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iaci-20230630

Table of Contents

As filed with the Securities and Exchange Commission on August 8, 2023

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023


☐			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. 001-39356

IAC Inc.

(Exact name of registrant as specified in its charter)


Delaware						84-3727412
(State or other jurisdiction of incorporation or organization)						(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common stock, par value $0.0001

IAC

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2023, the following shares of the registrant's common stock were outstanding:


Common Stock			80,056,471
Class B common stock			5,789,499
Total			85,845,970

TABLE OF CONTENTS


		Page Number
PART I
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheet	3
	Consolidated Statement of Operations	4
	Consolidated Statement of Comprehensive Operations	5
	Consolidated Statement of Shareholders' Equity	6
	Consolidated Statement of Cash Flows	8
	Notes to Consolidated Financial Statements
	Note 1—The Company and Summary of Significant Accounting Policies	9
	Note 2—Dotdash Meredith Restructuring Charges and Transaction-Related Expenses	12


	Note 3—Financial Instruments and Fair Value Measurements	14
	Note 4—Long-term Debt	19
	Note 5—Accumulated Other Comprehensive Loss	21
	Note 6—Segment Information	22
	Note 7—Pension and Postretirement Benefit Plans	29
	Note 8—Income Taxes	30
	Note 9—(Lo ss) Earnings Per Share	32
	Note 10—Financial Statement Details	34
	Note 11—Contingencies	35
	Note 12—Related Party Transactions	36
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	63
PART II
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
	Signatures	69

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

IAC INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)


	June 30, 2023		December 31, 2022
	(In thousands, except par value amounts)
ASSETS
Cash and cash equivalents	$	1,326,988	$	1,417,390

Marketable securities	115,559		239,373
Accounts receivable, net	521,666		607,809

Other current assets	234,194		296,563
Total current assets	2,198,407		2,561,135

Capitalized software, equipment, buildings, land and leasehold improvements, net	494,627		510,614
Goodwill	3,033,112		3,030,168
Intangible assets, net of accumulated amortization	1,061,868		1,170,041
Investment in MGM Resorts International	2,842,661		2,170,182
Long-term investments	431,777		325,721
Other non-current assets	486,638		625,774
TOTAL ASSETS	$	10,549,090	$	10,393,635

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Current portion of long-term debt	$	30,000	$	30,000
Accounts payable, trade	127,667		133,105
Deferred revenue	160,827		157,124
Accrued expenses and other current liabilities	715,700		759,759
Total current liabilities	1,034,194		1,079,988

Long-term debt, net	2,006,456		2,019,759
Deferred income taxes	178,295		76,276
Other long-term liabilities	517,865		617,843

Redeemable noncontrolling interests	34,778		27,235

Commitments and contingencies

SHAREHOLDERS' EQUITY:
Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,360 and 84,184 shares issued and 80,010 and 83,083 shares outstanding at June 30, 2023 and December 31, 2022, respectively	8		8
Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at June 30, 2023 and December 31, 2022	1		1
Additional paid-in-capital	6,312,394		6,295,080
Retained earnings (accumulated deficit)	63,711		(265,019)
Accumulated other comprehensive loss	(6,904)		(13,133)
Treasury stock, 4,350 and 1,101 shares at June 30, 2023 and December 31, 2022, respectively	(252,502)		(85,323)
Total IAC shareholders' equity	6,116,708		5,931,614
Noncontrolling interests	660,794		640,920
Total shareholders' equity	6,777,502		6,572,534
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	10,549,090	$	10,393,635

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

Table of Contents

IAC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands, except per share data)
Revenue	$	1,111,589	$	1,362,581	$	2,195,860	$	2,687,926
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)	353,078		509,570		696,007		1,044,110
Selling and marketing expense	413,954		508,376		817,251		995,937
General and administrative expense	218,166		253,986		491,242		498,330
Product development expense	86,398		84,908		171,185		165,196
Depreciation	41,283		29,052		102,455		59,288
Amortization of intangibles	54,183		56,081		108,789		113,271
Goodwill impairment	—		86,748		—		86,748
Total operating costs and expenses	1,167,062		1,528,721		2,386,929		2,962,880
Operating loss	(55,473)		(166,140)		(191,069)		(274,954)
Interest expense	(39,077)		(23,517)		(77,249)		(45,429)
Unrealized (loss) gain on investment in MGM Resorts International	(32,362)		(825,305)		672,478		(1,012,635)
Other income (expense), net	10,985		(89,425)		34,734		(82,726)
(Loss) earnings before income taxes	(115,927)		(1,104,387)		438,894		(1,415,744)
Income tax benefit (provision)	24,297		228,988		(115,205)		299,452
Net (loss) earnings	(91,630)		(875,399)		323,689		(1,116,292)
Net loss attributable to noncontrolling interests	2,585		6,269		5,041		11,364
Net (loss) earnings attributable to IAC shareholders	$	(89,045)	$	(869,130)	$	328,730	$	(1,104,928)

