security with a readily determinable fair value was $0.3 million. With the adoption of ASU No. 2016-01 on January 1, 2018, the unrealized gain of $0.3 million is included in "Other expense, net" in the accompanying consolidated statement of operations.
At December 31, 2017, current available-for-sale marketable debt securities are as follows:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(In thousands)
Commercial paper
$
4,995

 
$

 
$

 
$
4,995

Total available-for-sale marketable debt securities
$
4,995

 
$

 
$

 
$
4,995

The following table presents the proceeds from maturities and sales of available-for-sale marketable debt securities:
 
March 31,
 
2018
 
2017
 
(In thousands)
Proceeds from maturities and sales of available-for-sale marketable debt securities
$
5,000

 
$
75,350

The specific-identification method is used to determine the cost of available-for-sale marketable debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss) into earnings. There were no gross realized gains or losses from the maturities and sales of available-for-sale marketable debt securities for the three months ended March 31, 2018 and 2017.
NOTE 6—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

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 below for a discussion of fair value measurements made using Level 3 inputs.
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
 
March 31, 2018
 
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
$
762,064

 
$

 
$

 
$
762,064

Time deposits

 
85,038

 

 
85,038

Treasury discount notes
149,908

 

 

 
149,908

Commercial paper

 
217,342

 

 
217,342

Certificates of deposit

 
4,797

 

 
4,797

Marketable securities:
 
 
 
 
 
 
 
Commercial paper

 
4,990

 

 
4,990

Equity security with a readily determinable fair value
640

 

 
$

 
640

Total
$
912,612

 
$
312,167

 
$

 
$
1,224,779

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Contingent consideration arrangements
$

 
$

 
$
(1,965
)
 
$
(1,965
)
 
December 31, 2017
 
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
$
780,425

 
$

 
$

 
$
780,425

Time deposits

 
60,000

 

 
60,000

Treasury discount notes
100,457

 

 

 
100,457

Commercial paper

 
215,325

 

 
215,325

Certificates of deposit

 
6,195

 

 
6,195

Marketable securities:
 
 
 
 
 
 
 
Commercial paper

 
4,995

 

 
4,995

Total
$
880,882

 
$
286,515

 
$

 
$
1,167,397

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Contingent consideration arrangements
$

 
$

 
$
(2,647
)
 
$
(2,647
)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

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):
 
Contingent
Consideration
Arrangements
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Balance at January 1
$
(2,647
)
 
$
(33,871
)
Total net losses:
 
 
 
Included in earnings:
 
 
 
Fair value adjustments
(156
)
 
(1,891
)
Included in other comprehensive loss
(110
)
 
(1,059
)
Settlements
948

 
15,000

Balance at March 31
$
(1,965
)
 
$
(21,821
)
Contingent Consideration Arrangements
As of March 31, 2018, there are three contingent consideration arrangements related to business acquisitions. Two of the contingent consideration arrangements have limits as to the maximum amount that can be paid. The maximum contingent payments related to these arrangements is $32.1 million and the gross fair value of these arrangements, before the unamortized discount, at March 31, 2018 is $2.1 million. No payment is expected for the one contingent consideration arrangement without a limit on the maximum earnout.
The contingent consideration arrangements are based upon earnings performance and/or operating metrics. The Company generally determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, because the arrangements were initially 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 financial statements. The fair values of the contingent consideration arrangements at both March 31, 2018 and December 31, 2017 reflect discount rates of 12%.
The fair value of contingent consideration arrangements is 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 statement of operations. The contingent consideration arrangement liability at March 31, 2018 and December 31, 2017 includes a current portion of $2.0 million and $0.6 million, respectively, and non-current portion of $2.0 million at December 31, 2017, which are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet. At March 31, 2018, there is no non-current portion of the contingent consideration arrangement liability.
Assets measured at fair value on a nonrecurring basis
The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity method investments, are adjusted to fair value only when an impairment charge is recognized. Equity securities without readily determinable fair values are adjusted to fair value for observable price changes in orderly transactions for an identical or similar investment of the same issuer. Such fair value measurements are based predominantly on Level 3 inputs.
Equity securities without readily determinable fair values
At March 31, 2018 and December 31, 2017, the carrying values of the Company's investments in equity securities without readily determinable fair values totaled $81.0 million and $63.4 million, respectively, and are included in "Long-term

