MATCH GROUP, INC. NEW YORK, Feb. 2, 2016 /PRNewswire/ -- IAC (NASDAQ: IAC) released fourth quarter 2015 results today and published management's prepared remarks on the Investors section of its website at www.iac.com/Investors.
SUMMARY RESULTS
($ in millions except per share amounts)
---------------------------------------
Q4 2015 Q4 2014 Growth FY 2015 FY 2014 Growth
------- ------- ------ ------- ------- ------
Revenue $848.7 $830.8 2% $3,230.9 $3,109.5 4%
Adjusted EBITDA 160.8 160.0 1% 485.8 544.1 -11%
Adjusted Net Income 64.7 89.7 -28% 268.0 226.5 18%
Adjusted EPS 0.75 1.00 -25% 3.04 2.55 19%
Operating (Loss) Income (5.4) 110.4 NM 179.6 378.7 -53%
Net (Loss) Income (31.8) 70.2 NM 119.5 414.9 -71%
GAAP Diluted EPS (0.38) 0.78 NM 1.33 4.68 -72%
See reconciliations of GAAP to non-GAAP measures beginning on
page 12.
-------------------------------------------------------------
Q4 2015 HIGHLIGHTS
-- Match Group completed its IPO in Q4 2015. Revenue for the quarter
increased 12%, or 16% excluding the effects of foreign exchange, driven
by a 14% increase in Dating revenue attributable to 30% growth in
Average PMC, to over 4.6 million globally. Match Group Adjusted EBITDA
increased 16% versus the prior year.
-- In the HomeAdvisor segment, domestic revenue (82% of total revenue)
increased 51%, the 9(th) consecutive quarter of accelerated growth,
driven by 55% growth in service requests and 46% growth in paying
service professionals. Adjusted EBITDA increased 57% versus the prior
year. Full year 2015 revenue was $361.2 million, up 27% versus 2014.
-- Within Publishing, Premium Brands revenue increased 14% driven by strong
growth from About.com and Investopedia. Premium Brands ended 2015 with
over 100 million monthly active users.
-- Within Applications, Consumer revenue increased 6% driven by growth from
our downloadable desktop applications, including SlimWare, as well as
from Apalon, our mobile applications business.
-- In the Video segment, total revenue increased 13% versus the prior year
driven by Vimeo, DailyBurn and Electus, partially offset by $10.8
million lower revenue from IAC Films. The Adjusted EBITDA loss improved
87% versus the prior year.
-- Vimeo grew paid subscribers 19% to 676,000. Vimeo on Demand ended
2015 with approximately 32,000 titles from nearly 10,000 creators
and more than 1.2 million video buyers since launch.
-- DailyBurn revenue increased 80% with subscribers ending the year
over 105,000, up 56% versus the prior year.
-- Following completion of the Match Group IPO and related debt
transactions, IAC's Board of Directors has suspended the quarterly cash
dividend program.
DISCUSSION OF FINANCIAL AND OPERATING RESULTS
Q4 2015 Q4 2014 Growth
------- ------- ------
Revenue $ in millions
Match Group $267.6 $239.0 12%
HomeAdvisor 91.8 72.4 27%
Publishing 179.5 206.7 -13%
Applications 179.2 194.1 -8%
Video 66.0 58.2 13%
Other 64.8 60.5 7%
Intercompany Elimination (0.1) (0.2) 57%
----- ----
$848.7 $830.8 2%
====== ======
Adjusted EBITDA
Match Group $99.3 $85.4 16%
HomeAdvisor 5.8 3.7 57%
Publishing 22.7 41.8 -46%
Applications 41.7 47.7 -12%
Video (1.4) (10.9) 87%
Other 7.4 6.7 11%
Corporate (14.7) (14.4) -3%
$160.8 $160.0 1%
====== ======
Operating Income (Loss)
Match Group $67.6 $67.5 0%
HomeAdvisor 2.8 (0.2) NM
Publishing (70.4) 32.2 NM
Applications 37.1 45.2 -18%
Video (2.2) (11.7) 81%
Other (8.4) 5.6 NM
Corporate (31.9) (28.2) -13%
$(5.4) $110.4 NM
===== ======
Match Group
Dating revenue grew 14% due primarily to 12% higher Direct revenue(1), driven by increases in both North America and International, up 11% and 14%, respectively, versus the prior year period. Direct revenue growth was primarily driven by higher Average PMC at both North America and International, up 20% and 51%, respectively, due mainly to Tinder and the acquisition of PlentyOfFish, which closed on October 28, 2015, partially offset by 14% lower ARPPU(2) due to brand mix shifts, foreign exchange effects and deferred revenue write-offs. Excluding foreign exchange effects, total Dating revenue would have increased 18% and International Direct revenue would have increased 28%.
