MATCH GROUP, INC. GENERAL
Management Overview IAC operates Vimeo,Dotdash and Care.com, among many other online businesses, and has majority ownership of bothMatch Group , which includes Tinder, Match, PlentyOfFish, OkCupid and Hinge, and ANGI Homeservices, which includes HomeAdvisor,Angie's List and Handy. OnDecember 19, 2019 , IAC entered into a Transaction Agreement (as amended as ofApril 28, 2020 , the "Transaction Agreement") withMatch Group, Inc. ("MTCH"),IAC Holdings, Inc. , a direct wholly owned subsidiary of IAC ("New IAC"), andValentine Merger Sub LLC , an indirect wholly owned subsidiary of IAC. Subject to the terms and conditions set forth in the Transaction Agreement, the businesses of MTCH will be separated from the remaining businesses of IAC through a series of transactions that will result in the pre-transaction stockholders of IAC owning shares in two, separate public companies-(1) IAC, which will be renamedMatch Group, Inc. ("New Match") and which will own the businesses of MTCH and certain IAC financing subsidiaries, and (2) New IAC, which will be renamedIAC/InterActiveCorp and which will own IAC's other businesses-and the pre-transaction stockholders of MTCH (other than IAC) owning shares in New Match. Completion of the separation, which is expected to occur in the second quarter of 2020, is subject to a number of conditions, including approval by a majority of the disinterested shareholders of MTCH, approval of IAC's shareholders and other customary conditions and approvals. We refer to this transaction as the "Separation." As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer toIAC/InterActiveCorp and its subsidiaries (unless the context requires otherwise). For a more detailed description of the Company's operating businesses, see the Company's Annual Report on Form 10-K for the year endedDecember 31, 2019 . Key Terms: When the following terms appear in this report, they have the meanings indicated below: Reportable Segments (for additional information see " Note 8-Segment Information " to the consolidated financial statements included in " Item 1-Consolidated Financial Statements "): •Match Group ("MTCH") - is a leading provider of subscription dating products, with a portfolio of dating brands, including Tinder, Match, PlentyOfFish and OkCupid. AtMarch 31, 2020 , IAC's economic interest and voting interest in MTCH were 80.4% and 97.4%, respectively. • ANGI Homeservices ("ANGI") - connects quality home service professionals across 500 different categories, from repairing and remodeling to cleaning and landscaping, with consumers through category-transforming products under brands such as HomeAdvisor,Angie's List , Handy and Fixd Repair. AtMarch 31, 2020 , IAC's economic interest and voting interest in ANGI were 84.9% and 98.3%, respectively. • Vimeo - operates a global video platform for creative professionals, small and medium businesses ("SMBs"), organizations and enterprises to connect with their audiences, customers and employees. •Dotdash - is a portfolio of digital brands providing expert information and inspiration in select vertical content categories. • Applications - consists of Desktop, which includes our direct-to-consumer downloadable desktop applications and the business-to-business partnership operations, andMosaic Group , which is a leading provider of global subscription mobile applications ofApalon , iTranslate and TelTech. • Emerging & Other - consists ofAsk Media Group , Care.com, a leading global platform for finding and managing family care, which was acquired onFebruary 11, 2020 ,Bluecrew , NurseFly, a temporary healthcare staffing platform 37
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acquired onJune 26, 2019 ,The Daily Beast , College Humor Media, for periods prior to its sale onMarch 16, 2020 , andIAC Films . Defined Terms and Operating Metrics: Unless otherwise indicated or as the context otherwise requires certain terms, which include the principal operating metrics we use in managing our business, used in this quarterly report are defined below:Match Group •North America - consists of the financial results and metrics associated
with users located in
• International - consists of the financial results and metrics associated
with users located outside of
• Direct Revenue - is revenue that is received directly from end users of
its products and includes both subscription and à la carte revenue.
• Subscribers - are users who purchase a subscription to one of MTCH's
products. Users who purchase only à la carte features are not included in
Subscribers.
• Average Subscribers - is the number of Subscribers at the end of each day
in the relevant measurement period divided by the number of calendar days
in that period.
• Average Revenue per Subscriber ("ARPU") - is Direct Revenue from
Subscribers in the relevant measurement period (whether in the form of
subscription or à la carte revenue from Subscribers) divided by the
Average Subscribers in such period and further divided by the number of
calendar days in such period. Direct Revenue from users who are not
Subscribers and have purchased only à la carte features is not included in
ARPU.
ANGI Homeservices
• Marketplace Revenue - includes revenue from the HomeAdvisor, Handy and
Fixd Repair domestic marketplace, including consumer connection revenue
for consumer matches, revenue from pre-priced jobs sourced through the
HomeAdvisor, Handy and Fixd Repair platforms, and service professional
membership subscription revenue. It excludes revenue from Angie's List ,
mHelpDesk and HomeStars. Effective January 1, 2020 , Fixd Repair has been
moved to Marketplace from Advertising & Other and prior year amounts have
been reclassified to conform to the current year presentation.
• Advertising & Other Revenue - includes Angie's List revenue (revenue from
service professionals under contract for advertising and membership
subscription fees from consumers) as well as revenue from mHelpDesk and
HomeStars.
• Marketplace Service Requests - are fully completed and submitted domestic
customer service requests to HomeAdvisor and jobs sourced through the
HomeAdvisor, Handy and Fixd Repair platforms.
• Marketplace Monetized Transactions - are fully completed and submitted
domestic customer service requests to HomeAdvisor that were matched to and
paid for by a service professional and jobs sourced through the
HomeAdvisor, Handy and Fixd Repair platforms during the period.
• Marketplace Transacting Service Professionals ("Marketplace Transacting
SPs") - are the number of HomeAdvisor, Handy and Fixd Repair domestic
service professionals that paid for consumer matches or performed a job
sourced through the HomeAdvisor, Handy and Fixd Repair platforms during
the quarter.
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Vimeo
• Platform Revenue - primarily includes revenue from Software-as-a-Service
("SaaS") subscription fees and other related revenue from Vimeo
subscribers.
• Hardware Revenue - includes sales of our live streaming accessories. Vimeo
sold its hardware business on March 29, 2019 .
• Vimeo Ending Subscribers - is the number of subscribers to Vimeo's SaaS
video tools at the end of the period (including the addition of
subscribers from Magisto, a video creation service enabling consumers and
businesses to create short-form videos acquired on May 28, 2019 ).
• Display Advertising Revenue - primarily includes revenue generated from
display advertisements sold both directly through our sales team and via
programmatic exchanges.
• Performance Marketing Revenue - primarily includes affiliate commerce and
performance marketing commissions generated when consumers are directed
from our properties to third-party service providers. Affiliate commerce
commissions are generated when a consumer completes a transaction.
Performance marketing commissions are generated on a cost-per-click or
cost-per-new account basis.
