# People Inc (PPLI) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from People Inc's 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/1800227/000180022724000011/iaci-20231231.htm Accession: 0001800227-24-000011 Filing date: 2024-02-29 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/PPLI/ All MD&A years: /company/PPLI/mda/ Previous year: /company/PPLI/mda/fy2022/ (FY 2022) Next year: /company/PPLI/mda/fy2024/ (FY 2024) Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations Acquisition of Meredith: On December 1, 2021, Dotdash Media Inc. (referred to herein as "Dotdash"), a wholly-owned subsidiary of IAC Inc. (referred to herein as "IAC" or the "Company"), completed the acquisition of Meredith Holdings Corporation ("Meredith"), the former subsidiary of Meredith Corporation, comprising its digital and magazine businesses and its corporate operations. The parent of the combined entity is Dotdash Meredith, Inc. ("Dotdash Meredith"). Vimeo Spin-off: On May 25, 2021, IAC completed the spin-off of its full stake in Vimeo, Inc. (formerly Vimeo Holdings, Inc. ("Vimeo")) to IAC shareholders (which we refer to as the “Spin-off”). Following the Spin-off, Vimeo became an independent, separately traded public company. Therefore, Vimeo is presented as a discontinued operation within the Company's financial statements for 2021. Defined Terms and Operating Metrics: Unless otherwise indicated or as the context otherwise requires, certain terms used in this annual report, which include the principal operating metrics we use in managing our business, are defined below: IAC Businesses (for additional information see "Note 10—Segment Information" to the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data"): •Dotdash Meredith - one of the largest digital and print publishers in America. Nearly 200 million people trust us to help them make decisions, take action, and find inspiration. Dotdash Meredith's over 40 iconic brands include PEOPLE, Better Homes & Gardens, Verywell, FOOD & WINE, The Spruce, allrecipes, Byrdie, REAL SIMPLE, Investopedia, and Southern Living. Dotdash Meredith has two operating segments: (i) Digital, which includes its digital, mobile and licensing operations; and (ii) Print, which includes its magazine subscription and newsstand operations; •Angi Inc. - a publicly traded company that connects quality home service professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping. On November 1, 2023, Angi Inc. completed the sale of 100% of its wholly-owned subsidiary, Total Home Roofing, LLC ("Roofing"), and has reflected it as a discontinued operation in its standalone financial statements. Roofing does not meet the threshold to be reflected as a discontinued operation at the IAC level. During the fourth quarter of 2023, IAC moved Roofing to Emerging & Other and prior period financial information has been recast to conform to the current year presentation. Following IAC's move of Roofing to Emerging & Other, Angi Inc. has three operating segments: (i) Ads and Leads, (ii) Services and (iii) International (includes Europe and Canada). At December 31, 2023, the Company’s economic interest and voting interest in Angi Inc. were 84.2% and 98.1%, respectively; •Search - consists of Ask Media Group, a collection of websites providing general search services and information, and Desktop, which includes our direct-to-consumer downloadable desktop applications and our business-to-business partnership operations; and •Emerging & Other - consists of: ◦Care.com, a leading online destination for families to connect with caregivers for their children, aging parents, pets and homes and for caregivers to connect with families seeking care services. Care.com's brands include Care For Business, Care.com offerings to enterprises, and HomePay; ◦Mosaic Group, a leading developer and provider of global subscription mobile applications. Mosaic Group has a portfolio of some of the largest and most popular applications in the following verticals: Communications (RoboKiller, TapeACall, Trapcall), Language (iTranslate, Speak & Translate), Weather (Clime: NOAA Weather Radar Live, Weather Live), Business (PDF Hero, Scan Hero) and Lifestyle (Blossom, Pixomatic); ◦Roofing (previously included within the Angi Inc. segment), a provider of roof replacement and repair services, for periods prior to its sale on November 1, 2023; and ◦Vivian Health, IAC Films, The Daily Beast and, for periods prior to its sale on November 9, 2022, Bluecrew. 37 Dotdash Meredith •Digital Revenue - includes advertising revenue, performance marketing revenue and licensing and other revenue. ◦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 revenue generated through affiliate commerce, affinity marketing channels and performance marketing commissions. Affiliate commerce commission revenue is generated when Dotdash Meredith refers users to commerce partner websites resulting in a purchase or transaction. Affinity marketing programs market and place magazine subscriptions for both Dotdash Meredith and third-party publisher titles. Performance marketing commissions are generated on a cost-per-click or cost-per-action basis. ◦Licensing and Other revenue - primarily includes revenue generated through brand and content licensing agreements. Brand licensing generates royalties from multiple long-term trademark licensing agreements with retailers, manufacturers, publishers and service providers. Content licensing royalties are earned from our relationship with Apple News + as well as other content distribution relationships. •Print Revenue - primarily includes subscription, advertising, newsstand and performance marketing revenue. •Total Sessions - represents unique visits to all sites that are part of Dotdash Meredith's network and sourced from Google Analytics. •Core Sessions - represents a subset of Total Sessions that comprises unique visits to Dotdash Meredith's most significant (in terms of investment) owned and operated sites as follows: [[GREPCENT_TABLE]] [["PEOPLE","InStyle","Simply Recipes"],["allrecipes","FOOD & WINE","Serious Eats"],["Investopedia","Martha Stewart","EatingWell"],["Better Homes & Gardens","Byrdie","Parents"],["Verywell Health","REAL SIMPLE","Verywell Mind"],["The Spruce","Southern Living","Health"],["TRAVEL + LEISURE"]] [[/GREPCENT_TABLE]] Angi Inc. •Ads and Leads Revenue - primarily reflects domestic consumer connection revenue for consumer matches, revenue from service professionals under contract for advertising and membership subscription revenue from service professionals and consumers. •Services Revenue - primarily reflects domestic revenue from pre-priced offerings by which the consumer requests services through an Angi Inc. platform and Angi Inc. connects them with a service professional to perform the service. •International Revenue - primarily reflects revenue generated within the International segment (consisting of businesses in Europe and Canada), including consumer connection revenue for consumer matches and membership subscription revenue from service professionals and consumers. •Service Requests - are (i) fully completed and submitted domestic service requests for connections with Ads and Leads service professionals, (ii) contacts to Ads and Leads service professionals generated via the service professional directory from unique users in unique categories (such that multiple contacts from the same user in the same category in the same day are counted as one Service Request) and (iii) requests to book Services jobs in the period. •Monetized Transactions - are (i) Service Requests that are matched to a paying Ads and Leads service professional in the period and (ii) completed and in-process Services jobs in the period; a single Service Request can result in multiple monetized transactions. 38 •Transacting Service Professionals ("Transacting SPs") - are the number of (i) Ads and Leads service professionals that paid for consumer matches or advertising and (ii) Services service professionals that performed a Services job, during the most recent quarter. Operating Costs and Expenses: •Cost of revenue (exclusive of depreciation) - consists primarily of traffic acquisition costs, which include (i) payments made to partners who direct traffic to our Ask Media Group websites and who distribute our business-to-business customized browser-based applications and (ii) the amortization of fees paid to Apple and Google related to the distribution of apps and the facilitation of in-app purchases. Traffic acquisition costs include payment of amounts based on revenue share and other arrangements. Cost of revenue also includes production, distribution and editorial costs at Dotdash Meredith, compensation expense (including stock-based compensation expense) and other employee-related costs, content costs, roofing material and third-party contactor costs associated with Roofing arrangements for periods prior to its sale on November 1, 2023, hosting fees, credit card processing fees, payments made to independent third-party service professionals who performed work contracted under Services arrangements that were entered into prior to January 1, 2023 and the change to net revenue reporting described below and payments made to care providers for Care For Business. •Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing expenditures, including fees paid to search engines, social media sites, other online marketing platforms, app platforms and partner-related payments to those who direct traffic to the brands within our Angi Inc. segment, offline marketing expenditures, which primarily consists of costs related to television advertising, compensation expense (including stock-based compensation expense) and other employee-related costs for sales force and marketing personnel, subscription acquisition costs related to Dotdash Meredith, outsourced personnel and consulting costs and service guarantee expense at Angi Inc. •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 Care.com, which includes customer service costs within "Cost of revenue" in the statement of operations), rent expense and facilities cost, fees for professional services (including transaction-related costs related to the acquisition of Meredith Holdings Corporation ("Meredith") and other acquisitions), provision for credit losses, software license and maintenance costs and acquisition-related contingent consideration fair value adjustments (described below). The customer service function at Angi Inc. 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 and third-party contractor 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. •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. Changes in the estimated fair value of the contingent consideration arrangements are recognized during each reporting period in "General and administrative expense" in the statement of operations. Long-term debt (for additional information see "Note 7—Long-term Debt" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data"): •Dotdash Meredith Term Loan A - due December 1, 2026. At December 31, 2023 and 2022, the outstanding balance of the Dotdash Meredith Term Loan A was $315.0 million and $332.5 million, respectively, and bore interest at an adjusted term secured overnight financing rate ("Adjusted Term SOFR") plus 2.25%, or 7.69% and 5.91%, respectively. The Dotdash Meredith Term Loan A has quarterly principal payments. •Dotdash Meredith Term Loan B - due December 1, 2028. At December 31, 2023 and 2022, the outstanding balance of the Dotdash Meredith Term Loan B was $1.23 billion and $1.24 billion, respectively, and bore interest at Adjusted Term SOFR, subject to a minimum of 0.50%, plus 4.00%, or 9.44% and 8.22%, respectively. The Dotdash Meredith Term Loan B has quarterly principal payments. 39 •Dotdash Meredith Revolving Facility - Dotdash Meredith's $150 million revolving credit facility expires on December 1, 2026. At December 31, 2023 and 2022, there were no outstanding borrowings under the Dotdash Meredith Revolving Facility. •ANGI Group Senior Notes - on August 20, 2020, ANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of Angi Inc., issued $500.0 million of its 3.875% Senior Notes due August 15, 2028, with interest payable February 15 and August 15 of each year. 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 (loss) attributable to IAC shareholders to operating loss to Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021. MANAGEMENT OVERVIEW For a description of the Company's operating businesses, see "Description of IAC Businesses" included in "Item 1—Business." As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer to IAC Inc. and its subsidiaries (unless the context requires otherwise). Sources of Revenue Dotdash Meredith Dotdash Meredith revenue consists of digital and print revenue. Digital revenue consists principally of advertising, performance marketing and licensing and other revenue. Print revenue consists principally of subscription, advertising, project and other, newsstand and performance marketing revenue. Digital Advertising revenue is generated primarily through digital advertisements sold by Dotdash Meredith's sales team directly to advertisers or through advertising agencies and programmatic advertising networks. Performance marketing revenue includes commissions generated through affiliate commerce, affinity marketing and performance marketing channels. Affiliate commerce and performance marketing commission revenue is generated when Dotdash Meredith brands refer consumers to commerce partner websites resulting in a purchase or transaction. Affinity marketing programs are arrangements where Dotdash Meredith acts as an agent for both Dotdash Meredith and the third-party publishers to market and place magazine subscriptions online. Commissions are earned when a subscriber name has been provided to the publisher. Licensing and other revenue primarily includes revenue generated through brand and content licensing agreements. Print Subscription revenue relates to the sale of Dotdash Meredith's magazines. Most of Dotdash Meredith's subscription sales are prepaid at the time of order and may be canceled at any time for a refund of the pro rata portion of the initial subscription. Advertising revenue relates to the sale of advertising in magazines directly to advertisers or through advertising agencies. Revenue is recognized on the magazine issue’s on-sale date, which is the date the magazine is published. Project and other revenue relates to other revenue streams that are primarily project based and may relate to any one or combination of the following activities: audience targeted advertising, custom publishing, content strategy and development, email marketing, social media, database marketing and search engine optimization. Newsstand revenue is related to single copy magazines or bundles of single copy magazines sold to wholesalers for resale on newsstands. Publications sold to magazine wholesalers are sold with the right to receive credit from Dotdash Meredith for magazines returned to the wholesaler by retailers. Performance marketing revenue principally consists of affinity marketing revenue through which Dotdash Meredith places magazine subscriptions for third-party publishers. Commissions are earned when a subscriber name has been provided to the publisher and any free trial period is completed. 40 Angi Inc. Ads and Leads revenue includes consumer connection revenue, which comprises fees paid by service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service), revenue from service professionals under contract for advertising, membership subscription revenue from service professionals and consumers and revenue from other services. Consumer connection revenue varies based upon several factors including the service requested, product experience offered, and geographic location of service. Services revenue primarily reflects domestic revenue from pre-priced offerings by which the consumer requests services through an Angi Inc. platform and Angi Inc. engages a service professional to perform the service. International revenue primarily comprises consumer connection revenue for consumer matches and membership subscription revenue from service professionals and consumers. From January 1, 2020 through December 31, 2022, Services recorded revenue on a gross basis. Effective January 1, 2023, Angi Inc. modified the Services terms and conditions so that the service professional, rather than Angi Inc., has the contractual relationship with the consumer to deliver the service and Angi Inc.'s performance obligation to the consumer is to connect them with the service professional. This change in contractual terms requires revenue to be reported as the net amount of what is received from the consumer after deducting the amounts owed to the service professional providing the service effective for all arrangements entered into after December 31, 2022. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition. For the years ended December 31, 2022 and 2021, if Services revenue were recorded on a net basis, revenue would have been reduced by $242.6 million and $180.7 million, respectively. Search The Search segment consists of Ask Media Group and the Desktop business. Ask Media Group and Desktop revenue consist principally of advertising revenue, which is generated primarily through the display of paid listings in response to search queries. The majority of the paid listings displayed are supplied to us by Google Inc. ("Google") pursuant to our services agreement with Google, described in more detail in "Note 2—Summary of Significant Accounting Policies" to the financial statements included in "Item 8—Financial Statements and Supplementary Data." Ask Media Group also earns revenue from display advertisements (sold directly and through programmatic advertising networks). Desktop revenue also includes fees paid by subscribers for downloadable desktop applications as well as display advertisements. Emerging & Other Included within Emerging & Other are Care.com, Mosaic Group and Roofing. Care.com generates revenue primarily through subscription fees from families and caregivers for its suite of products and services, as well as through annual contracts with employers who provide access to Care.com’s suite of products and services as an employee benefit and through contracts with businesses that recruit employees through its platform. Mosaic Group revenue consists primarily of fees paid by subscribers for downloadable mobile applications distributed through the Apple App Store and Google Play Store and fees received directly from consumers, as well as display advertisements. For periods prior to its sale on November 1, 2023, Roofing revenue primarily consisted of revenue from the roof replacement business offering by which the consumer purchased services directly from the Roofing business and Roofing then engaged a service professional to perform the service. Revenue for the remaining businesses within Emerging & Other is generated primarily through marketplace services, advertising, media production and distribution and subscriptions. Services Agreement with Google (the "Services Agreement") The Company and Google are parties to an amended Services Agreement, which automatically renewed effective March 31, 2023 and now expires on March 31, 2025. As a result of certain industry-wide policy changes combined with increased enforcement by Google of policies under the Services Agreement in prior periods, the Company discontinued the introduction of new Desktop business-to-consumer ("B2C") products in 2021. Therefore, the current B2C revenue stream relates solely to the then existing installed base of products. As a result, the revenue and profits of the B2C business have declined significantly and the Company expects that trend to continue. See "Note 2—Summary of Significant Accounting Policies" to the financial statements included in "Item 8—Financial Statements and Supplementary Data" for additional information on the Services Agreement with Google. 41 Dotdash Meredith Restructuring and Other Charges Restructuring Charges During 2023, Dotdash Meredith continued to incur costs related to a voluntary retirement program announced in the first quarter of 2022 and recorded adjustments to previously accrued amounts related to a reduction in force plan, for which the related expenses were accrued primarily in the fourth quarter of 2022. For the year ended December 31, 2023, Dotdash Meredith incurred a net reversal of $0.5 million to restructuring expense, resulting from charges incurred of $3.7 million offset by reversals of previously recorded accrued costs of $4.2 million. During 2022, Dotdash Meredith management committed to several actions to improve efficiencies and better align its cost structure following the acquisition of Meredith on December 1, 2021, which included: (i) the discontinuation of certain print publications and the shutdown of PeopleTV, for which the related expense was primarily reflected in the first quarter of 2022, (ii) the aforementioned voluntary retirement program, for which the related expense was primarily reflected in the first half of 2022, (iii) the consolidation of certain leased office space, for which the related expense was reflected in the third quarter of 2022 and (iv) the aforementioned reduction in force plan. These actions resulted in $80.2 million of restructuring charges incurred for the year ended December 31, 2022. For the year ended December 31, 2022, restructuring charges included impairment charges of $21.3 million related to the consolidation of certain leased spaces following the Meredith acquisition, consisting of impairments of $14.3 million and $7.0 million of a right-of-use asset ("ROU asset") and related leasehold improvements, furniture and equipment, respectively, which are included in "General and administrative expense" and "Depreciation," respectively, in the statement of operations. Other Charges During the first quarter of 2023, Dotdash Meredith reassessed the sublease market assumptions and recorded impairment charges of $70.0 million related to certain unoccupied leased office space due to the continued decline in the commercial real estate market, consisting of impairments of $44.7 million and $25.3 million of an ROU asset and related leasehold improvements, furniture and equipment, respectively, which are included in "General and administrative expense" and "Depreciation," respectively, in the statement of operations. See "Note 2—Summary of Significant Accounting Policies" and "Note 11—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-in-Control Payments" to the financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on impairment and restructuring charges, respectively. Distribution, Marketing and Advertiser Relationships We pay traffic acquisition costs, which consist of 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, and fees paid to Apple and Google related to the distribution of apps and the facilitation of Mosaic Group's subscription-based in-app purchases of product features. We also pay to market and distribute our services on third-party distribution channels, such as Google and other search engines and social media websites such as Facebook. We also pay subscription acquisition costs, which represent commission payments made by our Dotdash Meredith business to third-party agents to sell magazine subscriptions within its print business. In addition, some of our businesses manage affiliate programs, pursuant to which we pay commissions and fees to third parties based on revenue earned. These distribution channels might also offer their own services and products, as well as those of other third parties, which compete with those we offer. We market and offer our services and products to consumers through branded websites, allowing consumers to transact directly with us in a convenient manner. We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to our websites and consumers and advertisers to our businesses. COVID-19 Update The COVID-19 pandemic and the various responses to it created significant volatility, uncertainty and economic disruption. Recently there has been a return to normal societal interactions, including the way the Company operates its businesses. 42 Angi Inc. As previously disclosed, the impact of COVID-19 initially resulted in a decline in demand for Service Requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While Angi Inc. experienced a rebound in Service Requests in early 2021, Service Requests started to decline in May 2021 and continued to decline during 2022 due, in part, to COVID-19 measures that were more widely in place in prior periods. Angi Inc.'s ability to monetize Service Requests rebounded modestly in the second half of 2021 and the first half of 2022; however, that improved monetization plateaued in the third quarter of 2022 returning to monetization rates similar to those experienced pre-COVID-19. Dotdash Meredith Digital advertising and performance marketing revenue at Dotdash, excluding Meredith, declined in 2022, compared to 2021 due in part to lower traffic to its sites compared to prior year COVID-19 traffic highs. Post-acquisition, Meredith has experienced a similar impact to its digital advertising revenue primarily from lower programmatic revenue as a result of traffic declines in the first quarter of 2023 due to COVID-19 supported traffic levels in early 2022. Outlook The extent to which developments related to the COVID-19 pandemic 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 severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments. 43 Results of Operations for the Years Ended December 31, 2023, 2022 and 2021. The following discussion should be read in conjunction with "Item 8—Financial Statements and Supplementary Data." Revenue [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Dotdash Meredith"],["Digital","$","892,426","","","$","931,482","","","$","367,134","","","$","(39,056)","","","(4)","%","","$","564,348","","","154%"],["Print","823,456","","","1,026,128","","","92,002","","","(202,672)","","","(20)","%","","934,126","","","1,015%"],["Intersegment eliminations","(20,989)","","","(22,911)","","","(2,863)","","","1,922","","","8","%","","(20,048)","","","(700)%"],["Total Dotdash Meredith","1,694,893","","","1,934,699","","","456,273","","","(239,806)","","","(12)","%","","1,478,426","","","324%"],["Angi Inc."],["Domestic"],["Ads and Leads","1,124,908","","","1,282,061","","","1,227,074","","","(157,153)","","","(12)","%","","54,987","","","4%"],["Services","118,033","","","381,256","","","289,948","","","(263,223)","","","(69)","%","","91,308","","","31%"],["Total Domestic","1,242,941","","","1,663,317","","","1,517,022","","","(420,376)","","","(25)","%","","146,295","","","10%"],["International","115,807","","","101,038","","","102,295","","","14,769","","","15","%","","(1,257)","","","(1)%"],["Total Angi Inc.","1,358,748","","","1,764,355","","","1,619,317","","","(405,607)","","","(23)","%","","145,038","","","9%"],["Search","629,038","","","731,431","","","873,346","","","(102,393)","","","(14)","%","","(141,915)","","","(16)%"],["Emerging & Other","695,057","","","823,465","","","753,203","","","(128,408)","","","(16)","%","","70,262","","","9%"],["Intersegment eliminations","(12,501)","","","(18,670)","","","(2,512)","","","6,169","","","33","%","","(16,158)","","","(643)%"],["Total","$","4,365,235","","","$","5,235,280","","","$","3,699,627","","","$","(870,045)","","","(17)","%","","$","1,535,653","","","42%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","Change","","% Change","","Change","","% Change"],["","(Operating metrics in thousands)"],["Operating metrics:"],["Dotdash Meredith"],["Digital"],["Total Sessions","10,813","","","11,947","","","12,341","","","(1,134)","","","(9)","%","","(394)","","","(3)","%"],["Core Sessions","8,370","","","8,186","","","8,344","","","184","","","2","%","","(158)","","","(2)","%"],["Angi Inc."],["Service Requests","23,255","","","29,459","","","33,513","","","(6,204)","","","(21)","%","","(4,054)","","","(12)","%"],["Monetized Transactions","27,111","","","28,938","","","31,510","","","(1,827)","","","(6)","%","","(2,572)","","","(8)","%"],["Transacting SPs","196","","","220","","","251","","","(24)","","","(11)","%","","(31)","","","(12)","%"]] [[/GREPCENT_TABLE]] 44 For the year ended December 31, 2023 compared to the year ended December 31, 2022 •Dotdash Meredith revenue decreased 12% to $1.7 billion due primarily to decreases of $202.7 million, or 20%, from Print and $39.1 million, or 4%, from Digital. The decrease from Print was due to the planned reduction in circulation of certain publications and the discontinuation of others in the first quarter of 2022. The decrease from Digital was due primarily to decreases of $60.9 million and $10.8 million, or 10% each, in Advertising Revenue and Licensing and Other Revenue, respectively, partially offset by an increase of $32.6 million, or 16% in Performance Marketing Revenue. The decrease in Advertising Revenue resulted primarily from lower programmatic revenue as a result of a 9% decline in Total Sessions and declines in premium advertising sold through the Dotdash Meredith sales team. Despite the increase in Core Sessions, Total Sessions was impacted by traffic declines in the first quarter of 2023 due to COVID-19 supported traffic levels in early 2022 and traffic declines in the second and third quarters of 2023 driven primarily by the Entertainment category and certain partner sites. The decrease in Licensing and Other Revenue was due primarily to lower royalties earned from retail partners. The increase in Performance Marketing Revenue was due primarily to an increase in affiliate commerce commission revenue, partially offset by a decrease in Performance Marketing revenue in the Finance and Health categories. •Angi Inc. revenue decreased 23% to $1.4 billion driven by decreases of $263.2 million, or 69%, from Services and $157.2 million, or 12%, from Ads and Leads, partially offset by an increase of $14.8 million, or 15%, from International. ◦The Services decrease was due primarily to the change to net revenue reporting described above under "Sources of Revenue - Angi Inc." and a decrease of $92.4 million due primarily to the continued shift away from complex and less profitable offerings, and lower Service Requests as a result of certain efforts described in Ads and Leads below. ◦The Ads and Leads decrease was due primarily to decreases of $173.6 million, or 18%, in consumer connection revenue and $8.1 million, or 13%, in membership subscription revenue, partially offset by an increase of $25.3 million, or 10%, in advertising revenue. The decrease in consumer connection revenue was due primarily to declines in Monetized Transactions as a result of an effort to rationalize sales to service professionals that are unprofitable as well as efforts to increase lead quality, including changes to certain demand channels, to enhance the user experience for both homeowners and service professionals. The decrease in membership subscription revenue was due primarily to a decline in service professionals in the Angi Inc. network. The increase in advertising revenue was due primarily to continued growth in sales and improved retention. ◦The International increase was driven by a larger service professional network and higher revenue per service professional. •Search revenue decreased 14% to $629.0 million due to decreases of $81.1 million, or 13%, from Ask Media Group and $21.3 million, or 21%, from Desktop. The decrease from Ask Media Group was due to a reduction in marketing by affiliate partners driving fewer visitors to ad supported search and content websites. The decrease from Desktop was due primarily to the Google policy changes and the subsequent discontinuing of new products described above under "Services Agreement with Google (the "Services Agreement"). •Emerging & Other revenue decreased 16% to $695.1 million due primarily to the inclusion of Bluecrew in the prior year period, which was sold on November 9, 2022, a decrease at Roofing due to a decline in projects and a strategic shift in operations to select markets prior to its sale on November 1, 2023, and decreases in revenue at Mosaic Group and IAC Films, partially offset by an increase of 3% to $375.0 million at Care.com and growth of 40% at Vivian Health. For the year ended December 31, 2022 compared to the year ended December 31, 2021 •Dotdash Meredith revenue increased 324% to $1.9 billion due to the contribution of $1.5 billion from Meredith, acquired December 1, 2021, partially offset by decreases of $11.8 million, or 11%, in Dotdash performance marketing revenue and $7.0 million, or 4%, in Dotdash advertising revenue. The decrease in Dotdash performance marketing revenue was due to primarily to declines in both affiliate commerce commission revenue and performance marketing commission revenue due primarily to lower traffic to its sites compared to the prior year COVID-19 traffic highs. The decrease in Dotdash advertising revenue was due primarily to a decrease in advertising sold through its sales team and lower programmatic rates. 