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

investments" in the accompanying consolidated balance sheet. The Company exercises reasonable effort to determine whether any observable price changes in orderly transactions for identical or similar investments in the same issuer have occurred. A similar investment will be considered identical or similar if it has identical or similar rights and obligations to the equity investments held by the Company. If such an orderly transaction has occurred, the Company will adjust the value of the equity investment in accordance with ASC 321, Investments — Equity Securities. During the three months ended March 31, 2018, the Company did not identify any transactions that resulted in adjustment to the carrying value of its equity securities without readily determinable fair values.
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:
 
March 31, 2018
 
December 31, 2017
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
(In thousands)
Current portion of long-term debt
$
(14,120
)
 
$
(14,199
)
 
$
(13,750
)
 
$
(13,802
)
Long-term debt, net
(1,980,579
)
 
(2,211,769
)
 
(1,979,469
)
 
(2,168,108
)
The fair value of long-term debt, including the current portion, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

NOTE 7—LONG-TERM DEBT
Long-term debt consists of:
 
March 31, 2018
 
December 31, 2017
 
(In thousands)
MTCH Debt:
 
 
 
MTCH Term Loan due November 16, 2022
$
425,000

 
$
425,000

6.375% Senior Notes due June 1, 2024 (the "6.375% MTCH Senior Notes"); interest payable each June 1 and December 1
400,000

 
400,000

5.00% Senior Notes due December 15, 2027 (the "5.00% MTCH Senior Notes"); interest payable each June 15 and December 15, which commences on June 15, 2018
450,000

 
450,000

Total MTCH long-term debt
1,275,000

 
1,275,000

Less: unamortized original issue discount
8,339

 
8,668

Less: unamortized debt issuance costs
13,219

 
13,636

Total MTCH debt, net
1,253,442

 
1,252,696

 
 
 
 
ANGI Debt:
 
 
 
ANGI Term Loan due November 1, 2022
271,563

 
275,000

Less: current portion of ANGI Term Loan
13,750

 
13,750

Less: unamortized debt issuance costs
2,786

 
2,938

Total ANGI debt, net
255,027

 
258,312

 
 
 
 
IAC Debt:
 
 
 
0.875% Exchangeable Senior Notes due October 1, 2022 (the "Exchangeable Notes"); interest payable each April 1 and October 1, which commences on April 1, 2018
517,500

 
517,500

4.75% Senior Notes due December 15, 2022 (the "4.75% Senior Notes"); interest payable each June 15 and December 15
34,859

 
34,859

Total IAC long-term debt
552,359

 
552,359

Less: current portion of IAC long-term debt
370

 

Less: unamortized original issue discount
63,922

 
67,158

Less: unamortized debt issuance costs
15,957

 
16,740

Total IAC debt, net
472,110

 
468,461

 
 
 
 
Total long-term debt, net
$
1,980,579

 
$
1,979,469

MTCH Senior Notes
The 6.375% MTCH Senior Notes were issued on June 1, 2016. The proceeds of $400 million were used to prepay a portion of indebtedness outstanding under the MTCH 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 redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
On December 4, 2017, MTCH issued $450 million aggregate principal amount of its 5.00% Senior Notes due December 15, 2027. The proceeds from these notes, along with cash on hand, were used to redeem the $445 million outstanding balance of the 6.75% MTCH Senior Notes, which were due on December 15, 2022, and pay the related call