Operating Costs and Expenses:
• Cost of revenue - consists primarily of traffic acquisition costs, which
includes (i) the amortization of in-app purchase fees and (ii) payments
made to partners who direct traffic to our Ask Media Group websites, who
distribute our business-to-business customized browser-based applications
and who integrate our paid listings into their websites. In-app purchase
fees are monies paid to Apple and Google in connection with the processing
of in-app purchases of subscriptions and product features through the
in-app payment systems provided by Apple and Google . Traffic acquisition
costs include payment of amounts based on revenue share and other
arrangements. Cost of revenue also includes hosting fees, compensation
expense (including stock-based compensation expense) and other
employee-related costs for MTCH, Vimeo and Care.com customer care and
support functions, personnel engaged in data center operations, employees
at Fixd Repair for service work performed, payments made to workers
staffed by Bluecrew , and payments made to independent service
professionals who perform work contracted under pre-priced arrangements
through the HomeAdvisor and Handy platforms, credit card processing fees,
production costs related to IAC Films and for periods prior to its sale on
March 16, 2020 , College Humor Media, content costs and expenses associated
with the operation of the Company's data centers.
• Selling and marketing expense - consists primarily of advertising
expenditures, which include online marketing, including fees paid to
search engines, social media sites and third parties that distribute our
direct-to-consumer downloadable desktop applications, offline marketing,
which is primarily television advertising, and partner-related payments to
those who direct traffic to the brands within our MTCH and ANGI segments,
and compensation expense (including stock-based compensation expense) and
other employee-related costs for ANGI's sales force and marketing
personnel.
• General and administrative expense - consists primarily of compensation
expense (including stock-based compensation expense) and other
employee-related costs for personnel engaged in executive management,
finance, legal, tax, human resources and customer service functions
(except for MTCH, Vimeo and Care.com which includes customer service costs
within cost of revenue), fees for professional services (including
transaction-related costs related to the Separation and acquisitions),
rent expense, facilities costs, bad debt expense, software license and
maintenance costs and acquisition-related contingent consideration fair
value adjustments (described below). The customer service function at ANGI
includes personnel who provide support to its service professionals and
consumers.
• Product development expense - consists primarily of compensation expense
(including stock-based compensation expense) and other employee-related
costs that are not capitalized for personnel engaged in the design,
development, testing and enhancement of product offerings and related
technology and software license and maintenance costs.
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• Acquisition-related contingent consideration fair value adjustments -
relate to the portion of the purchase price of certain acquisitions that
is contingent upon the financial performance and/or operating metric
targets of the acquired company. The fair value of the liability is
estimated at the date of acquisition and adjusted each reporting period
until the liability is settled. Significant changes in financial
performance and/or operating metrics will result in a significantly higher
or lower fair value measurement. The changes in the estimated fair value
of the contingent consideration arrangements during each reporting period,
including the accretion of the discount if the arrangement is longer than
one year, are recognized in "General and administrative expense" in the
accompanying consolidated statement of operations.
Long-term debt (for additional information see " Note 5-Long-term Debt " to
the consolidated financial statements included in " Item 1-Consolidated
Financial Statements "):
• MTCH Term Loan - On February 13, 2020 , the MTCH Term Loan was amended to
reprice the outstanding balance to LIBOR plus 1.75% and extend its
maturity from November 16, 2022 to February 13, 2027 . The outstanding
balance of the MTCH Term Loan as of March 31, 2020 is $425.0 million . At
March 31, 2020 , the MTCH Term Loan bore interest at LIBOR plus 1.75% and
was 3.46%. At December 31, 2019 , the MTCH Term Loan bore interest at LIBOR
plus 2.50%, or 4.44%.
• MTCH Credit Facility - On February 13, 2020 , the MTCH Credit Facility was
amended to, among other things, increase the available borrowing capacity
from $500 million to $750 million , reduce interest rate margins by 0.125%,
and extend its maturity from December 7, 2023 to February 13, 2025 . At
March 31, 2020 and December 31, 2019 , there were no outstanding borrowings
under the MTCH Credit Facility.
• 6.375% MTCH Senior Notes - MTCH's 6.375% Senior Notes due June 1, 2024 ,
with interest payable each June 1 and December 1 . The outstanding balance
of the 6.375% MTCH Senior Notes as of March 31, 2020 is $400.0 million .
• 5.00% MTCH Senior Notes - MTCH's 5.00% Senior Notes due December 15, 2027 ,
with interest payable each June 15 and December 15 . The outstanding
balance of the 5.00% MTCH Senior Notes as of March 31, 2020 is $450.0
million .
• 5.625% MTCH Senior Notes - On February 15, 2019 , MTCH issued $350 million
aggregate principal amount of its 5.625% Senior Notes due February 15,
2029 , with interest payable each February 15 and August 15 . The
outstanding balance of the 5.625% MTCH Senior Notes as of March 31, 2020
is $350.0 million .
• 4.125% MTCH Senior Notes - On February 11, 2020 , MTCH
issued $500 million aggregate principal amount of its 4.125% Senior Notes
due August 1, 2030 , with interest payable each February 1 and August 1 ,
commencing August 1, 2020 . The proceeds from the offering will be used to
fund a portion of the cash consideration of $3.00 per MTCH common share
that will be payable in connection with the Separation. If the Separation
is not consummated, the proceeds will be used by MTCH for general
corporate purposes.
• ANGI Term Loan - due November 5, 2023 . The outstanding balance of the ANGI
Term Loan as of March 31, 2020 is $244.1 million . At both March 31, 2020
and December 31, 2019 , the ANGI Term Loan bears interest at LIBOR plus
1.50% and has quarterly principal payments. The interest rate was 2.28%
and 3.25% at March 31, 2020 and December 31, 2019 , respectively.
• ANGI Credit Facility - The ANGI $250 million revolving credit facility
expires on November 5, 2023 . At March 31, 2020 and December 31, 2019 ,
there were no outstanding borrowings under the ANGI Credit Facility.
• 2022 Exchangeable Notes - On October 2, 2017 , IAC FinanceCo, Inc. , a
subsidiary of the Company, issued $517.5 million aggregate principal
amount of 0.875% Exchangeable Senior Notes due October 1, 2022 , which are
exchangeable into shares of the Company's common stock. Interest is
payable each April 1 and October 1 . The outstanding balance of the 2022
Exchangeable Notes as of March 31, 2020 is $517.5 million .
