UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2010
IAC/INTERACTIVECORP
(Exact name of registrant as specified in charter)
|
Delaware |
|
0-20570 |
|
59-2712887 |
|
(State or other jurisdiction |
|
(Commission |
|
(IRS Employer |
|
of incorporation) |
|
File Number) |
|
Identification No.) |
|
555 West 18th Street, New York, NY |
|
10011 |
|
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (212) 314-7300
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
On April 28, 2010, the Registrant issued a press release announcing its results for the quarter ended March 31, 2010. The full text of the press release, appearing in Exhibit 99.1 hereto, is incorporated herein by reference.
The attached document is furnished under both Item 2.02 “Results of Operations and Financial Condition” and Item 7.01 “Regulation FD Disclosure.”
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
IAC/INTERACTIVECORP |
|
|
|
|
|
|
|
By: |
/s/ Gregg Winiarski |
|
|
Name: |
Gregg Winiarski |
|
|
Title: |
Senior Vice President, |
|
|
|
General Counsel and Secretary |
Date: April 28, 2010
EXHIBIT INDEX
|
Exhibit No. |
|
Description |
|
|
|
|
|
99.1 |
|
Press Release of IAC/InterActiveCorp dated April 28, 2010. |
Exhibit 99.1
IAC REPORTS Q1 RESULTS
NEW YORK— April 28, 2010—IAC (Nasdaq: IACI) released first quarter 2010 results today.
SUMMARY RESULTS
$ in millions (except per share amounts)
|
|
|
Q1 2010 |
|
Q1 2009 |
|
Growth |
|
||
|
Revenue |
|
$ |
385.9 |
|
$ |
332.0 |
|
16 |
% |
|
|
|
|
|
|
|
|
|
||
|
Operating Income Before Amortization |
|
29.2 |
|
(3.2 |
) |
NM |
|
||
|
Adjusted Net Income |
|
(0.3 |
) |
(3.0 |
) |
91 |
% |
||
|
Adjusted EPS |
|
(0.00 |
) |
(0.02 |
) |
88 |
% |
||
|
|
|
|
|
|
|
|
|
||
|
Operating Income (Loss) |
|
3.5 |
|
(33.1 |
) |
NM |
|
||
|
Net Loss |
|
(18.7 |
) |
(28.4 |
) |
34 |
% |
||
|
GAAP Diluted EPS |
|
(0.16 |
) |
(0.19 |
) |
16 |
% |
||
See reconciliation of GAAP to non-GAAP measures beginning on page 9.
Information Regarding the Results:
· Operating Income Before Amortization improved at each segment, with results driven largely by strong growth at Search.
· Q1 revenue growth was driven by Search, benefiting from better macroeconomic conditions, and ServiceMagic, resulting from increased marketing efforts.
· Net loss and Adjusted Net Income include an impairment charge related to an investment, partially offset by a gain associated with the sale of our remaining interest in OpenTable, Inc., which collectively impacted net loss and Adjusted Net Income by $15.8 million and GAAP EPS and Adjusted EPS by $0.14.
· Q1 Free Cash Flow was $43.8 million, up 9% over the prior year, while cash flows from operating activities attributable to continuing operations was $56.4 million, up 16% over the prior year.
· IAC repurchased 6.5 million common shares at an average price of $23.27 per share between February 8, 2010 and April 23, 2010. As of April 23, 2010, IAC had 19.2 million shares remaining in its stock repurchase authorization.
Principal Areas of Focus:
· Search: Queries have grown sequentially over the past six quarters. Dictionary.com reached the 10 million mobile download milestone. Active toolbars increased over 20% sequentially and 65% year-over-year to 83 million.
· Local: CityGrid added more than 150 new publishers since launching its developer center on January 29th, and added Dex One as a major reseller partner, bringing the total number of reseller partners to 10. ServiceMagic grew domestic service providers 26% year-over-year, including the addition of service providers in new categories such as events and senior care.
· Personals: Match continued to grow domestic subscribers strongly; closed a joint venture with Meetic in Latin America and acquired Singlesnet, one of the most visited online dating websites in the world.