Adjusted EBITDA increased 16% due primarily to the higher revenue and lower costs in the current year period related to the ongoing consolidation and streamlining of our technology systems and European operations at our Dating businesses ($2.0 million in Q4 2015 versus $3.6 million in Q4 2014). Both revenue and Adjusted EBITDA were impacted by deferred revenue write-offs of $8.1 million in Q4 2015 primarily driven by the PlentyOfFish acquisition and $2.5 million in Q4 2014 in connection with The Princeton Review and FriendScout24 acquisitions. Operating income was flat versus the prior year despite the 16% higher Adjusted EBITDA due to an increase of $14.9 million in stock-based compensation expense due primarily to charges associated with the modification of certain awards and the issuance of equity awards since the prior year.
Please refer to the Match Group Q4 2015 earnings release for further detail.
Note 1: Direct Revenue is revenue that is directly received from an end user of our products.
Note 2: ARPPU, or Average Revenue per Paying User, is Direct Revenue in the relevant measurement period divided by the Average PMC in such period divided by the number of calendar days in such period.
HomeAdvisor
Revenue increased 27% due primarily to 51% growth at the HomeAdvisor domestic business, partially offset by international declines due primarily to the restructuring of certain European operations in Q4 2014. HomeAdvisor domestic revenue growth accelerated for the 9(th) consecutive quarter with year-over-year growth driven by 55% higher service requests and a 46% increase in paying service professionals to approximately 102,000. Adjusted EBITDA increased 57% due to the higher revenue, partially offset by increased investment in marketing and sales force related expenses.
Publishing
Revenue decreased 13% due to 28% lower Ask & Other(3) revenue, partially offset by 14% higher Premium Brands(4) revenue. Ask & Other revenue decreased primarily due to a decline in revenue at Ask.com and certain legacy businesses. Premium Brands revenue increased due primarily to strong growth at About.com and Investopedia. Adjusted EBITDA decreased 46% due to the lower revenue from Ask & Other and increased marketing and payroll related expenses at Premium Brands. Operating loss in the current year includes an impairment charge of $88.0 million related to certain intangible assets.
Applications
Revenue decreased 8% due to a 31% decline in Partnerships(5), partially offset by 6% growth in Consumer(6). Consumer growth was driven by higher revenue from our desktop applications, including SlimWare, and a full quarter contribution from Apalon, our mobile applications business (acquired on November 3, 2014). Adjusted EBITDA decreased 12% due primarily to the lower revenue at Partnerships, higher marketing spend at Consumer and $3.0 million in restructuring costs across Applications.
Video
Revenue grew 13% due primarily to strong growth at Electus, Vimeo, and DailyBurn, partially offset by $10.8 million lower revenue from IAC Films as the prior year benefited from the release of Top Five and Inherent Vice. The 87% improvement in the Adjusted EBITDA loss reflects increased profits from Electus and lower losses at IAC Films.
Note 3: Ask & Other revenue is principally composed of Ask.com, CityGrid and ASKfm.
Note 4: Premium Brands revenue is composed of About.com, Dictionary.com, Investopedia and The Daily Beast.
Note 5: Partnerships revenue is composed of our business-to-business partnership operations.
Note 6: Consumer revenue is composed of the direct-to-consumer downloadable desktop applications, including SlimWare, and Apalon, which houses our mobile applications.
Other
Revenue and Adjusted EBITDA increased 7% and 11%, respectively, due to growth at ShoeBuy. Operating loss in the current year includes a goodwill impairment charge of $14.1 million.
Corporate
Adjusted EBITDA loss increased slightly due primarily to a favorable legal settlement in the prior year, partially offset by lower compensation costs. Operating loss reflects an increase of $2.7 million in stock-based compensation expense due primarily to the issuance of equity awards since the prior year.
OTHER ITEMS
Interest expense increased due to both the costs and higher interest rate associated with the exchange of $445 million of Match Group 6.75% Senior Notes for a substantially like amount of IAC 4.75% Senior Notes, as well as $800 million of borrowings by Match Group under its term loan facility. In connection with the note exchange, $7.3 million in costs were expensed during the current year period. The note exchange and term loan borrowings closed on November 16, 2015.
Other income, net in Q4 2014 includes a $19.4 million pre-tax gain related to the sale of Urbanspoon.