• 2026 Exchangeable Notes - During the second quarter of 2019, IAC FinanceCo
2, Inc., a subsidiary of the Company, issued $575.0 million aggregate
principal amount of 0.875% Exchangeable Senior Notes due June 15, 2026 ,
which are
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exchangeable into shares of the Company's common stock. Interest is payable eachJune 15 andDecember 15 . The outstanding balance of the 2026 Exchangeable Notes as ofMarch 31, 2020 is$575.0 million . • 2030 Exchangeable Notes - During the second quarter of 2019, IAC FinanceCo 3, Inc., a subsidiary of the Company, issued$575.0 million aggregate principal amount of 2.00% Exchangeable Senior Notes dueJanuary 15, 2030 , which are exchangeable into shares of the Company's common stock. Interest is payable eachJanuary 15 andJuly 15 . The outstanding balance of the 2030 Exchangeable Notes as ofMarch 31, 2020 is$575.0 million . • IAC Credit Facility - The IAC$250 million revolving credit facility, under whichIAC Group, LLC , a subsidiary of the Company, is the borrower, expires onNovember 5, 2023 . AtMarch 31, 2020 andDecember 31, 2019 , there were no outstanding borrowings under the IAC Credit Facility. Non-GAAP financial measure: • Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") - is a non-GAAP financial measure. See " Principles of Financial Reporting " for the definition of Adjusted EBITDA and a reconciliation of net earnings attributable to IAC shareholders to operating (loss) income to consolidated Adjusted EBITDA for the three months endedMarch 31, 2020 and 2019. Certain Risks and Concentrations-Services Agreement withMarch 31, 2020 and 2019, consolidated revenue earned from$138.9 million and$195.8 million , representing 11% and 18%, respectively, of the Company's consolidated revenue. Accounts receivable related to revenue earned from$48.7 million and$53.0 million atMarch 31, 2020 andDecember 31, 2019 , respectively. Revenue attributable to the Services Agreement is earned by the Desktop business within the Applications segment andAsk Media Group within the Emerging & Other segment. For the three months endedMarch 31, 2020 and 2019, revenue earned from the Services Agreement was$46.1 million and$88.1 million , respectively, within the Applications segment and$80.5 million and$94.8 million , respectively, within the Emerging & Other segment. The Services Agreement was scheduled to expire onMarch 31, 2020 . OnFebruary 11, 2019 , the Company andApril 1, 2020 . The amendment extends the expiration date of the agreement toMarch 31, 2023 ; provided that duringSeptember 2020 and during each September thereafter, either party may, after discussion with the other party, terminate the Services Agreement, effective onSeptember 30 of the year following the year such notice is given. The Company believes that the amended agreement, taken as a whole, is comparable to the pre-amendment agreement withAsk Media Group . As described below,May 31, 2019 , Google announced industry-wide policy changes, which became effective onJuly 1, 2019 , related to all extensions distributed through theChrome Web Store . These industry-wide changes, combined with other changes to polices under the Services Agreement during the second half of 2019, have had a negative impact on the historical and expected future results of operations of the Desktop business. 41
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Overview-Consolidated Results
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Revenue:
Match Group $ 544,642 $ 80,017 17 % $ 464,625
ANGI Homeservices 343,650 40,207 13 % 303,443
Vimeo 56,968 13,387 31 % 43,581
Dotdash 44,120 10,159 30 % 33,961
Applications 104,148 (39,401 ) (27 )% 143,549
Emerging & Other 135,305 18,557 16 % 116,748
Inter-segment eliminations (68 ) (4 ) (6 )% (64 )Total$ 1,228,765 $ 122,922 11 %$ 1,105,843 Operating Income (Loss): Match Group$ 134,681 $ 15,853 13 %$ 118,828 ANGI Homeservices (16,296 ) (12,655 ) (348 )% (3,641 ) Vimeo (14,589 ) 3,195 18 % (17,784 ) Dotdash 2,411 (636 ) (21 )% 3,047 Applications (218,588 ) (243,944 ) NM 25,356 Emerging & Other (19,845 ) (17,325 ) (687 )% (2,520 ) Corporate (45,554 ) (2,141 ) (5 )% (43,413 ) Total$ (177,780 ) $ (257,653 ) NM$ 79,873 Adjusted EBITDA: Match Group$ 171,502 $ 16,435 11 %$ 155,067 ANGI Homeservices 34,397 (2,782 ) (7 )% 37,179 Vimeo (11,408 ) 4,792 30 % (16,200 ) Dotdash 7,011 (139 ) (2 )% 7,150 Applications 10,151 (19,537 ) (66 )% 29,688 Emerging & Other (16,980 ) (14,885 ) (710 )% (2,095 ) Corporate (31,398 ) (11,178 ) (55 )% (20,220 ) Total$ 163,275 $ (27,294 ) (14 )%$ 190,569 _____________________ NM = Not meaningful.
• Revenue increased$122.9 million , or 11%, to$1.2 billion , due to growth from MTCH of$80.0 million and ANGI of$40.2 million , increases of$18.6 million from Emerging & Other,$13.4 million from Vimeo and$10.2 million fromDotdash , partially offset by a decrease of$39.4 million from Applications. • Operating income decreased$257.7 million to a loss of$177.8 million due primarily to a goodwill impairment of$212.0 million and$21.4 million in indefinite-lived intangible asset impairments, which is reflected in amortization of intangibles, at Applications related to the Desktop business, a decrease in Adjusted EBITDA of$27.3 million , described below, and an increase of$5.8 million in depreciation, partially offset by a decrease of$9.0 million in stock-based compensation expense and a change of$7.8 million in acquisition-related contingent consideration fair value adjustments (income of$6.3 million in 2020 compared to expense of$1.5 million in 2019). The overall increase in amortization of intangibles of$29.4 million was due primarily to the inclusion in 2020 of indefinite-lived intangible asset impairments of$21.4 million related to the Desktop business noted above, and$4.6 million at MTCH. The goodwill and the indefinite-lived 42
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intangible asset impairments were driven by the impact of COVID-19. The increase
in depreciation was due primarily to the development of capitalized software to
support ANGI's products and services, as well as leasehold improvements related
to additional office space at ANGI. The decrease in stock-based compensation
expense was due primarily to the vesting of awards, including expense of
primarily to decreases of $19.5 million from Applications and $2.8 million
from ANGI, and increased losses of $14.9 million and $11.2 million from
Corporate and Emerging & Other, respectively, partially offset by growth
of $16.4 million from MTCH and $4.8 million from Vimeo.
Acquisitions and dispositions affecting year-over-year comparability include: Acquisitions:
Reportable Segment: Acquisition Date:
Fixd ANGI January 25, 2019
Magisto Vimeo May 28, 2019
NurseFly - controlling interest Emerging & Other June 26, 2019
Care.com Emerging & Other February 11, 2020
Dispositions: Reportable Segment: Sale Date:
Vimeo's hardware business Vimeo March 29, 2019
College Humor Media Emerging & Other March 16, 2020
COVID-19 Update
The Company's business could be materially and adversely affected by the
outbreak of COVID-19, which has been declared a "pandemic" by the World Health
Organization .
To date, the Company's ANGI Homeservices business has experienced a decline in
demand for home services requests, driven primarily by decreases in demand in
certain categories of jobs (particularly non-essential projects) and decreases
in demand in regions most affected by the COVID-19 outbreak, which the Company
attributes both to the unwillingness of consumers to interact with service
professionals face-to-face or have service professionals in their homes, and to
lower levels of consumer confidence and discretionary income generally. In
addition, with respect to our ad-supported businesses, the Company has
experienced a meaningful decrease in advertising rates across our various
properties (as much as 30% year over year). And while the Company's Match Group
business has experienced improved user and engagement metrics, it has also
experienced a decline in new users and paying subscribers during the pandemic.