· Media: The Daily Beast produced the Women in the World summit which brought together 300 global leaders from government, media, social activism, business and the arts. Electus announced an initiative to develop and produce an interactive telenovela, ‘Pedro & Maria,’ in conjunction with MTV and Procter & Gamble.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
DISCUSSION OF FINANCIAL AND OPERATING RESULTS
|
|
|
Q1 2010 |
|
Q1 2009 |
|
Growth |
|
||
|
|
|
$ in millions |
|
||||||
|
Revenue |
|
|
|
|
|
|
|
||
|
Search |
|
$ |
199.0 |
|
$ |
166.0 |
|
20 |
% |
|
Match |
|
89.3 |
|
90.1 |
|
-1 |
% |
||
|
ServiceMagic |
|
42.2 |
|
31.4 |
|
35 |
% |
||
|
Media & Other |
|
55.9 |
|
46.4 |
|
20 |
% |
||
|
Intercompany Elimination |
|
(0.4 |
) |
(1.8 |
) |
78 |
% |
||
|
|
|
$ |
385.9 |
|
$ |
332.0 |
|
16 |
% |
|
Operating Income Before Amortization |
|
|
|
|
|
|
|
||
|
Search |
|
$ |
31.5 |
|
$ |
10.3 |
|
208 |
% |
|
Match |
|
14.8 |
|
9.9 |
|
49 |
% |
||
|
ServiceMagic |
|
2.9 |
|
2.8 |
|
2 |
% |
||
|
Media & Other |
|
(6.8 |
) |
(11.2 |
) |
39 |
% |
||
|
Corporate |
|
(13.2 |
) |
(15.0 |
) |
12 |
% |
||
|
|
|
$ |
29.2 |
|
$ |
(3.2 |
) |
NM |
|
|
Operating Income (Loss) |
|
|
|
|
|
|
|
||
|
Search |
|
$ |
31.1 |
|
$ |
1.2 |
|
2469 |
% |
|
Match |
|
13.7 |
|
9.7 |
|
41 |
% |
||
|
ServiceMagic |
|
2.4 |
|
2.0 |
|
20 |
% |
||
|
Media & Other |
|
(9.2 |
) |
(12.8 |
) |
28 |
% |
||
|
Corporate |
|
(34.4 |
) |
(33.3 |
) |
-3 |
% |
||
|
|
|
$ |
3.5 |
|
$ |
(33.1 |
) |
NM |
|
Note: In the fourth quarter of 2009, IAC renamed and realigned its reportable segments. The Media & Advertising segment was renamed “Search” and the Emerging Businesses segment was renamed “Media & Other.” Evite was moved from the Search segment (formerly Media & Advertising) to the Media & Other segment (formerly Emerging Businesses). Certain prior year amounts have been reclassified to conform to the current year presentation.
Search
Search consists primarily of Ask.com and other destination search websites through which we provide search and related advertising services, toolbars and applications through which we promote and distribute these services and Citysearch.
Search revenue reflects an increase in proprietary queries and continued growth in distributed toolbars. The increase in proprietary queries was driven by increased traffic acquisition efforts and enhancements associated with proprietary toolbars. Growth in distributed toolbars revenue reflects increased revenue from existing partners and the addition of new partners, partially offset by a decline in revenue per query associated with changes in traffic mix with our distributed toolbars. Citysearch’s revenue declined primarily due to lower proprietary advertising and traffic, partially offset by an increase in advertising and traffic from network partners.
Profits were favorably impacted by higher revenue and lower marketing costs, partially offset by higher traffic acquisition costs. Operating income in 2010 reflects decreases of $6.3 million in amortization of intangibles and $2.3 million in amortization of non-cash marketing.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
Match
Revenue declined slightly reflecting the sale of Match Europe to Meetic on June 5, 2009, partially offset by the contribution from the People Media and Singlesnet acquisitions, which were not in the year ago period, and solid growth from the Match domestic business. Excluding the results of the aforementioned transactions, revenue and subscribers grew 8% and 2%, respectively, with the increase in subscribers driven by growth in the domestic businesses, partially offset by declines in the international businesses. Profits increased reflecting the net impact of the aforementioned transactions and a reduction of $3.0 million in acquisition related expenses. Operating income reflects an increase of $1.0 million in the amortization of intangibles resulting primarily from the acquisition of People Media.
ServiceMagic
Domestically, ServiceMagic revenue benefited from increases of 40% and 26% in service requests and service providers, respectively. Profits benefited from the reversal of a $1.5 million provision for contingent consideration, related to the 2009 acquisition of Market Hardware, which will not be earned. Profits were adversely impacted by higher consumer acquisition costs as the growth in service requests from paid channels outpaced free requests, higher operating expenses primarily associated with the expansion of the sales force and losses from continued investment at ServiceMagic International.
Media & Other
Media & Other includes Electus, The Daily Beast, InstantAction, CollegeHumor, Notional, Vimeo, Pronto, Evite, Gifts.com and Shoebuy.com. Revenue for the period primarily reflects growth at Pronto, driven by continued improvements in customer acquisition and monetization, as well as growth at The Daily Beast, Gifts.com and Vimeo. Revenue and profits also benefited by $3.1 million from profit participations related to our interest in Reveille. Profits in the current period includes a write-off of $2.4 million of certain capitalized software costs while operating loss reflects increases of $1.0 million and $0.8 million in non-cash compensation and amortization of intangibles, respectively. Operating loss in 2009 includes a goodwill impairment charge of $1.1 million related to sale of our gift card business.
Corporate
Corporate expenses in the current year reflect lower depreciation expense, taxes and professional fees. Operating loss was impacted by an increase in non-cash compensation expense of $3.0 million, which is due to the expense related to awards granted subsequent to Q1 2009.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
OTHER ITEMS
Other income (expense) in Q1 2010 includes a write-down of $18.3 million of our equity method investment in The HealthCentral Network, Inc. and $4.0 million pre-tax gain related to the sale of our remaining OpenTable, Inc. common stock.