45 •Angi Inc. revenue increased 9% to $1.8 billion driven by increases of $91.3 million, or 31%, from Services and $55.0 million, or 4%, from Ads and Leads, partially offset by a decrease of $1.3 million, or 1%, from International. ◦The increase in Services was due primarily to an increase in average revenue per Monetized Transactions due to higher average-order-value jobs in complex service categories and an increase in Monetized Transactions during 2022 compared to 2021, as well as price increases in certain job categories. ◦The increase in Ads and Leads was due primarily to price increases implemented during the second quarter of 2022 and the anniversary of the Angi Inc. brand integration that began in March 2021. ◦The decrease in International was due primarily to the unfavorable impact of the strengthening of the U.S. dollar relative to the Euro and British Pound. •Search revenue decreased 16% to $731.4 million due to decreases of $101.5 million, or 14% from Ask Media Group and $40.4 million, or 29%, from Desktop. The decrease from Ask Media Group was due to a reduction in marketing from affiliate partners driving fewer visitors to ad supported search and content websites. The decrease from Desktop was due primarily to the Google policy changes announced in the prior year described above under "Services Agreement with Google (the "Services Agreement")." •Emerging & Other revenue increased 9% to $823.5 million due primarily to the inclusion of Roofing for twelve months in the current year compared to six months in the prior year, a 10% increase at Care.com and growth from Vivian Health, partially offset by lower revenue at Mosaic Group, IAC Films, Bluecrew, which was sold on November 9, 2022, and Daily Beast. Cost of revenue (exclusive of depreciation shown separately below) [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Cost of revenue (exclusive of depreciation shown separately below)","$","1,343,254","","","$","1,933,705","","","$","1,296,282","","","$","(590,451)","","","(31)","%","","$","637,423","","","49","%"],["As a percentage of revenue","31%","","37%","","35%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023 compared to the year ended December 31, 2022 Cost of revenue in 2023 decreased from 2022 due to decreases of $274.8 million from Angi Inc., $178.8 million from Dotdash Meredith, $107.7 million from Emerging & Other and $29.2 million from Search. •The Angi Inc. decrease was due to a decrease of $274.8 million from Services due primarily to a $248.8 million decrease in payments to third-party professional service providers due primarily to the change to net revenue reporting effective January 1, 2023, described above. Additionally, payments to third-party professional service providers decreased as a result of the shift away from complex and less profitable offerings. •The Dotdash Meredith decrease was due primarily to decreases of $112.2 million from Print and $67.0 million from Digital. The decrease from Print was due primarily to decreases of $69.5 million in production and distribution costs (postage, paper, printing and content) due to the discontinuation of several publications in the first quarter of 2022 and the planned reduction in circulation of others. Print was further impacted by decreases of $24.2 million in compensation expense due to the voluntary retirement program in the first quarter of 2022 and the reduction in force described above under "Dotdash Meredith Restructuring and Other Charges" and $13.4 million in third-party advertising campaign fulfillment costs due to lower project-related revenue. The decrease from Digital was due primarily to decreases of $35.9 million in traffic acquisition costs, $14.0 million in compensation expense and $13.9 million in content creation costs. The decreases in traffic acquisition costs and content creation costs were due primarily to lower revenue. The decrease in compensation expense was due primarily to lower headcount due to the aforementioned voluntary retirement program in the first quarter of 2022 and the reduction in force. 46 •The Emerging & Other decrease was due primarily to the inclusion in the prior year period of $51.0 million in expense from Bluecrew, which was sold on November 9, 2022, a decrease in expense of $39.2 million from Roofing due primarily to a decline roofing materials and third-party contractor costs prior to its sale on November 1, 2023, and decreases of $11.6 million in production costs and third-party participation payments at IAC Films due primarily to Everything, Everywhere All at Once and $6.9 million in traffic acquisition costs at Mosaic Group. •The Search decrease was due primarily to a decrease in traffic acquisition costs of $26.1 million at Ask Media Group due primarily to a decrease in the proportion of revenue earned from affiliate partners who direct traffic to our websites. For the year ended December 31, 2022 compared to the year ended December 31, 2021 Cost of revenue in 2022 increased from 2021 due primarily to increases of $691.9 million from Dotdash Meredith and $62.7 million from Angi Inc., partially offset by a decrease of $145.8 million from Search. •The Dotdash Meredith increase was due primarily to an increase of $684.9 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, and an increase of $8.7 million in compensation expense related to increased editorial headcount at Dotdash. Included in Meredith's expense is $23.6 million of restructuring costs primarily related to the reorganization of the Dotdash Meredith business described above under "Dotdash Meredith Restructuring Charges." •The Angi Inc. increase was due primarily to an increase of $64.1 million from Services due primarily to an increase in payments to third-party professional service providers resulting from growth in the business. •The Search decrease was due primarily to a decrease in traffic acquisition costs of $159.7 million at Ask Media Group, partially offset by an increase in traffic acquisition costs of $15.1 million at Desktop. The decrease in traffic acquisition costs at Ask Media Group was due primarily to a decrease in the proportion of revenue earned from affiliate partners who direct traffic to our websites. The increase in traffic acquisition costs at Desktop was a result of higher revenue share rates resulting in higher expense compared to the prior year. Selling and marketing expense [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Selling and marketing expense","$","1,576,229","","","$","1,914,878","","","$","1,362,300","","","$","(338,649)","","","(18)","%","","$","552,578","","","41%"],["As a percentage of revenue","36%","","37%","","37%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023 compared to the year ended December 31, 2022 Selling and marketing expense in 2023 decreased from 2022 due primarily to decreases of $125.1 million from Angi Inc., $124.7 million from Dotdash Meredith, $60.3 million from Emerging & Other and $33.6 million from Search. •The Angi Inc. decrease was due primarily to decreases of $81.8 million from Ads and Leads, $34.8 million from Services and $5.8 million from International. ◦The Ads and Leads decrease was due primarily to a decrease of $82.0 million in advertising expense due primarily to a decrease of $107.5 million in online marketing spend due to increased efficiency, partially offset by an increase of $25.3 million in television spend primarily due to efforts to build awareness of the Angi Inc. brand. 47 ◦The Services decrease was due primarily to decreases of $20.4 million in consulting fees and outsourced personnel costs, $19.1 million in compensation expense and $7.1 million in advertising expense, partially offset by an increase of $14.9 million in service guarantee expense. The decreases in consulting fees and outsourced personnel costs were due to $12.7 million less phone-based sales wages primarily resulting from increased reliance on more profitable digital conversion channels and $6.1 million less due to streamlined fulfillment operations, partially offset by fewer complex services. The decrease in compensation expense was due primarily to lower headcount. The decrease in advertising expense was due primarily to a decrease of $4.7 million in service professional marketing spend. The increase in service guarantee expense is due to the aforementioned change in contractual terms and conditions resulting in the change to net revenue reporting such that this expense is no longer a component of cost of revenue, which is where the expense was recorded prior to January 1, 2023. ◦The International decrease was due primarily to a decrease of $10.2 million in advertising expense due primarily to decreases of $6.3 million and $4.2 million in online marketing spend and television spend, respectively, partially offset by an increase of $3.4 million in compensation expense due to higher headcount. •The Dotdash Meredith decrease was due primarily to a decrease of $121.7 million from Print due primarily to decreases of $78.9 million in subscription acquisition costs and $28.7 million in compensation expense. The decrease in subscription acquisition costs was driven by lower commission payments made to third-party agents that sell magazine subscriptions due to the planned reduction in the circulation of certain publications and the discontinuation of several publications in the first quarter of 2022. The decrease in compensation expense was due primarily to the voluntary retirement program in the first quarter of 2022 and the reduction in force described above under "Dotdash Meredith Restructuring and Other Charges." •The Emerging & Other decrease was due primarily to decreases of $21.9 million and $4.5 million in online marketing spend and television spend, respectively, at Mosaic Group, a decrease in expense of $15.4 million from Roofing due primarily to a decrease in compensation expense due to a reduction in headcount and a strategic shift in operations to select markets prior to its sale on November 1, 2023, the inclusion in the prior year period of $13.4 million in expense from Bluecrew, which was sold on November 9, 2022, and a decrease of $2.4 million in offline marketing spend at IAC Films. •The Search decrease was due primarily to a decrease of $31.9 million in online marketing spend at Ask Media Group. For the year ended December 31, 2022 compared to the year ended December 31, 2021 Selling and marketing expense in 2022 increased from 2021 due primarily to increases of $469.9 million from Dotdash Meredith, $43.7 million from Emerging & Other, $37.1 million from Search and $18.8 million from Angi Inc. •The Dotdash Meredith increase was due principally to an increase of $464.1 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year. Included in Meredith's expense is $16.6 million of restructuring costs primarily related to the reorganization of the Dotdash Meredith business described above under "Dotdash Meredith Restructuring and Other Charges." •The Emerging & Other increase was due primarily to an increase of $19.0 million at Roofing due primarily to the inclusion of expense for twelve months in the current year compared to six months in the prior year, increases of $10.0 million in compensation expense and $3.8 million in online marketing at Care.com, $5.1 million in compensation expense and $3.6 million in online marketing at Vivian Health and $5.2 million in marketing spend at IAC Films, partially offset by a decrease of $7.2 million in advertising expense at Mosaic Group. The increase in compensation expense at both Care.com and Vivian Health was due primarily to higher headcount. The increase in online marketing at Care.com was primarily due to efforts to increase their customer base. The increase in marketing spend at IAC Films was primarily related to Everything Everywhere All at Once. •The Search increase was due primarily to an increase of $60.1 million in online marketing at Ask Media Group, partially offset by a decrease of $24.1 million at Desktop. The increase at Ask Media Group was due primarily to increases in both search engine marketing and ad placement spend on social media sites. The decrease at Desktop was due to the elimination of all marketing of its B2C products beginning in early March 2021 due primarily to the Google policy changes in the fourth quarter of 2020 and the first quarter of 2021 described above under "Services Agreement with Google (the "Services Agreement"). 48 •The Angi Inc. increase was due primarily to increases of $13.6 million from Services and $11.9 million from Ads and Leads, partially offset by a decrease of $4.9 million from Other (unallocated corporate costs). ◦The Services increase was due primarily to increases in compensation expense of $19.4 million, outsourced personnel costs of $2.2 million and software maintenance costs of $1.6 million, partially offset by a decrease of $9.5 million in advertising expense. The increase in compensation expense was primarily due to higher headcount. The increase in outsourced personnel costs was primarily due to costs for improving the customer service experience. The increase in software maintenance cost was primarily due to general maintenance. The decrease in advertising expense was due primarily to decreases in service professional marketing and search engine marketing spend and was due primarily to high advertising costs in 2021 to promote Services. ◦The Ads and Leads increase was due primarily to increases in advertising expense of $20.9 million and software maintenance costs of $3.5 million, partially offset by a decrease of $10.3 million in compensation expense. The increase in advertising expense was due primarily to an increase of $23.3 million in online marketing spend due primarily to the continued brand integration initiative at the beginning of 2022 and increased costs to obtain service requests later in 2022. The increase in software maintenance costs was due primarily to general maintenance. The decrease in compensation is primarily due to lower headcount. ◦The Other (unallocated corporate costs) decrease of $4.9 million was due primarily to a decrease in lease expense of $5.4 million as a result of Angi Inc. repurposing and reducing its real estate footprint in 2021. General and administrative expense [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["General and administrative expense","$","891,958","","","$","991,983","","","$","797,448","","","$","(100,025)","","","(10)","%","","$","194,535","","","24%"],["As a percentage of revenue","20%","","19%","","22%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023 compared to the year ended December 31, 2022 General and administrative expense in 2023 decreased from 2022 due primarily to decreases of $87.8 million from Angi Inc., $18.0 million from Emerging & Other and $5.4 million from Dotdash Meredith, partially offset by an increase of $12.5 million from Corporate. •The Angi Inc. decrease was due primarily to decreases of $69.9 million from Ads and Leads and $22.7 million from Services. ◦The Ads and Leads decrease was due primarily to decreases of $24.5 million in the provision of credit losses, $20.6 million in legal expense, $15.7 million in compensation expense and $6.0 million in outsourced personnel costs. The decrease in the provision for credit losses was due primarily to lower revenue and improved collection rates. The decrease in legal expense was due, in part, to a $10.9 million benefit in 2023 related to insurance coverage for previously incurred legal fees. The decreases in compensation expense and outsourced personnel costs were due primarily to lower headcount and a reduction in third-party providers, respectively. ◦The Services decrease was due primarily to decreases of $11.3 million in compensation expense, $9.5 million in legal expense and $4.8 million in the provision for credit losses. The decrease in compensation expense was due primarily to lower headcount. The decrease in the provision for credit losses was due primarily to lower revenue and improved collection rates. •The Emerging & Other decrease was due primarily to a decrease in expense of $12.5 million from Roofing due, in part, to a decrease in compensation expense resulting from a reduction in headcount prior to its sale on November 1, 2023, and the inclusion in the prior year period of $6.8 million in expense from Bluecrew, which was sold on November 9, 2022, partially offset by the inclusion in the prior year period of a $3.2 million gain related to the termination of a lease and $2.3 million in impairment charges related to ROU assets in 2023 at Care.com. 49 •The Dotdash Meredith decrease was due primarily to the inclusion in 2022 of $28.1 million in restructuring costs related to activities described above under "Dotdash Meredith Restructuring and Other Charges" and the inclusion of $6.8 million in 2022 of transaction-related costs related to the acquisition of Meredith, a decrease in expense in 2023 of $8.0 million due to the reversal of certain indemnification liabilities established for tax contingencies in connection with the acquisition of Meredith and a decrease of $4.8 million in legal fees, partially offset by the inclusion in the first quarter of 2023 of $44.7 million related to an impairment charge of an ROU asset related to unoccupied lease space. •The Corporate increase was due primarily to an increase of $13.0 million in compensation expense. For the year ended December 31, 2022 compared to the year ended December 31, 2021 General and administrative expense in 2022 increased from 2021 due primarily to increases of $140.3 million from Dotdash Meredith, $52.2 million from Angi Inc. and $20.9 million from Emerging & Other, partially offset by a decrease of $15.6 million from Corporate. •The Dotdash Meredith increase was due primarily to an increase of $130.0 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, a $14.3 million impairment of an ROU asset related to the consolidation of certain leased spaces following the Meredith acquisition, and an increase of $13.9 million in compensation expense, partially offset by a decrease of $20.3 million in professional fees at Dotdash. During 2022, Dotdash Meredith incurred $28.1 million in restructuring costs, including the $14.3 million impairment described above, related to the reorganization of Dotdash Meredith's business described above under "Dotdash Meredith Restructuring and Other Charges" and $6.8 million in transaction-related costs, of which $5.7 million was incurred at Meredith, associated with its acquisition. The increase in compensation expense at Dotdash was due primarily to an increase in stock-based compensation expense. The decrease in professional fees at Dotdash was due to the inclusion in 2021 of $25.2 million of transaction-related costs in connection with the Meredith transaction. Expense in 2021 includes $53.3 million in transaction-related