In connection with the first quarter close of its books, the Company determined
that the effects of COVID-19 were an indicator of possible impairment for
certain of its assets. The Company determined, as of March 31, 2020 , the fair
value for those assets for which COVID-19 was deemed to be an indicator of
possible impairment and identified the following impairments:
• a $212.0 million impairment related to the goodwill of the Desktop
reporting unit;
• a $21.4 million impairment related to certain indefinite-lived intangible
assets of the Desktop reporting unit;
• a $4.6 million impairment related to certain indefinite-lived intangible
assets of the Match Group reporting unit;
• a $51.5 million impairment of certain equity securities without readily
determinable fair values; and
• a $7.5 million impairment of a note receivable and a warrant related to
certain investees.
The extent to which developments related to the COVID-19 outbreak and measures designed to curb its spread continue to impact the Company's business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company's control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel, non-essential services and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which
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have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to the COVID-19 outbreak. The longer the global outbreak and measures designed to curb the spread of the virus continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for the Company's various products and services), the greater the adverse impact is likely to be on the Company's business, financial condition and results of operations and the more limited will be the Company's ability to try and make up for delayed or lost revenues.
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Results of Operations for the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 Revenue Three Months Ended March 31, 2020 $ Change % Change 2019 (Dollars in thousands) Match Group$ 544,642 $ 80,017 17%$ 464,625 ANGI Homeservices 343,650 40,207 13% 303,443 Vimeo 56,968 13,387 31% 43,581 Dotdash 44,120 10,159 30% 33,961 Applications 104,148 (39,401 ) (27)% 143,549 Emerging & Other 135,305 18,557 16% 116,748 Inter-segment eliminations (68 ) (4 ) (6)% (64 )
Total$ 1,228,765 $ 122,922 11%$ 1,105,843 • MTCH revenue increased 17% to$544.6 million driven by International Direct Revenue growth of$55.3 million , or 26%, and North America Direct Revenue growth of$25.6 million , or 11%. Both International and North America Direct Revenue growth were driven by higher Average Subscribers, up 26% to 5.3 million and 5% to 4.6 million, respectively, due primarily to continued growth in Subscribers at Tinder and Hinge, with Pairs contributing to international growth. Total ARPU increased 1% driven by an increase of 5% in North America ARPU due to Tinder, driven primarily by increased purchases of à la carte features, partially offset by a 1% decrease in International ARPU due primarily to the unfavorable impact from the strengthening of theU.S. dollar relative to the Euro and certain other currencies. • ANGI revenue increased 13% to$343.6 million driven by Marketplace Revenue growth of$38.3 million , or 17%, and an increase of$3.9 million , or 6%, in Advertising & Other Revenue, partially offset by a decline of$1.9 million , or 9%, at the European businesses. The increase in Marketplace Revenue was due primarily to increases of 2% in Marketplace Service Requests to 5.9 million and 5% in Marketplace Transacting SPs to 191,000, and, to a lesser extent, an increase in revenue of$15.2 million due to the change to gross revenue reporting for Handy and HomeAdvisor's pre-priced product offering, effectiveJanuary 1, 2020 . Advertising & Other Revenue increased due primarily to an increase inAngie's List revenue. The revenue decline at the European businesses was due primarily to the impact of COVID-19, lower monetization from transitioning the Travaux.com business to Werkspot's technology platform in earlyFebruary 2020 and the unfavorable impact of the strengthening of theU.S. dollar relative to the Euro and British Pound. • Vimeo revenue grew 31% to$57.0 million due to Platform Revenue growth of$15.7 million , or 38%. Platform Revenue growth was driven by a 6% increase in average revenue per subscriber and a 31% increase in Vimeo Ending Subscribers to 1.3 million (including the contribution from Magisto, acquiredMay 28, 2019 ) as enterprises and organizations move to deliver their products and communicate with their customers more digitally due to the effects of COVID-19. Revenue in 2019 included$2.3 million from the hardware business, which was sold in the first quarter of 2019. •Dotdash revenue increased 30% to$44.1 million due to growth of 79% in Performance Marketing Revenue and 15% higher Display Advertising Revenue. The growth in Performance Marketing Revenue was due primarily to growth in both affiliate commerce commission revenue and performance marketing commission revenue. • Applications revenue decreased 27% to$104.1 million due to a decrease of$42.5 million , or 44%, at Desktop, partially offset by an increase of$3.1 million , or 7%, atMosaic Group . The decrease in Desktop revenue was driven by lower queries and monetization challenges following prior year browser policy changes and a decrease in advertising rates due to the impact of COVID-19 as well as continued business-to-business partnership declines. 45
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• Emerging & Other revenue increased 16% to$135.3 million due primarily to the contributions from Care.com, acquiredFebruary 11, 2020 , and Nursefly, acquiredJune 26, 2019 , as well as growth atAsk Media Group andThe Daily Beast , partially offset by lower revenue atIAC Films .
Cost of revenue (exclusive of depreciation shown separately below)
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Cost of revenue (exclusive of
depreciation shown separately below)
26% 24%
Cost of revenue in 2020 increased from 2019 due to increases of $23.7 million
from MTCH, $23.2 million from ANGI and $17.7 million from Emerging & Other,
partially offset by a decrease of $5.0 million from Applications.
• The MTCH increase was due primarily to increases of $9.6 million in in-app
purchase fees paid to Apple and Google as MTCH's revenues are increasingly
sourced through mobile app stores, $7.9 million in web operations,
including hosting fees, and $3.2 million in compensation expense related
to increased customer care personnel.
• The ANGI increase was due primarily to the change from net to gross
revenue reporting for Handy and HomeAdvisor pre-priced product offering,
effective January 1, 2020 .
• The Emerging & Other increase was due primarily to an increase of $10.9
million in traffic acquisition costs, principally due to an increase at
Ask Media Group driven by higher revenue sourced through partners, and
$9.4 million of expense from the inclusion of Care.com.
• The Applications decrease was due primarily to a decrease of $4.5 million
in traffic acquisition costs related to business-to-business partnership
revenue declines at Desktop.
Selling and marketing expense
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Selling and marketing expense
38%
Selling and marketing expense in 2020 increased from 2019 due to increases of
$14.7 million from ANGI, $5.8 million from MTCH, $3.1 million from Emerging &
Other, $2.3 million from Vimeo and $1.8 million from Dotdash , partially offset
by a decrease of $16.9 million from Applications.
• The ANGI increase was due primarily to increases in compensation expense
of $7.7 million and advertising expense of $4.4 million . The increase in
compensation expense was due primarily to growth in the sales force. The
increase in advertising expense was due primarily to an increase in online
marketing, partially offset by a decrease in television spend. Beginning
mid-way through 2019, the proportion of service requests through Google
free traffic declined while service requests through Google paid traffic
increased. In addition, paid service requests became considerably more
expensive on average than in the first half of 2019. In response to this
continuing trend, we implemented new processes in the second half of 2019
that are increasingly more focused on profitability targets of our paid
customer acquisition than the cost of each service request. We expect the
year-over-year increase in paid traffic to be more modest in the back half
of 2020.
• The MTCH increase was due primarily to increases in spending at Tinder,
Pairs, OkCupid and Hinge, partially offset by decreases in spending at
Match. Selling and marketing expense declined as a percentage of revenue
as MTCH continues to generate revenue growth from brands with relatively
lower marketing expense.