The tax provision for continuing operations was $4.0 million in Q1 2010 on a pre-tax loss of $13.9 million. The effective tax rate for adjusted net income was 104% in Q1 2010. The continuing operations tax provision, despite a pre-tax loss, and the adjusted net income effective tax rate, which was higher than the statutory rate of 35%, were due principally to a valuation allowance on the deferred tax asset created by the impairment charge for our investment in The HealthCentral Network, Inc., interest on tax contingencies and state taxes, partially offset by foreign income taxed at lower rates. The effective tax rate for continuing operations was 8% in Q1 2009 on a pre-tax loss of $32.6 million. The tax provision for adjusted net income was $0.5 million in Q1 2009 on a pre-tax loss of $2.6 million. The continuing operations effective tax rate, which was lower than the statutory rate of 35%, and the adjusted net income tax provision, despite a pre-tax loss, were due principally to a valuation allowance on the deferred tax asset created by losses from equity investments, non-deductible Meetic related transaction costs, interest on tax contingencies and state taxes, partially offset by foreign income taxed at lower rates.
LIQUIDITY AND CAPITAL RESOURCES
During Q1, IAC repurchased 11.1 million common shares at an average price of $22.20 per share. As of March 31, 2010, IAC had 110.8 million absolute common and class B common shares outstanding. IAC may purchase shares over an indefinite period of time, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price, and future outlook.
As of March 31, 2010, IAC had approximately $1.5 billion in cash and marketable securities, and $95.8 million in long-term debt.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
OPERATING METRICS
|
|
|
Q1 2010 |
|
Q1 2009 |
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
SEARCH |
|
|
|
|
|
|
|
|
Revenue by traffic source (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proprietary |
|
74 |
% |
69 |
% |
|
|
|
Network |
|
26 |
% |
31 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
MATCH |
|
|
|
|
|
|
|
|
Paid Subscribers (000s) |
|
1,585 |
|
1,438 |
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
SERVICEMAGIC |
|
|
|
|
|
|
|
|
Service Requests (000s) (b) |
|
1,391 |
|
996 |
|
40 |
% |
|
Accepts (000s) (c) |
|
1,783 |
|
1,319 |
|
35 |
% |
(a) Proprietary includes Ask.com, Fun Web Products and Dictionary.com. Network includes distributed search, sponsored listings, and toolbars.
(b) Fully completed and submitted customer requests for service on ServiceMagic.
(c) The number of times “Service Requests” are accepted by Service Professionals. A “Service Request” can be transmitted to and accepted by more than one Service Professional.
DILUTIVE SECURITIES
IAC has various tranches of dilutive securities. The table below details these securities as well as potential dilution at various stock prices (shares in millions, rounding differences may occur).
|
|
|
|
|
Avg. |
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
Strike / |
|
As of |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Shares |
|
Conversion |
|
4/23/10 |
|
Dilution at: |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Share Price |
|
|
|
|
|
$ |
23.54 |
|
$ |
25.00 |
|
$ |
30.00 |
|
$ |
35.00 |
|
$ |
40.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Absolute Shares as of 4/23/10 |
|
110.9 |
|
|
|
110.9 |
|
110.9 |
|
110.9 |
|
110.9 |
|
110.9 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
RSUs and Other |
|
5.7 |
|
|
|
5.7 |
|
5.6 |
|
5.2 |
|
5.0 |
|
4.8 |
|
||||||
|
Options |
|
14.9 |
|
$ |
21.03 |
|
2.7 |
|
3.2 |
|
4.8 |
|
6.1 |
|
7.1 |
|
|||||
|
Warrants |
|
18.3 |
|
$ |
28.08 |
|
0.0 |
|
0.0 |
|
1.4 |
|
3.6 |
|
5.5 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total Treasury Method Dilution |
|
|
|
|
|
8.3 |
|
8.8 |
|
11.4 |
|
14.7 |
|
17.4 |
|
||||||
|
% Dilution |
|
|
|
|
|
7.0 |
% |
7.3 |
% |
9.4 |
% |
11.7 |
% |
13.5 |
% |
||||||
|
Total Treasury Method Diluted Shares Outstanding |
|
|
|
|
|
119.2 |
|
119.6 |
|
122.3 |
|
125.6 |
|
128.3 |
|
||||||
CONFERENCE CALL
IAC will audiocast its conference call with investors and analysts discussing the Company’s Q1 financial results on Wednesday, April 28, 2010, at 11:00 a.m. Eastern Time (ET). This call will include the disclosure of certain information, including forward-looking information, which may be material to an investor’s understanding of IAC’s business. The live audiocast is open to the public at www.iac.com/investors.htm.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