costs at Meredith associated with its acquisition, including charges related to double-trigger change in control payments. •The Angi Inc. increase was due primarily to increases of $27.8 million from Services, $23.7 million from Ads and Leads and $9.3 million from Other (unallocated corporate costs), partially offset by a decrease of $8.6 million from International. ◦The Services increase was due primarily to an increase of $16.7 million in compensation expense, $8.8 million in legal expense and $2.2 million in software license and maintenance expense. The increase in compensation expense was due primarily to increases of $10.5 million in stock-based compensation expense resulting from management departures in 2022 and new awards granted in 2022, and $6.2 million in wage-related expenses due to higher headcount. The increase in legal expense was due primarily to accruals for certain legal matters in the fourth quarter of 2022. The increase in software license and maintenance expense is due to general maintenance. ◦The Ads and Leads increase was due primarily to increases of $16.4 million in the provision for credit losses, $4.3 million in outsourced personnel costs, $5.7 million in legal expense and $2.0 million in software and maintenance expense, partially offset by a decrease of $0.5 million in compensation expense. The increase in the provision for credit losses was due primarily to higher revenue. The increase in outsourced personnel costs was due primarily to the use of outsourced firms to support customer service needs. The increase in legal expense was due primarily to accruals for certain legal matters in the third and fourth quarters of 2022. The decrease in compensation expense was primarily due to a decrease of $5.1 million resulting from lower headcount, partially offset by an increase of $4.5 million in stock-based compensation. ◦The Other (unallocated corporate costs) increase was due primarily to an increase of $14.4 million in compensation expense, partially offset by a decrease of $7.3 million of impairment charges of ROU assets and related leasehold improvements and furniture and equipment. The increase in compensation expense was due primarily to an increase of $12.9 million in wage-related expense due to higher headcount and $1.6 million in stock-based compensation expense. The increase in stock-based compensation expense is the result of the reversal of previously recognized stock-based compensation as a result of the forfeiture of unvested awards due to management departures in 2021 and 2022, and new awards granted in 2022. The decrease in impairments of ROU assets and related leasehold improvements and furniture and equipment was due primarily to Angi Inc. reducing its real estate footprint in 2021. 50 ◦The International decrease was due primarily to the inclusion in compensation expense, in 2021, of $7.0 million in charges related to the acquisition of the remaining interests in MyBuilder at a premium to fair value. •The Emerging & Other increase was due primarily to the inclusion of $16.2 million of expense from Roofing for twelve months in the current year compared to six months in the prior year. •The Corporate decrease was due primarily to a decrease of $10.3 million in compensation expense due primarily to a decrease in bonuses and payroll taxes, and the inclusion in 2021 of $6.2 million of transaction-related costs in connection with the Spin-off. Product development expense [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Product development expense","$","334,491","","","$","318,028","","","$","230,810","","","$","16,463","","","5%","","$","87,218","","","38%"],["As a percentage of revenue","8%","","6%","","6%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023 compared to the year ended December 31, 2022 Product development expense in 2023 increased from 2022 due primarily to an increase of $22.8 million from Angi Inc., partially offset by a decrease of $7.9 million from Emerging & Other. •The Angi Inc. increase was due primarily to an increase of $20.0 million from Ads and Leads due primarily to an increase of $21.8 million in compensation expense resulting from a decrease in capitalized projects in 2023 as compared to 2022. •The Emerging & Other decrease was due primarily to the inclusion in the prior year period of $8.8 million of expense at Bluecrew, which was sold on November 9, 2022, and a decrease of $2.7 million in outsourced personnel costs at Care.com, partially offset by an increase of $4.7 million in compensation expense at Vivian Health. The increase in compensation expense at Vivian Health was due primarily to a $7.1 million increase in payroll-related expenses due to higher headcount, partially offset by a $2.4 million charge related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with an equity raise in the second quarter of 2022. For the year ended December 31, 2022 compared to the year ended December 31, 2021 Product development expense in 2022 increased from 2021 due primarily to increases of $77.5 million from Dotdash Meredith and $12.6 million from Emerging & Other, partially offset by a decrease of $4.9 million from Search. •The Dotdash Meredith increase was due primarily to an increase of $63.5 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, and an increase of $13.1 million in compensation expense at Dotdash due primarily to higher headcount. •The Emerging & Other increase was due primarily to increases of $7.0 million and $5.9 million in compensation expense at Care.com and Vivian Health, respectively. The increase in compensation expense at Care.com was due to higher headcount. The increase in compensation expense at Vivian Health was due primarily to higher headcount and a $2.4 million charge related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with an equity raise in the second quarter of 2022. •The Search decrease was due primarily to a decrease of $6.2 million in compensation expense due primarily to the reduction in headcount following the cessation of new B2C products described above under "Services Agreement with Google (the "Services Agreement")", partially offset by an increase of $2.1 million in outsourced personnel costs at Ask Media Group due to various product initiatives. 51 Depreciation [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Depreciation","$","175,096","","","$","130,986","","","$","75,015","","","$","44,110","","","34","%","","$","55,971","","","75%"],["As a percentage of revenue","4%","","3%","","2%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023 compared to the year ended December 31, 2022 Depreciation in 2023 increased from 2022 due primarily to increases of $28.9 million at Dotdash Meredith and $16.1 million at Angi Inc. The increase at Dotdash Meredith was due primarily to an impairment of leasehold improvements and furniture and equipment of $25.3 million in the first quarter of 2023 related to unoccupied leased space and a $4.2 million write-off of certain leasehold improvements and furniture and equipment during the second quarter of 2023, partially offset by the inclusion of a $7.0 million impairment recorded in the third quarter of 2022 of leasehold improvements and furniture and equipment related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges." The increase at Angi Inc. was due primarily to an increase in capitalized software projects placed in service and investments in capitalized software. For the year ended December 31, 2022 compared to the year ended December 31, 2021 Depreciation in 2022 increased from 2021 due primarily to an increase of $28.3 million of expense from the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, an increase in expense of $18.5 million at Angi Inc. primarily related to the impairment of certain capitalized software projects that are no longer being utilized as Angi Inc. transitions away from certain business offerings in Services, and the impairment of leasehold improvements and furniture and equipment at Dotdash Meredith of $7.0 million related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges." 52 Operating (loss) income [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Dotdash Meredith"],["Digital","$","(16,656)","","","$","(66,629)","","","$","73,980","","","$","49,973","","","75","%","","$","(140,609)","","","NM"],["Print","(3,500)","","","(54,448)","","","(6,527)","","","50,948","","","94","%","","(47,921)","","","(734)","%"],["Other","(130,582)","","","(67,014)","","","(60,277)","","","(63,568)","","","(95)","%","","(6,737)","","","(11)","%"],["Total Dotdash Meredith","(150,738)","","","(188,091)","","","7,176","","","37,353","","","20","%","","(195,267)","","","NM"],["Angi Inc."],["Domestic"],["Ads and Leads","50,043","","","85,593","","","65,485","","","(35,550)","","","(42)","%","","20,108","","","31","%"],["Services","(23,450)","","","(95,166)","","","(63,984)","","","71,716","","","75","%","","(31,182)","","","(49)","%"],["Other","(61,377)","","","(61,794)","","","(56,196)","","","417","","","1","%","","(5,598)","","","(10)","%"],["Total Domestic","(34,784)","","","(71,367)","","","(54,695)","","","36,583","","","51","%","","(16,672)","","","(30)","%"],["International","8,286","","","(4,253)","","","(13,222)","","","12,539","","","NM","","8,969","","","68","%"],["Total Angi Inc.","(26,498)","","","(75,620)","","","(67,917)","","","49,122","","","65","%","","(7,703)","","","(11)","%"],["Search","44,198","","","83,398","","","108,334","","","(39,200)","","","(47)","%","","(24,936)","","","(23)","%"],["Emerging & Other","18,763","","","(156,839)","","","(31,334)","","","175,602","","","NM","","(125,505)","","","(401)","%"],["Corporate","(146,488)","","","(137,619)","","","(153,326)","","","(8,869)","","","(6)","%","","15,707","","","10","%"],["Total","$","(260,763)","","","$","(474,771)","","","$","(137,067)","","","$","214,008","","","45","%","","$","(337,704)","","","(246)","%"],["As a percentage of revenue","(6)%","","(9)%","","(4)%"]] [[/GREPCENT_TABLE]] ________________________ NM = Not meaningful. For the year ended December 31, 2023 compared to the year ended December 31, 2022 Operating loss decreased $214.0 million to a loss of $260.8 million due primarily to an increase in Adjusted EBITDA of $136.9 million, described below, a net decrease in goodwill impairments of $103.8 million ($9.0 million in 2023 (at Mosaic Group) compared to $112.8 million in 2022 ($86.7 million at Mosaic Group and $26.0 million at Roofing)) and decreases of $11.7 million in amortization of intangibles and $6.3 million in stock-based compensation expense, partially offset by an increase of $44.1 million in depreciation and income of $0.6 million in 2022 related to an acquisition-related contingent consideration fair value adjustment. The goodwill impairment at Mosaic Group in 2023 was due to the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. The decrease in the amortization of intangibles was due primarily to a higher expense in 2022 at Dotdash Meredith resulting from fair value adjustments recorded during the measurement period to identifiable intangible assets in connection with the completion of purchase accounting related to the acquisition of Meredith, partially offset by $79.9 million and $7.6 million indefinite-lived intangible asset impairments at the Dotdash Meredith Digital segment in the fourth and third quarters of 2023, respectively, and lower expense at Care.com and Angi Inc.'s Services segment due to certain intangible assets becoming fully amortized. The decrease in stock-based compensation expense was due primarily to lower expense at Angi Inc.'s Services segment due to a reduction in headcount as a result of the shift away from complex and less profitable offerings. The increase in depreciation was due primarily to the impairment of leasehold improvements and furniture and equipment of $25.3 million at Dotdash Meredith in the first quarter of 2023 related to unoccupied leased space, a $4.2 million write-off of certain leasehold improvements and furniture and equipment during the second quarter of 2023 and an increase in expense at Angi Inc. due primarily to an increase in capitalized software projects placed in service and investments in capitalized software, partially offset by the inclusion of a $7.0 million impairment at Dotdash Meredith recorded in the third quarter of 2022 of leasehold improvements and furniture and equipment related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges." At December 31, 2023, there was $269.6 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 3.9 years. 53 For the year ended December 31, 2022 compared to the year ended December 31, 2021 Operating loss increased $337.7 million to a loss of $474.8 million, despite the increase of $92.3 million in Adjusted EBITDA, described below, due primarily to an increase of $232.9 million in amortization of intangibles, goodwill impairment charges of $112.8 million, and increases of $56.0 million in depreciation and $44.0 million in stock-based compensation expense, partially offset by a change in acquisition-related contingent consideration fair value adjustments (income of $0.6 million in 2022 compared to expense of $15.0 million in 2021). The increase in amortization of intangibles was due primarily to the acquisition of Meredith, partially offset by lower expense at Care.com due to certain intangible assets becoming fully amortized. The goodwill impairment charges relate to impairments of $86.7 million at Mosaic Group in the second quarter of 2022 and $26.0 million at Roofing in the fourth quarter of 2022. The goodwill impairment at Mosaic Group was a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. The goodwill impairment at Roofing was due to the business exiting certain markets and the projected reduction in future profits. The increase in depreciation was due primarily to the inclusion of Meredith for twelve months in the current year compared to one month in the prior year, an increase in expense at Angi Inc. primarily related to the impairment of certain capitalized software projects that are no longer being utilized as Angi Inc. transitions away from certain business offerings in Services, and the impairment of leasehold improvements and furniture and equipment at Dotdash Meredith of $7.0 million recorded in the third quarter of 2022 related to the consolidation of certain leased spaces, as described above under "Dotdash Meredith Restructuring and Other Charges." The increase in stock-based compensation expense was due primarily to the reversal of previously recognized stock-based compensation expense due to forfeitures from management departures in 2021, the acceleration of awards related to management departures in 2022 and new awards granted since the first quarter of 2022. See "Note 2—Summary of Significant Accounting Policies" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data" for further discussion of the Company’s assessment of impairment of goodwill and indefinite-lived intangible assets. Adjusted EBITDA [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Dotdash Meredith"],["Digital","$","242,969","","","$","186,696","","","$","91,179","","","$","56,273","","","30","%","","$","95,517","","","105","%"],["Print","64,226","","","31,135","","","2,639","","","33,091","","","106","%","","28,496","","","1080","%"],["Other","(84,438)","","","(65,682)","","","(60,196)","","","(18,756)","","","(29)","%","","(5,486)","","","(9)","%"],["Total Dotdash Meredith","222,757","","","152,149","","","33,622","","","70,608","","","46","%","","118,527","","","353","%"],["Angi Inc."],["Domestic"],["Ads and Leads","147,357","","","168,952","","","136,260","","","(21,595)","","","(13)","%","","32,692","","","24","%"],["Services","8,123","","","(52,126)","","","(48,203)","","","60,249","","","NM","","(3,923)","","","(8)","%"],["Other","(50,076)","","","(49,866)","","","(46,066)","","","(210)","","","\u2014","%","","(3,800)","","","(8)","%"],["Total Domestic","105,404","","","66,960","","","41,991","","","38,444","","","57","%","","24,969","","","59","%"],["International","13,074","","","(481)","","","(6,615)","","","13,555","","","NM","","6,134","","","93","%"],["Total Angi Inc.","118,478","","","66,479","","","35,376","","","51,999","","","78","%","","31,103","","","88","%"],["Search","44,283","","","83,486","","","108,381","","","(39,203)","","","(47)","%","","(24,895)","","","(23)","%"],["Emerging & Other","41,839","","","(23,043)","","","25,872","","","64,882","","","NM","","(48,915)","","","NM"],["Corporate","(90,873)","","","(79,521)","","","(95,985)","","","(11,352)","","","(14)","%","","16,464","","","17","%"],["Total","$","336,484","","","$","199,550","","","$","107,266","","","$","136,934","","","69","%","","$","92,284","","","86","%"],["As a percentage of revenue","8%","","4%","","3%"]] [[/GREPCENT_TABLE]] 54 For a reconciliation of net earnings (loss) attributable to IAC shareholders to operating loss to Adjusted EBITDA, see "Principles of Financial Reporting." For a reconciliation of operating income (loss) to Adjusted EBITDA for the Company's reportable segments, see "Note 10—Segment Information" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data." For the year ended December 31, 2023 compared to the year ended December 31, 2022 •Dotdash Meredith Adjusted EBITDA increased $70.6 million to $222.8 million due to increases in Adjusted