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• The Emerging & Other increase was due primarily to$9.9 million of expense from the inclusion of Care.com, partially offset by decreases in marketing of$6.2 million atAsk Media Group , driven by a shift in revenue resulting in the payment of traffic acquisition costs, and$0.9 million in compensation at College Humor Media due to its sale during the first quarter of 2020. • The Vimeo increase was due primarily to increases in compensation expense of$3.5 million , due, in part, to growth in the sales force and software license and maintenance costs of$0.6 million , partially offset by lower marketing of$2.3 million due to a brand campaign in 2019. • TheDotdash increase was due primarily to an increase in compensation expense of$1.6 million , due, in part, to growth in the sales force. • The Applications decrease was due primarily to lower online marketing of$15.4 million principally at Desktop as we continue to mitigate the negative impact on revenue from prior year browser policy changes, and a decrease of$0.8 million in compensation expense.
General and administrative expense
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
General and administrative expense
21% 19%
General and administrative expense in 2020 increased from 2019 due to increases
of $27.8 million from MTCH, $10.1 million from ANGI, $7.0 million from Emerging
& Other and $3.3 million from Corporate, partially offset by a decrease of $7.5
million from Applications.
• The MTCH increase was due primarily to increases of $10.7 million in legal
fees, $9.5 million in compensation expense related to an increase in
headcount, $3.5 million in costs related to the Separation and an increase
of $2.3 million in non-income taxes.
• The ANGI increase was due primarily to an increase of $6.2 million in
compensation expense and $3.5 million in bad debt expense due to higher
Marketplace Revenue and the impact from COVID-19 on expected credit
losses. The increase in compensation expense was due primarily to an
increase of $4.4 million in stock-based compensation expense due primarily
to the issuance of new equity awards since 2019 and an increase of $2.5
million in expense due to the modification charge related to the
combination of the HomeAdvisor business and Angie's List ($10.4 million in
2020 compared to $7.9 million in 2019).
• The Emerging & Other increase was due primarily to $6.7 million of expense
from the inclusion of Care.com.
• The Corporate increase was due primarily to higher professional fees,
including $7.6 million in costs related to the Separation, partially
offset by a decrease in stock-based compensation expense due primarily to
the vesting of awards, partially offset by a net increase in modification
charges.
Product development expense
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Product development expense
8%
Product development expense in 2020 increased from 2019 due to increases of
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• The Emerging & Other increase was due primarily to$4.9 million of expense from the inclusion of Care.com. • The Vimeo increase was due primarily to an increase of$4.5 million in compensation expense due primarily from the inclusion of Magisto and higher headcount. • TheDotdash increase was due primarily to an increase of$3.6 million in compensation expense due primarily to higher headcount and an increase in expense for contractors engaged in improving the user's experience. • The Applications increase was due primarily to an increase of$2.1 million in compensation expense due primarily to higher headcount at Mosaic. Depreciation Three Months Ended March 31, 2020 $ Change % Change 2019 (Dollars in thousands) Depreciation$24,738 $5,767 30%$18,971 As a percentage of revenue 2% 2% Depreciation in 2020 increased from 2019 due primarily to the development of capitalized software to support ANGI's products and services, as well as leasehold improvements related to additional office space at ANGI. Operating income (loss) Three Months Ended March 31, 2020 $ Change % Change 2019 (Dollars in thousands) Match Group$ 134,681 $ 15,853 13%$ 118,828 ANGI Homeservices (16,296 ) (12,655 ) (348)% (3,641 ) Vimeo (14,589 ) 3,195 18% (17,784 ) Dotdash 2,411 (636 ) (21)% 3,047 Applications (218,588 ) (243,944 ) NM 25,356 Emerging & Other (19,845 ) (17,325 ) (687)% (2,520 ) Corporate (45,554 ) (2,141 ) (5)% (43,413 ) Total$ (177,780 ) $ (257,653 ) NM$ 79,873 As a percentage of revenue (14)% 7%
Operating income decreased
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The aggregate carrying value of goodwill for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately$709.4 million . The aggregate carrying value of indefinite-lived intangible assets for which the most recent estimate of the excess of fair value over carrying value is less than 20% is approximately$162.5 million . AtMarch 31, 2020 , there was$333.9 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.5 years. Adjusted EBITDA Three Months Ended March 31, 2020 $ Change % Change 2019 (Dollars in thousands) Match Group$ 171,502 $ 16,435 11%$ 155,067 ANGI Homeservices 34,397 (2,782 ) (7)% 37,179 Vimeo (11,408 ) 4,792 30% (16,200 ) Dotdash 7,011 (139 ) (2)% 7,150 Applications 10,151 (19,537 ) (66)% 29,688 Emerging & Other (16,980 ) (14,885 ) (710)% (2,095 ) Corporate (31,398 ) (11,178 ) (55)% (20,220 ) Total$ 163,275 $ (27,294 ) (14)%$ 190,569 As a percentage of revenue 13% 17% For a reconciliation of net (loss) earnings attributable to IAC shareholders to operating (loss) income to consolidated Adjusted EBITDA, see " Principles of Financial Reporting ." For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company's reportable segments, see " Note 8-Segment Information " to the consolidated financial statements included in " Item 1-Consolidated Financial Statements ." •MTCH Adjusted EBITDA increased 11% to$171.5 million due primarily to the increase of$80.0 million in revenue due to growth at Tinder and lower selling and marketing expense as a percentage of revenue, partially offset by higher legal fees and higher in-app purchase fees as revenue continues to be increasingly sourced through mobile app stores. •ANGI Adjusted EBITDA decreased 7% to$34.4 million , despite higher revenue, due primarily to increased European losses and an increase of$3.5 million in bad debt expense due to higher Marketplace Revenue and the impact from COVID-19 on expected credit losses. •Vimeo Adjusted EBITDA loss decreased 30% to$11.4 million due primarily to higher revenue and lower marketing expense, partially offset by higher compensation expense due primarily to an increase in headcount, including its sales force, and a charge of$0.7 million related to the termination of a lease. •Dotdash Adjusted EBITDA decreased 2% to$7.0 million , despite higher revenue, due primarily to higher compensation expense, an increase in expense for contractors engaged in improving the user's experience and an increase in bad debt expense due, in part, to the impact of COVID-19 on expected credit losses. •Applications Adjusted EBITDA decreased 66% to$10.2 million due primarily to a decrease in revenue. •Emerging & Other Adjusted EBITDA loss increased$14.9 million to$17.0 million due primarily to$13.5 million in transaction-related items from the Care.com acquisition (including$8.7 million in deferred revenue write-offs and$4.8 million in transaction-related costs), reduced profits atAsk Media Group , reflecting an increase in traffic acquisition costs, increased losses atBluecrew and losses at Nursefly, partially offset by lower losses at College Humor Media. •Corporate Adjusted EBITDA loss increased 55% to$31.4 million due primarily to higher professional fees, including$7.6 million in costs related to the Separation. 49
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Interest expense
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Interest expense
Interest expense in 2020 increased from 2019 due primarily to the increase in the average outstanding long-term debt balance, partially offset by lower interest rates on variable rate debt compared to the prior year period. Other (expense) income, net
Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Other (expense) income, net
Other expense, net in 2020 includes:$51.5 million in impairments (downward adjustments) related to investments in equity securities without readily determinable fair values and$7.5 million in impairments of a note receivable and a warrant related to certain investees due to the impact of COVID-19; and$10.1 million of interest income. Other income, net in 2019 includes:$12.4 million of interest income;$8.1 million in a realized loss related to the sale of a business; and$1.9 million in net foreign currency exchange losses due primarily to the weakening of theU.S. dollar and the Euro relative to the British Pound during the three months endedMarch 31, 2019 . Income tax benefit Three Months Ended March 31, 2020 $ Change % Change 2019 (Dollars in thousands)
Income tax benefit
NM
For further details of income tax matters, see " Note 2-Income Taxes " to the
consolidated financial statements included in " Item 1. Consolidated Financial
Statements ."