GAAP FINANCIAL STATEMENTS
IAC CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited; $ in thousands except per share amounts)
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
||
|
Revenue |
|
$ |
385,926 |
|
$ |
332,010 |
|
|
Costs and expenses: |
|
|
|
|
|
||
|
Cost of revenue (exclusive of depreciation shown separately below) |
|
136,155 |
|
112,922 |
|
||
|
Selling and marketing expense |
|
131,152 |
|
132,900 |
|
||
|
General and administrative expense |
|
77,231 |
|
73,634 |
|
||
|
Product development expense |
|
16,617 |
|
18,088 |
|
||
|
Depreciation |
|
17,895 |
|
16,214 |
|
||
|
Amortization of intangibles |
|
3,349 |
|
8,015 |
|
||
|
Amortization of non-cash marketing |
|
— |
|
2,305 |
|
||
|
Goodwill impairment |
|
— |
|
1,056 |
|
||
|
Total costs and expenses |
|
382,399 |
|
365,134 |
|
||
|
|
|
|
|
|
|
||
|
Operating income (loss) |
|
3,527 |
|
(33,124 |
) |
||
|
|
|
|
|
|
|
||
|
Other income (expense): |
|
|
|
|
|
||
|
Interest income |
|
1,635 |
|
3,728 |
|
||
|
Interest expense |
|
(1,323 |
) |
(1,464 |
) |
||
|
Equity in losses of unconsolidated affiliates |
|
(22,613 |
) |
(1,847 |
) |
||
|
Gain on sale of investment |
|
3,989 |
|
— |
|
||
|
Other income |
|
931 |
|
146 |
|
||
|
Total other (expense) income, net |
|
(17,381 |
) |
563 |
|
||
|
|
|
|
|
|
|
||
|
Loss from continuing operations before income taxes |
|
(13,854 |
) |
(32,561 |
) |
||
|
Income tax (provision) benefit |
|
(4,009 |
) |
2,679 |
|
||
|
Loss from continuing operations |
|
(17,863 |
) |
(29,882 |
) |
||
|
(Loss) earnings from discontinued operations, net of tax |
|
(1,461 |
) |
1,238 |
|
||
|
Net loss |
|
(19,324 |
) |
(28,644 |
) |
||
|
Net loss attributable to noncontrolling interests |
|
619 |
|
258 |
|
||
|
Net loss attributable to IAC shareholders |
|
$ |
(18,705 |
) |
$ |
(28,386 |
) |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Per share information attributable to IAC shareholders: |
|
|
|
|
|
||
|
Basic loss per share from continuing operations |
|
$ |
(0.15 |
) |
$ |
(0.20 |
) |
|
Diluted loss per share from continuing operations |
|
$ |
(0.15 |
) |
$ |
(0.20 |
) |
|
|
|
|
|
|
|
||
|
Basic loss per share |
|
$ |
(0.16 |
) |
$ |
(0.19 |
) |
|
Diluted loss per share |
|
$ |
(0.16 |
) |
$ |
(0.19 |
) |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Non-cash compensation expense by function: |
|
|
|
|
|
||
|
Cost of revenue |
|
$ |
941 |
|
$ |
824 |
|
|
Selling and marketing expense |
|
983 |
|
954 |
|
||
|
General and administrative expense |
|
18,928 |
|
15,444 |
|
||
|
Product development expense |
|
1,478 |
|
1,358 |
|
||
|
Total non-cash compensation expense |
|
$ |
22,330 |
|
$ |
18,580 |
|
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
IAC CONSOLIDATED BALANCE SHEET
($ in thousands)
|
|
|
March 31, |
|
December 31, |
|
||
|
|
|
2010 |
|
2009 |
|
||
|
|
|
(unaudited) |
|
(audited) |
|
||
|
ASSETS |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
952,272 |
|
$ |
1,245,997 |
|
|
Marketable securities |
|
575,132 |
|
487,591 |
|
||
|
Accounts receivable, net |
|
109,422 |
|
101,834 |
|
||
|
Other current assets |
|
164,172 |
|
164,627 |
|
||
|
Total current assets |
|
1,800,998 |
|
2,000,049 |
|
||
|
|
|
|
|
|
|
||
|
Property and equipment, net |
|
291,429 |
|
297,412 |
|
||
|
Goodwill |
|
1,010,086 |
|
999,355 |
|
||
|
Intangible assets, net |
|
257,589 |
|
261,172 |
|
||
|
Long-term investments |
|
244,868 |
|
272,930 |
|
||
|
Other non-current assets |
|
165,544 |
|
184,971 |
|
||
|
TOTAL ASSETS |
|
$ |
3,770,514 |
|
$ |
4,015,889 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
||
|
LIABILITIES |
|
|
|
|
|
||
|
Accounts payable, trade |
|
$ |
58,318 |
|
$ |
39,173 |
|
|
Deferred revenue |
|
64,594 |
|
57,822 |
|
||
|
Accrued expenses and other current liabilities |
|
185,537 |
|
193,282 |
|
||
|
Total current liabilities |
|
308,449 |
|
290,277 |
|
||
|
|
|
|
|
|
|
||
|
Long-term debt |
|
95,844 |
|
95,844 |
|
||
|
Income taxes payable |
|
457,608 |
|
450,129 |
|
||
|
Other long-term liabilities |
|
23,649 |
|
23,633 |
|
||
|
|
|
|
|
|
|
||
|
Redeemable noncontrolling interests |
|
22,172 |
|
28,180 |
|
||
|
|
|
|
|
|
|
||
|
Commitments and contingencies |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
||
|
Common stock |
|
224 |
|
223 |
|
||
|
Class B convertible common stock |
|
16 |
|
16 |
|
||
|
Additional paid-in capital |