EBITDA of $56.3 million and $33.1 million from Digital and Print, respectively, partially offset by an increase in Adjusted EBITDA losses of $18.8 million from Other (unallocated corporate costs). ◦The Digital Adjusted EBITDA increase was due primarily to decreases in traffic acquisition costs, compensation expense and the inclusion in 2022 of $33.3 million of restructuring charges and transaction-related expenses, including a $14.3 million impairment of an ROU asset related to the consolidation of certain leased spaces following the Meredith acquisition. ◦The Print Adjusted EBITDA increase was due primarily to the inclusion in 2022 of $34.8 million of restructuring charges and transaction-related expenses. ◦The Other (unallocated corporate costs) Adjusted EBITDA loss increase was due primarily to an impairment charge of $44.7 million of an ROU asset related to unoccupied lease space recognized in the first quarter of 2023, partially offset by the inclusion in 2022 of $12.3 million of restructuring charges and transaction-related expenses and a decrease in expense in 2023 of $8.0 million due to the reversal of certain indemnification liabilities established for tax contingencies in connection with the acquisition of Meredith. See "Note 2—Summary of Significant Accounting Policies" and "Note 11—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-In-Control Payments" to the financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on impairment and restructuring charges, respectively. •Angi Inc. Adjusted EBITDA increased $52.0 million to $118.5 million due primarily to increases in Adjusted EBITDA of $60.2 million and $13.6 million from Services and International, respectively, partially offset by a decrease in Adjusted EBITDA of $21.6 million from Ads and Leads. ◦The Services Adjusted EBITDA increase was due primarily to pricing and fulfillment optimization efforts over the past year and lower operating expenses due to a reduced overall cost base as a result of a shift away from complex and less profitable offerings. ◦The International Adjusted EBITDA increase was due primarily to an increase in revenue and lower selling and marketing expense due to more efficient marketing spend. ◦The Ads and Leads Adjusted EBITDA decrease was due primarily to lower revenue, partially offset by lower general and administrative expense due to a decrease in the provision for credit losses, a decrease in legal expense due, in part, to a $10.9 million benefit in 2023 related to insurance coverage for previously incurred legal fees, and a decrease in compensation expense and lower selling and marketing expense due to improved marketing efficiency. •Search Adjusted EBITDA decreased 47% to $44.3 million due primarily to lower revenue at Ask Media Group due to a reduction in marketing by affiliate partners driving fewer visitors to ad supported search and content websites and at Desktop resulting from the wind-down of the B2C business. •Emerging & Other Adjusted EBITDA increased $64.9 million to $41.8 million from a loss of $23.0 million due primarily to the sale of Bluecrew, which had Adjusted EBITDA losses of $23.1 million in the prior year period, reduced losses of $18.5 million at Roofing due primarily to a strategic shift of operations to select markets prior to its sale on November 1, 2023, higher profits at Care.com and Mosaic Group, the inclusion in the second quarter of 2022 of a $9.8 million charge at Vivian Health related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with an equity raise in the second quarter of 2022 and lower losses at Newco (an IAC incubator). 55 •Corporate Adjusted EBITDA loss increased $11.4 million to $90.9 million due primarily to increased compensation expense. For the year ended December 31, 2022 compared to the year ended December 31, 2021 •Dotdash Meredith Adjusted EBITDA increased 353% to $152.1 million, due to higher revenue, and a decrease in transaction-related costs ($7.1 million in 2022 compared to $78.5 million in 2021, inclusive of costs related to change-in-control payments), partially offset by $80.2 million in restructuring charges associated with the Meredith acquisition described above under "Dotdash Meredith Restructuring and Other Charges." •Angi Inc. Adjusted EBITDA increased 88% to $66.5 million due primarily to an increase of $32.7 million from Ads and Leads and a decrease of $6.1 million in International Adjusted EBITDA losses, partially offset by increased Adjusted EBITDA losses of $3.9 million from Services and $3.8 million from Other (corporate unallocated costs). ◦The Ads and Leads Adjusted EBITDA increase was due primarily to higher revenue of $55.0 million, partially offset by increases in general and administrative expense of $23.7 million and selling and marketing of $11.9 million, which are described above. ◦The International Adjusted EBITDA loss decrease was due primarily to a decrease of $8.6 million in general and administrative expense, due to the inclusion in compensation expense in 2021 of $7.0 million in charges related to the acquisition of the remaining interests in MyBuilder at a premium to fair value. ◦The Services Adjusted EBITDA loss increase was due primarily to increases in general and administrative expense of $27.8 million and selling and marketing expense of $13.6 million, partially offset by higher revenue of $91.3 million. ◦The Other (unallocated corporate costs) Adjusted EBITDA loss increased was due primarily to an increase in general and administrative expense, which is described above. •Search Adjusted EBITDA decreased $24.9 million to $83.5 million due primarily to a decrease in Ask Media Group revenue and an increase in online marketing and a decrease in Desktop revenue and an increase in traffic acquisition costs as a result of higher revenue share rates resulting in higher expense compared to the prior year. •Emerging & Other Adjusted EBITDA decreased $48.9 million to a loss of $23.0 million due primarily to the inclusion of expense from Roofing for twelve months in the current year compared to six months in the prior year, a $9.8 million charge at Vivian Health related to the sale of equity interests held by certain members of its management and the settlement of certain employee stock-based awards in conjunction with an equity raise in the second quarter of 2022, lower profits at IAC Films and Mosaic Group and increased losses at Newco, Daily Beast and Bluecrew, which was sold on November 9, 2022, partially offset by higher profits at Care.com. •Corporate Adjusted EBITDA loss decreased 17% to $79.5 million due primarily to a decrease in compensation expense due primarily to decreases in bonuses and payroll taxes and the inclusion in 2021 of $6.2 million of transaction-related costs in connection with the Spin-off. Interest expense [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Interest expense","$","(157,632)","","","$","(110,165)","","","$","(34,264)","","","$","(47,467)","","","43","%","","$","(75,901)","","","(222)%"]] [[/GREPCENT_TABLE]] For the year ended December 31, 2023 compared to the year ended December 31, 2022 Interest expense in 2023 increased from 2022 due primarily to an increase in interest rates from 8.22% and 5.91% at December 31, 2022 to 9.44% and 7.69% at December 31, 2023 on the Dotdash Meredith Term Loan B and Dotdash Meredith Term Loan A, respectively. 56 For the year ended December 31, 2022 compared to the year ended December 31, 2021 Interest expense in 2022 increased from 2021 due primarily to the Dotdash Meredith Term Loans incurred in December 2021, partially offset by the decrease resulting from the repayment of the ANGI Group Term Loan during the second quarter of 2021 and the write-off of deferred financing costs in 2021 associated with the termination of a bridge facility entered into by IAC in connection with the Meredith transaction. 57 Unrealized gain (loss) on investment in MGM Resorts International ("MGM") [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Unrealized gain (loss) on investment in MGM Resorts International","$","721,668","","","$","(723,515)","","","$","789,283","","","$","1,445,183","","","NM","","$","(1,512,798)","","","NM"]] [[/GREPCENT_TABLE]] During the fourth quarter of 2023, due to MGM's ongoing share repurchase program, which increased the Company's ownership interest passively, the Company determined that the equity method of accounting applies and has elected to account for its investment in MGM pursuant to the fair value option. Prior to the fourth quarter of 2023, the Company's investment in MGM was accounted for as an equity security with a readily determinable fair value, with changes in fair value recognized through income each period. Since the Company has always marked its investment in MGM to fair value through income each period the election of the fair value option will result in no change to the historical accounting for this investment. For the years ended December 31, 2023, 2022 and 2021, the Company recognized unrealized pre-tax gains (losses) of $721.7 million, $(723.5) million and $789.3 million, respectively on its investment in MGM and were due to changes in the price of MGM's common stock as reported on the New York Stock Exchange. Based on the number of MGM common shares outstanding at December 31, 2023, the Company owns 19.8% of MGM. Other income (expense), net [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021"],["","(Dollars in thousands)"],["Interest income","$","71,114","","","$","24,916","","","$","1,351"],["Unrealized increase (decrease) in the estimated fair value of a warrant","2,832","","","(62,495)","","","104,018"],["Foreign exchange gains (losses), net(a)","1,528","","","(8,503)","","","(13,636)"],["Net periodic pension benefit credit (cost), other than the service cost component(b)","139","","","(206,422)","","","(17,858)"],["Net (downward) upward adjustments to the carrying value of equity securities without readily determinable fair values and realized gains on sales of businesses and investments(c)(d)","(19,201)","","","59,299","","","18,874"],["Unrealized (loss) gain related to marketable equity securities","(145)","","","(20,342)","","","18,788"],["Realized gain on the sale of a marketable equity security","\u2014","","","\u2014","","","7,174"],["Loss on extinguishment of debt(e)","\u2014","","","\u2014","","","(1,110)"],["Other","7,595","","","(4,238)","","","(5,747)"],["Other income (expense), net","$","63,862","","","$","(217,785)","","","$","111,854"],["$ Change","$","281,647","","","$","(329,639)"],["% Change","NM","","NM"]] [[/GREPCENT_TABLE]] _____________________ (a)    Includes $10.0 million in foreign exchange losses primarily related to the substantial liquidation of certain foreign subsidiaries in the year ended December 31, 2021. (b)     Includes pre-tax actuarial gains (losses) of $1.7 million, $(213.4) million and $(7.1) million for the years ended December 31, 2023, 2022 and 2021, respectively, related to the pension plans in the U.S and U.K. See "Note 13—Pension and Postretirement Benefit Plans" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data" for additional information. (c)    Includes downward and upward adjustments to the carrying value of equity securities without readily determinable fair values. For the years ended December 31, 2023, 2022 and 2021, the Company recorded net (downward) and upward adjustments of $(20.2) million, $(89.1) million and $8.9 million, respectively. (d) Includes a gain of approximately $132.2 million on the sale of Bluecrew in the year ended December 31, 2022. On November 9, 2022, the Company completed the sale of Bluecrew, which was included within Emerging & Other, to EmployBridge, a provider of light industrial staffing solutions, for cash and stock with the Company becoming a minority shareholder in the combined company. (e)     Represents the write-off of deferred debt issuance costs related to the ANGI Group Term Loan, which was repaid in its entirety during the second quarter of 2021. 58 Income tax (provision) benefit [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Income tax (provision) benefit","$","(108,818)","","","$","331,087","","","$","(138,990)","","","$","(439,905)","","","NM","","$","470,077","","","NM"],["Effective income tax rate","30%","","22%","","19%"]] [[/GREPCENT_TABLE]] For further details of income tax matters, see "Note 14—Income Taxes" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data." In 2023, the effective income tax rate is higher than the statutory rate of 21% due primarily to state taxes and nondeductible compensation expense, partially offset by research credits. In 2022, the effective income tax rate was higher than the statutory rate of 21% due primarily to state taxes and research credits, partially offset by the non-deductible portion of the Mosaic Group goodwill impairment charge. In 2021, the effective income tax rate was lower than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by state taxes, an increase in the valuation allowance on beginning-of-the-year deferred tax assets related to the Spin-off and non-deductible transaction-related items associated with the acquisition of Meredith. Net loss attributable to noncontrolling interests [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021","","2023 Change","","2022 Change"],["","","","","","","","$ Change","","% Change","","$ Change","","% Change"],["","(Dollars in thousands)"],["Net loss attributable to noncontrolling interests","$","7,625","","","$","22,285","","","$","8,562","","","$","(14,660)","","","(66)","%","","$","13,723","","","160%"]] [[/GREPCENT_TABLE]] Net loss attributable to noncontrolling interests in 2023, 2022 and 2021 primarily represents the publicly-held interest in Angi Inc.'s losses. Net loss attributable to noncontrolling interests in 2022 and 2021 also included noncontrolling interest in a subsidiary that primarily held investments in equity securities. The subsidiary recorded net unrealized losses in 2022 and net realized gains in 2021. 59 PRINCIPLES OF FINANCIAL REPORTING The Company 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, and on which our internal budgets are based and may impact management compensation. 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. The Company 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. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses. The following table reconciles net earnings (loss) attributable to IAC shareholders to operating loss to Adjusted EBITDA: [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021"],["","(In thousands)"],["Net earnings (loss) attributable to IAC shareholders","$","265,942","","","$","(1,170,170)","","","$","597,547"],["Add back:"],["Net loss attributable to noncontrolling interests","(7,625)","","","(22,285)","","","(8,562)"],["(Earnings) loss from discontinued operations, net of taxes","\u2014","","","(2,694)","","","1,831"],["Income tax provision (benefit)","108,818","","","(331,087)","","","138,990"],["Other (income) expense, net","(63,862)","","","217,785","","","(111,854)"],["Unrealized (gain) loss on investment in MGM Resorts International","(721,668)","","","723,515","","","(789,283)"],["Interest expense","157,632","","","110,165","","","34,264"],["Operating loss","(260,763)","","","(474,771)","","","(137,067)"],["Add back:"],["Stock-based compensation expense","117,181","","","123,476","","","79,487"],["Depreciation","175,096","","","130,986","","","75,015"],["Amortization of intangibles","295,970","","","307,718","","","74,839"],["Acquisition-related contingent consideration fair value adjustments","\u2014","","","(612)","","","14,992"],["Goodwill impairment","9,000","","","112,753","","","\u2014"],["Adjusted EBITDA","$","336,484","","","$","199,550","","","$","107,266"]] [[/GREPCENT_TABLE]] For a reconciliation of operating loss to Adjusted EBITDA for the Company's reportable segments, see "Note 10—Segment Information" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data." Non-Cash Expenses That Are Excluded from Our Non-GAAP Measure         Stock-based compensation expense consists of expense associated with awards that were granted under various IAC stock and annual incentive plans and expense related to awards issued by certain subsidiaries of the Company. These expenses are not paid in cash and we view the economic costs of stock-based awards to be the dilution to our share base; we also include the related shares in our fully diluted shares outstanding for GAAP earnings per share using the treasury stock method. The Company is currently settling all stock-based awards on a net basis; IAC remits the required tax-withholding amounts for net-settled awards from its current funds.         Depreciation is a non-cash expense relating to our capitalized software, equipment, buildings and leasehold improvements 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. 60         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 advertiser relationships, technology, licensee relationships, trade names, content, customer lists and user base, service professional relationships and subscriber 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 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. 