Per share information attributable to IAC common stock and Class B common stock shareholders:
Basic (loss) earnings per share	$	(1.07)	$	(10.02)	$	3.77	$	(12.73)
Diluted (loss) earnings per share	$	(1.07)	$	(10.02)	$	3.64	$	(12.73)

Stock-based compensation expense by function:
Cost of revenue	$	533	$	49	$	552	$	54
Selling and marketing expense	2,198		2,441		3,941		3,949
General and administrative expense	24,040		24,560		46,884		49,931
Product development expense	3,422		4,606		7,757		7,409

Total stock-based compensation expense	$	30,193	$	31,656	$	59,134	$	61,343

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

Table of Contents

IAC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands)
Net (loss) earnings	$	(91,630)	$	(875,399)	$	323,689	$	(1,116,292)
Other comprehensive income (loss), net of income taxes:
Change in foreign currency translation adjustment	2,486		(14,392)		3,405		(18,093)
Change in unrealized gains and losses on available-for-sale marketable debt securities	(11)		—		(37)		—
Change in net unrealized gains on interest rate swaps	5,639		—		3,352		—
Total other comprehensive income (loss), net of income taxes	8,114		(14,392)		6,720		(18,093)
Comprehensive (loss) income, net of income taxes	(83,516)		(889,791)		330,409		(1,134,385)
Components of comprehensive loss (income) attributable to noncontrolling interests:
Net loss attributable to noncontrolling interests	2,585		6,269		5,041		11,364
Change in foreign currency translation adjustment attributable to noncontrolling interests	(377)		776		(493)		843


Comprehensive loss attributable to noncontrolling interests	2,208		7,045		4,548		12,207
Comprehensive (loss) income attributable to IAC shareholders	$	(81,308)	$	(882,746)	$	334,957	$	(1,122,178)

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

Table of Contents

IAC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Three and six months ended June 30, 2023

(Unaudited)


	Redeemable Noncontrolling Interests		Common Stock, $0.0001 par value			Class B common stock, $0.0001 par value			Additional Paid-in-Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Total IAC Shareholders' Equity		Noncontrolling Interests		Total Shareholders' Equity
			$		Shares	$		Shares
			(In thousands)
Balance at March 31, 2023	$	27,189	$	8	84,257	$	1	5,789	$	6,306,229	$	152,756	$	(14,641)	$	(177,052)	$	6,267,301	$	653,179	$	6,920,480
Net loss	(288)		—		—	—		—	—		(89,045)		—		—		(89,045)		(2,297)		(91,342)
Other comprehensive income, net of income taxes	—		—		—	—		—	—		—		7,737		—		7,737		377		8,114
Stock-based compensation expense	—		—		—	—		—	20,064		—		—		—		20,064		11,268		31,332
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—		—		103	—		—	(2,725)		—		—		—		(2,725)		—		(2,725)
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes	—		—		—	—		—	(1,875)		—		—		—		(1,875)		172		(1,703)
Purchase of IAC treasury stock	—		—		—	—		—	—		—		—		(75,450)		(75,450)		—		(75,450)
Purchase of Angi Inc. treasury stock	—		—		—	—		—	(3,397)		—		—		—		(3,397)		—		(3,397)

Adjustment of noncontrolling interests to fair value	7,881		—		—	—		—	(7,881)		—		—		—		(7,881)		—		(7,881)
Adjustment to the liquidation value of Vivian Health preferred shares	—		—		—	—		—	1,877		—		—		—		1,877		(1,877)		—
Other	(4)		—		—	—		—	102		—		—		—		102		(28)		74
Balance at June 30, 2023	$	34,778	$	8	84,360	$	1	5,789	$	6,312,394	$	63,711	$	(6,904)	$	(252,502)	$	6,116,708	$	660,794	$	6,777,502