Operating loss in Q4 2015 includes the $88.0 million intangible asset impairment charge in the Publishing segment and the $14.1 million goodwill impairment charge in the Other segment which impacted net loss and GAAP EPS by $69.4 million and $0.84, respectively. These charges did not impact Adjusted Net Income.
The effective tax rates for continuing operations in Q4 2015 and Q4 2014 were 14% and 39%, respectively, and the effective tax rates for Adjusted Net Income in Q4 2015 and Q4 2014 were 40% and 39%, respectively. The Q4 2015 effective rate for continuing operations was lower than the prior year primarily due to the non-deductible goodwill impairment charge.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2015, IAC had 83.0 million common and class B common shares outstanding. As of January 29, 2016, the Company had 5.6 million shares remaining in its stock repurchase authorization. IAC may purchase shares over an indefinite period on the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
As of December 31, 2015, the Company had $1.5 billion in cash and cash equivalents and marketable securities, of which IAC had $1.4 billion and Match Group had $99.8 million. Additionally, the Company had $1.8 billion in long-term debt, of which IAC had $555 million and Match Group had $1.2 billion ($40 million matures in the current year). IAC has a $300 million revolving credit facility. Match Group has a $500 million revolving credit facility. Both credit facilities were undrawn as of December 31, 2015 and currently remain undrawn.
As of December 31, 2015, IAC's ownership interest and voting interest in Match Group were 84.6% and 98.2%, respectively.
OPERATING METRICS
Q4 2015 Q4 2014 Growth
------- ------- ------
Match Group
-----------
Direct Revenue (in
millions)(a)
North America
(b) $149.2 $134.4 11%
International
(c) 77.6 68.2 14%
----
Total Direct
Revenue(a) $226.8 $202.6 12%
Indirect
Revenue 14.7 9.8 49%
----
Total Dating
Revenue $241.5 $212.5 14%
Non-dating
Revenue 26.1 26.5 -2%
----
Total Revenue $267.6 $239.0 12%
======
Dating Average PMC (d)
(in thousands)
North America
(b) 2,916 2,429 20%
International
(c) 1,697 1,127 51%
-----
Total Dating
Average PMC 4,613 3,556 30%
=====
Dating ARPPU(e)
North
America(b) $0.56 $0.60 -8%
International
(c) $0.50 $0.66 -24%
Total Dating
ARPPU $0.53 $0.62 -14%
HomeAdvisor
-----------
Domestic
Revenue (in
millions) $75.6 $50.1 51%
Domestic
Service
Requests
(000s) (f) 2,308 1,491 55%
Domestic
Paying
Service
Professionals
(000s) (g) 102 70 46%
Publishing (in millions)
-----------------------
Revenue
Premium
Brands (h) $82.4 $72.5 14%
Ask & Other
(i) 97.1 134.2 -28%
----
Total Revenue $179.5 $206.7 -13%
======
Applications (in millions)
-------------------------
Revenue
Consumer (j) $128.4 $120.6 6%
Partnerships
(k) 50.8 73.5 -31%
----
Total Revenue $179.2 $194.1 -8%
======
Video (in thousands)
-------------------
Vimeo Ending
Subscribers 676 566 19%
OPERATING METRICS NOTES
(a) Direct Revenue is revenue that is directly received from an end user of our products.
(b) North America includes Match, Chemistry, People Media, PlentyOfFish, OkCupid, Tinder and other dating businesses operating within the United States and Canada.
(c) International includes Meetic, PlentyOfFish, Tinder and all dating businesses operating outside of the United States and Canada.
(d) Average PMC is calculated by summing the number of paid subscribers, or paid member count (PMC), at the end of each day in the relevant measurement period and dividing it by the number of calendar days in that period.
(e) ARPPU, or Average Revenue per Paying User, is Direct Revenue in the relevant measurement period divided by the Average PMC in such period divided by the number of calendar days in such period.
(f) Fully completed and submitted customer service requests on HomeAdvisor.
(g) The number of service professionals that had an active membership or paid for leads in the last month of the period.
(h) Premium Brands revenue is composed of About.com, Dictionary.com, Investopedia and The Daily Beast.
(i) Ask & Other revenue is principally composed of Ask.com, CityGrid and ASKfm.
(j) Consumer revenue is composed of the direct-to-consumer downloadable desktop applications, including SlimWare, and Apalon, which houses our mobile operations.
(k) Partnerships revenue is composed of our business-to-business partnership operations.
DILUTIVE SECURITIES
IAC has various tranches of dilutive securities. The table below details these securities as well as potential dilution at various stock prices (shares in millions; rounding differences may occur).
Avg.