|
11,332,007 |
|
11,322,993 |
|
||
|
Accumulated deficit |
|
(770,082 |
) |
(751,377 |
) |
||
|
Accumulated other comprehensive income |
|
14,621 |
|
24,503 |
|
||
|
Treasury stock |
|
(7,713,994 |
) |
(7,468,532 |
) |
||
|
Total shareholders’ equity |
|
2,862,792 |
|
3,127,826 |
|
||
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$ |
3,770,514 |
|
$ |
4,015,889 |
|
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
IAC CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; $ in thousands)
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
||
|
Cash flows from operating activities attributable to continuing operations: |
|
|
|
|
|
||
|
Net loss |
|
$ |
(19,324 |
) |
$ |
(28,644 |
) |
|
Less: loss (earnings) from discontinued operations, net of tax |
|
1,461 |
|
(1,238 |
) |
||
|
Loss from continuing operations |
|
(17,863 |
) |
(29,882 |
) |
||
|
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities attributable to continuing operations: |
|
|
|
|
|
||
|
Depreciation |
|
17,895 |
|
16,214 |
|
||
|
Amortization of intangibles |
|
3,349 |
|
8,015 |
|
||
|
Amortization of non-cash marketing |
|
— |
|
2,305 |
|
||
|
Goodwill impairment |
|
— |
|
1,056 |
|
||
|
Non-cash compensation expense |
|
22,330 |
|
18,580 |
|
||
|
Deferred income taxes |
|
6,649 |
|
(3,937 |
) |
||
|
Equity in losses of unconsolidated affiliates |
|
22,613 |
|
1,847 |
|
||
|
Gain on sale of investment |
|
(3,989 |
) |
— |
|
||
|
Changes in current assets and liabilities: |
|
|
|
|
|
||
|
Accounts receivable |
|
(9,729 |
) |
1,778 |
|
||
|
Other current assets |
|
(3,034 |
) |
1,633 |
|
||
|
Accounts payable and other current liabilities |
|
2,966 |
|
19,122 |
|
||
|
Income taxes payable |
|
5,028 |
|
2,518 |
|
||
|
Deferred revenue |
|
7,921 |
|
6,751 |
|
||
|
Other, net |
|
2,277 |
|
2,699 |
|
||
|
Net cash provided by operating activities attributable to continuing operations |
|
56,413 |
|
48,699 |
|
||
|
Cash flows from investing activities attributable to continuing operations: |
|
|
|
|
|
||
|
Acquisitions, net of cash acquired |
|
(9,759 |
) |
(11,537 |
) |
||
|
Capital expenditures |
|
(12,575 |
) |
(8,580 |
) |
||
|
Proceeds from sales and maturities of marketable debt securities |
|
195,665 |
|
26,386 |
|
||
|
Purchases of marketable debt securities |
|
(284,933 |
) |
(118,033 |
) |
||
|
Proceeds from sales of investment |
|
5,325 |
|
— |
|
||
|
Purchases of long-term investments |
|
(213 |
) |
(1,211 |
) |
||
|
Other, net |
|
(2,371 |
) |
(8,402 |
) |
||
|
Net cash used in investing activities attributable to continuing operations |
|
(108,861 |
) |
(121,377 |
) |
||
|
Cash flows from financing activities attributable to continuing operations: |
|
|
|
|
|
||
|
Purchase of treasury stock |
|
(246,154 |
) |
(29,176 |
) |
||
|
Issuance of common stock, net of withholding taxes |
|
2,471 |
|
148,778 |
|
||
|
Excess tax benefits from stock-based awards |
|
4,800 |
|
86 |
|
||
|
Other, net |
|
— |
|
1,054 |
|
||
|
Net cash (used in) provided by financing activities attributable to continuing operations |
|
(238,883 |
) |
120,742 |
|
||
|
Total cash (used in) provided by continuing operations |
|
(291,331 |
) |
48,064 |
|
||
|
Net cash provided by (used in) operating activities attributable to discontinued operations |
|
834 |
|
(527 |
) |
||
|
Effect of exchange rate changes on cash and cash equivalents |
|
(3,228 |
) |
264 |
|
||
|
Net (decrease) increase in cash and cash equivalents |
|
(293,725 |
) |
47,801 |
|
||
|
Cash and cash equivalents at beginning of period |
|
1,245,997 |
|
1,744,994 |
|
||
|
Cash and cash equivalents at end of period |
|
$ |
952,272 |
|
$ |
1,792,795 |
|
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
IAC RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASH FLOW
(unaudited; $ in millions; rounding differences may occur)
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
Net cash provided by operating activities attributable to continuing operations |
|
$ |
56.4 |
|
$ |
48.7 |
|
|
Capital expenditures |
|
(12.6 |
) |
(8.6 |
) |
||
|
Free Cash Flow |
|
$ |
43.8 |
|
$ |
40.1 |
|
For the three months ended March 31, 2010, consolidated Free Cash Flow increased by $3.7 million from the prior year period due principally due to an increase in Operating Income Before Amortization and higher cash tax refunds partially offset by the payment of discretionary cash bonuses for 2009 in Q1 2010 while cash bonuses for 2008 were paid in Q4 2008 and higher capital expenditures.