Balance at December 31, 2022	$	27,235	$	8	84,184	$	1	5,789	$	6,295,080	$	(265,019)	$	(13,133)	$	(85,323)	$	5,931,614	$	640,920	$	6,572,534
Net (loss) earnings	(542)		—		—	—		—	—		328,730		—		—		328,730		(4,499)		324,231
Other comprehensive income, net of income taxes	—		—		—	—		—	—		—		6,227		—		6,227		493		6,720
Stock-based compensation expense	—		—		—	—		—	36,127		—		—		—		36,127		25,138		61,265
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—		—		176	—		—	(4,575)		—		—		—		(4,575)		—		(4,575)
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes	—		—		—	—		—	(6,574)		—		2		—		(6,572)		2,459		(4,113)
Purchase of IAC treasury stock	—		—		—	—		—	—		—		—		(167,179)		(167,179)		—		(167,179)
Purchase of Angi Inc. treasury stock	—		—		—	—		—	(3,397)		—		—		—		(3,397)		—		(3,397)

Adjustment of noncontrolling interests to fair value	8,089		—		—	—		—	(8,089)		—		—		—		(8,089)		—		(8,089)
Adjustment to the liquidation value of Vivian Health preferred shares	—		—		—	—		—	3,689		—		—		—		3,689		(3,689)		—
Other	(4)		—		—	—		—	133		—		—		—		133		(28)		105
Balance at June 30, 2023	$	34,778	$	8	84,360	$	1	5,789	$	6,312,394	$	63,711	$	(6,904)	$	(252,502)	$	6,116,708	$	660,794	$	6,777,502

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

Table of Contents

IAC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Three and six months ended June 30, 2022

(Unaudited)


	Redeemable Noncontrolling Interests		Common Stock, $0.0001 par value			Class B common stock, $0.0001 par value			Additional Paid-in-Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total IAC Shareholders' Equity		Noncontrolling Interests		Total Shareholders' Equity
			$		Shares	$		Shares
			(In thousands)
Balance at March 31, 2022	$	27,817	$	8	84,075	$	1	5,789	$	6,249,328	$	669,353	$	765	$	—	$	6,919,455	$	581,462	$	7,500,917
Net loss	(2,353)		—		—	—		—	—		(869,130)		—		—		(869,130)		(3,916)		(873,046)
Other comprehensive loss	—		—		—	—		—	—		—		(13,616)		—		(13,616)		(776)		(14,392)
Stock-based compensation expense	—		—		—	—		—	18,239		—		—		—		18,239		14,111		32,350
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—		—		57	—		—	(798)		—		—		—		(798)		—		(798)
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes	—		—		—	—		—	(2,327)		—		(1)		—		(2,328)		878		(1,450)
Purchase of IAC treasury stock	—		—		—	—		—	—		—		—		(59,079)		(59,079)		—		(59,079)

Distribution to and purchase of noncontrolling interests	(1,179)		—		—	—		—	—		—		—		—		—		—		—
Adjustment of noncontrolling interests to fair value	14,905		—		—	—		—	(14,905)		—		—		—		(14,905)		—		(14,905)
Issuance of Vivian Health preferred shares, net of fees, and the reclassification and creation of noncontrolling interest	(11,782)		—		—	—		—	11,526		—		—		—		11,526		43,174		54,700
Other	—		—		—	—		—	866		—		—		—		866		—		866
Balance at June 30, 2022	$	27,408	$	8	84,132	$	1	5,789	$	6,261,929	$	(199,777)	$	(12,852)	$	(59,079)	$	5,990,230	$	634,933	$	6,625,163