Exercise As of
Shares Price 1/29/16 Dilution at:
------ ----- ------- ------------
Share Price $51.94 $55.00 $60.00 $65.00 $70.00
Absolute Shares as
of 1/29/16 83.1 83.1 83.1 83.1 83.1 83.1
RSUs and Other * 3.3 3.3 3.2 3.0 2.8 2.6
Options 7.3 $52.17 1.2 1.3 1.5 1.7 2.0
Total Dilution 4.5 4.5 4.5 4.5 4.6
% Dilution 5.1% 5.1% 5.1% 5.2% 5.3%
Total Diluted
Shares Outstanding 87.5 87.5 87.5 87.6 87.7
==== ==== ==== ==== ====
* Assumes Match Group subsidiary denominated stock-based awards are settled with shares of Match Group common stock; therefore, no dilution from these awards is included in the table above.
CONFERENCE CALL
IAC will audiocast a conference call to answer questions regarding the Company's fourth quarter 2015 results and management's published remarks on Wednesday, February 3, 2016, at 8:45 a.m. Eastern Time. This call will include the disclosure of certain information, including forward-looking information, which may be material to an investor's understanding of IAC's business. The live audiocast will be open to the public at, and management's remarks have been posted on, www.iac.com/Investors.
GAAP FINANCIAL STATEMENTS
IAC CONSOLIDATED STATEMENT OF OPERATIONS
($ in thousands except per share amounts)
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Revenue $848,728 $830,754 $3,230,933 $3,109,547
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below) 214,084 233,712 778,161 860,204
Selling and marketing expense 315,274 279,832 1,345,576 1,147,409
General and administrative expense 147,364 131,637 525,629 443,610
Product development expense 47,220 42,163 185,766 160,515
Depreciation 15,512 16,948 62,205 61,156
Amortization of intangibles 100,648 16,090 139,952 57,926
Goodwill impairment 14,056 - 14,056 -
------ --- ------ ---
Total operating costs and expenses 854,158 720,382 3,051,345 2,730,820
------- ------- --------- ---------
Operating (loss) income (5,430) 110,372 179,588 378,727
Equity in earnings (losses) of unconsolidated affiliates 850 (300) 772 (9,697)
Interest expense (28,366) (14,195) (73,636) (56,314)
Other (expense) income, net (3,677) 16,023 36,149 (42,787)
(Loss) earnings from continuing operations before income taxes (36,623) 111,900 142,873 269,929
Income tax benefit (provision) 5,206 (43,914) (29,516) (35,372)
(Loss) earnings from continuing operations (31,417) 67,986 113,357 234,557
Earnings from discontinued operations, net of tax 28 625 17 174,673
--- --- --- -------
Net (loss) earnings (31,389) 68,611 113,374 409,230
Net (earnings) loss attributable to noncontrolling interests (460) 1,561 6,098 5,643
---- ----- ----- -----
Net (loss) earnings attributable to IAC shareholders $(31,849) $70,172 $119,472 $414,873
======== ======= ======== ========
Per share information attributable to IAC shareholders:
Basic (loss) earnings per $(0.38) $0.83 $1.44 $2.88
share from continuing
operations
Diluted (loss) earnings per $(0.38) $0.78 $1.33 $2.71
share from continuing
operations
Basic (loss) earnings per share $(0.38) $0.84 $1.44 $4.98
Diluted (loss) earnings per share $(0.38) $0.78 $1.33 $4.68
Dividends declared per common share $0.34 $0.34 $1.36 $1.16
Stock-based compensation expense by function:
Cost of revenue $364 $45 $1,210 $949
Selling and marketing expense 2,902 516 10,186 2,144
General and administrative expense 26,478 14,109 82,798 49,862
Product development expense 3,837 1,467 11,256 6,679
Total stock-based compensation expense $33,581 $16,137 $105,450 $59,634
======= ======= ======== =======
IAC CONSOLIDATED
BALANCE SHEET
($ in thousands)
December 31, December 31,
2015 2014
---- ----
ASSETS
Cash and cash
equivalents $1,481,447 $990,405
Marketable securities 39,200 160,648
Accounts receivable,
net 250,077 236,086
Other current assets 174,286 148,749
Total current assets 1,945,010 1,535,888
Property and equipment,
net 302,817 302,459
Goodwill 2,245,364 1,754,926
Intangible assets, net 440,828 491,936
Long-term investments 137,386 114,983
Other non-current
assets 138,545 56,693
TOTAL ASSETS $5,209,950 $4,256,885
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Current portion of
long-term debt $40,000 $ -
Accounts payable, trade 86,883 81,163
Deferred revenue 258,412 194,988
Accrued expenses and
other current
liabilities 383,251 397,549
Total current
liabilities 768,546 673,700
Long-term debt, net of
current maturities 1,748,213 1,080,000
Income taxes payable 33,692 32,635
Deferred income taxes 348,773 391,790
Other long-term
liabilities 64,510 45,191
Redeemable
noncontrolling
interests 30,391 40,427
Commitments and
contingencies
SHAREHOLDERS' EQUITY
Common stock 254 252