In 2020, the Company recorded an income tax benefit of $89.9 million , which
represented an effective tax rate of 33%. The effective income tax rate was
higher than the statutory rate of 21% due primarily to excess tax benefits
generated by the exercise and vesting of stock-based awards and a revaluation of
net operating loss deferred taxes due to the CARES Act, partially offset by the
non-deductible portion of the Desktop goodwill impairment charge and unbenefited
losses related to other investment impairments.
The income tax benefits in 2019, despite pre-tax income, were due primarily to
excess tax benefits generated by the exercise and vesting of stock-based awards.
Net earnings attributable to noncontrolling interests
Noncontrolling interests represent the noncontrolling holders' percentage share
of earnings or losses from the subsidiaries in which the Company holds a
majority, but less than 100%, ownership interest and the results of which are
included in our consolidated financial statements.
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Three Months Ended March 31,
2020 $ Change % Change 2019
(Dollars in thousands)
Net earnings attributable to
noncontrolling interests $28,397 $4,107 17% $24,290 Net earnings attributable to noncontrolling interests in 2020 and 2019 primarily represents the publicly-held interest in MTCH's and ANGI's earnings.
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PRINCIPLES OF FINANCIAL REPORTING
IAC reports Adjusted EBITDA as a supplemental measure to U.S. generally accepted
accounting principles ("GAAP"). This measure is one of 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. This non-GAAP measure 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 measure presented by providing
the comparable GAAP measure with equal or greater prominence and descriptions of
the reconciling items, including quantifying such items, to derive the non-GAAP
measure. We encourage investors to examine the reconciling adjustments between
the GAAP and non-GAAP measure, which we discuss below.
Definition of Non-GAAP Measure
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("Adjusted EBITDA") is defined as operating income excluding: (1) stock-based
compensation expense; (2) depreciation; and (3) acquisition-related items
consisting of (i) amortization of intangible assets and impairments of goodwill
and intangible assets, if applicable, and (ii) gains and losses recognized on
changes in the fair value of contingent consideration arrangements. We believe
this measure is useful for analysts and investors as this measure allows a more
meaningful comparison between our performance and that of our competitors. The
above items are excluded from our Adjusted EBITDA measure because these items
are non-cash in nature. Adjusted EBITDA has certain limitations because it
excludes the impact of these expenses.
The following table reconciles net (loss) earnings attributable to IAC
shareholders to operating (loss) income to consolidated Adjusted EBITDA:
Three Months Ended March 31,
2020 2019
(In thousands)
Net (loss) earnings attributable to IAC shareholders
28,397 24,290
Income tax benefit (89,896 ) (63,604 )
Other expense (income), net 49,893 (651 )
Interest expense 44,866 31,143
Operating (loss) income (177,780 ) 79,873
Stock-based compensation expense 58,464 67,444
Depreciation 24,738 18,971
Amortization of intangibles 52,162 22,752
Acquisition-related contingent consideration fair value
adjustments (6,282 ) 1,529
Goodwill impairment 211,973 -
Adjusted EBITDA $ 163,275 $ 190,569 For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company's reportable segments, see " Note 8-Segment Information " to the consolidated financial statements included in " Item 1-Consolidated Financial Statements ." Non-Cash Expenses That Are Excluded From Our Non-GAAP Measure
Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of stock options, restricted stock units ("RSUs"), performance-based RSUs and market-based awards. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method. Performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period). To the extent that stock-based awards are settled on a net basis, the Company remits the required tax-withholding amounts from its current funds.
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Depreciation is a non-cash expense relating to our property, capitalized
software and equipment and is computed using the straight-line method to
allocate the cost of depreciable assets to operations over their estimated
useful lives, or, in the case of leasehold improvements, the lease term, if
shorter.
Amortization of intangible assets and impairments of goodwill and intangible
assets are non-cash expenses related primarily to acquisitions. At the time of
an acquisition, the identifiable definite-lived intangible assets of the
acquired company, such as technology, service professional relationships,
customer lists and user base, memberships, trade names and content, are valued
and amortized over their estimated lives. Value is also assigned to acquired
indefinite-lived intangible assets, which comprise trade names and trademarks,
and goodwill that are not subject to amortization. An impairment is recorded
when the carrying value of an intangible asset or goodwill exceeds its fair
value. We believe that intangible assets represent costs incurred by the
acquired company to build value prior to acquisition and the related
amortization and impairments of intangible assets or goodwill, if applicable,
are not ongoing costs of doing business.
Gains and losses recognized on changes in the fair value of contingent
consideration arrangements are accounting adjustments to report contingent
consideration liabilities at fair value. These adjustments can be highly
variable and are excluded from our assessment of performance because they are
considered non-operational in nature and, therefore, are not indicative of
current or future performance or the ongoing cost of doing business.
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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Position
March 31, 2020 December 31, 2019
(In thousands)
MTCH cash and cash equivalents:
United States $ 695,552 $ 322,267
All other countries 95,769 143,409
Total MTCH cash and cash equivalents 791,321 465,676
ANGI cash and cash equivalents:
United States 370,711 377,648
All other countries 13,519 12,917
Total ANGI cash and cash equivalents 384,230 390,565
IAC (excluding MTCH and ANGI) cash and cash
equivalents, short-term investments and marketable
securities:
United States 1,590,438 2,226,344
All other countries 56,740 56,710
Total cash and cash equivalents 1,647,178 2,283,054
Short-term investments (United States) 20,000 -
Marketable securities (United States) 49,912 19,993
Total IAC (excluding MTCH and ANGI) cash and cash equivalents, short-term investments and marketable securities
1,717,090 2,303,047
Total cash and cash equivalents, short-term investments
and marketable securities $ 2,892,641 $ 3,159,288
MTCH debt:
MTCH Term Loan $ 425,000 $ 425,000
6.375% MTCH Senior Notes 400,000 400,000
5.00% MTCH Senior Notes 450,000 450,000
5.625% MTCH Senior Notes 350,000 350,000
4.125% MTCH Senior Notes 500,000 -
Total MTCH long-term debt 2,125,000 1,625,000Less: unamortized original issue discount 6,618 6,282 Less: unamortized debt issuance costs 20,428 15,235 Total MTCH debt, net
2,097,954 1,603,483
ANGI debt:
ANGI Term Loan 244,063 247,500
Less: current portion of ANGI Term Loan 13,750 13,750 Less: unamortized debt issuance costs
1,670 1,804
Total ANGI debt, net 228,643 231,946
IAC debt:
2022 Exchangeable Notes 517,500 517,500
2026 Exchangeable Notes 575,000 575,000
2030 Exchangeable Notes 575,000 575,000
Total IAC long-term debt 1,667,500 1,667,500
Less: unamortized original issue discount 340,688 351,605
Less: unamortized debt issuance costs 28,401 29,752
Total IAC debt, net 1,298,411 1,286,143
Total long-term debt, net $ 3,625,008 $ 3,121,572
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IAC, MTCH and ANGI Long-term Debt
For a detailed description of IAC, MTCH and ANGI long-term debt, see " Note
5-Long-term Debt " to the consolidated financial statements included in
" Item 1. Consolidated Financial Statements ."