61 FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES Financial Position [[GREPCENT_TABLE]] [["","December 31,"],["","2023","","2022"],["","(In thousands)"],["Angi Inc. cash and cash equivalents:"],["United States","$","354,341","","","$","311,422"],["All other countries","9,703","","","9,733"],["Total Angi Inc. cash and cash equivalents","364,044","","","321,155"],["Dotdash Meredith cash and cash equivalents:"],["United States","243,801","","","109,000"],["All other countries","17,779","","","14,866"],["Total Dotdash Meredith cash and cash equivalents","261,580","","","123,866"],["IAC (excluding Angi Inc. and Dotdash Meredith) cash and cash equivalents and marketable securities:"],["United States","642,613","","","939,168"],["All other countries","29,208","","","33,201"],["Total cash and cash equivalents","671,821","","","972,369"],["Marketable securities (United States)","148,998","","","239,373"],["Total IAC (excluding Angi Inc. and Dotdash Meredith) cash and cash equivalents and marketable securities","820,819","","","1,211,742"],["Total cash and cash equivalents and marketable securities","$","1,446,443","","","$","1,656,763"],["Dotdash Meredith Debt:"],["Dotdash Meredith Term Loan A","$","315,000","","","$","332,500"],["Dotdash Meredith Term Loan B","1,225,000","","","1,237,500"],["Total Dotdash Meredith long-term debt","1,540,000","","","1,570,000"],["Less: current portion of Dotdash Meredith long-term debt","30,000","","","30,000"],["Less: original issue discount","4,470","","","5,310"],["Less: unamortized debt issuance costs","8,423","","","10,215"],["Total Dotdash Meredith long-term debt, net","1,497,107","","","1,524,475"],["ANGI Group Debt:"],["ANGI Group Senior Notes","500,000","","","500,000"],["Less: unamortized debt issuance costs","3,953","","","4,716"],["Total ANGI Group long-term debt, net","496,047","","","495,284"],["Total long-term debt, net","$","1,993,154","","","$","2,019,759"]] [[/GREPCENT_TABLE]] The Company's international cash can be repatriated without significant tax consequences. During the year ended December 31, 2023, international cash totaling $4.3 million was repatriated to the U.S. 62 Cash Flow Information In summary, IAC's cash flows are as follows: [[GREPCENT_TABLE]] [["","Years Ended December 31,"],["","2023","","2022","","2021"],["","(In thousands)"],["Net cash provided by (used in):"],["Operating activities attributable to continuing operations","$","189,528","","","$","(82,791)","","","$","118,900"],["Investing activities attributable to continuing operations","$","(87,467)","","","$","(494,808)","","","$","(2,907,503)"],["Financing activities attributable to continuing operations","$","(223,013)","","","$","(112,651)","","","$","1,115,737"]] [[/GREPCENT_TABLE]] Net cash provided by operating activities attributable to continuing operations consists of net earnings adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include the unrealized (gains) losses on the investment in MGM, deferred income taxes, amortization of intangibles, pension and postretirement benefit cost, depreciation, stock-based compensation expense, provision for credit losses, goodwill impairment, unrealized (increase) decrease in the estimated fair value of a warrant, non-cash lease expense (including ROU impairments) and net losses (gains) on investments in equity securities and sales of businesses. 2023 Adjustments to net earnings consist primarily of amortization of intangibles of $296.0 million, depreciation of $175.1 million, stock-based compensation expense of $117.2 million, non-cash lease expense of $101.7 million, deferred income taxes of $88.8 million, provision of credit losses of $87.7 million, net losses on investments in equity securities and sales of businesses of $19.3 million and goodwill impairment of $9.0 million, partially offset by an unrealized gain on the investment in MGM of $721.7 million and an unrealized increase in the estimated fair value of a warrant of $2.8 million. The decrease from changes in working capital include a decrease in accounts payable and other liabilities of $120.3 million, a decrease in operating lease liabilities of $74.3 million and an increase in accounts receivable of $37.3 million. The decrease in accounts payable and other liabilities is due, in part, to a decrease in accrued traffic acquisition costs and related payables at Search and Dotdash Meredith, a decrease in accrued advertising at Angi Inc. and Search and a decrease in accrued employee compensation, due primarily to restructuring related severance payments at Dotdash Meredith. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The increase in accounts receivable is due primarily to timing of cash receipts at Angi and an increase in revenue relative to the fourth quarter of 2022 at Dotdash Meredith Digital, partially offset by a decrease in revenue relative to the fourth quarter of 2022 at Search. Net cash used in investing activities includes $455.4 million for the purchases of marketable debt securities, capital expenditures of $141.4 million, primarily related to payment of approximately $80 million for the acquisition of the formerly leased land under IAC's New York City headquarters building as well as investments of $45.2 million in capitalized software at Angi Inc. to support its products and services, and $103.6 million for the purchase of additional preferred shares of Turo, partially offset by maturities of marketable debt securities of $550.0 million, net proceeds from the sales of assets of $29.8 million, including $28.2 million related to the sale of a building at Dotdash Meredith, net proceeds from the sales of businesses and investments of $11.9 million and net collections of notes receivable of $11.3 million. Net cash used in financing activities includes the repurchase of 3.2 million shares of IAC common stock, on a settlement date basis, for $165.6 million at an average price of $51.00 per share, principal payments on Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B of $30.0 million, the repurchase of 4.4 million shares of Angi Inc. Class A common stock, on a settlement date basis, for $10.9 million at an average price of $2.50 per share, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $10.6 million and withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $6.0 million. 63 2022 Adjustments to net loss attributable to continuing operations consist primarily of an unrealized loss on the investment in MGM of $723.5 million, amortization of intangibles of $307.7 million, pension and postretirement benefit cost of $210.0 million, depreciation of $131.0 million, stock-based compensation expense of $123.5 million, provision of credit losses of $116.6 million, goodwill impairment of $112.8 million, non-cash lease expense (including ROU asset impairments) of $70.9 million and an unrealized decrease in the estimated fair value of a warrant of $62.5 million, partially offset by deferred income taxes of $337.8 million and net gains on sales of businesses and investments in equity securities of $39.0 million. The decrease from changes in working capital include a decrease in accounts payable and other liabilities of $247.9 million, an increase in accounts receivable of $66.7 million, a decrease in operating lease liabilities of $63.8 million and a decrease in deferred revenue of $11.0 million. The decrease in accounts payable and other liabilities is due primarily to (i) a decrease in accrued employee compensation due, in part, to change-in-control payments, partially offset by an increase in restructuring charges, at Dotdash Meredith, (ii) a decrease in accrued traffic acquisition costs and related payables at Search, (iii) a decrease in accounts payable at Dotdash Meredith due primarily to timing of payments and lower spend due to the discontinuation of certain print publications, (iv) a payment of pre-acquisition income tax indemnification liabilities at Dotdash Meredith and (v) a decrease in customer deposit liabilities at Dotdash Meredith due, in part, to the discontinuation of certain print publications. The increase in accounts receivable is due primarily to revenue growth at Angi Inc., primarily attributable to Services, and an increase in revenue related to various production deals at IAC Films, partially offset by a decrease in revenue at Search and a decrease at Dotdash Meredith primarily due to the discontinuation of certain publications, reduced circulation of other publications and continued secular declines at Print and decreases in performance marketing and advertising revenue at Digital. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The decrease in deferred revenue is due primarily to timing of the utilization of services provided through Care for Business at Care.com, lower annual memberships at Angi Inc., primarily at Ads and Leads, and a decrease in Digital licensing contracts at Dotdash Meredith. Net cash used in investing activities attributable to continuing operations includes $244.3 million for the purchase of 5.7 million additional shares of MGM, $233.9 million for the purchase of marketable debt securities and capital expenditures of $139.8 million primarily related to investments in capitalized software at Angi Inc., Care.com and Dotdash Meredith, partially offset by net proceeds from the sale of certain businesses and investments of $90.8 million and a collection of notes receivable of $19.5 million. Net cash used in financing activities attributable to continuing operations includes the repurchase of 1.1 million shares of IAC common stock, on a settlement date basis, for $85.3 million at an average price of $77.44 per share, principal payments on Dotdash Meredith Term Loan A and Dotdash Meredith Term Loan B of $30.0 million, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $18.1 million, withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $8.8 million and the repurchase of 1.0 million shares of Angi Inc. Class A common stock, on a settlement date basis, for $8.1 million at an average price of $7.80 per share, partially offset by proceeds from the issuance of Vivian Health preferred shares, net of fees of $34.7 million. 2021 Adjustments to net earnings attributable to continuing operations consist primarily of an unrealized gain on the investment in MGM of $789.3 million, an unrealized increase in the estimated fair value of a warrant of $104.0 million and net gains on sales of businesses and investments in equity securities of $44.8 million, partially offset by deferred income taxes of $133.4 million, provision of credit losses of $89.9 million, stock-based compensation expense of $79.5 million, depreciation of $75.0 million, amortization of intangibles of $74.8 million, non-cash lease expense (including ROU asset impairments) of $35.7 million and pension and postretirement benefit cost of $18.2 million. The decrease from changes in working capital primarily consists of an increase in accounts receivable of $154.9 million and a decrease in operating lease liabilities of $31.0 million, partially offset by an increase in accounts payable and other liabilities of $90.3 million and an increase in deferred revenue of $8.3 million. The increase in accounts receivable is due primarily to revenue growth at Angi Inc., primarily attributable to Services, and an increase at Search due primarily to revenue growth, partially offset by timing of cash receipts. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The increase in accounts payable and other liabilities is due primarily to increases in (i) accrued traffic acquisition costs and related payables at Search, (ii) accrued advertising and related payables at Angi Inc., (iii) accrued sales returns at Angi Inc., (iv) accrued professional fees at Dotdash Meredith, primarily related to transaction-related costs associated with the acquisition of Meredith and (v) customer deposit liability due to the inclusion of Meredith, partially offset by a decrease in accrued compensation costs due primarily to a decrease in deferred payroll tax payments under the Coronavirus Aid, Relief, and Economic Security Act, and payments of cash bonuses. The increase in deferred revenue is due primarily to the growth in subscription sales at Care.com. 64 Net cash used in investing activities attributable to continuing operations includes cash used for acquisitions of $2.7 billion, principally related to the acquisitions of Meredith at Dotdash for $2.7 billion and Roofing for $25.4 million, the cash distribution related to the spin-off of Vimeo of $333.2 million, capital expenditures of $90.2 million primarily related to investments in capitalized software at Angi Inc. to support its products and services and payment of $12.7 million related to the purchase of a 50% interest in an aircraft at Corporate, and purchases of investments of $24.3 million, primarily related to Turo preferred shares, partially offset by maturities of marketable debt securities of $225.0 million and net proceeds from the sale of businesses and investments of $16.5 million, primarily related to the sales of certain investments. Net cash provided by financing activities attributable to continuing operations includes the borrowings of Dotdash Meredith Term Loans of $1.6 billion, partially offset by a prepayment of the ANGI Group Term Loan of $220.0 million, which otherwise would have matured on November 5, 2023, withholding taxes paid on behalf of IAC employees, excluding Angi Inc., for stock-based awards that were net settled of $96.0 million, withholding taxes paid on behalf of Angi Inc. employees for stock-based awards that were net settled of $61.9 million, the repurchase of 3.2 million shares of Angi Inc. Class A common stock, on a settlement date basis, for $35.4 million at an average price of $11.06 per share, the purchase of redeemable noncontrolling interests of $30.3 million, and debt issuance costs of $23.5 million, primarily related to the Dotdash Meredith Term Loans and Dotdash Meredith Revolving Facility. Discontinued Operations Net cash provided by discontinued operations in the year ended December 31, 2021 of $319.2 million relates to the operations of Vimeo. There were no cash flows from discontinued operations following the Spin-off. Liquidity and Capital Resources Financing Arrangements In March 2023, Dotdash Meredith entered into interest rate swaps for a total notional amount of $350 million with a maturity date of April 1, 2027, to manage interest rate risk exposure. Dotdash Meredith designated the interest rate swaps as cash flow hedges and applies hedge accounting to these contracts. The interest rate swaps synthetically convert $350 million of the Dotdash Meredith Term Loan B for the duration of the interest rate swaps from a variable rate to a fixed rate of approximately 7.92% ((i) the weighted average fixed interest rate of approximately 3.82% on the interest rate swaps plus (ii) the adjustment to the secured overnight financing rate of 0.10% plus (iii) the base rate of 4.00%), beginning on April 3, 2023. For a detailed description of long-term debt and interest rate swaps, see "Note 2—Summary of Significant Accounting Policies" and "Note 7—Long-term Debt" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data." Investment in MGM At December 31, 2023, the Company owns 64.7 million common shares of MGM, including a total of 5.7 million common shares purchased in the first and third quarters of 2022 for $244.3 million. Based on the number of MGM common shares outstanding at December 31, 2023, the Company owns 19.8% of MGM. Investment in Turo In April 2023, the Company purchased additional preferred shares of Turo for $103.6 million. At December 31, 2023, IAC's aggregate percentage ownership in Turo is approximately 30%, on an as-converted basis. Share Repurchase Authorizations and Activity During the year ended December 31, 2023, IAC repurchased 3.2 million shares of its common stock, on a trade date basis, at an average price of $51.00 per share, or $165.6 million in aggregate. At February 9, 2024, IAC had 3.7 million shares remaining in its share repurchase authorization. 