Class B convertible
common stock 16 16
Additional paid-in
capital 11,486,315 11,415,617
Retained earnings 331,394 325,118
Accumulated other
comprehensive loss (152,103) (87,700)
Treasury stock (9,861,350) (9,661,350)
Total IAC shareholders'
equity 1,804,526 1,991,953
Noncontrolling
interests 411,299 1,189
------- -----
Total shareholders'
equity 2,215,825 1,993,142
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $5,209,950 $4,256,885
========== ==========
IAC
CONSOLIDATED
STATEMENT OF
CASH FLOWS
($ in
thousands)
Twelve Months Ended December 31,
--------------------------------
2015 2014
---- ----
Cash flows from
operating
activities
attributable
to continuing
operations:
Net earnings $113,374 $409,230
Less: earnings
from
discontinued
operations,
net of tax 17 174,673
Earnings from
continuing
operations 113,357 234,557
Adjustments to
reconcile operations:
earnings from
continuing
operations to
net cash
provided by
operating
activities
attributable
to continuing
Stock-based
compensation
expense 105,450 59,634
Depreciation 62,205 61,156
Amortization of
intangibles 139,952 57,926
Impairment of
long-term
investments 6,689 66,601
Goodwill
impairment 14,056 -
Excess tax
benefits from
stock-based
awards (56,418) (44,957)
Deferred income
taxes (59,786) 76,869
Equity in
(earnings)
losses of
unconsolidated
affiliates (772) 9,697
Acquisition-
related
contingent
consideration
fair value
adjustments (15,461) (13,367)
Gain on real
estate
transaction (34,341) -
Gains on sales
of long-term
investments,
assets and a
business (1,005) (21,946)
Other
adjustments,
net 26,496 20,789
Changes in
assets and
liabilities,
net of effects
of
acquisitions:
Accounts
receivable (29,680) (19,918)
Other assets (21,174) (3,606)
Accounts
payable and
other current
liabilities 8,989 5,206
Income taxes
payable 24,167 (94,492)
Deferred
revenue 66,914 30,142
Other changes
in assets and
liabilities,
net (233) (243)
Net cash
provided by
operating
activities
attributable
to continuing
operations 349,405 424,048
------- -------
Cash flows from
investing
activities
attributable
to continuing
operations:
Acquisitions,
net of cash
acquired (617,402) (259,391)
Capital
expenditures (62,049) (57,233)
Proceeds from
maturities and
sales of
marketable
debt
securities 218,462 21,644
Purchases of
marketable
debt
securities (93,134) (175,826)
Proceeds from
the sales of
long-term
investments,
assets and a
business 9,413 58,388
Purchases of
long-term
investments (34,470) (24,334)
Other, net (3,541) (3,042)
Net cash used
in investing
activities
attributable
to continuing
operations (582,721) (439,794)
-------- --------
Cash flows from
financing
activities
attributable
to continuing
operations:
Borrowings
under term
loan facility 788,000 -
Debt issuance
costs (19,050) (383)
Fees and
expenses
related to
note exchange (6,954) -
Principal
payment on
long-term
debt (80,000) -
Proceeds from
Match Group
initial public
offering, net
of fees and
expenses 428,789 -
Purchase of
treasury stock (200,000) -
Dividends (113,196) (97,338)
Issuance of
common stock,
net of
withholding
taxes (38,418) 1,609
Repurchase of
stock-based
awards (23,431) -
Excess tax
benefits from
stock-based
awards 56,418 44,957
Purchase of
noncontrolling
interests (32,207) (33,165)
Acquisition-
related
contingent
consideration
payments (5,750) (8,109)
Funds returned
from escrow
for Meetic
tender offer - 12,354
Other, net (19,393) (905)
Net cash
provided by
(used in)
financing
activities
attributable
to continuing
operations 734,808 (80,980)
------- -------
Total cash
provided by
(used in)
continuing
operations 501,492 (96,726)
Total cash used
in
discontinued
operations (152) (145)
Effect of
exchange rate
changes on
cash and cash
equivalents (10,298) (13,168)
Net increase
(decrease) in
cash and cash
equivalents 491,042 (110,039)
Cash and cash
equivalents at
beginning of
period 990,405 1,100,444
Cash and cash
equivalents at
end of period $1,481,447 $990,405
========== ========
RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
IAC RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASH FLOW
($ in millions; rounding
differences may occur)
Twelve Months Ended December 31,
--------------------------------
2015 2014
---- ----
Net cash provided by
operating activities
attributable to
continuing operations $349.4 $424.0
Capital expenditures (62.0) (57.2)
Tax refunds related to
sales of a business and
an investment (2.1) (0.8)
Free Cash Flow $285.3 $366.0
====== ======
For the twelve months ended December 31, 2015, consolidated Free Cash Flow decreased $80.7 million due primarily to lower Adjusted EBITDA and higher income tax payments.