21

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

premium. At any time prior to December 15, 2022, the 5.00% MTCH Senior Notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
The indentures governing the 6.375% and 5.00% MTCH Senior Notes (i) contain covenants that would limit MTCH's ability to pay dividends or to make distributions and repurchase or redeem MTCH stock in the event a default has occurred or MTCH's leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0 and (ii) are ranked equally with each other. At March 31, 2018, there were no limitations pursuant thereto. There are additional covenants that limit MTCH's ability and the ability of its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MTCH is not in compliance with certain ratios set forth in the indentures, and (ii) incur liens, enter into agreements restricting MTCH subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets.
MTCH Term Loan and MTCH Credit Facility
At March 31, 2018, the outstanding balance on the MTCH Term Loan was $425 million and the loan bears interest at 4.29% (LIBOR plus 2.50%). The MTCH Term Loan provides for annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio contained in the credit agreement. Interest payments are due at least quarterly through the term of the loan.
MTCH has a $500 million revolving credit facility (the "MTCH Credit Facility") that expires on October 7, 2020. At March 31, 2018 and December 31, 2017, there were no outstanding borrowings under the MTCH Credit Facility. The annual commitment fee on undrawn funds based on the current leverage ratio is 30 basis points. Borrowings under the MTCH Credit Facility bear interest, at MTCH's option, at a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on MTCH's consolidated net leverage ratio. The terms of the MTCH Credit Facility require MTCH to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimum interest coverage ratio of not less than 2.5 to 1.0 (in each case as defined in the agreement).
There are additional covenants under the MTCH Credit Facility and the MTCH Term Loan that limit the ability of MTCH and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. While the MTCH Term Loan remains outstanding, these same covenants under its credit agreement are generally more restrictive than the covenants that are applicable to the MTCH Credit Facility. Obligations under the MTCH Credit Facility and MTCH Term Loan are unconditionally guaranteed by certain MTCH wholly-owned domestic subsidiaries, and are also secured by the stock of certain MTCH domestic and foreign subsidiaries. The MTCH Term Loan and outstanding borrowings, if any, under the MTCH Credit Facility rank equally with each other, and have priority over the 6.375% and 5.00% MTCH Senior Notes to the extent of the value of the assets securing the borrowings under the MTCH credit agreement.
ANGI Term Loan:
At March 31, 2018, the outstanding balance on the ANGI Term Loan was $271.6 million and the loan bears interest at LIBOR plus 2.00%, which is subject to change in future periods based on ANGI's consolidated net leverage ratio, or 3.78%. Interest payments are due at least quarterly through the term of the loan and quarterly principal payments of 1.25% of the original principal amount in the first three years, 2.5% in the fourth year and 3.75% in the fifth year are required.
The terms of the ANGI Term Loan require ANGI to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.5 to 1.0 (in each case as defined in the credit agreement). There are additional covenants under the ANGI Term Loan that limit the ability of ANGI and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. The ANGI Term Loan is guaranteed by ANGI's wholly-owned material domestic subsidiaries and is secured by substantially all assets of ANGI and the guarantors, subject to certain exceptions.
IAC Exchangeable Notes:
On October 2, 2017, IAC FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, issued $517.5 million aggregate principal amount of its 0.875% Exchangeable Senior Notes due October 1, 2022 (the “Exchangeable Notes”). The

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Exchangeable Notes are guaranteed by the Company. Each $1,000 of principal of the Exchangeable Notes is exchangeable for 6.5713 shares of the Company's common stock, which is equivalent to an exchange price of approximately $152.18 per share, subject to adjustment upon the occurrence of specified events. Upon exchange, the Company has the right to settle the principal amount of Exchangeable Notes with any of the three following alternatives: (1) shares of our common stock, (2) cash or (3) a combination of cash and shares of our common stock.
The Exchangeable Notes are exchangeable at any time prior to the close of business on the business day immediately preceding July 1, 2022 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days during the period of 30 consecutive trading days during the immediately preceding calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our 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 under the Indenture. On or after July 1, 2022 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.
A portion of the net proceeds from the sale of the Exchangeable Notes of $499.5 million, after deducting fees and expenses, was used to pay the net premium of $50.7 million on the Exchangeable Note Hedge and Warrant (defined below).
We separately account for the debt and the equity components of the Exchangeable Notes. Accordingly, the Company recorded a debt discount and corresponding increase to additional paid-in capital of $70.4 million, which is the fair value attributed to the exchange feature or equity component of the debt, on the date of issuance. The Company is amortizing the debt discount utilizing the effective interest method over the life of the Exchangeable Notes which increases the effective interest rate from its coupon rate of 0.875% to 3.88%.
In connection with the debt offering, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon the occurrence of specified events) the entire 3.4 million shares that would be issuable upon the exchange of the Exchangeable Notes at approximately $152.18 per share (the "Exchangeable Note Hedge"), and sold warrants allowing the holder to purchase initially (subject to adjustment upon the occurrence of specified events) 3.4 million shares at $229.70 per share (the "Warrant"). The Exchangeable Note Hedge is expected to reduce the potential dilutive effect of the Company's common stock upon any exchange of notes and/or offset any cash payment IAC FinanceCo, Inc. is required to make in excess of the principal amount of the exchanged notes. The Warrants would separately 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 the applicable strike price of the Warrants.
As of March 31, 2018, the if-converted value of the Exchangeable Notes exceeds its principal amount by $14.3 million based on the Company's stock price on March 31, 2018.
The Company incurred cash and non-cash interest expense of $5.2 million for the three months ended March 31, 2018, which includes amortization of debt issuance costs of $0.9 million. As of March 31, 2018, the unamortized discount is $63.9 million resulting in a net carrying value of the liability component of $453.6 million.
IAC Senior Notes
The 4.75% Senior Notes were issued by IAC on December 21, 2012. These Notes are unconditionally guaranteed by certain wholly-owned domestic subsidiaries, which are designated as guarantor subsidiaries. See "Note 12—Guarantor and Non-Guarantor Financial Information" for financial information relating to guarantor and non-guarantor subsidiaries. The 4.75% Senior Notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest thereon to the applicable redemption date.
IAC Credit Facility