65 During the year ended December 31, 2023, Angi Inc. repurchased 4.4 million shares of its Class A common stock, on a trade date basis, at an average price of $2.50 per share, or $11.1 million in aggregate. During the fourth quarter of 2023, Angi Inc. put in place a share repurchase plan with the intent of utilizing the remaining shares in its stock repurchase authorization. The plan will be subject to price and volume limitations. From January 1, 2024 through February 9, 2024, Angi Inc. repurchased an additional 2.7 million shares at an average price of $2.36, or $6.3 million in aggregate. At February 9, 2024, Angi Inc. had 7.9 million shares remaining in its share repurchase authorization. IAC and Angi Inc. may purchase their shares pursuant to their authorizations over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, price and future outlook. Outstanding Stock-based Awards IAC and Angi Inc. may settle stock options, stock settled stock appreciation rights, restricted stock units ("RSUs") and restricted stock on a gross or a net basis based upon factors deemed relevant by management at the time. To the extent that equity awards are settled on a net basis, the holders of the awards receive shares of IAC or Angi Inc., as applicable, with a value equal to the fair value of the award on the vest date for RSUs and restricted stock and with a value equal to the intrinsic value of the award upon exercise for stock options or stock settled appreciation rights less, in each case, an amount equal to the required cash tax withholding payment, which will be paid by IAC or Angi Inc., as applicable, on the employee's behalf. All awards are being settled currently on a net basis. The following table summarizes (i) the aggregate intrinsic value of IAC and Angi Inc. non-publicly traded subsidiary denominated stock settled stock appreciation rights, IAC options, Angi Inc. stock settled stock appreciation rights and Angi Inc. options and (ii) the aggregate fair value (based on stock prices as of February 9, 2024) of IAC and Angi Inc. RSUs and IAC restricted stock outstanding as of that date; assuming these awards were net settled on that date, the withholding taxes that would be paid by IAC and Angi Inc. on behalf of employees upon exercise or vesting that would be payable (assuming these equity awards are net settled with a 50% tax rate), and the shares that would have been issued are as follows: [[GREPCENT_TABLE]] [["","Aggregate intrinsic value / fair value of awards outstanding","","Estimated withholding taxes payable on vested shares and shares that will vest by December 31, 2024","","Estimated withholding taxes payable on shares that will vest after December 31, 2024","","Estimated IAC shares to be issued"],["","(In thousands)"],["IAC"],["Stock settled stock appreciation rights denominated in shares of certain non-publicly traded IAC subsidiaries other than Angi Inc. subsidiaries (a)","$","20,822","","","$","8,809","","","$","1,602","","","196"],["IAC denominated stock options (b)","99,293","","","49,647","","","\u2014","","","938"],["IAC RSUs (c)","89,820","","","1,022","","","42,491","","","875"],["IAC restricted stock (d)","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total IAC outstanding employee stock-based awards","209,935","","","59,478","","","44,093","","","2,009"],["Angi Inc."],["Angi Inc. RSUs","64,065","","","10,257","","","20,640"],["Angi Inc. stock appreciation rights","\u2014","","","\u2014","","","\u2014","","","See footnote (f) below"],["Other Angi Inc. equity awards (a)(e)","3,302","","","956","","","695","","","See footnote (f) below"],["Total Angi Inc. outstanding employee stock-based awards","67,367","","","11,213","","","21,335"],["Total outstanding employee stock-based awards","$","277,302","","","$","70,691","","","$","65,428"]] [[/GREPCENT_TABLE]] _______________ 66 (a)    The number of shares ultimately needed to settle these awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant subsidiary at the time of exercise. In addition, the number of shares required to settle these awards will be impacted by movement in the stock price of IAC and Angi Inc. (b)    The Company has the discretion to settle these awards net of withholding tax and exercise price (which is represented in the table above) or settle on a gross basis and require award holders to pay related withholding taxes, which he or she may do by selling shares of IAC common stock upon exercise. Assuming all IAC stock options outstanding on February 9, 2024 were settled on a gross basis (i.e., through the issuance of a number of shares of IAC common stock equal to the number of stock options exercised), the Company would have issued 2.6 million shares of IAC common stock and would have received $36.5 million in cash proceeds. (c)    Approximately 65% of the estimated withholding taxes payable upon the vesting of RSUs scheduled to vest after December 31, 2024 is related to RSUs that are scheduled to cliff vest in 2025 (the five-year anniversary of the grant date), subject to continued employment through the vesting date. (d)    On November 5, 2020, the Company granted 3.0 million shares of IAC restricted common stock to its CEO, that cliff vest on the ten-year anniversary of the grant date based on satisfaction of IAC's stock price targets and subject to continued employment through the vesting date. As of the date of this report, the price per share of IAC common stock was below the minimum price threshold to earn the award. (e)    Includes Angi Inc. stock options and subsidiary denominated equity. (f)    Pursuant to the employee matters agreement between IAC and Angi Inc., certain stock appreciation rights of Angi Inc. and equity awards denominated in shares of Angi Inc.'s subsidiaries may be settled in either shares of Angi Inc. common stock or IAC common stock. To the extent shares of IAC common stock are issued in settlement of these awards, Angi Inc. is obligated to reimburse IAC for the cost of those shares by issuing shares of Angi Inc. common stock. For a detailed description of employee stock-based awards, see "Note 12—Stock-Based Compensation" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data." Contractual Obligations The Company enters into various contractual arrangements as a part of its continued operations. Material contractual obligations as of December 31, 2023 are described in the accompanying notes to the financial statements within "Item 8—Financial Statements and Supplementary Data"; these include operating leases as described in "Note 6—Leases," principal and interest payments on long-term debt as described in "Note 7—Long-Term Debt" and pension and postretirement benefits as described in "Note 13—Pension and Postretirement Benefit Plans." The Company has material purchase obligations, which represent legally binding agreements to purchase goods and services that specify all significant terms. Future payments under these agreements at December 31, 2023 are as follows: [[GREPCENT_TABLE]] [["","Amount of Commitment Expiration Per Period"],["","Less Than 1 Year","","1-3 Years","","3-5 Years","","More Than 5 Years","","Total Amounts Committed"],["","(In thousands)"],["Purchase obligations","$","93,483","","","$","4,590","","","$","\u2014","","","$","\u2014","","","$","98,073"]] [[/GREPCENT_TABLE]] Purchase obligations include future payments of (i) $43.0 million for the final payment related to a three-year cloud computing arrangement, with payment expected to be made by September 2024, (ii) $12.0 million related to advertisement placement services in 2024, (iii) $4.9 million related to office productivity and email tools, (iv) $4.5 million related to research tools and (v) $3.5 million related to media spend to be made in 2024. Capital Expenditures The Company anticipates that it will need to make capital expenditures in connection with the development and expansion of its operations. The Company's 2024 capital expenditures are expected to be lower than its 2023 capital expenditures of $141.4 million by approximately 40% to 50%, due primarily to the acquisition of the formerly leased land under IAC's New York City headquarters building in 2023, partially offset by an increase related to capitalized software at Angi Inc. Liquidity Assessment On a consolidated basis, the Company generated positive cash flows from operating activities of $189.5 million for the year ended December 31, 2023; excluding the positive cash flows from operating activities of $94.2 million and $14.0 million generated by Angi Inc. and Dotdash Meredith, respectively, the Company generated positive cash flows from operating activities of $81.4 million. 67 At December 31, 2023, the Company's consolidated cash, cash equivalents and marketable securities, excluding MGM, were $1.4 billion, of which $364.0 million and $261.6 million was held by Angi Inc. and Dotdash Meredith, respectively. The Company's consolidated debt includes approximately $1.5 billion, which is a liability of Dotdash Meredith, Inc., and $500.0 million, which is a liability of ANGI Group, a subsidiary of Angi Inc. The Dotdash Meredith Credit Agreement contains covenants that would limit Dotdash Meredith’s ability to pay dividends, incur incremental secured indebtedness, or make distributions or certain investments in the event a default has occurred or if Dotdash Meredith’s consolidated net leverage ratio exceeds 4.0 to 1.0, subject to certain available amounts as defined in the Dotdash Meredith Credit Agreement. This ratio was exceeded for the test period ended December 31, 2023. The Dotdash Meredith Credit Agreement also permits IAC to, among other things, contribute cash to Dotdash Meredith which will provide additional liquidity to ensure that Dotdash Meredith does not exceed certain consolidated net leverage ratios for any test period, as further defined in the Dotdash Meredith Credit Agreement. In connection with these capital contributions, Dotdash Meredith may make distributions to IAC in amounts not more than any such capital contributions, provided that no default has occurred and is continuing. Such capital contributions and subsequent distributions impact the consolidated net leverage ratios of Dotdash Meredith. During the year ended December 31, 2023, IAC contributed $510.0 million to Dotdash Meredith and Dotdash Meredith subsequently distributed back to IAC $405.0 million during the year ended December 31, 2023 and $105.0 million in January 2024. Angi Inc. is an independent public company 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 Angi Inc. and its subsidiaries. The Company's liquidity could be negatively affected by a decrease in demand for its products and services due to economic or other factors. The Company believes Angi Inc.'s and Dotdash Meredith's existing cash, cash equivalents and expected positive cash flows from operations, and the Company's existing cash and cash equivalents and expected positive cash flows from operations, excluding Angi Inc. and Dotdash Meredith, will be sufficient to fund their respective 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 next twelve months. The Company may need to raise additional capital through future debt or equity financing to make acquisitions and investments. Additional financing may not be available on terms favorable to the Company, or at all, and may also be impacted by any disruptions in the financial markets. The indebtedness at Dotdash Meredith and Angi Inc. could further limit the Company's ability to raise additional financing. 68 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The following disclosure is provided to supplement the descriptions of IAC's accounting policies contained in "Note 2—Summary of Significant Accounting Policies" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data" in regard to significant areas of judgment. Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). These estimates, judgments and assumptions impact the reported amount of assets, liabilities, revenue and expenses and the related disclosure of assets and liabilities. Actual results could differ from these estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on our financial statements than others. What follows is a discussion of some of our more significant accounting policies and estimates. Business Combinations and Contingent Consideration Arrangements Acquisitions, which are generally referred to in GAAP as business combinations, are an important part of the Company's growth strategy. The Company invested $2.7 billion in acquisitions in the year ended December 31, 2021. There were no acquisitions made in the years ended December 31, 2023 and 2022. The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. Management makes two critical determinations at the time of an acquisition: (1) the reporting unit(s) that will benefit from the acquisition and to which goodwill will be assigned and (2) the allocation of the purchase price of the acquired business to the assets acquired and the liabilities assumed based upon their fair values. The reporting unit determination is important beyond the initial allocation of purchase price because future impairment assessments of goodwill, as described below, are performed at the reporting unit level. Historically, when the Company’s acquisitions have been complementary to existing reporting units, the goodwill is allocated to an existing reporting unit. Acquisitions within Emerging & Other usually result in the creation of a new reporting unit because it is a standalone business with unique product offerings, management or target markets. The acquisition of Meredith closed on December 1, 2021 and the allocation of purchase price to the assets acquired and liabilities assumed, the determination of the reporting units and the allocation of goodwill to the reporting units were finalized during the fourth quarter of 2022. See "Note 4—Business Combination" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data" for a description of the accounting for this business combination. The allocation of purchase price to the assets acquired and liabilities assumed is based upon their fair values and is complex because of the judgments involved in determining these values. The determination of purchase price and the fair value of monetary assets acquired and liabilities assumed is typically the least complex aspect of the Company’s accounting for business combinations due to management’s experience and/or the inherently lower level of judgment required. Due to the higher degree of complexity associated with the valuation of acquired intangible assets, the Company usually obtains the assistance of outside valuation experts in the allocation of purchase price to the identifiable intangible assets acquired, which can be both definite-lived, such as advertiser, licensee and subscriber relationships, certain acquired trade names and trademarks, digital content and acquired technology, or indefinite lived, such as certain acquired trade names and trademarks. While outside valuation experts may be used, management has the ultimate responsibility for the valuation methods, models and inputs used and the resulting purchase price allocation. The excess purchase price over the value of net tangible and identifiable intangible assets acquired is recorded as goodwill and is assigned to the reporting unit(s) expected to benefit from the business combination as of the acquisition date. 69 In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be part of the purchase price. The premise underlying the accounting for contingent consideration arrangements is that there are divergent views as to the acquired company’s valuation between the Company and the selling shareholders of the acquiree. Therefore, a model is developed with future payments of a portion of the purchase price linked to one or more financial (e.g., revenue and/or profit performance) and/or operating (e.g., number of subscribers) metrics that may be achieved over a specified time frame in the future based upon the performance of the business. In keeping with the accounting guidance for business combinations, each of these arrangements is initially recorded at its fair value at the time of the acquisition and the fair value is included in the aggregate purchase price. The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated with the obligation to determine the net amount reflected in the financial statements. The number of scenarios used is typically greater for longer-term arrangements. The contingent consideration arrangements are reassessed and reflected at current fair values for each subsequent reporting period thereafter until settled. The changes in the remeasured fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount, if applicable, are recognized in "General and administrative expense" in the statement of operations. Significant changes in the specified forecasted financial or operating metrics can result in a significantly higher or lower fair value measurement, which can result in volatility of general and administrative expense as the resulting remeasurement gains and losses are recorded. Recoverability of Goodwill and Indefinite-Lived Intangible Assets The carrying value of goodwill is $3.0 billion at both December 31, 2023 and 2022. Indefinite-lived intangible assets, which consist of the Company's acquired trade names and trademarks, have a carrying value of $544.2 million and $631.1 million at December 31, 2023 and 2022, respectively. Goodwill and indefinite-lived intangible assets are assessed annually for impairment as of October 1 or more frequently if an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset has declined below its carrying value. In performing its annual goodwill impairment assessment, the Company has the option under GAAP to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value; if the conclusion of the qualitative assessment is that there are no indicators of impairment, the Company does not perform a quantitative test, which would require a valuation of the reporting unit, as of October 1. GAAP provides a not all-inclusive set of examples of macroeconomic, industry, market and company specific factors for entities to consider in performing the qualitative assessment described above; management considers the factors it deems relevant in making its more-likely-than-not assessments. While the Company also has the option under GAAP to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent. If the conclusion of our qualitative assessment is that there are indicators of impairment and a quantitative test is required, the annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of the Company's reporting unit that is being tested to its carrying value. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its estimated fair value, a goodwill impairment equal to the excess is recorded. The Company’s annual assessment of the recovery of goodwill begins with management’s reassessment of its operating segments and reporting units. A reporting unit is an operating segment or one level below an operating segment, which is referred to as a component. This reassessment of reporting units is also made each time the Company changes its operating segments to the extent that this also results in a change in reporting units. If the goodwill of a reporting unit is allocated to newly formed reporting units, the allocation is usually made to each reporting unit based upon their relative fair values. During the third quarter of 2023 and second quarter of 2022, the Company reassessed the fair value of the Mosaic Group reporting unit (included within Emerging & Other) and recorded goodwill impairments of $9.0 million and $86.7 million, respectively, as a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies. 70 For the Company's annual goodwill test at October 1, 2023, a qualitative assessment of the Angi Inc. Ads and Leads, Services and International reporting units and the Vivian Health reporting unit goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units are described below: •The Company considered the strong forecasted operating performance, in addition to actual operating results in the current year, of the Angi Inc. Ads and Leads and Services reporting units and, based on the Company's latest valuation prepared as of October 1, 2022, the excess of the estimated fair value of each reporting unit compared to their respective carrying values. •The Company prepared valuations of the Angi Inc. International and Vivian Health reporting units primarily in connection with the issuance and/or settlement of equity awards that are denominated in the equity of these businesses during the year ended December 31, 2023. The valuations were prepared time proximate to, however, not as of, October 1, 2023. The fair value of each of these businesses was in excess of its October 1, 2023 carrying value. For the Company's annual goodwill test at October 1, 2023, the Company quantitatively tested the Dotdash Meredith Digital, Mosaic Group and Care.com reporting units. The Company's quantitative tests resulted in no impairments. The Company's remaining reporting units, Dotdash Meredith Print, Search, Roofing, The Daily Beast, IAC Films and Newco, have no goodwill as of October 1, 2023. In the fourth quarter of 2022, a quantitative assessment was performed on the Roofing reporting unit; this test resulted in an impairment of $26.0 million due to Roofing exiting certain markets and a projected reduction in future profits from the business, which reduced its fair value. 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 $1.6 billion. The fair value of the Company's reporting units is determined using both an income approach based on discounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. The Company uses the same approach in determining the fair value of its businesses in connection with its non-public subsidiary denominated stock-based compensation plans, which can be a significant factor in the decision to apply the qualitative assessment rather than a quantitative test. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reporting unit's current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in the quantitative tests for 2023 for determining the fair values of the Company's Dotdash Meredith Digital, Care.com and Mosaic Group reporting units were 15.5%, 16% and 16%, respectively, and were intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. The discount rates used in the quantitative tests for 2022 for determining the fair values of the Company's Mosaic Group and Roofing reporting units were both 16%. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. The future cash flows are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, on forecasted growth rates. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessment ranged from 15% to 17% in 2023 and 12% to 18.5% in 2022, and the royalty rates used ranged from 2% to 8% in 2023 and 1% to 8% in 2022. 71 During the third quarter of 2023, the Company determined that a projected reduction in future revenue related to a certain indefinite-lived trade name intangible asset in the Dotdash Meredith Digital segment was an indicator of possible impairment. Following the identification of the indicator, the Company updated its calculation of the fair value of the indefinite-lived intangible asset and recorded an impairment of $7.6 million. The discount rate used to value the trade name was 16% and the royalty rate was 8%. A quantitative assessment of this indefinite-lived trade name intangible was prepared as of October 1, 2023; this test resulted in no additional impairment as its carrying value approximates its fair value. The October 1, 2023 annual quantitative assessment of indefinite-lived intangible assets identified an impairment of $79.9 million related to certain other indefinite-lived trade name intangible assets in the Dotdash Meredith Digital segment. The discount rate used to value these trade names was 15.5% and the royalty rate was 6%. If the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment equal to the excess is recorded. The aggregate carrying value of indefinite-lived intangible assets for which the excess of fair value over carrying value is less than 20% is $303.7 million. Impairment charges recorded on indefinite-lived intangibles are included in "Amortization of intangibles" in the accompanying statement of operations. The October 1, 2023 and 2022 annual assessments of goodwill and indefinite-lived intangible assets did not identify any further impairments. The October 1, 2021 annual assessment of goodwill and indefinite-lived intangible assets did not identify any impairments. Recoverability of Long-Lived Assets We review the carrying value of all long-lived assets, other than goodwill and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. The carrying value of these long-lived assets is $1.1 billion and $1.5 billion at December 31, 2023 and 2022, respectively. During the first quarter of 2023, Dotdash Meredith recorded impairment charges of $70.0 million related to certain unoccupied leased office space due to the continued decline in the commercial real estate market consisting of impairments of $44.7 million and $25.3 million of an ROU asset and related leasehold improvements, furniture and equipment, respectively. During the third quarter of 2022, Dotdash Meredith recorded impairment charges of $21.3 million related to the consolidation of certain leased spaces following the Meredith acquisition consisting of impairments of $14.3 million and $7.0 million of an ROU asset and related leasehold improvements, furniture and equipment, respectively. See "Note 11—Dotdash Meredith Restructuring Charges, Transaction-Related Expenses and Change-In-Control Payments" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data" for additional information. The impairment charges related to ROU assets are included in "General and administrative expense" and the impairment charges related to leasehold improvements, furniture and equipment are included in "Depreciation" in the statement of operations. The impairment charges represent the amount by which the carrying value of the asset group exceeded its estimated fair value, calculated using a DCF approach using sublease market assumptions of the expected cash flows and discount rate. The impairment charges were allocated between the ROU assets and related leasehold improvements, furniture and equipment of the asset group based on their relative carrying values. Income Taxes The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized. At December 31, 2023 and 2022, the balance of the Company's net deferred tax liability is $162.9 million and $74.7 million, respectively. 72 The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustainable upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes. At December 31, 2023 and 2022, the Company has unrecognized tax benefits, including interest and penalties, of $19.6 million and $16.6 million, respectively. We consider many factors when evaluating and estimating our tax positions and unrecognized tax benefits, which may require periodic adjustment and which may not accurately anticipate actual outcomes. Although management currently believes changes to unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. The ultimate amount of deferred income tax assets realized and the amounts paid for deferred income tax liabilities and unrecognized tax benefits may vary from our estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results. Stock-Based Compensation Stock-based compensation at the Company is inherently complex. Our desire is to attract, retain, inspire and reward our management team and employees at each of our subsidiaries, including those employed by recently acquired companies, by allowing them to benefit directly from the value they help to create. We accomplish these objectives, in part, by issuing equity awards denominated in the equity of our non-publicly traded subsidiaries as well as in IAC and Angi Inc. We further refine this approach by tailoring certain equity awards to the applicable circumstances. For example, we have in the past issued certain equity awards for which vesting is linked to the achievement of a performance target such as revenue or profits; these awards are referred to as performance-based awards. In other cases, we link the vesting of equity awards to the achievement of a value target for a subsidiary or IAC or Angi Inc.'s stock price, as applicable; these awards are referred to as market-based awards. The nature and variety of these types of equity-based awards creates complexity in our determination of stock-based compensation expense. In addition, acquisitions are an important part of the Company's growth strategy. These transactions may result in the modification of equity awards, which may create additional complexity and additional stock-based compensation expense. In addition, our spin-offs and internal reorganizations can also lead to modifications of equity awards and may result in additional complexity and stock-based compensation expense. Finally, the means by which we settle our equity-based awards also introduces complexity into our financial reporting. We provide a path to liquidity by settling the non-public subsidiary denominated awards in IAC or Angi Inc. shares, as applicable. In addition, certain former Angi Inc. subsidiary denominated awards and Angi Inc. stock appreciation rights can be settled in IAC or Angi Inc. awards at the Company’s election. These features increase the complexity of our earnings per share calculations. Stock-based compensation expense reflected in our statement of operations includes expense related to equity awards issued by certain of our subsidiaries and awards granted to the Company's Corporate employees and the employees of Angi Inc. These awards have been in the form of restricted stock units ("RSUs"), performance-based RSUs, market-based RSUs and restricted stock. For RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying common stock and expensed as stock-based compensation expense over the vesting term. For performance-based RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying common stock and expensed as stock-based compensation over the vesting term when the performance targets are considered probable of being achieved. For market-based RSUs, a lattice model is used to estimate the value of the awards. For IAC restricted stock, a lattice model was used to estimate the fair value of the award which is based on the satisfaction of IAC's stock price targets. The principal form of equity awards to the employees and management of its non-publicly traded subsidiaries is stock settled stock appreciation rights that are denominated in the equity of the relevant subsidiary of the Company or Angi Inc., in the case of its International business, which are settleable in shares of the Company or Angi Inc. as applicable. The value of the stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly, these interests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price and these interests can have substantial value in the event of significant appreciation. The grant date value of these stock settled stock appreciation rights is measured at grant date, using a Black-Scholes option pricing model and, for those with a market condition, a lattice model, at fair value and is expensed over the vesting term. 73 The Company estimates the fair value of stock options upon issuance or modification using a Black-Scholes option pricing model and, for those with a market condition, a lattice model. No stock options were issued by the Company in the years ended December 31, 2023, 2022 and 2021, respectively. Investments in Equity Securities The Company's equity securities, other than those of its consolidated subsidiaries and those accounted for under the equity method, are accounted for at fair value under the measurement alternative in accordance with ASC Subtopic 321, Investments - Equity Securities, with any changes to fair value recognized in "Other income (expense), net" in the statement of operations each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer; fair value is generally determined based on a market approach as of the transaction date. A security will be considered identical or similar if it has identical or similar rights to the equity securities held by the Company. The Company reviews its investments in equity securities without readily determinable fair values for impairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors the Company considers in making this determination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of its investments in equity securities, which require judgment and the use of estimates. When the Company's assessment indicates that the fair value of the investment is below its carrying value, the Company writes down the investment to its fair value and records the corresponding charge in "Other income (expense), net" in the statement of operations. The carrying value of the Company’s equity securities without readily determinable fair values is $404.8 million and $323.5 million at December 31, 2023 and 2022, respectively, which is included in "Long-term investments" in the balance sheet. The Company has no investments in marketable equity securities, following the change in classification of its investment in MGM to an equity method investment in the fourth quarter of 2023, described below. At December 31, 2022, the Company had two investments in marketable equity securities, other than its investment in MGM, including one investment that was fully impaired in the first quarter of 2023 due to the investee declaring bankruptcy and another investment that was sold in the third quarter of 2023. The Company recorded net unrealized pre-tax losses of $0.3 million and $20.3 million for these investments during the years ended December 31, 2023 and 2022, respectively. The unrealized pre-tax losses related to these investments are included in "Other income (expense), net" in the statement of operations. During the fourth quarter of 2023, due to MGM's ongoing share repurchase program, which increased the Company's ownership interest passively, the Company determined that the equity method of accounting applies and has elected to account for its investment in MGM pursuant to the fair value option. Prior to the fourth quarter of 2023, the Company's investment in MGM was accounted for as an equity security with a readily determinable fair value, with changes in fair value recognized through income each period. Since the Company has always marked its investment in MGM to fair value through income each period the election of the fair value option will result in no change to the historical accounting for this investment. At December 31, 2023, the Company owns 64.7 million common shares of MGM, including a total of 5.7 million common shares purchased in the first and third quarters of 2022 for $244.3 million. Based on the number of MGM common shares outstanding at December 31, 2023, the Company owns 19.8% of MGM. The fair value of the investment in MGM is remeasured each reporting period based upon MGM's closing stock price on the New York Stock Exchange on the last trading day in the reporting period and any unrealized pre-tax gains or losses are included in the statement of operations. For the years ended December 31, 2023, 2022 and 2021, the Company recognized unrealized pre-tax gains (losses) of $721.7 million, $(723.5) million and $789.3 million, respectively on its investment in MGM. The cumulative unrealized net pre-tax gain through December 31, 2023 is $1.6 billion. A $2.00 increase or decrease in the share price of MGM would result in an unrealized gain or loss, respectively, of $129.4 million. At February 9, 2024, the fair value of the Company's investment in MGM was $3.0 billion. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see "Note 2—Summary of Significant Accounting Policies" in the accompanying notes to the financial statements included in "Item 8—Financial Statements and Supplementary Data." 74