Balance at December 31, 2021	$	18,741	$	8	83,922	$	1	5,789	$	6,265,669	$	905,151	$	4,397	$	—	$	7,175,226	$	573,734	$	7,748,960
Net loss	(2,387)		—		—	—		—	—		(1,104,928)		—		—		(1,104,928)		(8,977)		(1,113,905)
Other comprehensive loss	—		—		—	—		—	—		—		(17,250)		—		(17,250)		(843)		(18,093)
Stock-based compensation expense	—		—		—	—		—	34,941		—		—		—		34,941		27,667		62,608
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—		—		210	—		—	(14,810)		—		—		—		(14,810)		—		(14,810)
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes	—		—		—	—		—	(4,102)		—		1		—		(4,101)		178		(3,923)
Purchase of IAC treasury stock	—		—		—	—		—	—		—		—		(59,079)		(59,079)		—		(59,079)
Purchase of Angi Inc. treasury stock	—		—		—	—		—	(8,144)		—		—		—		(8,144)		—		(8,144)
Distribution to and purchase of noncontrolling interests	(1,179)		—		—	—		—	—		—		—		—		—		—		—
Adjustment of noncontrolling interests to fair value	24,041		—		—	—		—	(24,041)		—		—		—		(24,041)		—		(24,041)
Issuance of Vivian Health preferred shares, net of fees, and the reclassification and creation of noncontrolling interest	(11,782)		—		—	—		—	11,526		—		—		—		11,526		43,174		54,700
Other	(26)		—		—	—		—	890		—		—		—		890		—		890
Balance at June 30, 2022	$	27,408	$	8	84,132	$	1	5,789	$	6,261,929	$	(199,777)	$	(12,852)	$	(59,079)	$	5,990,230	$	634,933	$	6,625,163

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

Table of Contents

IAC INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2023		2022
	(In thousands)
Cash flows from operating activities:
Net earnings (loss)	$	323,689	$	(1,116,292)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Unrealized (gain) loss on investment in MGM Resorts International	(672,478)		1,012,635
(Gains) losses on investments in equity securities and sales of businesses, net	(1,460)		14,440
Amortization of intangibles	108,789		113,271
Depreciation	102,455		59,288
Deferred income taxes	101,451		(306,428)
Non-cash lease expense (including right-of-use asset impairments)	72,506		28,802
Stock-based compensation expense	59,134		61,343
Provision for credit losses	48,608		51,710
Unrealized decrease (increase) in the estimated fair value of a warrant	7,731		(12,851)
Pension and postretirement benefit expense	636		79,080
Goodwill impairment	—		86,748
Other adjustments, net	(7,838)		13,016
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable	30,325		(195)
Other assets	45,688		2,532
Operating lease liabilities	(39,576)		(32,059)
Accounts payable and other liabilities	(57,504)		(72,958)
Income taxes payable and receivable	2,453		(32)
Deferred revenue	3,645		10,045
Net cash provided by (used in) operating activities	128,254		(7,905)
Cash flows from investing activities:

Capital expenditures	(108,107)		(73,641)

Proceeds from sales of assets	28,890		164
Proceeds from maturities of marketable debt securities	325,000		—
Purchases of marketable debt securities	(197,017)		—

Purchases of investments	(103,555)		(1,036)
Net proceeds from the sales of businesses and investments	3,491		27,871
Purchases of investment in MGM Resorts International	—		(202,500)
Decrease in notes receivable	14,197		19,111
Other, net	9,901		4,766
Net cash used in investing activities	(27,200)		(225,265)
Cash flows from financing activities:

Principal payments on Dotdash Meredith Term Loans	(15,000)		(15,000)


Debt issuance costs	—		(785)
Withholding taxes paid on behalf of IAC employees on net settled stock-based awards	(5,250)		(15,952)
Withholding taxes paid on behalf of Angi Inc. employees on net settled stock-based awards	(4,124)		(3,513)
Purchases of IAC treasury stock	(165,622)		(59,079)
Purchases of Angi Inc. treasury stock	(3,397)		(8,144)
Proceeds from the issuance of Vivian Health preferred shares, net of fees	—		34,700



Purchase of noncontrolling interests	—		(1,179)
Other, net	41		5,160
Net cash used in financing activities	(193,352)		(63,792)
Total cash used	(92,298)		(296,962)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	1,724		(4,201)
Net decrease in cash and cash equivalents and restricted cash	(90,574)		(301,163)
Cash and cash equivalents and restricted cash at beginning of period	1,426,069		2,121,864
Cash and cash equivalents and restricted cash at end of period	$	1,335,495	$	1,820,701

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

Table of Contents

IAC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

IAC today consists of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, among others ranging from early stage to established businesses.

As used herein, "IAC," the "Company," "we," "our," "us" and other similar terms refer to IAC Inc. and its subsidiaries (unless the context requires otherwise).

Basis of Presentation

The Company prepares its consolidated financial statements (referred to herein as "financial statements") in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). The 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. All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated.

The unaudited interim financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. In the opinion of management, the unaudited interim financial statements include all normal recurring adjustments considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for the full year. The unaudited interim financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Accounting Estimates

Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its 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 assets and liabilities. Actual results could differ from these estimates.