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

IAC has a $300 million revolving credit facility (the "IAC Credit Facility") that expires October 7, 2020. At March 31, 2018 and December 31, 2017, there were no outstanding borrowings under the IAC Credit Facility. The annual commitment fee on undrawn funds is currently 25 basis points, and is based on the leverage ratio (as defined in the agreement) most recently reported. Borrowings under the IAC 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 leverage ratio. The terms of the IAC Credit Facility require that the Company maintains a leverage ratio of not more than 3.25 to 1.0 and restrict our ability to incur additional indebtedness. Borrowings under the IAC Credit Facility are unconditionally guaranteed by substantially the same domestic subsidiaries that guarantee the 4.75% Senior Notes and are also secured by the stock of certain of our domestic and foreign subsidiaries. The 4.75% Senior Notes are subordinate to the outstanding borrowings under the IAC Credit Facility to the extent of the value of the assets securing such borrowings.
NOTE 8—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated other comprehensive loss into earnings:
For the three months ended March 31, 2018, the Company's accumulated other comprehensive loss relates to foreign currency translation adjustments.
 
 
Three Months Ended March 31, 2018
 
 
Accumulated Other Comprehensive (Loss) Income
 
 
 
Balance as of January 1
 
$
(103,568
)
    Other comprehensive income before reclassifications
 
28,479

Amounts reclassified to earnings
 
139

Net current period other comprehensive income
 
28,618

Balance as of March 31
 
$
(74,950
)
 
Three Months Ended March 31, 2017
 
Foreign Currency Translation Adjustment
 
Unrealized Gains On Available-For-Sale Securities
 
Accumulated Other Comprehensive (Loss) Income
 
(In thousands)
Balance as of January 1
$
(170,149
)
 
$
4,026

 
$
(166,123
)
    Other comprehensive income before reclassifications
18,062

 
2

 
18,064

Amounts reclassified to earnings
714

 

 
714

Net current period other comprehensive income
18,776

 
2

 
18,778

Balance as of March 31
$
(151,373
)
 
$
4,028

 
$
(147,345
)
The amounts reclassified out of accumulated other comprehensive loss into earnings for the three months ended March 31, 2018 and 2017 relate to the liquidation of international subsidiaries.
At March 31, 2018 and 2017, there was no tax benefit or provision on the accumulated other comprehensive loss.
NOTE 9—EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share attributable to IAC shareholders:

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Three Months Ended March 31,
 
2018
 
2017
 
Basic
 
Diluted
 
Basic
 
Diluted
 
(In thousands, except per share data)
Numerator:
 
 
 
 
 
 
 
Net earnings
$
87,839

 
$
87,839

 
$
28,463

 
$
28,463

Net earnings attributable to noncontrolling interests
(16,757
)
 
(16,757
)
 
(2,254
)
 
(2,254
)
Impact from public subsidiaries' dilutive securities (a)

 
(7,442
)
 

 
(2,430
)
Net earnings attributable to IAC shareholders
$
71,082

 
$
63,640

 
$
26,209

 
$
23,779

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average basic shares outstanding
82,983

 
82,983

 
78,193

 
78,193

Dilutive securities (a) (b) (c) (d)

