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As filed with the Securities and Exchange Commission on August 7, 2024
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, 2024
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. 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 2, 2024, the following shares of the registrant's common stock were outstanding:
| | | | | |
Common Stock | 80,333,866 | |
Class B common stock | 5,789,499 | |
Total | 86,123,365 | |
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
IAC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| (In thousands, except par value amounts) |
ASSETS | | | |
Cash and cash equivalents | $ | 1,601,775 | | | $ | 1,297,445 | |
| | | |
Marketable securities | 87,210 | | | 148,998 | |
Accounts receivable, net | 489,853 | | | 536,650 | |
| | | |
Other current assets | 189,450 | | | 257,499 | |
Total current assets | 2,368,288 | | | 2,240,592 | |
| | | |
Buildings, capitalized software, land, equipment and leasehold improvements, net | 409,097 | | | 455,281 | |
Goodwill | 2,878,672 | | | 3,024,266 | |
Intangible assets, net of accumulated amortization | 793,523 | | | 874,705 | |
Investment in MGM Resorts International | 2,876,317 | | | 2,891,850 | |
Long-term investments | 401,491 | | | 411,216 | |
Other non-current assets | 476,759 | | | 473,267 | |
TOTAL ASSETS | $ | 10,204,147 | | | $ | 10,371,177 | |
| | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
LIABILITIES: | | | |
Current portion of long-term debt | $ | 38,750 | | | $ | 30,000 | |
Accounts payable, trade | 76,908 | | | 105,514 | |
Deferred revenue | 120,592 | | | 143,449 | |
Accrued expenses and other current liabilities | 648,769 | | | 671,527 | |
Total current liabilities | 885,019 | | | 950,490 | |
| | | |
Long-term debt, net | 1,971,107 | | | 1,993,154 | |
Deferred income taxes | 172,307 | | | 164,612 | |
Other long-term liabilities | 450,504 | | | 474,540 | |
| | | |
Redeemable noncontrolling interests | 29,132 | | | 33,378 | |
| | | |
Commitments and contingencies | | | |
| | | |
SHAREHOLDERS' EQUITY: | | | |
Common Stock, $0.0001 par value; authorized 1,600,000 shares; 84,683 and 84,465 shares issued and 80,333 and 80,115 shares outstanding at June 30, 2024 and December 31, 2023, respectively | 8 | | | 8 | |
Class B common stock, $0.0001 par value; authorized 400,000 shares; 5,789 shares issued and outstanding at June 30, 2024 and December 31, 2023 | 1 | | | 1 | |
Additional paid-in-capital | 6,363,548 | | | 6,340,312 | |
(Accumulated deficit) retained earnings | (96,278) | | | 923 | |
Accumulated other comprehensive loss | (6,473) | | | (10,942) | |
Treasury stock, 4,350 shares at June 30, 2024 and December 31, 2023 | (252,441) | | | (252,441) | |
Total IAC shareholders' equity | 6,008,365 | | | 6,077,861 | |
Noncontrolling interests | 687,713 | | | 677,142 | |
Total shareholders' equity | 6,696,078 | | | 6,755,003 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 10,204,147 | | | $ | 10,371,177 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| (In thousands, except per share data) |
Revenue | $ | 949,527 | | | $ | 1,111,589 | | | $ | 1,879,207 | | | $ | 2,195,860 | |
Operating costs and expenses: | | | | | | | |
Cost of revenue (exclusive of depreciation shown separately below) | 267,503 | | | 353,078 | | | 539,467 | | | 696,007 | |
Selling and marketing expense | 335,708 | | | 413,954 | | | 679,633 | | | 817,251 | |
General and administrative expense | 209,998 | | | 218,166 | | | 422,667 | | | 491,242 | |
Product development expense | 78,159 | | | 86,398 | | | 165,158 | | | 171,185 | |
Depreciation | 33,448 | | | 41,283 | | | 70,021 | | | 102,455 | |
Amortization of intangibles | 36,710 | | | 54,183 | | | 73,438 | | | 108,789 | |
| | | | | | | |
Total operating costs and expenses | 961,526 | | | 1,167,062 | | | 1,950,384 | | | 2,386,929 | |
Operating loss | (11,999) | | | (55,473) | | | (71,177) | | | (191,069) | |
Interest expense | (39,515) | | | (39,077) | | | (79,233) | | | (77,249) | |
Unrealized (loss) gain on investment in MGM Resorts International | (179,284) | | | (32,362) | | | (15,533) | | | 672,478 | |