IAC RECONCILIATION OF GAAP EPS TO ADJUSTED EPS
(unaudited; in thousands except per share amounts)
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
|
||
|
Diluted loss per share |
|
$ |
(0.16 |
) |
$ |
(0.19 |
) |
|
GAAP diluted weighted average shares outstanding |
|
116,446 |
|
147,776 |
|
||
|
Net loss attributable to IAC shareholders |
|
$ |
(18,705 |
) |
$ |
(28,386 |
) |
|
Non-cash compensation expense |
|
22,330 |
|
18,580 |
|
||
|
Amortization of intangibles |
|
3,349 |
|
8,015 |
|
||
|
Amortization of non-cash marketing |
|
— |
|
2,305 |
|
||
|
Goodwill impairment |
|
— |
|
1,056 |
|
||
|
Gain on sale of VUE interests and related effects |
|
1,716 |
|
1,516 |
|
||
|
Discontinued operations, net of tax |
|
1,461 |
|
(1,238 |
) |
||
|
Impact of income taxes and noncontrolling interests |
|
(10,429 |
) |
(4,857 |
) |
||
|
Adjusted Net Income |
|
$ |
(278 |
) |
$ |
(3,009 |
) |
|
|
|
|
|
|
|
||
|
Adjusted EPS weighted average shares outstanding |
|
116,446 |
|
147,776 |
|
||
|
|
|
|
|
|
|
||
|
Adjusted EPS |
|
$ |
(0.00 |
) |
$ |
(0.02 |
) |
|
|
|
|
|
|
|
||
|
GAAP Basic weighted average shares outstanding |
|
116,446 |
|
147,776 |
|
||
|
Options, warrants and RSUs, treasury method |
|
— |
|
— |
|
||
|
GAAP Diluted weighted average shares outstanding |
|
116,446 |
|
147,776 |
|
||
|
Options, warrants and RSUs, treasury method not included in diluted shares above |
|
— |
|
— |
|
||
|
Impact of RSUs |
|
— |
|
— |
|
||
|
Adjusted EPS shares outstanding |
|
116,446 |
|
147,776 |
|
||
For Adjusted EPS purposes, the impact of RSUs on shares outstanding is based on the weighted average number of RSUs outstanding as compared with shares outstanding for GAAP purposes, which includes RSUs on a treasury method basis. The weighted average number of RSUs outstanding for Adjusted EPS purposes includes the weighted average number of performance-based RSUs that the Company believes are probable of vesting. There are no performance-based RSUs included for GAAP purposes.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
IAC RECONCILIATION OF DETAILED SEGMENT RESULTS TO GAAP
(unaudited; $ in millions; rounding differences may occur)
|
|
|
For the three months ended March 31, 2010 |
|
||||||||||||||||
|
|
|
Operating Income |
|
Non-cash |
|
Amortization of |
|
Amortization of |
|
Goodwill |
|
Operating income |
|
||||||
|
Search |
|
$ |
31.5 |
|
$ |
(0.1 |
) |
$ |
— |
|
$ |
(0.3 |
) |
$ |
— |
|
$ |
31.1 |
|
|
Match |
|
14.8 |
|
— |
|
— |
|
(1.1 |
) |
— |
|
13.7 |
|
||||||
|
ServiceMagic |
|
2.9 |
|
— |
|
— |
|
(0.5 |
) |
— |
|
2.4 |
|
||||||
|
Media & Other |
|
(6.8 |
) |
(0.9 |
) |
— |
|
(1.5 |
) |
— |
|
(9.2 |
) |
||||||
|
Corporate |
|
(13.2 |
) |
(21.3 |
) |
— |
|
— |
|
— |
|
(34.4 |
) |
||||||
|
Total |
|
$ |
29.2 |
|
$ |
(22.3 |
) |
$ |
— |
|
$ |
(3.3 |
) |
$ |
— |
|
3.5 |
|
|
|
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
(17.4 |
) |
||||||
|
Loss from continuing operations before income taxes |
|
|
|
|
|
|
|
|
|
|
|
(13.9 |
) |
||||||
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
(4.0 |
) |
||||||
|
Loss from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
(17.9 |
) |
||||||
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(19.3 |
) |
||||||
|
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
||||||
|
Net loss attributable to IAC shareholders |
|
|
|
|
|
|
|
|
|
|
|
$ |
(18.7 |
) |
|||||
|
Supplemental: Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Search |
|
$ |
9.1 |
|
|
|
|
|
|
|
|
|
|
|
|
Match |
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ServiceMagic |
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Media & Other |
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation |
|
$ |
17.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2009 |
|
||||||||||||||||
|
|
|
Operating Income |
|
Non-cash |
|
Amortization of |
|
Amortization of |
|
Goodwill |
|
Operating income |
|
||||||
|
Search |
|
$ |
10.3 |
|
$ |
(0.1 |
) |
$ |
(2.3 |
) |
$ |
(6.6 |
) |
$ |
— |
|
$ |
1.2 |
|
|
Match |
|
9.9 |
|
(0.1 |
) |
— |
|
(0.1 |
) |
— |
|
9.7 |
|
||||||
|
ServiceMagic |
|
2.8 |
|
(0.1 |
) |
— |
|
(0.6 |
) |
— |
|
2.0 |
|
||||||
|
Media & Other |
|
(11.2 |
) |
0.1 |
|
— |
|
(0.7 |
) |
(1.1 |
) |
(12.8 |
) |
||||||
|
Corporate |
|
(15.0 |
) |
(18.3 |
) |
— |
|
— |
|
— |
|
(33.3 |
) |
||||||
|
Total |
|
$ |
(3.2 |
) |
$ |
(18.6 |
) |
$ |
(2.3 |
) |
$ |
(8.0 |
) |
$ |
(1.1 |
) |
(33.1 |
) |
|
|
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
||||||
|
Loss from continuing operations before income taxes |
|
|
|
|
|
|
|
|
|
|
|
(32.6 |
) |
||||||
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
2.7 |
|
||||||
|
Loss from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
(29.9 |
) |
||||||
|
Earnings from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
(28.6 |
) |
||||||
|
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
0.3 |
|
||||||
|
Net loss attributable to IAC shareholders |
|
|
|
|
|
|
|
|
|
|
|
$ |
(28.4 |
) |
|||||
|
Supplemental: Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Search |
|
$ |
8.3 |
|
|
|
|
|
|
|
|
|
|
|
|
Match |
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ServiceMagic |
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Media & Other |
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation |
|
$ |
16.2 |
|
|
|
|
|
|
|
|
|
|
|
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
IAC’S PRINCIPLES OF FINANCIAL REPORTING
IAC reports Operating Income Before Amortization, Adjusted Net Income, Adjusted EPS and Free Cash Flow, all of which are supplemental measures to GAAP. These measures are among the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. IAC endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures contained in this release and which we discuss below.