IAC RECONCILIATION OF GAAP EPS TO ADJUSTED EPS
(in thousands except per share amounts)
Three Months Ended December 31, Twelve Months Ended December 31,
------------------------------- --------------------------------
2015 2014 2015 2014
---- ---- ---- ----
Net (loss) earnings attributable to IAC shareholders $(31,849) $70,172 $119,472 $414,873
Stock-based compensation expense 33,581 16,137 105,450 59,634
Amortization of intangibles 100,648 16,090 139,952 57,926
Acquisition-related contingent consideration fair value adjustments 2,445 414 (15,461) (13,367)
Goodwill impairment 14,056 - 14,056 -
Gain on sale of VUE interests and related effects - - - (48,588)
Discontinued operations, net of tax (28) (625) (17) (174,673)
Impact of income taxes and noncontrolling interests (54,186) (12,500) (95,448) (69,336)
Adjusted Net Income $64,667 $89,688 $268,004 $226,469
======= ======= ======== ========
GAAP Basic weighted average shares outstanding 83,004 83,898 82,944 83,292
Options and RSUs, treasury method - 5,564 5,323 5,266
GAAP Diluted weighted average shares outstanding 83,004 89,462 88,267 88,558
Options and RSUs, treasury method not included in diluted shares above 2,623 - - -
Impact of RSUs and other 607 426 (216) 351
Adjusted EPS weighted average shares outstanding 86,234 89,888 88,051 88,909
====== ====== ====== ======
GAAP Diluted (loss) earnings per share $(0.38) $0.78 $1.33 $4.68
====== ===== ===== =====
Adjusted EPS $0.75 $1.00 $3.04 $2.55
===== ===== ===== =====
For Adjusted EPS purposes, the impact of RSUs on shares outstanding is based on the weighted average number of RSUs outstanding, including performance-based RSUs outstanding that the Company believes are probable of vesting. For GAAP diluted EPS purposes, RSUs, including performance-based RSUs for which the performance criteria have been met, are included on a treasury method basis. In addition, for Adjusted EPS purposes, Match Group subsidiary denominated stock-based awards are assumed to be settled with shares of Match Group common stock and weighted average shares have been adjusted accordingly.
IAC RECONCILIATION OF SEGMENT NON-GAAP MEASURE TO GAAP MEASURE
($ in millions; rounding differences may occur)
For the three months ended December 31, 2015
--------------------------------------------
Adjusted EBITDA Stock-based compensation expense Depreciation Amortization of intangibles Acquisition-related contingent consideration fair
value adjustments Goodwill impairment Operating income (loss)
--------------- -------------------------------- ------------ --------------------------- -------------------------------------------------- ------------------- ----------------------
Match Group $99.3 $(19.1) $(6.2) $(6.0) $(0.4) $ - $67.6
HomeAdvisor 5.8 (0.4) (1.8) (0.8) - - 2.8
Publishing 22.7 - (2.3) (90.8) - - (70.4)
Applications 41.7 - (1.1) (1.5) (2.0) - 37.1
Video (1.4) - (0.4) (0.4) - - (2.2)
Other 7.4 - (0.6) (1.2) - (14.1) (8.4)
Corporate (14.7) (14.1) (3.1) - - - (31.9)
-----
Total $160.8 $(33.6) $(15.5) $(100.6) $(2.4) $(14.1) $(5.4)
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For the three months ended December 31, 2014
--------------------------------------------
Adjusted EBITDA Stock-based compensation expense Depreciation Amortization of intangibles Acquisition-related contingent consideration fair
value adjustments Operating income (loss)
--------------- -------------------------------- ------------ --------------------------- -------------------------------------------------- ----------------------
Match Group $85.4 $(4.2) $(8.4) $(4.6) $(0.7) $67.5
HomeAdvisor 3.7 (0.4) (2.0) (1.4) - (0.2)
Publishing 41.8 - (2.5) (7.1) - 32.2
Applications 47.7 - (0.8) (1.3) (0.3) 45.2
Video (10.9) (0.2) (0.2) (0.5) - (11.7)
Other 6.7 - (0.5) (1.2) 0.6 5.6
Corporate (14.4) (11.3) (2.6) - - (28.2)
-----
Total $160.0 $(16.1) $(16.9) $(16.1) $(0.4) $110.4
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IAC RECONCILIATION OF SEGMENT NON-GAAP MEASURE TO GAAP MEASURE
($ in millions; rounding differences may occur)
For the twelve months ended December 31, 2015
---------------------------------------------
Adjusted EBITDA Stock-based compensation expense Depreciation Amortization of intangibles Acquisition-related contingent consideration fair
value adjustments Goodwill impairment Operating income (loss)
--------------- -------------------------------- ------------ --------------------------- -------------------------------------------------- ------------------- ----------------------
Match Group $278.7 $(50.1) $(26.0) $(20.1) $11.1 $ - $193.6