Other income, net | 54,693 | | | 10,985 | | | 89,498 | | | 34,734 | |
(Loss) earnings before income taxes | (176,105) | | | (115,927) | | | (76,445) | | | 438,894 | |
Income tax benefit (provision) | 34,638 | | | 24,297 | | | (20,050) | | | (115,205) | |
Net (loss) earnings | (141,467) | | | (91,630) | | | (96,495) | | | 323,689 | |
Net (earnings) loss attributable to noncontrolling interests | (765) | | | 2,585 | | | (706) | | | 5,041 | |
Net (loss) earnings attributable to IAC shareholders | $ | (142,232) | | | $ | (89,045) | | | $ | (97,201) | | | $ | 328,730 | |
| | | | | | | |
Per share information attributable to IAC common stock and Class B common stock shareholders: | | | | | | | |
Basic (loss) earnings per share | $ | (1.71) | | | $ | (1.07) | | | $ | (1.17) | | | $ | 3.77 | |
Diluted (loss) earnings per share | $ | (1.71) | | | $ | (1.07) | | | $ | (1.17) | | | $ | 3.64 | |
| | | | | | | |
Stock-based compensation expense by function: | | | | | | | |
Cost of revenue | $ | 760 | | | $ | 533 | | | $ | 1,253 | | | $ | 552 | |
Selling and marketing expense | 2,372 | | | 2,198 | | | 4,013 | | | 3,941 | |
General and administrative expense | 23,115 | | | 24,040 | | | 48,069 | | | 46,884 | |
Product development expense | 2,852 | | | 3,422 | | | 4,671 | | | 7,757 | |
| | | | | | | |
Total stock-based compensation expense | $ | 29,099 | | | $ | 30,193 | | | $ | 58,006 | | | $ | 59,134 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| (In thousands) |
Net (loss) earnings | $ | (141,467) | | | $ | (91,630) | | | $ | (96,495) | | | $ | 323,689 | |
Other comprehensive (loss) income, net of income taxes: | | | | | | | |
Change in foreign currency translation adjustment | (199) | | | 2,486 | | | 19 | | | 3,405 | |
Change in net unrealized gains on interest rate swaps | 574 | | | 5,639 | | | 4,271 | | | 3,352 | |
Change in unrealized gains and losses on available-for-sale marketable debt securities | 2 | | | (11) | | | (20) | | | (37) | |
Total other comprehensive income, net of income taxes | 377 | | | 8,114 | | | 4,270 | | | 6,720 | |
Comprehensive (loss) income, net of income taxes | (141,090) | | | (83,516) | | | (92,225) | | | 330,409 | |
Components of comprehensive (income) loss attributable to noncontrolling interests: | | | | | | | |
Net (earnings) loss attributable to noncontrolling interests | (765) | | | 2,585 | | | (706) | | | 5,041 | |
Change in foreign currency translation adjustment attributable to noncontrolling interests | 41 | | | (377) | | | 195 | | | (493) | |
| | | | | | | |
| | | | | | | |
Comprehensive (income) loss attributable to noncontrolling interests | (724) | | | 2,208 | | | (511) | | | 4,548 | |
Comprehensive (loss) income attributable to IAC shareholders | $ | (141,814) | | | $ | (81,308) | | | $ | (92,736) | | | $ | 334,957 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three and six months ended June 30, 2024
(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) Income | | Treasury Stock | | Total IAC Shareholders' Equity | | Noncontrolling Interests | | Total Shareholders' Equity |
| | | $ | | Shares | | $ | | Shares | | | | | | |
| | | | (In thousands) |
Balance at March 31, 2024 | $ | 32,622 | | | | $ | 8 | | | 84,638 | | | $ | 1 | | | 5,789 | | | $ | 6,346,106 | | | $ | 45,954 | | | $ | (6,893) | | | $ | (252,441) | | | $ | 6,132,735 | | | $ | 684,107 | | | $ | 6,816,842 | |
Net (loss) earnings | (82) | | | | — | | | — | | | — | | | — | | | — | | | (142,232) | | | — | | | — | | | (142,232) | | | 847 | | | (141,385) | |
Other comprehensive income (loss), net of income taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 418 | | | — | | | 418 | | | (41) | | | 377 | |
Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | 20,425 | | | — | | | — | | | — | | | 20,425 | | | 10,093 | | | 30,518 | |
Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 45 | | | — | | | — | | | (692) | | | — | | | — | | | — | | | (692) | | | — | | | (692) | |
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | 4,113 | | | — | | | 2 | | | — | | | 4,115 | | | (5,594) | | | (1,479) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | (11,484) | | | — | | | — | | | — | | | (11,484) | | | — | | | (11,484) | |