Definitions of Non-GAAP Measures
Operating Income Before Amortization is defined as operating income excluding, if applicable: (1) non-cash compensation expense, (2) amortization of non-cash marketing, (3) amortization and impairment of intangibles, (4) goodwill impairment, (5) pro forma adjustments for significant acquisitions, and (6) one-time items. We believe this measure is useful to investors because it represents the consolidated operating results from IAC’s segments, taking into account depreciation, which we believe is an ongoing cost of doing business, but excluding the effects of any other non-cash expenses. Operating Income Before Amortization has certain limitations in that it does not take into account the impact to IAC’s statement of operations of certain expenses, including non-cash compensation, non-cash marketing, and acquisition-related accounting.
Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net income available to common shareholders excluding, net of tax effects and noncontrolling interest, if applicable: (1) non-cash compensation expense, (2) amortization of non-cash marketing, (3) amortization and impairment of intangibles, (4) goodwill impairment, (5) pro forma adjustments for significant acquisitions, (6) equity income or loss from IAC’s 5.44% interest in VUE and gain on the sale of IAC’s interest in VUE, (7) non-cash income or expense reflecting changes in the fair value of the derivatives created in the Expedia spin-off as a result of both IAC and Expedia shares being issuable upon the conversion of the Ask Convertible Notes and the exercise of certain IAC warrants, (8) income or expense reflecting changes in the fair value of the derivative asset associated with the HSE sale, (9) impairment of our investment in Arcandor, (10) one-time items, and (11) discontinued operations. We believe Adjusted Net Income is useful to investors because it represents IAC’s consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and noncontrolling interest, but excluding the effects of any other non-cash expenses.
Adjusted EPS is defined as Adjusted Net Income divided by fully diluted weighted average shares outstanding for Adjusted EPS purposes. We include dilution from options and warrants per the treasury stock method and include all restricted shares and restricted stock units (“RSUs”) in shares outstanding for Adjusted EPS, with performance-based RSUs included based on the number of shares that the Company believes are probable of vesting. This differs from the GAAP method for including RSUs, which treats them on a treasury method basis and with respect to performance-based RSUs only to the extent the performance criteria are met (assuming the end of the reporting period is the end of the contingency period). In addition, convertible instruments are assumed to be converted in determining shares outstanding for Adjusted EPS, if the effect is dilutive. Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, IAC’s consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges which are not allocated to the operating businesses such as interest expense, taxes and noncontrolling interest, but excluding the effects of any other non-cash expenses. Adjusted Net Income and Adjusted EPS have the same limitations as Operating Income Before Amortization, and in addition Adjusted Net Income and Adjusted EPS do not account for IAC’s former passive ownership in VUE. Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.
Free Cash Flow is defined as net cash provided by operating activities, less capital expenditures. In addition, Free Cash Flow excludes tax payments and refunds related to the sale of IAC’s interests in VUE, PRC, HSE, Jupiter Shop Channel, EPI, and an internal restructuring due to the exclusion of the proceeds from these sales from cash provided by operating activities. We believe Free Cash Flow is useful to investors because it represents the cash that our operating businesses generate, before taking into account cash movements that are non-operational. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. For example, it does not take into account stock repurchases. Therefore, we think it is important to evaluate Free Cash Flow along with our consolidated statement of cash flows.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
IAC’S PRINCIPLES OF FINANCIAL REPORTING - continued
Pro Forma Results
We will only present Operating Income Before Amortization, Adjusted Net Income and Adjusted EPS on a pro forma basis if we view a particular transaction as significant in size or transformational in nature. For the periods presented in this release, there are no transactions that we have included on a pro forma basis.
One-Time Items
Operating Income Before Amortization and Adjusted Net Income are presented before one-time items, if applicable. These items are truly one-time in nature and non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. GAAP results include one-time items. For the periods presented in this release, there are no adjustments for any one-time items.