HomeAdvisor 18.5 (1.6) (6.6) (3.8) - - 6.5
Publishing 87.8 - (9.6) (104.9) - - (26.7)
Applications 184.3 - (4.6) (6.3) 1.8 - 175.1
Video (38.4) (0.4) (1.1) (1.6) 2.6 - (38.8)
Other 10.6 - (2.5) (3.3) - (14.1) (9.2)
Corporate (55.7) (53.4) (11.9) - - - (120.9)
------
Total $485.8 $(105.4) $(62.2) $(140.0) $15.5 $(14.1) $179.6
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For the twelve months ended December 31, 2014
---------------------------------------------
Adjusted EBITDA Stock-based compensation expense Depreciation Amortization of intangibles Acquisition-related contingent consideration fair
value adjustments Operating income (loss)
--------------- -------------------------------- ------------ --------------------------- -------------------------------------------------- -----------------------
Match Group $273.4 $(20.9) $(25.5) $(11.4) $12.9 $228.6
HomeAdvisor 17.7 (0.6) (6.5) (9.6) - 1.1
Publishing 151.0 - (11.9) (28.6) - 110.5
Applications 186.2 - (4.4) (2.5) (0.3) 179.0
Video (39.9) (0.6) (0.9) (2.1) 0.2 (43.3)
Other 13.1 - (1.8) (3.8) 0.6 8.1
Corporate (57.4) (37.6) (10.1) - - (105.1)
------
Total $544.1 $(59.6) $(61.2) $(57.9) $13.4 $378.7
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IAC'S PRINCIPLES OF FINANCIAL REPORTING
IAC reports Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow, all of which are supplemental measures to GAAP. These measures are among the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. IAC endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures, which are included in this release. Interim results are not necessarily indicative of the results that may be expected for a full year.
Definitions of Non-GAAP Measures
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 goodwill and intangible asset impairments and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. We believe Adjusted EBITDA is a useful measure for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced.
Adjusted Net Income generally captures all items on the statement of operations that have been, or ultimately will be, settled in cash and is defined as net earnings attributable to IAC shareholders excluding, net of tax effects and noncontrolling interests, if applicable: (1) stock-based compensation expense, (2) acquisition-related items consisting of (i) amortization of intangibles and goodwill and intangible asset impairments and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements, (3) income or loss effects related to IAC's former passive ownership in VUE, and (4) discontinued operations. We believe Adjusted Net Income is useful to investors because it represents IAC's consolidated results taking into account depreciation, which management believes is an ongoing cost of doing business, as well as other charges that are not allocated to the operating businesses such as interest expense, income taxes and noncontrolling interests, but excluding the effects of any other non-cash expenses.
Adjusted EPS is defined as Adjusted Net Income divided by fully diluted weighted average shares outstanding for Adjusted EPS purposes. We include dilution from options and warrants in accordance with the treasury stock method and include all restricted stock units ("RSUs") in shares outstanding for Adjusted EPS, with performance-based RSUs included based on the number of shares that the Company believes are probable of vesting. This differs from the GAAP method for including RSUs, which are treated on a treasury method, and performance-based RSUs, which are included for GAAP purposes only to the extent the performance criteria have been met (assuming the end of the reporting period is the end of the contingency period). Shares outstanding for Adjusted EPS purposes are therefore higher than shares outstanding for GAAP EPS purposes. We believe Adjusted EPS is useful to investors because it represents, on a per share basis, IAC's consolidated results, taking into account depreciation, which we believe is an ongoing cost of doing business, as well as other charges, which are not allocated to the operating businesses such as interest expense, income taxes and noncontrolling interests, but excluding the effects of any other non-cash expenses. Adjusted Net Income and Adjusted EPS have the same limitations as Adjusted EBITDA, and in addition, Adjusted Net Income and Adjusted EPS do not account for IAC's former passive ownership in VUE. Therefore, we think it is important to evaluate these measures along with our consolidated statement of operations.