 
6,086

 

 
4,311

Denominator for earnings per share—weighted average shares(a) (b) (c) (d)
82,983

 
89,069

 
78,193

 
82,504

 
 
 
 
 
 
 
 
Earnings per share attributable to IAC shareholders:
Earnings per share
$
0.86

 
$
0.71

 
$
0.34

 
$
0.29

________________________
(a) 
For the three months ended March 31, 2018, it is more dilutive for IAC to settle certain ANGI equity awards and MTCH to settle certain MTCH equity awards.  For the three months ended March 31, 2017, it is more dilutive for MTCH to settle certain MTCH equity awards.  The impact from ANGI’s dilutive securities is not applicable for periods prior to the Combination.
(b) 
If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options, warrants and subsidiary denominated equity, exchange of the Company's Exchangeable Notes and vesting of restricted stock units ("RSUs"). For the three months ended March 31, 2018 and 2017, 6.8 million and 2.0 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
(c) 
Market-based awards and performance-based stock units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods. For the three months ended March 31, 2018 and 2017, 0.2 million and 0.4 million shares, respectively, 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.
(d) 
It is the Company's intention to settle the Exchangeable Notes through a combination of cash, equal to the face amount of the notes, and shares; the Exchangeable Notes are only dilutive once the average price of IAC common stock for the period exceeds the approximate $152.18 per share exchange price per $1,000 principal amount of the Exchangeable Notes.

NOTE 10—SEGMENT INFORMATION
The overall concept that IAC employs in determining its operating segments is to present the financial information in a manner consistent with: how the chief operating decision maker views the businesses; how the businesses are organized as to segment management; and the focus of the businesses with regards to the types of services or products offered or the target market. Operating segments are combined for reporting purposes if they meet certain aggregation criteria, which principally relate to the similarity of their economic characteristics.

25

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Revenue:
 
 
 
Match Group
$
407,367

 
$
298,764

ANGI Homeservices
255,311

 
150,745

Video
66,162

 
50,577

Applications
131,987

 
158,897

Publishing
134,322

 
78,080

Other(a)

 
23,980

Inter-segment eliminations
(74
)
 
(210
)
Total
$
995,075

 
$
760,833

___________________
(a) 
The 2017 results at the Other segment consists of the results of The Princeton Review prior its sale, which occurred on March 31, 2017.
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Operating Income (Loss):
 
 
 
Match Group
$
112,233

 
$
58,871

ANGI Homeservices
(10,756
)
 
1,388

Video
(15,875
)
 
(15,589
)
Applications
25,461

 
32,768

Publishing
15,811

 
(5,788
)
Other

 
(5,621
)
Corporate
(36,924
)
 
(28,969
)
Total
$
89,950

 
$
37,060

 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Adjusted EBITDA:(b)
 
 
 
Match Group
$
137,741

 
$
86,231

ANGI Homeservices
36,640

 
10,212

Video
(12,940
)
 
(14,732
)
Applications
26,752

 
34,933

Publishing
17,213

 
1,179

Other

 
(1,532
)
Corporate
(17,008
)
 
(14,315
)
Total
$
188,398

 
$
101,976

________________________
(b) 
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

26

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

individual business segments, and this measure is one of the primary metrics on 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. Adjusted EBITDA has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses.
The following table presents the revenue of the Company's segments disaggregated by type of service:
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Match Group
 
 
 
 Direct revenue:
 
 
 
North America
$
211,357

 
$
175,328

International
181,380

 
112,424

 Direct revenue
392,737

 
287,752

 Indirect revenue (principally advertising revenue)
14,630

 
11,012

 Total Match Group revenue
$
407,367

 
$
298,764

 
 
 
 
ANGI Homeservices
 
 
 
Marketplace:
 
 
 
Consumer connection revenue (c)
$
149,060

 
$
116,000

Membership subscription revenue
15,627

 
12,752

Other revenue
921

 
892

Marketplace revenue
165,608

 
129,644

Advertising & Other revenue (d)
70,418

 
8,428

North America
236,026

 
138,072

Consumer connection revenue (c)
14,367

 
8,465

Membership subscription revenue
4,671

 
4,006

Advertising and other revenue
247

 
202

Europe
19,285

 
12,673

 Total ANGI Homeservices revenue
$
255,311

 
$
150,745

 
 