On an ongoing basis, the Company evaluates its estimates, judgments and assumptions, including those related to: the fair values of cash equivalents and marketable debt and equity securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the recoverability of right-of-use assets ("ROU assets"); the useful lives and recoverability of capitalized software, equipment, buildings and leasehold improvements and definite-lived intangible assets; the recoverability of goodwill and indefinite-lived intangible assets; the fair value of equity securities without readily determinable fair values; the fair value of interest rate swaps; contingencies; the fair value of acquisition-related contingent consideration arrangements; unrecognized tax benefits; the liability for potential refunds and customer credits; the valuation allowance for deferred income tax assets; pension and postretirement benefit expenses, including actuarial assumptions regarding discount rates, expected returns on plan assets, inflation and healthcare costs; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates, judgments and assumptions on historical experience, its forecasts and budgets and other factors that the Company considers relevant.

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IAC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Interest Rate Swaps

In March 2023, Dotdash Meredith entered into interest rate swaps for a total notional amount of $350 million, which synthetically converted a portion of the Dotdash Meredith Term Loan B from floating rate to fixed rate to manage interest rate risk exposure beginning on April 3, 2023. Dotdash Meredith designated the interest rate swaps as cash flow hedges and applies hedge accounting to these contracts in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification 815, Derivatives and Hedging. As cash flow hedges, the interest rate swaps are recognized at fair value on the balance sheet as either assets or liabilities, with the changes in fair value recorded in "Accumulated other comprehensive loss" in the balance sheet and reclassified into “Interest expense” in the statement of operations in the periods in which the interest rate swaps affect earnings. Dotdash Meredith assessed hedge effectiveness at the time of entering into these agreements and determined these interest rate swaps are expected to be highly effective. Dotdash Meredith evaluates the hedge effectiveness of the interest rate swaps quarterly, or more frequently, if necessary, by verifying (i) that the critical terms of the interest rate swaps continue to match the critical terms of the hedged interest payments and (ii) that it is probable the counterparties will not default. If the two requirements are met, the interest rate swaps are determined to be effective and all changes in the fair value of the interest rate swaps are recorded in "Accumulated other comprehensive loss." The cash flows related to interest settlements of the hedged monthly interest payments are classified as operating activities in the statement of cash flows, consistent with the interest expense on the related Dotdash Meredith Term Loan B. See "Note 4—Long-term Debt" for additional information.

General Revenue Recognition

The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised services or goods is transferred to the Company's customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.

From January 1, 2020 through December 31, 2022, Services recorded revenue on a gross basis. Effective January 1, 2023, Angi Inc. modified the Services terms and conditions so that the service professional, rather than Angi Inc., has the contractual relationship with the consumer to deliver the service and Angi Inc.'s performance obligation to the consumer is to connect them with the service professional. This change in contractual terms requires revenue to be reported as the net amount of what is received from the consumer after deducting the amounts owed to the service professional providing the service effective for all arrangements entered into after December 31, 2022. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition. For the three and six months ended June 30, 2022, if Services revenue were recorded on a net basis, revenue would have been reduced by $71.1 million and $122.8 million, respectively.

The Company's disaggregated revenue disclosures are presented in "Note 6—Segment Information."

Deferred Revenue

Deferred revenue consists of payments that are received or are contractually due in advance of the Company's performance obligation. 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 remaining term or expected completion of its performance obligation is one year or less. The current and non-current deferred revenue balances were $160.8 million and $0.1 million, respectively, at June 30, 2023, and $157.1 million and $0.2 million, respectively, at December 31, 2022. During the six months ended June 30, 2023, the Company recognized $127.3 million of revenue that was included in the deferred revenue balance at December 31, 2022. During the six months ended June 30, 2022, the Company recognized $125.2 million of revenue that was included in the deferred revenue balance at December 31, 2021. The current and non-current deferred revenue balances were $165.5 million and $0.4 million, respectively, at December 31, 2021. Non-current deferred revenue is included in "Other long-term liabilities" in the balance sheet.

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IAC INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Practical Expedients and Exemptions

For contracts that have an original duration of one year or less, the Company uses the practical expedient available under FASB Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, applicable to such contracts and does not consider the time value of money.

In addition, as permitted under the practical expedient available under ASU No. 2014-09