Adjustment of noncontrolling interests to redemption amount | (3,337) | | | | — | | | — | | | — | | | — | | | 3,337 | | | — | | | — | | | — | | | 3,337 | | | — | | | 3,337 | |
Adjustment to the liquidation value of Vivian Health preferred shares | — | | | | — | | | — | | | — | | | — | | | 1,699 | | | — | | | — | | | — | | | 1,699 | | | (1,699) | | | — | |
Other | (71) | | | | — | | | — | | | — | | | — | | | 44 | | | — | | | — | | | — | | | 44 | | | — | | | 44 | |
Balance at June 30, 2024 | $ | 29,132 | | | | $ | 8 | | | 84,683 | | | $ | 1 | | | 5,789 | | | $ | 6,363,548 | | | $ | (96,278) | | | $ | (6,473) | | | $ | (252,441) | | | $ | 6,008,365 | | | $ | 687,713 | | | $ | 6,696,078 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | |
Balance at December 31, 2023 | $ | 33,378 | | | | $ | 8 | | | 84,465 | | | $ | 1 | | | 5,789 | | | $ | 6,340,312 | | | $ | 923 | | | $ | (10,942) | | | $ | (252,441) | | | $ | 6,077,861 | | | $ | 677,142 | | | $ | 6,755,003 | |
Net (loss) earnings | (91) | | | | — | | | — | | | — | | | — | | | — | | | (97,201) | | | — | | | — | | | (97,201) | | | 797 | | | (96,404) | |
Other comprehensive income (loss), net of income taxes | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,465 | | | — | | | 4,465 | | | (195) | | | 4,270 | |
Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | 39,935 | | | — | | | — | | | — | | | 39,935 | | | 21,112 | | | 61,047 | |
Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 218 | | | — | | | — | | | (8,815) | | | — | | | — | | | — | | | (8,815) | | | — | | | (8,815) | |
Issuance of Angi Inc. common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | — | | | — | | | — | | | 2,255 | | | — | | | 4 | | | — | | | 2,259 | | | (7,002) | | | (4,743) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Purchase of Angi Inc. treasury stock | — | | | | — | | | — | | | — | | | — | | | (18,184) | | | — | | | — | | | — | | | (18,184) | | | — | | | (18,184) | |
Adjustment of noncontrolling interests to redemption amount | (3,842) | | | | — | | | — | | | — | | | — | | | 3,842 | | | — | | | — | | | — | | | 3,842 | | | — | | | 3,842 | |
Adjustment to the liquidation value of Vivian Health preferred shares | — | | | | — | | | — | | | — | | | — | | | 4,141 | | | — | | | — | | | — | | | 4,141 | | | (4,141) | | | — | |
Other | (313) | | | | — | | | — | | | — | | | — | | | 62 | | | — | | | — | | | — | | | 62 | | | | | 62 | |
Balance at June 30, 2024 | $ | 29,132 | | | | $ | 8 | | | 84,683 | | | $ | 1 | | | 5,789 | | | $ | 6,363,548 | | | $ | (96,278) | | | $ | (6,473) | | | $ | (252,441) | | | $ | 6,008,365 | | | $ | 687,713 | | | $ | 6,696,078 | |
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 redemption amount | 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 redemption amount | 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 | |
IAC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
| (In thousands) |
Cash flows from operating activities: | | | |
Net (loss) earnings | $ | (96,495) | | | $ | 323,689 | |
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | | | |
Amortization of intangibles | 73,438 | | | 108,789 | |
Depreciation | 70,021 | | | 102,455 | |
Stock-based compensation expense | 58,006 | | | 59,134 | |
Non-cash lease expense (including right-of-use asset impairments) | 31,270 | | | 72,506 | |
Provision for credit losses | 29,648 | | | 48,608 | |
Unrealized loss (gain) on investment in MGM Resorts International | 15,533 | | | (672,478) | |
Deferred income taxes | 6,452 | | | 101,451 | |
Gains on sales of businesses and investments in equity securities (including upward and downward adjustments), net | (28,203) | | | (1,460) | |
| | | |
Unrealized (increase) decrease in the estimated fair value of a warrant | (20,393) | | | 7,731 | |
| | | |
Other adjustments, net | (350) | | | (7,202) | |
Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | |
Accounts receivable | 13,167 | | | 30,325 | |
Other assets | 65,974 | | | 45,688 | |
Operating lease liabilities | (34,764) | | | (39,576) | |
Accounts payable and other liabilities | (50,519) | | | (57,504) | |
Income taxes payable and receivable | 7,512 | | | 2,453 | |
