IAC(IAC) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Consolidated Financial Statements This section presents the unaudited consolidated financial statements for IAC Inc. and its subsidiaries for the period ended September 30, 2022, including the Balance Sheet, Statement of Operations, Statement of Comprehensive Operations, Statement of Shareholders' Equity, and Statement of Cash Flows, with detailed notes on accounting policies and financial details Consolidated Balance Sheet As of September 30, 2022, IAC's total assets decreased to $10.44 billion from $12.30 billion at year-end 2021, driven by a decline in the MGM investment and cash, with liabilities and equity also decreasing Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $10,441,573 | $12,300,288 | | Cash and cash equivalents | $1,607,384 | $2,118,730 | | Goodwill | $3,008,244 | $3,226,610 | | Investment in MGM Resorts International | $1,923,585 | $2,649,442 | | Total Liabilities | $3,903,470 | $4,432,587 | | Long-term debt, net | $2,026,404 | $2,046,237 | | Total Shareholders' Equity | $6,538,103 | $7,748,960 | Consolidated Statement of Operations Q3 2022 revenue rose to $1.30 billion due to the Meredith acquisition, but the company reported an operating loss of $124.7 million and a net loss of $63.8 million, with a nine-month net loss of $1.17 billion primarily from an MGM investment unrealized loss Q3 2022 vs Q3 2021 Performance (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Revenue | $1,300,901 | $924,068 | | Operating Loss | $(124,680) | $(32,067) | | Net (Loss) Earnings Attributable to IAC Shareholders | $(63,823) | $60,690 | | Diluted (Loss) Earnings Per Share | $(0.74) | $0.65 | Nine Months Ended Sep 30, 2022 vs 2021 Performance (in thousands, except per share data) | Metric | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | | Revenue | $3,988,827 | $2,540,185 | | Operating Loss | $(399,634) | $(67,717) | | Unrealized (Loss) Gain on MGM Investment | $(970,112) | $687,155 | | Net (Loss) Earnings Attributable to IAC Shareholders | $(1,168,751) | $584,575 | | Diluted (Loss) Earnings Per Share | $(13.51) | $6.14 | Consolidated Statement of Cash Flows For the nine months ended September 30, 2022, net cash used in operating activities was $101.5 million, a shift from prior-year cash provided, with increased cash used in investing for MGM stock and in financing for treasury stock purchases Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(101,493) | $209,629 | | Net Cash Used in Investing Activities | $(294,148) | $(216,553) | | Net Cash Used in Financing Activities | $(101,239) | $(369,105) | | Net Decrease in Cash | $(504,793) | $(56,953) | Notes to Consolidated Financial Statements These notes detail significant accounting policies and events, including the Meredith acquisition, Vimeo spin-off, Google revenue concentration, goodwill impairment, restructuring charges, financial instruments like the MGM investment, and segment performance - The company completed the acquisition of Meredith on December 1, 2021, which is now part of the Dotdash Meredith segment[26] - The spin-off of Vimeo was completed on May 25, 2021, and Vimeo's historical results are presented as discontinued operations[27] - Revenue from Google represented 12% and 13% of total company revenue for the three and nine months ended September 30, 2022, respectively[48] - A goodwill impairment charge of $86.7 million was recorded in Q2 2022 related to the Mosaic Group reporting unit within the Emerging & Other segment[70] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, key business trends, and strategic initiatives, covering segment results, Meredith integration, Angi Inc. performance, Search segment challenges due to Google policy changes, and overall liquidity and capital resources Results of Operations IAC's Q3 2022 revenue grew 41% to $1.3 billion due to the Meredith acquisition, with Dotdash Meredith surging 617% and Angi Inc. growing 8%, while the Search segment declined 31% and the operating loss widened to $124.7 million Q3 2022 Revenue by Segment (in thousands) | Segment | Q3 2022 Revenue | % Change YoY | | :--- | :--- | :--- | | Dotdash Meredith | $467,085 | 617% | | Angi Inc. | $498,036 | 8% | | Search | $156,719 | (31)% | | Emerging & Other | $180,820 | 7% | | Total | $1,300,901 | 41% | Q3 2022 Adjusted EBITDA by Segment (in thousands) | Segment | Q3 2022 Adj. EBITDA | % Change YoY | | :--- | :--- | :--- | | Dotdash Meredith | $31,193 | 280% | | Angi Inc. | $22,882 | 85% | | Search | $19,111 | (36)% | | Emerging & Other | $2,425 | (11)% | | Corporate | $(20,830) | 10% | | Total | $54,781 | 81% | - The Search segment's revenue decline was driven by a reduction in marketing from affiliate partners at Ask Media Group and the impact of prior-year Google policy changes on the Desktop business[219] Financial Position, Liquidity and Capital Resources As of September 30, 2022, IAC held $1.62 billion in cash and marketable securities with $2.03 billion in long-term debt, using $101.5 million in cash from operations, primarily for MGM share purchases and stock repurchases Financial Position as of Sep 30, 2022 (in thousands) | Item | Amount | | :--- | :--- | | Total cash and cash equivalents and marketable securities | $1,623,727 | | Total long-term debt, net | $2,026,404 | - During the nine months ended Sep 30, 2022, IAC repurchased 1.1 million shares of its common stock for $85.3 million[278] - The company's ability to access cash from Angi Inc. is limited, and covenants on Dotdash Meredith's debt could restrict its ability to pay dividends to the parent company[289] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are equity price risk from its $1.9 billion MGM investment and interest rate risk from $1.58 billion in variable-rate debt, exposing it to market volatility and interest rate fluctuations - The investment in MGM was valued at $1.9 billion as of September 30, 2022, representing approximately 18% of IAC's consolidated total assets[295] - A $2.00 change in MGM's share price would result in an unrealized pre-tax gain or loss of $129.4 million[295] - The company has $1.58 billion in variable-rate debt through the Dotdash Meredith Term Loans, where a 100-basis point (1%) change in the Adjusted Term SOFR would impact annual interest expense by $15.8 million[296][297] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting occurring during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[301] - There were no material changes to internal controls over financial reporting during the third quarter of 2022[302] PART II - OTHER INFORMATION Legal Proceedings This section details ongoing litigation, specifically a shareholder class action related to the 2020 MTCH Separation, which was dismissed by the Delaware Chancery Court but is now under appeal - A shareholder lawsuit concerning the MTCH Separation was dismissed with prejudice by the Delaware Chancery Court on September 1, 2022[306] - Plaintiffs in the MTCH Separation lawsuit filed a notice of appeal to the Delaware Supreme Court on October 3, 2022[306] Risk Factors This section provides a cautionary statement on forward-looking information, directing investors to the 2021 Form 10-K for detailed risks, including those related to Google relationships, advertising spending, the Print business, competition, and cybersecurity - The company's performance is subject to numerous risks, including its relationship with Google, changes in advertising spending, and its ability to monetize products on mobile devices[309] - Investors are directed to the more comprehensive risk factor discussion in the company's 2021 Form 10-K[311] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2022, IAC did not issue unregistered equity securities but repurchased 366,732 shares of its common stock for approximately $26.2 million under its buyback program Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2022 | — | — | | August 2022 | 366,732 | $71.56 | | September 2022 | — | — | | Total | 366,732 | $71.56 | - As of September 30, 2022, 6,934,494 shares remained available for repurchase under the company's authorization[314] Exhibits This section lists all exhibits filed with the Form 10-Q, including executive officer certifications and Inline XBRL data files