 
 
Video
 
 
 
 Subscription revenue
$
34,343

 
$
24,817

 Media production and distribution revenue
20,048

 
20,933

 Advertising and other revenue
11,771

 
4,827

 Total Video revenue
$
66,162

 
$
50,577

 
 
 
 
Applications
 
 
 
Advertising revenue:
 
 
 
Google advertising revenue
$
87,431

 
$
105,098

Other
6,354

 
6,313

Advertising revenue
93,785

 
111,411

Subscription and other revenue
16,289

 
18,921

Consumer
110,074

 
130,332

Advertising revenue:
 
 
 

27

Table of Contents
IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

Google advertising revenue
21,146

 
27,709

Other
731

 
783

Advertising revenue
21,877

 
28,492

Other revenue
36

 
73

Partnerships
21,913

 
28,565

 Total Applications revenue
$
131,987

 
$
158,897

 
 
 
 
Publishing
 
 
 
Advertising revenue:
 
 
 
Google advertising revenue
$
13,638

 
$
9,789

Other
23,947

 
15,866

Advertising revenue
37,585

 
25,655

 Other revenue
1,223

 
345

Premium Brands
38,808

 
26,000

Advertising revenue:
 
 
 
Google advertising revenue
88,692

 
44,687

Other
6,613

 
7,205

Advertising revenue
95,305

 
51,892

 Other revenue
209

 
188

Ask & Other
95,514

 
52,080

 Total Publishing revenue
$
134,322

 
$
78,080

_______________________________________________________________________________
(c) 
Fees paid by service professionals for consumer matches.
(d) 
Includes Angie's List revenue from service professionals under contract for advertising and Angie's List membership subscription fees from consumers, as well as revenue from mHelpDesk, HomeStars and Felix.
Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:
 
Three Months Ended March 31,
 
2018
 
2017
 
(In thousands)
Revenue:
 
 
 
United States
$
657,580

 
$
548,598

All other countries
337,495

 
212,235

 Total
$
995,075

 
$
760,833

 
March 31,
2018
 
December 31,
2017
 
(In thousands)
Long-lived assets (excluding goodwill and intangible assets):
 
 
 
United States
$
272,881

 
$
286,541

All other countries
28,984

 
28,629

Total
$
301,865

 
$
315,170


28

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The following tables reconcile operating income (loss) for the Company's reportable segments and net earnings attributable to IAC shareholders to Adjusted EBITDA:
 
Three Months Ended March 31, 2018
 
Operating
Income
(Loss)
 
Stock-Based
Compensation
Expense
 
Depreciation
 
Amortization
of Intangibles
 
Acquisition-related Contingent Consideration Fair Value Adjustments
 

Adjusted
EBITDA
 
(In thousands)
Match Group
$
112,233

 
$
16,963

 
$
8,147

 
$
242

 
$
156

 
$
137,741

ANGI Homeservices
(10,756
)
 
$
24,906

 
$
6,184

 
$
16,306

 
$

 
$
36,640

Video
(15,875
)
 
$
131

 
$
675

 
$
2,129

 
$

 
$
(12,940
)
Applications
25,461

 
$

 
$
755

 
$
536

 
$

 
$
26,752

Publishing
15,811

 
$

 
$
662

 
$
740

 
$

 
$
17,213

Other

 
$

 
$

 
$

 
$

 
$

Corporate
(36,924
)
 
$
17,082

 
$
2,834

 
$

 
$

 
$
(17,008
)
Operating income
89,950

 
 
 
 
 
 
 
 
 
 
Interest expense
(26,505
)
 
 
 
 
 
 
 
 
 
 
Other expense, net
(4,619
)
 
 
 
 
 
 
 
 
 
 
Earnings before income taxes
58,826

 
 
 
 
 
 
 
 
 
 
Income tax benefit
29,013

 
 
 
 
 
 
 
 
 
 
Net earnings
87,839

 
 
 
 
 
 
 
 
 
 
Net earnings attributable to noncontrolling interests
(16,757
)
 
 
 
 
 
 
 
 
 
 
Net earnings attributable to IAC shareholders
$
71,082

 
 
 
 
 
 
 
 
 
 

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IAC/INTERACTIVECORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)