Deferred revenue | 8,780 | | | 3,645 | |
Net cash provided by operating activities | 149,077 | | | 128,254 | |
Cash flows from investing activities: | | | |
| | | |
Capital expenditures | (31,804) | | | (108,107) | |
Net proceeds from sales of assets | 12,759 | | | 28,890 | |
Proceeds from maturities of marketable debt securities | 262,500 | | | 325,000 | |
Purchases of marketable debt securities | (197,117) | | | (197,017) | |
Net proceeds from the sales of businesses and investments | 162,179 | | | 3,491 | |
Decrease in notes receivable | 10,083 | | | 14,197 | |
Purchases of investments | — | | | (103,555) | |
| | | |
| | | |
| | | |
Other, net | — | | | 9,901 | |
Net cash provided by (used in) investing activities | 218,600 | | | (27,200) | |
Cash flows from financing activities: | | | |
| | | |
Principal payments on Dotdash Meredith Term Loans | (15,000) | | | (15,000) | |
Withholding taxes paid on behalf of IAC employees on net settled stock-based awards | (8,928) | | | (5,250) | |
Withholding taxes paid on behalf of Angi Inc. employees on net settled stock-based awards | (4,743) | | | (4,124) | |
| | | |
Purchases of Angi Inc. treasury stock | (18,201) | | | (3,397) | |
Purchases of IAC treasury stock | — | | | (165,622) | |
| | | |
| | | |
| | | |
| | | |
Other, net | (170) | | | 41 | |
Net cash used in financing activities | (47,042) | | | (193,352) | |
Total cash provided (used) | 320,635 | | | (92,298) | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash | (875) | | | 1,724 | |
Net increase (decrease) in cash and cash equivalents and restricted cash | 319,760 | | | (90,574) | |
Cash and cash equivalents and restricted cash at beginning of period | 1,306,241 | | | 1,426,069 | |
Cash and cash equivalents and restricted cash at end of period | $ | 1,626,001 | | | $ | 1,335,495 | |
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 is comprised of category leading businesses, including Dotdash Meredith, Angi Inc. and Care.com, as well as 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).
Total Home Roofing, LLC Sale
On November 1, 2023, Angi Inc. completed the sale of 100% of its wholly-owned subsidiary, Total Home Roofing, LLC ("Roofing"), and has reflected it as a discontinued operation in its standalone financial statements. Roofing does not meet the threshold to be reflected as a discontinued operation at the IAC level. During the fourth quarter of 2023, IAC moved Roofing to Emerging & Other and prior period financial information has been recast to conform to this presentation. Following IAC's move of Roofing to Emerging & Other, Angi Inc. has three operating segments: (i) Ads and Leads, (ii) Services and (iii) International (includes Europe and Canada).
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, 2023.
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 buildings, capitalized software, equipment 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; 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.
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 a variable rate to a 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 ("ASC") Topic 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 3—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 authorized 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.
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 $120.6 million and $0.1 million, respectively, at June 30, 2024, and $143.4 million and $0.1 million, respectively, at December 31, 2023. During the six months ended June 30, 2024, the Company recognized $97.5 million of revenue that was included in the deferred revenue balance at December 31, 2023. The change in the deferred revenue balance from December 31, 2023 to June 30, 2024 also reflects the reduction of $33.2 million related to the sale of Mosaic Group in the first quarter of 2024. 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. The current and non-current deferred revenue balances were $157.1 million and $0.2 million, respectively, at December 31, 2022. Non-current deferred revenue is included in "Other long-term liabilities" in the balance sheet.