Free Cash Flow is defined as net cash provided by operating activities, less capital expenditures. In addition, Free Cash Flow excludes, if applicable, tax payments and refunds related to the sales of certain businesses and investments, including IAC's interests in VUE, an internal restructuring and dividends received that represent a return of capital due to the exclusion of the proceeds from these sales and dividends from cash provided by operating activities. We believe Free Cash Flow is useful to investors because it represents the cash that our operating businesses generate, before taking into account non-operational cash movements. Free Cash Flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flow for discretionary expenditures. For example, it does not take into account stock repurchases. Therefore, we think it is important to evaluate Free Cash Flow along with our consolidated statement of cash flows.
Non-Cash Expenses That Are Excluded From Our Non-GAAP Measures
Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of stock options, restricted stock units and performance-based RSUs. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method; however, performance-based RSUs are included only to the extent the performance criteria have been met (assuming the end of the reporting period is the end of the contingency period). We view the true cost of stock options, restricted stock units and performance-based RSUs as the dilution to our share base, and such awards are included in our shares outstanding for Adjusted EPS purposes as described above under the definition of Adjusted EPS. Upon the exercise of certain stock options and vesting of restricted stock units and performance-based RSUs, the awards are settled, at the Company's discretion, on a net basis, with the Company remitting the required tax-withholding amount from its current funds.
Depreciation is a non-cash expense relating to our property and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives.
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 content, technology, customer lists, advertiser and supplier relationships, 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 impairment charges 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 ongoing costs of doing business.
Income or loss effects related to IAC's former passive ownership in VUE are excluded from Adjusted Net Income and Adjusted EPS because IAC had no operating control over VUE, which was sold for a gain in 2005, had no way to forecast this business, and did not consider the results of VUE in evaluating the performance of IAC's businesses.
Free Cash Flow
We look at Free Cash Flow as a measure of the strength and performance of our businesses, not for valuation purposes. In our view, applying "multiples" to Free Cash Flow is inappropriate because it is subject to timing, seasonality and one-time events. We manage our business for cash and we think it is of utmost importance to maximize cash - but our primary valuation metrics are Adjusted EBITDA and Adjusted EPS.
OTHER INFORMATION
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This press release and our conference call, which will be held at 8:45 a.m. Eastern Time on February 3, 2016, may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "anticipates," "estimates," "expects," "plans" and "believes," among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: IAC's future financial performance, IAC's business prospects, strategy and anticipated trends in the industries in which IAC's businesses operate and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: changes in senior management at IAC and/or its businesses, changes in our relationship with, or policies implemented by, Google, adverse changes in economic conditions, either generally or in any of the markets in which IAC's businesses operate, adverse trends in any of the industries in which IAC's businesses operate (primarily the online advertising, general advertising and dating industries), our dependence on third parties to drive traffic to our various websites and distribute our products and services in a cost-effective manner, our ability to attract and convert visitors to our various websites into users and customers, our ability to offer new or alternative products and services in a cost-effective manner and consumer acceptance of these products and services, our ability to build, maintain and/or enhance our various brands, our ability to develop and monetize mobile versions of our various products and services, foreign currency exchange rate fluctuations, changes in industry standards and technology, the integrity and scalability or our systems and infrastructure (and those of third parties), our ability to protect our systems from cyberattacks, operational and financial risks relating to acquisitions, our ability to expand successfully into international markets and regulatory changes. Certain of these and other risks and uncertainties are discussed in IAC's filings with the Securities and Exchange Commission ("SEC"). Other unknown or unpredictable factors that could also adversely affect IAC's business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, these forward-looking statements may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of IAC management as of the date of this press release. IAC does not undertake to update these forward-looking statements.
About IAC
IAC (NASDAQ: IAC) is a leading media and Internet company comprised of some of the world's most recognized brands and products, such as HomeAdvisor, Vimeo, About.com, Dictionary.com, The Daily Beast, Investopedia, and Match Group's online dating portfolio, which includes Match, OkCupid and Tinder. The company is headquartered in New York City and has offices worldwide.
http://iac.com
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SOURCE IAC