Cash Flow Information
In summary, the Company's cash flows are as follows:
Three Months Ended March 31,
2020 2019
(In thousands)
Net cash provided by (used in)
Operating activities$ 80,975 $ 102,941 Investing activities (586,006 ) 55,607 Financing activities 194,663 (73,660 ) Net cash provided by operating activities consists of earnings adjusted for non-cash items, the effect of changes in working capital and acquisition-related contingent consideration payments (to the extent greater than the liability initially recognized at the time of acquisition). Non-cash adjustments include goodwill impairments, stock-based compensation expense, deferred income taxes, amortization of intangibles, net losses on equity securities, depreciation, and bad debt expense. 2020 Adjustments to earnings consist primarily of a$212.0 million goodwill impairment,$58.5 million of stock-based compensation expense,$52.2 million of amortization of intangibles, including impairments of$26.0 million ,$51.5 million of impairments of certain equity securities without readily determinable fair values,$24.7 million of depreciation, and$19.9 million of bad debt expense, partially offset by$59.2 million of deferred income taxes. The deferred income tax benefit primarily relates to the net operating loss created by the exercise and vesting of stock-based awards. The decrease from changes in working capital primarily consists of an increase in accounts receivable of$79.8 million , a$47.8 million net change in income taxes payable and receivable, and a decrease in accounts payable and other liabilities of$24.7 million , partially offset by an increase in deferred revenue of$25.5 million . The increase in accounts receivable is primarily due to timing of cash receipts at MTCH, including cash received in the fourth quarter of 2019 rather than in the first quarter of 2020, as well as revenue growth at ANGI. The increase in income taxes receivable and decrease in income taxes payable is primarily due to receivables created by carrying back net operating losses pursuant to the Coronavirus Aid, Relief, and Economic Security Act and income tax payments in excess of tax accruals in foreign jurisdictions. The decrease in accounts payable and other liabilities is due, in part, to a decrease in accrued employee compensation mainly related to the payment of 2019 cash bonuses in 2020, partially offset by increases in (i) accrued advertising and related payables at ANGI and (ii) accrued interest primarily related to the MTCH Senior Notes due to timing of interest payments and the 4.125% MTCH Senior Notes, which were issued in the first quarter of 2020. The increase in deferred revenue is due primarily to growth in subscription sales at Vimeo and Care.com. Net cash used in investing activities includes cash used for acquisitions and investments of$532.9 million , principally related to the Care.com acquisition, purchases (net of maturities) of marketable debt securities of$29.8 million and capital expenditures of$24.6 million , primarily related to investments in the development of capitalized software at ANGI and MTCH to support their products and services, and leasehold improvements at ANGI. Net cash provided by financing activities includes$500.0 million in proceeds from the 4.125% MTCH Senior Notes, partially offset by$145.4 million and$3.2 million for withholding taxes paid on behalf of MTCH and ANGI employees, respectively, for stock-based awards that were net settled,$81.7 million for the repurchase of 1.3 million shares of MTCH common stock, on a settlement date basis, at an average price of$64.57 per share,$38.5 million for the repurchase of 5.2 million shares of ANGI common stock, on a settlement date basis, at an average price of$7.43 per share,$20.9 million for withholding taxes paid on behalf of IAC employees for stock-based awards that were net settled and$9.0 million of debt issuance costs. 55
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2019
Adjustments to earnings consist primarily of$67.4 million of stock-based compensation expense,$22.8 million of amortization of intangibles,$19.0 million of depreciation and$15.0 million of bad debt expense, partially offset by$65.1 million of deferred income taxes. The deferred income tax benefit primarily relates to the net operating loss created by the exercise and vesting of stock-based awards. The decrease from changes in working capital primarily consists of an increase in accounts receivable of$88.4 million , a decrease in accounts payable and other liabilities of$26.8 million and a decrease in income taxes payable and receivable, net of$6.2 million , partially offset by an increase in deferred revenue of$26.8 million . The increase in accounts receivable is primarily due to increases at MTCH, ANGI and Applications due to the timing of cash receipts, including cash received in the fourth quarter of 2018 rather than in the first quarter of 2019, as well as revenue growth at ANGI. The decrease in accounts payable and other liabilities is primarily due to a decrease in accrued employee compensation mainly related to the payment of 2018 cash bonuses in 2019, partially offset by an increase in accrued interest primarily related to the MTCH Senior Notes due to the timing of interest payments. The decrease in income taxes payable and receivable, net is primarily due to income tax payments in excess of tax accruals in foreign jurisdictions. The increase in deferred revenue is due primarily to growth in subscription sales at MTCH, Vimeo, and Applications. Net cash provided by investing activities includes proceeds from maturities (net of purchases) of marketable debt securities of$83.8 million , net proceeds from the sale of businesses and investments of$20.5 million , principally related to theDecember 31, 2018 sale of Felix, partially offset by capital expenditures of$25.9 million , primarily related to investments in the development of capitalized software at ANGI and MTCH to support their products and services and cash used for acquisitions of$21.6 million , principally related to the Fixd Repair acquisition. Net cash used in financing activities includes$300.0 million to repay the outstanding borrowings under the MTCH Credit Facility,$106.6 million and$16.5 million for withholding taxes paid on behalf of MTCH and ANGI employees, respectively, for stock-based awards that were net settled,$24.2 million for the repurchase of$0.4 million shares of MTCH common stock, on a settlement date basis, at an average price of$55.60 per share,$14.1 million for withholding taxes paid on behalf of IAC employees for stock-based awards that were net settled, partially offset by$350.0 million in proceeds from the 5.625% MTCH Senior Notes,$40.0 million in borrowings under the MTCH Credit Facility, and$9.3 million in proceeds from the exercise of IAC stock options. Liquidity and Capital Resources The Company's principal sources of liquidity are its cash and cash equivalents, short-term investments and marketable securities, cash flows generated from operations and available borrowings under the IAC Credit Facility. IAC's consolidated cash and cash equivalents, short-term investments and marketable securities atMarch 31, 2020 were$2.9 billion , of which$791.3 million was held by MTCH and$384.2 million was held by ANGI. The Company generated$81.0 million of operating cash flows for three months endedMarch 31, 2020 , of which$74.7 million was generated by MTCH and$55.9 million was generated by ANGI. Each of MTCH and ANGI is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, the Company cannot freely access the cash of MTCH and ANGI and their respective subsidiaries. In addition, certain agreements governing MTCH and ANGI indebtedness limit the payment of dividends or distributions and loans or advances to stockholders, including the Company, in the event a default has occurred or in the case of MTCH, its secured net leverage ratio (as defined in the MTCH Term Loan) exceeds 2.0 to 1.0 or its consolidated leverage ratio (as defined in certain MTCH indentures) exceeds 5.0 to 1.0, and in the case of ANGI, its consolidated net leverage ratio (as defined in the ANGI Term Loan) exceeds 4.5 to 1.0. There were no such limitations atMarch 31, 2020 . There were no outstanding borrowings under the IAC, MTCH and ANGI credit facilities atMarch 31, 2020 . The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations. The Company's 2020 capital expenditures are expected to be lower than 2019 capital expenditures of$136.7 million by approximately 10% to 20%, driven by lower capital expenditures at Corporate due to timing of payments related to the purchase of a 50% interest in an aircraft and ANGI related to lower leasehold improvements, partially offset by higher capital expenditures at MTCH due to building improvements related to the expansion of office space at MTCH's Tinder business and the development of capitalized software to support its products and services. The remaining payment of$13.1 million related to the purchase of the 50% interest in an aircraft is expected to be made in 2021. AtMarch 31, 2020 , IAC has 8.0 million shares remaining in its share repurchase authorization. 56