Practical Expedients and Exemptions
For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), applicable to such contracts and does not consider the time value of money.
In addition, as permitted under the practical expedient available under ASC 606, 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 tied to sales-based or usage-based royalties, allocated entirely to unsatisfied performance obligations, or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which it has the right to invoice for services performed.
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company also applies the practical expedient to expense sales commissions as incurred where the anticipated customer relationship period is one year or less.
Certain Risks and Concentrations—Services Agreement with Google (the "Services Agreement")
The Company and Google are parties to an amended Services Agreement, which automatically renewed effective March 31, 2023 and now expires on March 31, 2025. The Company earns certain other advertising revenue from Google that is not attributable to the Services Agreement. A portion of the Company’s net cash from operating activities that it can freely access is attributable to revenue earned pursuant to the Services Agreement and other revenue earned from Google.
For the three and six months ended June 30, 2024, total revenue earned from Google was $126.5 million and $257.9 million, respectively, representing 13% and 14%, respectively, of the Company's revenue. The total revenue earned from the Services Agreement for the three and six months ended June 30, 2024 was $98.5 million and $201.4 million, respectively, representing 10% and 11%, respectively, of the Company's total revenue. For the three and six months ended June 30, 2023, total revenue earned from Google was $197.9 million and $370.8 million, respectively, representing 18% and 17%, respectively, of the Company's revenue. The total revenue earned from the Services Agreement for the three and six months ended June 30, 2023 was $164.6 million and $303.3 million, respectively, representing 15% and 14%, respectively, of the Company's total revenue. The related accounts receivable totaled $42.5 million and $52.2 million at June 30, 2024 and December 31, 2023, respectively.
The revenue attributable to the Services Agreement is earned by Ask Media Group and the Desktop business, which comprise the Search segment. For the three and six months ended June 30, 2024, revenue earned from the Services Agreement was $81.8 million and $167.2 million, respectively, within Ask Media Group and $16.7 million and $34.2 million, respectively, within the Desktop business. For the three and six months ended June 30, 2023, revenue earned from the Services Agreement was $146.1 million and $266.4 million, respectively, within Ask Media Group and $18.4 million and $37.0 million, respectively, within the Desktop business.
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. These updates may be specific to the Services Agreement or could be more general and thereby impact the Company as well as other companies. These policy and guideline updates have in the past and could in the future require modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which have been and could be costly to address or negatively impact revenue and have had and in the future could have an adverse effect on our financial condition and results of operations.
Recent Accounting Pronouncements
Recent Accounting Pronouncements Adopted by the Company
There were no recently issued accounting pronouncements adopted by the Company during the six months ended June 30, 2024.
Recent Accounting Pronouncements Not Yet Adopted by the Company
Accounting Standards Update ("ASU") 2023-07—Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In November 2023, the FASB issued ASU No. 2023-07, which is intended to provide users of financial statements with more decision-useful information about reportable segments of a public business entity, primarily through enhanced disclosures of significant segment expenses. This ASU requires annual and interim disclosures of significant expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss and an amount and description of its composition of other segment items. The provisions of this ASU also require entities to include all annual disclosures required by Topic 280 in the interim periods and permits entities to include multiple measures of a segment's profit or loss if such measures are used by the CODM to assess segment performance and determine allocation of resources, provided that at least one of those measures is determined in a way that is consistent with the measurement principles under GAAP. The amendments in ASU 2023-07 apply retrospectively and are effective for fiscal years beginning after December 15, 2023 and interim periods after December 15, 2024. Early adoption is permitted. The Company does not plan to early adopt and is currently assessing the impact of adopting the updated guidance on the financial statements.