Non-Cash Expenses That Are Excluded From Our Non-GAAP Measures
Non-cash compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of restricted stock, restricted stock units and stock options. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding which, for restricted stock units and stock options, are included on a treasury method basis. We view the true cost of our restricted stock units as the dilution to our share base, and as such units are included in our shares outstanding for Adjusted EPS purposes as described above under the definition of Adjusted EPS. Upon vesting of restricted stock and restricted stock units and the exercise of certain stock options, the awards are settled, at the Company’s discretion, on a net basis, with the Company remitting the required tax withholding amount from its current funds.
Amortization of non-cash marketing consists of non-cash advertising credits secured from Universal Television as part of the transaction pursuant to which VUE was created, and the subsequent transaction by which IAC sold its partnership interests in VUE (collectively referred to as “NBC Universal Advertising”). The NBC Universal Advertising was available for television advertising on various NBC Universal network and cable channels without any cash cost.
The NBC Universal Advertising is excluded from Operating Income Before Amortization and Adjusted Net Income because it is non-cash and generally is incremental to the advertising the Company otherwise secures as a result of its ordinary cost/benefit marketing planning process. Accordingly, the Company’s aggregate level of advertising, and the increased concentration of that advertising on NBC Universal network and cable channels, does not reflect what our advertising effort would otherwise be without these credits, which were used prior to December 31, 2009. As a result, management believes that treating the NBC Universal Advertising as an expense does not appropriately reflect its true cost/benefit relationship, nor does it best reflect the Company’s long-term level of advertising expenditures. Nonetheless, while the benefits directly attributable to television advertising are always difficult to determine, and especially so with respect to the NBC Universal Advertising due to its incrementality and heavy concentration, it is likely that the Company does derive benefits from it, though management believes such benefits are generally less than those received through its regular advertising for the reasons stated above. Operating Income Before Amortization and Adjusted Net Income therefore have the limitation of including those benefits while excluding the associated expense.
Amortization of intangibles is a non-cash expense relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as technology and supplier agreements, are valued and amortized over their estimated lives. While it is likely that we will have significant intangible amortization expense as we continue to acquire companies, we believe that since intangibles represent costs incurred by the acquired company to build value prior to acquisition, they were part of transaction costs.
Equity income or loss from IAC’s 5.44% common interest in VUE was excluded from Adjusted Net Income and Adjusted EPS because IAC had no operating control over VUE, had no way to forecast this business, and did not consider the results of VUE in evaluating the performance of IAC’s businesses. The gain from the sale in June 2005 of IAC’s interests in VUE and related effects are excluded from Adjusted Net Income and Adjusted EPS for similar reasons.
Non-cash income or expense reflecting changes in the fair value of the derivatives created in the Expedia spin-off is excluded from Adjusted Net Income and Adjusted EPS because the obligations underlying these derivatives, which relate to the Ask Convertible Notes and certain IAC warrants, are expected to ultimately be settled in shares of IAC common stock and Expedia common stock, and not in cash.
Non-cash income or expense reflecting changes in the fair value of the derivative asset created in the HSE sale is excluded from Adjusted Net Income and Adjusted EPS because the variations in the value of the derivative are non-operational in nature.
Free Cash Flow
We look at Free Cash Flow as a measure of the strength and performance of our businesses, not for valuation purposes. In our view, applying “multiples” to Free Cash Flow is inappropriate because it is subject to timing, seasonality and one-time events. We manage our business for cash and we think it is of utmost importance to maximize cash — but our primary valuation metrics are Operating Income Before Amortization and Adjusted EPS. In addition, because Free Cash Flow is subject to timing, seasonality and one-time events, we believe it is not appropriate to annualize quarterly Free Cash Flow results.
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT
OTHER INFORMATION
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release and our conference call to be held at 11:00 a.m. Eastern Time today may contain “forward -looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: IAC’s future financial performance, IAC’s business prospects and strategy, anticipated trends and prospects in the industries in which IAC’s businesses operate and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: changes in senior management at IAC and/or its businesses, changes in our relationship with Google, adverse changes in economic conditions, either generally or in any of the markets in which IAC’s businesses operate, adverse trends in the online advertising industry or the advertising industry generally, our ability to convert visitors to our various websites into users and customers, our ability to offer new or alternative products and services in a cost-effective manner and consumer acceptance of these products and services, operational and financial risks relating to acquisitions, changes in industry standards and technology, our ability to expand successfully into international markets and regulatory changes. Certain of these and other risks and uncertainties are discussed in IAC’s filings with the Securities and Exchange Commission (“SEC”). Other unknown or unpredictable factors that could also adversely affect IAC’s business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, these forward-looking statements may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of IAC management as of the date of this press release. IAC does not undertake to update these forward-looking statements.
About IAC
IAC operates more than 50 leading and diversified Internet businesses across 30 countries... our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world. To view a full list of the companies of IAC please visit our website at www.iac.com.
Contact Us
IAC Investor Relations
Nick Stoumpas / Lisa Jaffa
(212) 314-7400
IAC Corporate Communications
Stacy Simpson / Leslie Cafferty
(212) 314-7470 / 7326
IAC
555 West 18th Street, New York, NY 10011 212.314.7300 Fax 212.314.7309 http://iac.com
* * *
SEE IMPORTANT NOTES AT END OF THIS DOCUMENT