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During the three months endedMarch 31, 2020 , MTCH repurchased 1.3 million shares, on a trade date basis, of its common stock at an average price of$64.57 per share, or$81.7 million in aggregate. AtMarch 31, 2020 , MTCH has 8.6 million shares remaining in its share repurchase authorization. During the three months endedMarch 31, 2020 , ANGI repurchased 5.1 million shares, on a trade date basis, of its common stock at an average price of$7.40 per share, or$37.5 million in aggregate. FromApril 1, 2020 throughMay 5, 2020 , ANGI repurchased an additional 2.5 million shares at an average price of$6.18 per share, or$15.4 million in aggregate. ANGI has 20.1 million shares remaining in its share repurchase authorization as ofMay 5, 2020 . IAC, MTCH and ANGI may purchase shares over an indefinite period of time on the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook. The Company has granted stock settled stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries to employees and management of those subsidiaries. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IAC shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment, which, for purposes of this paragraph is assumed at a 50% withholding rate. The number of IAC common shares that would be required to net settle these vested and unvested interests, at current estimated fair values, other than for MTCH, ANGI and their subsidiaries, atMay 1, 2020 is 0.1 million shares. In addition, withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been$21.1 million atMay 1, 2020 . The number of IAC common shares ultimately needed to settle these awards may vary significantly as a result of both movements in the Company's stock price and the determination of fair value of the relevant subsidiary that is different than the Company's estimate. The Company currently settles all stock options on a net basis. Assuming all stock options outstanding onMay 1, 2020 , were net settled on that date, the Company would have issued 1.6 million common shares (of which 1.5 million is related to vested options and 0.2 million is related to unvested options) and would have remitted$351.2 million (of which$317.0 million is related to vested options and$34.3 million is related to unvested options) in cash for withholding taxes (in each case assuming a 50% withholding rate). The Company's RSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of IAC common stock. These equity awards are settled on a net basis. The number of IAC common shares that would be required to net settle these awards atMay 1, 2020 is 0.1 million shares. In addition, withholding taxes, which will be paid by the Company on behalf of the employees upon vest, would have been$23.9 million atMay 1, 2020 , assuming a 50% withholding rate. MTCH currently settles substantially all equity awards on a net basis. Assuming all MTCH awards outstanding onMay 1, 2020 , were net settled on that date, MTCH would have issued 5.7 million common shares (of which 1.5 million is related to vested shares and 4.2 million is related to unvested shares) and would have remitted$422.6 million (of which$112.2 million is related to vested shares and$310.4 million is related to unvested shares) in cash for withholding taxes (in each case assuming a 50% withholding rate). While certain MTCH stock options ("Tandem Awards") can be settled in MTCH or IAC common stock at the Company's election, the Company is no longer settling the Tandem Awards in IAC stock. ANGI currently settles all equity awards on a net basis. In connection with the Combination, previously issued stock appreciation rights related to the common stock of HomeAdvisor (US) were converted into ANGI stock appreciation rights that are settleable, at ANGI's option, on a net basis with ANGI remitting withholding taxes on behalf of the employee or on a gross basis with ANGI issuing a sufficient number of Class A shares to cover the withholding taxes. While these awards can be settled in either Class A shares of ANGI or shares of IAC common stock at IAC's option, these awards are currently being settled in shares of ANGI. If settled in IAC common stock, ANGI reimburses IAC in either cash or through the issuance of Class A shares to IAC. Assuming all of the stock appreciation rights outstanding onMay 1, 2020 were net settled on that date, ANGI would have issued 5.3 million shares of ANGI Class A stock and ANGI would have remitted$35.7 million in cash for withholding taxes (assuming a 50% withholding rate). Assuming all other ANGI equity awards outstanding onMay 1, 2020 were net settled on that date, including stock options, RSUs and subsidiary denominated equity, ANGI would have issued 6.1 million shares and would have remitted$41.3 million in cash for withholding taxes (assuming a 50% withholding rate). As ofMarch 31, 2020 , IAC's economic interest and voting interest in MTCH is 80.4% and 97.4%, respectively, and in ANGI is 84.9% and 98.3%, respectively. IAC intends to take steps if necessary to maintain an economic interest in each of MTCH and ANGI of at least 80%. In addition, the Transaction Agreement requires MTCH to undertake such steps as necessary to ensure that IAC maintains its 80% economic ownership. 57
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AtMarch 31, 2020 , all of the Company's international cash can be repatriated without significant tax consequences. The Company believes its existing cash, cash equivalents, short-term investments, marketable securities, available borrowings under the IAC Credit Facility and expected positive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments for the foreseeable future. The Company's liquidity could be negatively affected by a decrease in demand for its products and services due to COVID-19 or other factors. As described in the "COVID-19 Update" section above, to date, the COVID-19 outbreak and measures designed to curb its spread have adversely impacted certain of the Company businesses. The longer the global outbreak and measures designed to curb the spread of the COVID-19 outbreak have adverse impacts on economic conditions generally, the greater the adverse impact is likely to be on the Company's business, financial condition and results of operations. The Company's indebtedness could limit its ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures, debt service or other requirements; and (ii) use operating cash flow to make acquisitions or capital expenditures, or invest in other areas, such as developing business opportunities. The Company's ability to obtain additional financing could also be impacted by any disruptions in the financial markets caused by COVID-19 or otherwise. The Company may need to raise additional capital through future debt or equity financing to make additional acquisitions and investments. Additional financing may not be available on terms favorable to the Company or at all. During the first quarter of 2020, IAC contributed$1.1 billion toIAC Holdings, Inc. , a directly wholly owned subsidiary of IAC ("New IAC"). If the Separation is consummated:
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