ASU 2023-09—Income Taxes (Topic 740)—Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU No. 2023-09, which establishes required categories and a quantitative threshold to the annual tabular rate reconciliation disclosure and disaggregated jurisdictional disclosures of income taxes paid. The guidance's annual requirements are effective for the Company beginning with the December 31, 2025 reporting period. Early adoption is permitted and prospective disclosure should be applied, however, retrospective disclosure is permitted. The Company is currently assessing the pronouncement and its impact on its income tax disclosures, but it does not impact the Company's results of operations, financial condition or cash flows.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Securities
At June 30, 2024 and December 31, 2023, the fair value of marketable securities are as follows:
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| (In thousands) |
| | | |
Available-for-sale marketable debt securities | $ | 87,210 | | | $ | 148,998 | |
Total marketable securities | $ | 87,210 | | | $ | 148,998 | |
Marketable securities are carried at fair value. The Company has no investments in marketable equity securities, following the change in classification of its investment in MGM Resorts International ("MGM") to an equity method investment in the fourth quarter of 2023, described below. Prior to the fourth quarter of 2023, the Company had two investments in marketable equity securities, other than its investment in MGM, including one investment that was fully impaired in the first quarter of 2023 due to the investee declaring bankruptcy and another investment that was sold in the third quarter of 2023. The Company recorded net unrealized pre-tax gains of $1.3 million and $0.1 million during the three and six months ended June 30, 2023, respectively, for these investments. The unrealized pre-tax gains related to these investments are included in "Other income, net" in the statement of operations.
At June 30, 2024 and December 31, 2023, current available-for-sale marketable debt securities are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| Amortized cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | Amortized cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| (In thousands) |
Treasury discount notes | $ | 87,211 | | | $ | — | | | $ | (1) | | | $ | 87,210 | | | $ | 148,971 | | | $ | 27 | | | $ | — | | | $ | 148,998 | |
Total available-for-sale marketable debt securities | $ | 87,211 | | | $ | — | | | $ | (1) | | | $ | 87,210 | | | $ | 148,971 | | | $ | 27 | | | $ | — | | | $ | 148,998 | |
IAC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The contractual maturities of debt securities classified as current available-for-sale at June 30, 2024 and December 31, 2023 were within one year. There were no investments in available-for-sale marketable debt securities that had been in a continuous unrealized loss position for longer than twelve months at June 30, 2024 and December 31, 2023.
Investment in MGM Resorts International
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| (In thousands) |
Investment in MGM | $ | 2,876,317 | | | $ | 2,891,850 | |
At June 30, 2024, the Company owns 64.7 million common shares of MGM which represents 21.2% of MGM's common shares outstanding. During the fourth quarter of 2023, due to MGM's ongoing share repurchase program, which increased the Company's ownership interest passively, the Company determined that the equity method of accounting applied and elected to account for its investment in MGM pursuant to the fair value option. Prior to the fourth quarter of 2023, the Company's investment in MGM was accounted for as an equity security with a readily determinable fair value, with changes in fair value recognized through income each period. Since the Company has always marked its investment in MGM to fair value through income each period the election of the fair value option results in no change from its historical accounting for this investment. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange on the last trading day in the reporting period and any unrealized pre-tax gains or losses are included in the statement of operations. For the three and six months ended June 30, 2024, the Company recorded unrealized pre-tax losses on its investment in MGM of $179.3 million and $15.5 million, respectively. For the three and six months ended June 30, 2023, the Company recorded an unrealized pre-tax loss and gain on its investment of MGM of $32.4 million and $672.5 million, respectively. The cumulative unrealized net pre-tax gain through June 30, 2024 is $1.6 billion. A $2.00 increase or decrease in the share price of MGM would result in an unrealized gain or loss, respectively, of $129.4 million. At August 2, 2024, the fair value of the Company's investment in MGM was $2.3 billion.
The following table presents MGM's summarized financial information for the six months ended June 30, 2024. As noted above, the Company has elected to account for its investment in MGM pursuant to the fair value option. By electing the fair value option, the Company’s investment in MGM is remeasured each reporting period with any changes recognized through income based on MGM’s closing stock price. As a result, the value of our investment and the financial impacts in any given period are not necessarily correlated with the income statement information presented below.
| | | | | |
| Six Months Ended June 30, 2024 |
| (In thousands) |
Revenues | $ | 8,710,845 | |
Expenses | $ | 7,767,503 | |
Net income | $ | 582,528 | |
Net income attributable to MGM | $ | 404,548 | |
Long-term Investments
Long-term investments consist of:
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| (In thousands) |
Equity securities without readily determinable fair values | $ | 396,481 | | | $ | 404,848 | |
Other | 5,010 | | | 6,368 | |
Total long-term investments | $ | 401,491 | | | $ | 411,216 | |